Meera Nair

Kirtsaeng – Part I

In Case Reviews on March 27, 2013 at 8:25 pm

Last week the United States Supreme Court handed down its decision on Kirtsaeng v. Wiley, a decision favourable to libraries, consumers, and, notably, capitalists. At issue was a foundational element of market operations: the right to resell property free of constraint by the original owner of the property. In this case, a foreign graduate student attending an American university arranged for the lawful purchase of textbooks in his home country, which he then resold in the United States. The publisher claimed infringement.

The case makes for good reading, not only as it illustrates (and rebuts) a disturbing effort on the part of an academic press to claim larger rights than copyright actually affords, but also because of the elegance of the language of rebuttal. The majority opinion, written by Justice Stephen Breyer, leaves no doubt that the argument of the publisher is ill-conceived. Breyer’s erudite prose also raises the story to something far more enjoyable than merely bewildering references to sections and subsections.

The grant of copyright under Title 17 (the United States’ Copyright Act) includes an extensive list of exclusive rights reserved for copyright owners, rights that allow for significant control of copyrighted work and subsequent copies. However, those rights are subject to a few limitations; one such limitation being that of First Sale: “the owner of a particular copy or phonorecord lawfully made under this title … is entitled, without the authority of the copyright owner, to sell or oth­erwise dispose of the possession of that copy or phonorecord.”

For a body of law that involves much arcane language, “first sale” is refreshingly transparent. With the proviso that the property transferred was lawfully made, “first sale” literally indicates where a copyright owner’s control stops: at the conclusion of the first transfer of the property. Clearly, pirated copies do not enjoy the shelter of first sale. But the property under question was not an outcome of piracy; these books were produced in accordance with the publisher’s wishes, by the publisher’s subsidiary organization for the Asian market.

The case hinged upon the meaning of five words: “lawfully made under this title”. The publisher asserted that the limitation of first sale did not apply to copies manufactured outside the United States. But as a significant amount of book printing is carried out overseas, such an interpretation has ramifications far beyond this case.

Imagine a not improbable scenario: a consumer purchases a new book in the United States (unaware that it was manufactured on foreign soil) and later gives away some books, including the foreign production, to a charitable organization collecting books, toys and other household items. A used bookstore then acquires the book from the charity and sells it to another consumer who eventually donates the book to a library. Not surprisingly, the library loans the book to its patrons. If the location of the book’s manufacture becomes the determinant of first sale, all actions after the first purchase become suspect.

To any ordinary individual, it is beyond belief that the United States Congress intended this outcome. Yet, the publisher’s interpretation was shared by lower Courts and the United States Solicitor General. Breyer acknowledges those views and then writes:

The geographical interpretation, however, bristles with linguistic difficulties. It gives the word “lawfully” little, if any, linguistic work to do. (How could a book be unlawfully “made under this title”?) It imports geography into a statutory provision that says nothing explicitly about it.

Breyer spends considerable time exploring the meaning of those five words, dryly observing: “…  neither ‘under’ nor any other word in the phrase means ‘where’”. He determines that “lawfully made under this title” means that to enjoy the limit of first sale, the manufacture must have met the requirements of American law. In other words, when a copyright holder authorizes the foreign production, location does not render first sale inapplicable. Alerting readers to the entirety of his analysis, Breyer writes: “We believe that geographical interpretations create more linguistic problems than they resolve. And considerations of simplicity and coherence tip the purely linguistic balance in Kirtsaeng’s, nongeographical, favor.”

Breyer then examines the past and present language of the exception of first sale, the common law history of first sale, and, the challenge a geographic reading of first sale would pose to other conditions within Title 17 that specifically reject geography (i.e.,“§104 of the Act itself says that works ‘subject to protection under this title’ include unpublished works ‘without regard to the nationality or domicile of the author,’…”). Following the linguistic and legal analyses, Breyer considers the social practices that have been built upon the exception of first sale. With reference to a myriad of briefs submitted to the Court, Breyer uncovers a range of activities taken for granted today that would have been cloaked in fear and uncertainty if the publisher’s arguments had prevailed.

Briefly, library collections in the United States contain some 200 million foreign produced works; “How are the libraries to obtain permission to distribute these millions of books? How can they find, say, the copyright owner of a foreign book, perhaps written decades ago?” Art museums would be at risk if they choose to display foreign-made art, i.e. the 20th century works of René Magritte, Henry Matisse and Pablo Picasso. Even the works of American Cy Twombly would be affected, given that Twombly took up residence in Italy in 1957. And used-book dealers have  “operated … for centuries under the assumption that the ‘first sale’ doctrine applies.”

Libraries, museums and used-bookstores are at the forefront of the dissemination necessary for copyright to live up to its American constitutional mandate of furthering the progress of the arts and sciences. To impede such accepted practices of operation is troubling, to say the least. And yet, that is only one aspect of the problems created by a geographical reading of first sale. The very functioning of a consumer culture is at risk. A truly fearsome prospect was raised by technology companies and retailers; a loss of first sale means potential disruption to the resale of any consumer item that has copyrighted material within it and is manufactured abroad. At the top of the list were items which rely on software, including automobiles, mobile phones, tablets and computers. Yet, even this list is modest – the reality is that “over $2.3 trillion worth of foreign goods were imported in 2011.” Given that packaging materials contain copyrighted work, the potential reach of copyright holders into legitimate market operations is almost beyond comprehension.

My next post will continue this story. Included are the publisher’s efforts to paint these potential consequences as merely a “parade of horribles”, market segmentation, and how Canada might be affected should the site of production become a consideration in the handling of lawfully made products. In the meantime, the 6-3 opinion, delivered by Justice Stephen Breyer is here; Jennifer Howard covered the story for The Chronicle of Higher Education, and detailed analyses are available from Kenneth Crewes, Director of the Copyright Advisory Office for Columbia Law School, Howard Knopf of Excess Copyright, and Kevin Smith, Scholarly Communications Officer for Duke University.

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