Publishers and librarians have been waiting for months with bated breath for the Supreme Court's decision in Kirtsaeng v. John Wiley and Sons, the most important first sale case in a century. International publishers will be using their recovered breath to curse the outcome; librarians will be using theirs to cheer. The Court voted 6-3 that first sale applies uniformly, whether books are published in the United States or abroad.
Supap Kirtsaeng came to the United States from Thailand to study mathematics at Cornell and USC. On the side, he was a textbook importer. His friends and family bought inexpensive English-language editions of textbooks in Thailand and shipped them to him in the United States, where he resold them on eBay and other Web sites.
Kirtsaeng's arbitrage worked because textbook publishers price discriminate. Americans can afford to pay more for books than Thailanders can, and so they do. Wiley sued, claiming Kirtsaeng violated two separate provisions of the Copyright Act: Section 602 of the Copyright act, which prohibits importing copyrighted works without permission, and Section 106, which prohibits distributing them.
But the heart of the case was Kirtsaeng's first sale defense. The Supreme Court recognized first sale in the 1908 Bobbs-Merrill case. It's now codified in Section 109 of the Copyright Act, which allows the owner of a copy to sell, lend, or give it away without the copyright owner's permission. Textually, Kirtsaeng had a strong case. The Section 602 import right is defined in terms of the Section 106 distribution right, and the Section 109 first sale defense explicitly applies to distribution. A 1998 Supreme Court decision, Quality King held that yes, first sale is a complete defense to claims of unauthorized importation.
But Section 109's definition of first sale contains a phrase with a crucial ambiguity. It only protects the owner of a copy "lawfully made under this title." (The "title" in question is Title 17 of the United States Code, better known as the Copyright Act.) A pirate printing house owns the paper and ink that go into its unauthorized editions, so it owns the copies that result. But first sale doesn't protect samizdat; the pirate's copies aren't "lawfully made."
Wiley claimed, and the lower courts agreed, that "lawfully made under this title" referred only to books made in the United States, where the Copyright Act applies. Copies printed abroad aren't "lawfully" or "unlawfully" made under the U.S. Copyright Act; they're not "under" it in the first place. Hence, they're outside first sale's purview entirely.
Justice Breyer, writing for himself and five colleauges, disagreed. "Lawfully made," he explained, refers only to infringing versus noninfringing copies; it does not make geographic distinctions. First sale applies to copies made anywhere in the world "as long as their manufacture met the requirements of American copyright law." Since the textbooks Kirtsaeng was importing were printed with the permission of the copyright holders, they were legal, and so were his imports. Game, set, match.
Breyer's opinion gives particular weight to concerns suggested by the American Library Association and other groups who submitted amicus briefs. If copies made abroad aren't subject to first sale, there goes the lending right for imported books; art galleries couldn't safely display foreign paintings; and don't even think about trying to sell your imported car, which contains copyrighted software. Indeed, one might ask, why wouldn't publishers shift all their priting overseas, to be rid of first sale once and for all? Breyer's opinion for the Court denies this parade of horribles a permit.
Justice Ginsburg's forceful dissent, however, points out the serious consequences the decision will have for publishers. If Kirtsaeng can import international editions, so can Amazon, or anyone. The price differential between the two will collapse. Publishers will be reluctant to create inexpensive editions for those in less affluent countries who can't afford the eye-watering prices (some) Americans can. That's bad for readers around the world, and could make it infeasible to publish some books at all.
The Kirtsaeng opinion seriously undermines the viability of English-language territorial rights in this age of global e-commerce and cheap shipping. All English-language editions will be competing against each other, which means licensing a U.S. edition and a Canadian edition and an Indian edition is inviting the three publishers to compete against each other on price.
Perhaps territoriality was not long for this world anyway, given the the rise of the Internet, of e-books, and of cheap book scanners. But the Supreme Court just kicked it into a well while screaming "THIS IS FIRST SALE!" Or, in Justce Breyer's more judicious wording, "But the Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book."
Justice Kagan's concurring opinion, however, may point to a compromise. There is a subtle gap between the "parade of horribles" that keeps librarians up at night and the counter-parade that keeps multinational publishers up at night. The librarians and other first sale fans care primarily about domestic first sale. If you have a book in your hands here in the United States, you want to know, definitively, that it's legal to sell or lend it out. But publishers care more about import protection. They've lived with first sale at home since for over a century, it's part of the legal landscape. Imports, though, are another story.
Wiley took Kirtsaeng to court because it fears that cheap international editions will flood American trade channels. In other words, if Section 109 first sale were to protect domestic distributors under Section 106, but not international importers under Section 602, the sky might not fall on anyone.
Justice Kagan's point is that if today's decision in Kirtsaeng seems as though it has serious consequences for publishers, those consequences actually stem from Quality King. To be fair, Quality King has a strong textual basis in the Copyright Act. But it also did so in a bizarre factual setting: copyrighted shampoo labels printed in the U.S., shipped abroad, and then brought back. So there is some wiggle room here for either the Court or Congress to recreate territoriality without gutting first sale, were they so inclined.
The Kirtsaeng opinions make for fascinating reading: they show the Court's two copyright mavens at the top of their game. Justice Breyer has been a skeptic since his classic 1970 article "The Uneasy Case for Copyright." In a moment of levity, dismissing some inconvenient loose statements in Quality King, he writes, "Is the Court having once written dicta calling a tomato a vegetable bound to deny that it is a fruit forever after?"
Justice Ginsburg (who is the mother of copyright superscholar, Jane Ginsburg) for her part, has written repeatedly from the bench in support of clear and reliable rights for copyright owners, most famously in Eldred v. Ashcroft, where her opinion for the Court upheld a retroactive twenty-year extension of copyright's term.
However one comes out on first sale and imported textbooks, the issue, in books and beyond, is too significant to end here. Register of Copyrights Maria Pallante is already proposing significant reforms to the Copyright Act. Ladies and gentlemen, start your lobbyists.
James Grimmelmann is currently Professor of Law at New York Law School and Visiting Professor of Law at the Georgetown University Law Center. In the fall of 2013, he will start as Professor of Law at the University of Maryland. He is a PW contributing editor for legl affairs.