John Wiley & Sons, Inc. v. Kirtsaeng

Second Circuit affirms judgment in favor of publisher, holding, as a matter of first impression, that the first sale doctrine does not apply to works manufactured outside of the United States.

Plaintiff John Wiley & Sons, Inc., a publisher of academic, scientific and educational journals and books for sale in domestic and international markets, holds registered U. S. copyrights of American editions of various books. Defendant Supap Kirtsaeng sold foreign editions of eight of plaintiff’s textbooks on commercial websites such as eBay.com. Plaintiff sued defendant for copyright infringement, trademark infringement, and unfair competition under New York law. At the conclusion of trial, the jury found defendant liable for willful copyright infringement of all eight works and imposed damages for each infringement. Defendant appealed, arguing that the district court erred in holding that the first sale doctrine was not an available defense. As a matter of first impression, the Second Circuit held that the first sale doctrine, which allows a person who buys a legally produced copyrighted work to sell or otherwise dispose of the work as he sees fit, does not apply to works manufactured outside the United States.

In commencing its analysis, the court acknowledged that an apparent tension exists between section 109(a) of the Copyright Act, which codifies the first sale doctrine, and section 602(a)(1), which prohibits the importation into the United States of copyrighted works acquired abroad without the authorization of the copyright owner. Guided by the Supreme Court’s dicta in Quality King Distributors, Inc. v. L’anza Research International, Inc., the court sought to resolve this ambiguity by adopting a holding that preserved the mandates of section 602(a)(1).

In Quality King, explained the court, the Supreme court stated, in dicta, that although the first sale doctrine and section 602(a) may be applicable in some situations, “the former does not subsume the latter; those provisions retain significant independent meaning.” Because section 602(a)(1) would have no force in the vast majority of cases if the first sale doctrine was interpreted to apply to works manufactured abroad, the court reasoned that a proper reading of the Copyright Act militates in favor finding that the first sale doctrine only applies to domestically manufactured works. Applying these principles to the facts of the case, the court concluded that defendant could not avail himself of the first sale doctrine since all the books in question were manufactured outside the United States.

The court also rejected defendant’s contention that he was prejudiced by the court’s refusal to instruct the jury that the first sale doctrine was an unsettled area of law because the instruction was essential to his argument that he had performed pre-sale research regarding the legality of his sales and therefore had not willfully infringed plaintiff’s copyrights. While the district court was free to permit the jury to consider the unsettled state of the law in determining whether defendant’s conduct was willful, the district court was not required to do so. The court noted that defendant was provided ample opportunity to introduce evidence at trial and to argue to the jury that his internet research had led him to believe that his conduct was not unlawful.

Finally, the court held that the district court did not err in allowing into evidence the amount of defendant’s gross revenues. Defendant argued that the admission of evidence regarding his gross revenues prejudiced him by confusing the jury as to the amount of damages that should have been awarded to plaintiff because the majority of his revenues came from the sale of other publishers’ used volumes, many of which were produced in the United States. In noting that the jury could have imposed the same amount of damages without knowledge of defendant’s revenues, the court held that the district court’s ruling was not improper.