Supreme Court Rules Against Entertainment Industry in Landmark Copyright Ruling

Justice Stephen Breyer delivers majority opinion holding that the "first sale" doctrine applies to works bought overseas and resold in the United States.

The U.S. Supreme Court on Tuesday ruled in favor of Supap Kirtsaeng, an immigrant from Thailand who challenged the $600,000 he was ordered to pay for willfully infringing a textbook publisher's copyrights when he sold books first purchased overseas in the U.S. through eBay.

The important ruling deals with the first-sale doctrine under U.S. copyright law, which allows for the reselling of acquired copyrighted works without the authority of the original copyright owner. Advocates for Kirtsaeng argued that limiting the first-sale doctrine would cause manufacturing to fly overseas and imperil the reselling of many goods including films and music.

John Wiley & Sons Inc., the publisher that pursued Kirtsaeng, argued on the other hand that before copyrighted works are resold, they first had to be "lawfully made" and that illegal importation is a violation of the exclusive rights enjoyed by copyright owners.

The publisher was supported in its position by the U.S. government and many of the entertainment industry trade associations including the MPAA and the RIAA, arguing that extending the first-sale doctrine to copies made abroad could impede authors' ability to control entry into poorer nations, limit their flexibility to adapt to market conditions and undermine territorial licensing agreements.

Kirtsaeng moved to the United States from Thailand in 1997 to study mathematics at Cornell University. During his studies, he asked his friends and family back home to buy cheap copies of foreign edition English language textbooks. Later, he resold them, paid back his family and friends, and kept the profit.
The case has huge ramifications -- for instance, Tuesday's ruling could impact the pricing of music, films and other copyrighted works globally.  But in some ways, the battle came down to a linguistic fight over five words, "lawfully made under this title," found in the first-sale doctrine, codified in USC §109(a). The question was whether those words imposed a geographical limitation since there are other portions of the copyright act that deal with exclusive rights and illegal importation.

Whether the controversial five words meant the first sale doctrine only applied if the other conditions for a legal copy were met (as Wiley argued) or whether it just meant that the first sale doctrine was in accordance with the rest of the copyright law (as Kirtsaeng argued) commanded the Supreme Court's attention.

"In our view, §109(a)’s language, its context, and the common-law history of the 'first sale' doctrine, taken together, favor a non-geographical interpretation," writes Justice Breyer. "We also doubt that Congress would have intended to create the practical copyright-related harms with which a geographical interpretation would threaten ordinary scholarly, artistic, commercial, and consumer activities."

For instance, to interpret these words geographically, he writes, would mean that anyone who buys a bumper sticker in Canada, Europe or Asia couldn't display it in America. He also says that "to interpret these words geographically would mean that the teacher could not (without further authorization) use a copy of a film during class if the copy was lawfully made in Canada, Mexico, Europe, Africa, or Asia."

The ramifications of a ruling that favored the publisher would be dire, says the judge. Libraries might stop circulating millions of books made abroad. Cars might not be able to be resold without the permission for each piece of copyrighted automobile software. Art museums might not be able to display foreign-produced works by Cy Twombly, René Magritte, Henri Matisse or Pablo Picasso -- and Judge Breyer asks, "What are the museums to do, they ask, if the artist retained the copyright, if the artist cannot be found, or if a group of heirs is arguing about who owns which copyright?"

The entertainment industry had its own concerns that taking an expansive view of the first sale doctrine would increase piracy, grey market sales and limit the ability to price copyrighted works in accordance to local economic conditions on a global basis.

According to three justices, the majority decision's "bold departure from Congress’ design" is "stunning," and they further say that the parade of horribles is "largely imaginary." They object to the majority's interpretation of the phrase "lawfully made under this title" and say that the high court has just reduced the illegal importation clause of the Copyright Act to "insignificance."

Justice Ginsbury says that the majority has failed to address Congress' intention "to grant copyright owners the right to control the importation of foreign-made copies of their works" and that an alternative interpretation of the first sale doctrine would not not bar art museums from lawfully displaying works made in other countries. "Museums can, of course, seek the copyright owner’s permission to display a work," she writes.

The Justice adds, "Kirtsaeng and his supporting amici cite not a single case in which the owner of a consumer good authorized for sale in the United States has been sued for copyright infringement after reselling the item or giving it away as a gift or to charity."

Read More... http://www.hollywoodreporter.com/thr-esq/supreme-court-rules-entertainment-industry-429695