The U.S. Supreme Court raised questions about the multibillion-dollar trade in goods outside authorized distribution channels, hearing arguments in the case of a graduate student sued for selling foreign-edition textbooks in the U.S. at discount prices.
The copyright dispute may restrict the so-called gray market, with ramifications for publishers, retailers, entertainment companies, manufacturers and consumers. Retailers that offer gray-market products, led by eBay Inc. and Costco Wholesale Corp., are seeking limits on copyrights. The motion picture, music, software and publishing industries say the gray market illegally undercuts their U.S. sales.
The high court case concerns Supap Kirtsaeng, who was ordered to pay John Wiley & Sons Inc. $600,000 for importing the publisher’s copyrighted textbooks from his native Thailand and selling them in the U.S. for a profit.
Allowing copyright holders to sue over such importations would give them “endless, eternal downstream control over sales and rentals” of their goods, Kirtsaeng’s lawyer, E. Joshua Rosenkranz, told the court. That would give companies an incentive to send their manufacturing overseas, he said.
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Justice Stephen Breyer asked Wiley & Sons’s lawyer Theodore Olson whether a ruling for the publisher would mean that someone who bought a Toyota that included copyrighted sound and global- positioning systems couldn’t sell the vehicle without getting permission from the copyright holders.
Olson said that in some cases an implied license, or “fair use” doctrine, would protect people.
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The dispute turns on a legal doctrine that says a copyright holder can profit only from the original sale of a product. In 1998, the Supreme Court unanimously ruled that the so-called first-sale doctrine applies to U.S.-made products that are sold overseas. The ruling meant that purchasers could bring those goods back into the U.S. to sell or distribute even if the copyright holder objected.
The question now is whether that same reasoning applies when companies manufacture goods abroad. The New York-based 2nd U.S. Circuit Court of Appeals ruled that it doesn’t, siding with Wiley and upholding the jury award.
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Kagan told Rosenkranz that a copyright isn’t “one right that applies everywhere in the world.” Instead, she said, “You have your U.S. rights and you have your Chinese rights, and you have your rights under each jurisdiction’s law.”
“Your position is essentially to say that, when I sell my Chinese rights to somebody, I’m also selling my U.S. rights to that same person, because the person who has the Chinese rights can just turn around and import the goods,” Kagan said.
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Taken to its logical extreme, elimination of the first-sale doctrine for foreign-made goods would prevent libraries from lending books, bar consumers from reselling items and even stop museums from displaying artwork in violation of the copyright owner’s rights, those critics say.