Why you should care about the three words “First Sale Doctrine” and an upcoming Supreme Court decision.

A case is now headed to the Supreme Court and the decision on this case could have significant implications for the market for copyrighted works here in the US.  The question is whether works copyrighted in the US but produced overseas have been “lawfully” produced such that our First Sale doctrine would apply.

First Sale leads to the following scenario:  You go to the a store and buy a textbook or DVD.  After a few reads or views, you decide to sell that textbook or DVD, or rent it to someone, or lend it to someone.  Your opportunity to resell, rent, or lend the work is covered by first sale, and therefore OK under the law.  The “first sale” of the copyrighted work effectively brings to a close the copyright owners exclusive control over that copy of the work—only that copy.

In the absence of First Sale, owners of copyrighted works essentially retain ongoing control over the distribution, sale, rental, etc of  their works, as that control is defined under the law.

The first sale plot thickened in the past decade, however.

In 2008, the Ninth Circuit Court of Appeals in the US  ruled in favor of Omega (watch) in a case involving Costco (aka, Costco versus Omega).  Costco was purchasing Omega watches in cheaper markets overseas and then selling those watches in the US.  The Circuit Court determined that the first sale doctrine would not apply to copyrighted items manufactured overseas.  The Supreme Court heard the case on appeal, and split 4-4 in late 2010.

The result of of the Supreme Court’s lack of a decision was (a) a lack of national clarity on this first sale question, but (b) some clarity on when first sale might still apply.  In this case, if the product was manufactured overseas, but US sale was authorized by the copyright holder, then first sale could still kick in.

Meaning: Copyright owners could not simply manufacturer a product overseas to create a workaround for the First Sale doctrine. This doctrine would still apply to products manufactured overseas but legally sold in the US.  You could resell these CDs, DVDs, and Books after your first purchase.

Fast forward to 2012 and a case that is both similar and yet different in a important way now heads to the Supreme Court.  The pathway for the case flowed through the 2nd Circuit Court.  In the case Kirtsaeng v. Wiley, the court will come to an opinion on whether works first copyrighted in the US, then produced overseas, would or would not be covered by the first sale doctrine in the US.

The important difference in this case would be that the 2nd Circuit Court’s ruling applied even to those products manufactured overseas and then sold with the permission of the Copyright holder in the US.

Meaning: Copyright owners could simply manufacturer a product overseas and retain exclusive control over the sale, resale, rental of their work — control that could not be trumped by the First Sale doctrine.  Buyers of a CD, DVD, Book, or other copyrighted thing in the US could not legally resell the item.

This case has significant implications.  So please, pay attention.



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