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ECPA Legal Update: First Sale Doctrine Dilemma

Monday, May 21, 2012   (0 Comments)
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By Brian Flagler and Craig Gipson, Flagler Law Group

Can publishers control whether a third party purchases books produced abroad, imports those books into the United States, and resells them for a profit? We should soon know the answer. The U.S. Supreme Court recently agreed to hear a case on the application of the first sale doctrine to copyrighted works produced abroad.

The Supreme Court will decide the Kirtsaeng case (1). Employing a technical interpretation, the federal court hearing Kirtsaeng essentially found that the copyright owner’s right to control distribution overrides the purchaser’s right of resale when it comes to foreign-manufactured products. In other words, the first sale doctrine only applies to books produced in the U.S. – for any book printed and bound outside the U.S., publishers retain the right to control the distribution of each copy, even after the initial sale. If Kirtsaeng stands, the purchaser of a copyrighted work may only resell or lend that work if it was manufactured in the U.S. or the copyright owner grants permission for its resale or lending.

We reported in February 2011 that the Supreme Court’s split decision in Costco v. Omega left open the question as to whether the first sale doctrine applies to books manufactured abroad, imported into the U.S., and exported for sale exclusively overseas. The Kirtsaeng court held thatthe first sale doctrine does not apply in this situation, which is now the law for cases litigated in the states of New York, Connecticut, and Vermont. However, another appellate court reached a different conclusion, finding that the first sale doctrine applies both to U.S.-manufactured goods and foreign-manufactured goods imported into the U.S. with the copyright owner’s approval.

There are other concerns regarding the long-term viability and practicality of the Kirtsaeng decision as it currently stands. The case could cripple resale and lending organizations. Imagine every used book-seller and library in the country searching for proof that the books in their collections were manufactured in the U.S. From an economic perspective, the court noted that its interpretation creates an incentive to move even more printing jobs overseas.

For now, publishers desiring to retain the right to ban importation of editions of their works intended for sale only outside the U.S. would be wise to continue to manufacture the edition overseas and to "drop ship” that edition directly to overseas accounts without importation into or warehousing in the U.S.

The Supreme Court should hear the case in the fall of 2012 with an opinion expected in early 2013.

(1) John Wiley & Sons v. Kirtsaeng, 654 F.3d 210 (2d Cir. 2011).


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