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Second Circuit Rules First Sale Doctrine Only Applies to Goods Manufactured Domestically
By Heather Whitney – Edited by Chinh Vo

John Wiley & Sons v. Kirtsaeng, No. 09-4896-cv (2d Cir. Aug. 15, 2011)
Slip Opinion

After the Supreme Court’s non-precedential decision in Costco v. Omega, 131 S.Ct. 565 (2010), it is no surprise that the nexus of the first sale doctrine and works manufactured outside of the United States remains in flux.  In Wiley, the Second Circuit affirmed the judgment of the District Court for the Southern District of New York, awarding statutory damages to book publisher John Wiley & Sons for copyright infringement after a jury trial. In a case of first impression, the Second Circuit held that defendant Kirtsaeng, a Thai student studying in the United States, was not entitled to a “first sale doctrine” defense under the Copyright Act when he resold  books imported from abroad, finding the doctrine inapplicable to copyrighted works produced outside of the United States.

The Library Journal provides an overview of the case and commentary on its significance to libraries. TechDirt criticizes the decision, arguing it makes reselling items lawfully purchased overly risky when the place of manufacture is uncertain because, under the opinion, the first sale doctrine would not apply to goods made overseas. 

Defendant Kirtsaeng, who had moved from Thailand to the United States for college, had friends and family ship him foreign editions of textbooks printed abroad by a Wiley subsidiary. Kirtsaeng then sold the books online for profit, bringing in up to $1.2 million in revenue by taking advantage of the lower prices Wiley often assigned to books sold internationally. However, the international editions defendant resold contained language indicating that such editions were to be sold only in a particular country or geographic area, none of which included the United States. In response to Kirtsaeng’s sales, Wiley filed an action claiming, among other things, copyright infringement. At issue on appeal was whether the defendant was entitled a defense under the first sale doctrine given that the textbooks were not manufactured in the United States.

The Second Circuit initially looked to the plain text of the Copyright Act, which states that the first sale doctrine applies only to copyrighted goods “lawfully made under this title.” The court found that “lawfully made under this title” referred only to goods manufactured in the United States. Section 602(a)(1) of the Copyright Act states that “[i]mportation into the United States … of copies . . . of a work that have been acquired outside the United States is an infringement of the [owner’s] exclusive right to distribute copies.” The Second Circuit reasoned that applying the first sale doctrine to works made abroad would give “no force” to § 602 “in the vast majority of cases.” The court also applied the Supreme Court’s dicta from Quality King Distributors, Inc. v. L’anza Research International, Inc., 523 U.S. 135 (1998), which suggested that copies made under the law of another country are not subject to the first sale doctrine. In holding as it did, the Court went further than the Ninth Circuit in Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), which found that the first sale doctrine applied to foreign-manufactured copies if that copy was imported into the United States with the copyright owner’s permission. Here, the Second Circuit included no such exception.

Judge Garvan Murtha dissented, reasoning that since the statutory text does not make reference to the place of manufacture, but instead focuses on whether that copy was manufactured lawfully, a copy authorized by the U.S. rightsholder is lawful under the Copyright Act and thus subject to the first sale doctrine. Judge Garvan also found it unrealistic that Congress would provide more copyright protection to foreign goods than domestic ones. He further noted that the additional restraint on trade and alienation, along with the incentive to drive manufacturing outside of the United States, amounts to bad policy and was likely not Congress’ intent.

How the first sale doctrine applies to international works, if at all, remains unsettled. As Judge Murtha pointed out in his dissent, by restricting the first sale doctrine to works created in the United States, the court’s decision creates a strong incentive for copyright owners to manufacture their goods abroad, harming American workers.

Heather Whitney is a 2L at Harvard Law School.

Posted On Sep - 21 - 2011 Comments Off

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