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Kirtsaeng v. John Wiley & Sons, Inc.

In a 6-to-3 decision with far-reaching implications, U.S. Supreme Court holds that "first sale" doctrine applies to copies of copyrighted works lawfully made abroad, and that importation and resale of textbooks manufactured and sold abroad is therefore not an infringement of publisher's exclusive distribution right.

John Wiley & Sons, Inc., publishes academic textbooks and assigns a foreign subsidiary the right to publish and sell its English-language textbooks abroad. Supap Kirtsaeng, a Thai citizen who moved to the United States to attend Cornell University, arranged for his friends and family to buy copies of foreign-edition English-language textbooks at Thai bookshops, where they sold for lower prices, and to mail them to him in the United States, where he resold them for a profit. Wiley brought suit against Kirtsaeng for copyright infringement, claiming that his importation and resale of Wiley’s textbooks was unauthorized and infringed its exclusive right to distribute the books under section 106(3) of the Copyright Act and violated the importation prohibition of Section 602.

Kirtsaeng defended on the grounds that Section 109(a) of the Act, otherwise known as the “first sale” doctrine, permitted him to resell the books without Wiley’s permission. Section 109(a) provides:

Notwithstanding the provisions of section 106(3) (granting the copyright owner exclusive distribution rights), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

The district court held that Kirtsaeng could not assert the first sale defense because the doctrine does not apply to foreign-made goods, even if made with the copyright owner’s permission. A divided panel of the Second Circuit affirmed, holding that the first sale doctrine did not apply because the textbooks were manufactured abroad and therefore were not “lawfully made under this title” as required by Section 109 to invoke the first sale doctrine. In light of differing views among the Circuit Courts, the Supreme Court granted certiorari to resolve the issue of whether the “first sale” doctrine, codified in Section 109, applies to copies of copyrighted works made abroad with the copyright owner’s authorization.

The Supreme Court reversed, holding that the first sale doctrine contains no geographic limitation and therefore applies to copies of copyrighted works made abroad. Justice Breyer, writing for the majority, found that the language of section 109(a), as well as the legislative history, statutory context and common law history, favored Kirtsaeng’s interpretation that the first sale doctrine is not subject to a geographical limitation.

The Court first examined the language of section 109(a) at issue – “lawfully made under this title” – and found that, read literally, it says nothing about geography and favors the non-geographical interpretation advanced by Kirtsaeng. The Court found that “lawfully made under this title” means made “in accordance with” or “in compliance with” the Copyright Act and, therefore, applied to copies made abroad. Justice Breyer also reasoned that a non-geographical interpretation gives meaning to each word in the phrase: “‘lawfully made’ suggests an effort to distinguish copies that were made lawfully from those that were not and ‘under this title’ sets forth the standard of ‘lawful[ness]’ (i.e., the U. S. Copyright Act).” In contrast, the interpretation advanced by Wiley, the Court found, “bristles with linguistic difficulties,” including that “neither ‘under’ nor any other word in ‘lawfully made under this title’ means ‘where.’ Nor can a geographical limitation be read into the word ‘applicable.’ ” The Court also noted that it was not clear that the Copyright Act has no application outside the U.S., which Wiley’s interpretation would require.

The Court found that both the historical and current statutory context of the first sale doctrine indicated that Congress did not have a geographic limitation in mind when it enacted the current version of section 109(a). According to the Court, the phrase “lawfully made under this title” was added to the current version of the Copyright Act only to limit its application to owners of lawfully made copies, as opposed to possessors of such copies. Noting that, like the current version of the first sale doctrine, the prior version said nothing about geographic limitation, the Court concluded that Congress did not implicitly introduce a geographical limitation when it enacted the current version of Section 109. The Court also noted that other aspects of the current Copyright Act favored application of the first sale doctrine to copies made abroad, including the fact that the current version of the Copyright Act omitted the so-called “manufacturing clause” (a clause in the prior Copyright Act that limited importation of copies of copyrighted works printed outside the United States) in order to treat copies manufactured in the U.S. the same as copies manufactured abroad.

The Court found that the first sale doctrine’s “impeccable historical pedigree” from the common law “makes no geographic distinctions” and therefore supported Kirtsaeng’s non-geographical interpretation of Section 109(a).

Finally, the Court noted that limiting the first sale doctrine to copies made in the U.S. would inhibit the constitutional objective of “promot[ing] the Progress of Science and useful Arts” by subjecting booksellers, libraries, museums, retailers and others, who have long relied on the protections of the first sale doctrine, to potential liability for displaying or distributing copies of copyrighted works made abroad. The Court rejected the argument that this “parade of horribles” was only theoretical and unlikely to occur, because the law in this area was, until now, unsettled, and a decision in Wiley’s favor would likely spur copyright owners to take action with respect to the resale of copies of copyrighted works made abroad.

Justice Ginsburg, joined by Justice Kennedy and, in part, by Justice Scalia, wrote a forceful dissent. She argued that the statutory language at issue – “lawfully made under this title” – is “most sensibly read as referring to instances in which a copy’s creation is governed by, and conducted in compliance with, [the Copyright Act],” which, according to the dissent, does not apply extraterritorially. The dissent also noted that the Court’s holding would greatly diminish the applicability of Section 602’s ban on unauthorized importations of copies of copyrighted works and would render meaningless exceptions to the importation ban for certain governmental, personal, scholarly, educational and religious purposes. Justice Ginsburg also contended that the Court’s decision would frustrate Congress’s intent in enacting the importation ban of enabling copyright owners to engage in “market segmentation,” whereby less expensive copies are sold in geographic regions where consumers are unable to afford more expensive copies. The dissent believed that the majority’s “parade of horribles” was unlikely to materialize, because most “downstream” resellers of copyrighted works made abroad would either obtain licenses from the copyright owner or successfully invoke the doctrines of fair use and implied license to defend infringement suits. Finally, Justice Ginsberg noted that the Court’s decision was inconsistent with the position taken by the United States in international treaty negotiations and was therefore “inconsistent with the long-term economic interests of the United States” and “risks undermining the United States’ credibility on the world stage.”