Supreme Court Justices Weigh Right to Resell Foreign-Made Books, Movies and Songs

On Monday, the justices of the U.S. Supreme Court heard oral arguments in an important copyright case involving the right to resell goods imported domestically.

The case, Kirtsaeng v. John Wiley & Sons, Inc., involves an immigrant from Thailand who was ordered to pay $600,000 for willfully infringing a textbook publisher’s copyrights when he sold books first purchased overseas in the U.S. through eBay.

Some are lining up behind the appellant, Supap Kirtsaeng, and arguing that limiting the first-sale doctrine would cause manufacturing to fly overseas and imperil the reselling of many goods including films and music. Others, including the Hollywood studios, are supporting John Wiley on grounds that a reversal of a lower court’s opinion could give rise to parallel imports and undermine territorial licensing agreements around the world.

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Both sides have points, but at its heart, the case is a good ol’ fashioned fight over ambiguous statutory language. And after Monday’s hearing, the outcome was as uncertain as the hurricane raging through the area.

At the hearing, the Supreme Court justices considered legislation drafted decades ago that probably many attorneys on both sides of the debate would admit could have been drafted better.

Copyright law has one section (109) that allows for the reselling of acquired copyrighted works without the authority of the original copyright owner. Copyright law also has another section (602) that makes it an infringement of the exclusive rights of copyright owners to import without the authority of copyright owners.

How to square this?

The first sale doctrine has the words, “lawfully made under this title,” and both sides disagree whether that makes the first-sale doctrine subservient to illegal importation, or vice-versa.

Even Justice Elena Kagan admits being a little stumped.

“I find this language a little bit perplexing, and I can kind of see it both ways” she said at the hearing.

In questioning Joshua Rosenkranz, the attorney appearing on behalf of Kirtsaeng, Kagan took a territorial-based view of rights that would please much of Hollywood.

“A copyright holder has a kind of a bundle of rights,” she says. “It’s not one right that applies everywhere in the world. It’s you have your U.S. rights and you have your Chinese rights, you have your rights under each jurisdiction’s law.”

But when Kagan questioned Ted Olson, the attorney representing the publisher, the justice adopted the viewpoint of the petitioner that the exact location of where a copyrighted work was manufactured might not be as important to the functioning of the first-sale doctrine as the work’s legitimacy to exist.

“If you focus more on the lawfully word, lawfully made, and then under this title doesn’t mean made in the United States, it means lawfully made under the rules of this title,” she said.

Some of the other Supreme Court justices were concerned about the ramifications of any decision.

For instance, Justice Stephen Breyer began running through a quick list of concerns should a majority opinion give copyright owners the ability to control secondary distribution on works for the mere fact that they are manufactured overseas. This concern has become heightened in the wake of disputes like Omega S.A. v. Costco Wholesale Corp where manufacturers of goods normally outside the scope of copyright law have claimed copyright authority. In Omega v. Costco, which was heard at the Supreme Court in 2010 and provoked a 4-4 deadlock, a Swiss watchmaker put tiny insignia designs on watches to control the secondary market. A ruling at the 9th Circuit was upheld, but really, the justices punted the issue of what to do about copyrighted goods manufactured overseas until this latest case.

Speaking to Olson, Breyer said, “I would like to know if you were the lawyer for the Toyota distributor, and if you were the lawyer for the Metropolitan Museum of Art, or you are the lawyer for a university library, and your client comes to you and says, ‘My God, I just read the Supreme Court opinion. It says that we can’t start selling these old books, or lending them or putting them in our word processor or reselling the Toyota [or] displaying the Picasso without the permission of the copyright holder…What, as their lawyer, do you tell them?”

Olson answered that it depending on the situation, and that defendants would have other defenses such as fair use or implied license.

Other justices were concerned with the prospect of outsourcing, especially upon Rosenkranz’ statement that “the moment that a manufacturer learns that this Court says you get what we’ve called the Holy Grail of manufacturing, endless eternal downstream control over sales and rentals…that will be yet another reason for manufacturers silently to decide that they’re sending their manufacturing overseas.”

Justice Ruth Bader Ginsburg threw that point over to Olson, who responded that it would be Congress’s concern from that point and there’s no evidence it would actually happen. “It’s entirely speculative,” he said.

According to legal experts following the case, the outcome will likely be a close one.

Aaron Moss at Greenberg Glusker, who was part of a team that represented Costco in the Costco v. Omega battle, which provoked a deadlocked, extremely brief opinion thanks largely to Justice Kagan’s recusal, says Kagan is likely to provide the key vote. And based on Monday, Moss says, “If she’s made up her mind, she didn’t tip her hand.”

Here’s the full transcript from Monday’s hearing.

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner