Meera Nair

Kirtsaeng – Part II

In Case Reviews on March 31, 2013 at 2:09 pm

The potential consequences of a geographical interpretation of first sale were what engaged me in my last post. In the Kirtsaeng decision, Justice Stephen Breyer gives due consideration to those risks and writes: “Neither Wiley nor any of its many amici deny that a geographical interpretation could bring about these ‘horribles’—at least in principle. Rather, Wiley essentially says that the list is artificially invented.”

Breyer limits his reference to that single word, but commentators (listed in the last post) all made reference to a “parade of horribles,” each being careful to make the reference in quotation marks. A casual Canadian reader, while aware that the phrase must have some distinctive meaning, is lost as to what it actually is. Indeed to anyone from Vancouver, “parade of horribles” conjures up images of the Parade of Lost Souls, of Commercial Drive fame, where Halloween revellers in ghoulish costumes happily followed the parade’s motto: “Honour the Dead and Wake the Living” (which may not be entirely inappropriate). But clearly something else was to be inferred here.

In an article dated to 1 July 2012 Ben Zimmer, writing for the Boston Globe, explains that the expression is rooted in nineteenth century satires of seventeenth century military parades in New England. Later adopted as a “legal-world insult,” the expression is used to “dismiss opponents’ concerns about a ruling’s negative effects.” Zimmer identifies an early proponent of the phrase as Thomas Reed Powell. Born in 1880, Powell attended Harvard Law School and went on to become a prominent legal observer. “One of his favorite expressions was ‘parade of imaginary horribles,’ which appeared in his writing as early as 1921.”  Zimmer also observes:

The expression, and the scorn for the opposition that it carries, are holding strong in the legal world, much to the chagrin of Justice Antonin Scalia, the Supreme Court’s foremost language kvetcher. In a 1990 law review article, Scalia listed “the familiar parade of horribles” as one of the “canards of contemporary legal analysis.” More often than not, Scalia feels, countering the doubts of dissenters as a “parade of horribles” is lazy reasoning: It’s still up to the writer of an opinion to explain “why all of the untoward results asserted to follow from the principle the court is adopting indeed do not follow.”

Returning to the case at hand, the phrase appears in the brief representing the position of Wiley. Their last argument calling for a geographically-based reading of first sale is titled: “Kirtsaeng’s Parade of Horribles is Speculative and Unpersuasive.” According to the publisher, “Kirtsaeng’s arguments depend on his assumption that the copyright owner could impose restrictions on downstream purchasers even after having authorized the sale of a particular copy in the United States.” Kirtsaeng’s argument (the brief is here) is that a geographical reading of first sale renders copyright owners with the capability of imposing “restrictions on downstream purchasers” – that is the crux of the dispute.

In any case, parade of horribles next appears in the dissent included with the majority opinion. Penned* by Justice Ruth Ginsburg, she writes: “The Court’s parade of horribles, however, is largely imaginary. Congress’ objective in enacting [the] importation prohibition can be honored without generating the absurd consequences hypothesized in the Court’s opinion.” In Part V-B-1 of the dissent, Ginsburg argues that “Copyright law and precedent … erect barriers to the anticipated horribles.” As illustration of how the horribles will not come to pass, seeking permission, implied license and fair use are all offered. But the principle argument by the publisher and echoed by Ginsberg, was that no such suits were likely to happen. From the dissent:

Most telling in this regard, no court, it appears, has been called upon to answer any of the Court’s “horribles” in an actual case. Three decades have passed since a federal court first published an opinion reading [first sale] as applicable exclusively to copies made in the United States. … Yet 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. The absence of such lawsuits is unsurprising. Routinely suing one’s customers is hardly a best business practice.

However, Breyer reminds all that “the law has not been long settled on this matter.” A geographical interpretation of first sale achieved favour at a Court of Appeal only through the Kirtsaeng/Wiley dispute. Meaning support from a higher court is less than two years old. Breyer writes:

The fact that harm has proved limited so far may simply reflect the reluctance of copyright holders so far to assert geographically based resale rights. They may decide differently if the law is clarified in their favor. … Thus, we believe that the practical problems that petitioner and his amici have described are too serious, too extensive, and too likely to come about for us to dismiss them as insignificant.

Between Wiley and Kirtsaeng, this case was fought on two fronts. For Kirtsaeng and its amici (friends of the court), the issue was the dilution of the limit of first sale. In response to that risk, libraries, museums, advocacy groups and many more parties offered articulate and well-reasoned arguments. Arguments not easily rejected by a “canard of legal analysis.” But from the perspective of Wiley and its supporters, the issue was not the role of first sale, but another section of Title 17, one which prohibits unauthorized imports. §106(a)(1) states “Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords … .”

For copyright owners, such a prohibition provides a mechanism by which markets can be divided into domestic and international segments, with varying products and pricing as desired by the copyright holder. Wiley argued that allowing first sale to apply to copies made outside the United States deprives the prohibition of meaningful effect. And that this will have negative consequences for publishers:

… there is a reason why Congress chose in 1976 to permit segmentation of international markets: It is both common practice and economically efficient for companies to sell their products in different countries at different prices, and in different forms, based on differing conditions in the relevant marketplaces. The market for college textbooks provides an excellent example.

With the disparity of income levels between the United States and developing nations, Wiley states:

If publishers were to price these textbooks at the same level as the U.S. editions, then the result would either be less widespread access to quality educational materials, or at least fewer legitimate copies of the textbooks as consumers unable to afford them turn instead to piracy.

To address market segmentation, my Kirtsaeng saga must run to a third post.

* For those curious as to how the Justices aligned on this case, the syllabus (headnote) gives the answer: “Breyer,  J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Alito, Sotomayor, and Kagan, JJ., joined. Kagan, J., filed a concurring opinion, in which Alito, J., joined. Ginsburg, J., filed a dissenting opinion, in which Kennedy, J., joined, and in which Scalia, J., joined except as to Parts III and V–B–1.”

Update – April 2, 2013:  CBC describes the defeat of first sale in a New York District Court. ReDigi, an online market place for used iTunes songs, was deemed in violation of copyright. The court denied ReDigi’s reliance on first sale in part because of first sale’s seeming ineligibility in the digital sphere. (Fortunately, the Canadian Supreme Court insists that copyright be read in a technologically neutral fashion.) While the circumstances of this case differ from Kirtsaeng, a common theme is: should copyright owners have the means to control downstream uses of their works after receiving compensation for a sale conducted in accordance with copyright law?

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