U.S. Supreme Court Rules on First Sale Copyright Protection in Kirtsaeng Decision

The authorized sale of a copyright-protected work, that is lawfully manufactured abroad, is subject to the first sale doctrine in the United States.

Section 109(a) of the Copyright Act provides that once a person obtains ownership of a lawfully-made copy of a copyrighted work, the person may sell or otherwise dispose of that lawful copy without the authority of the copyright owner. 17 U.S.C. § 109(a). This principle is known as the “first sale doctrine.” On March 19, 2013, the Supreme Court issued the much-anticipated decision in Kirtsaeng v. John Wiley & Sons, Inc., holding 6 to 3 that the first sale doctrine applies to lawfully-made works that are manufactured abroad and imported into the United States. Kirtsaeng extends the Court’s previous decision in Quality King Distributors, Inc. v. L’anza Research International, Inc., 523 U.S. 135 (1998), which applied the first sale doctrine to U.S.-manufactured works first sold abroad but later reimported into the United States by a third party. The decision may significantly impact a copyright owner’s ability to control the distribution of foreign and domestic versions of works, such as by the division of international markets.

The Court’s Opinion

Supap Kirtsaeng, a citizen of Thailand, came to the United States to study mathematics. During his studies, he asked friends and family members in Thailand to purchase and send copies of English-language versions of the textbooks, which had been manufactured abroad, to him in the United States. Kirtsaeng sold these imported textbooks in the United States at a profit. John Wiley & Sons, Inc., owns the copyrights for the textbooks sold by Kirtsaeng. Wiley sued Kirtsaeng, claiming that Kirtsaeng’s unauthorized importation and resale of the textbooks Wiley manufactured and distributed abroad infringed Wiley’s exclusive rights to distribute the copyrighted works. The lower courts ruled in favor of Wiley, finding that the first sale doctrine does not apply to foreign-made works. Kirtsaeng appealed the decisions to the Supreme Court of the United States. In a split decision, the Court reversed, holding that the first sale doctrine applies to copies of a copyrighted work that are lawfully made abroad.

Writing for the Court, Justice Breyer recognized that this case lies at the intersection between a copyright owner’s exclusive rights to control the distribution of copyrighted works, including importation of those works, and a lawful purchaser’s ability to resell the purchased work. The Court acknowledged that the Copyright Act grants the copyright owner certain exclusive rights, including the right “to distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership.” Slip op. at 1 (citing 17 U.S.C. § 106(3)). However, the Court also observed that these ownership rights are subject to certain limitations, including the first sale doctrine as codified in § 109(a). At the same time, the importation into the United States of copies of a copyrighted work, without the copyright owner’s authority, “violates the owner’s exclusive distribution right” under § 602(a)(1) of the Copyright Act, which is an importation prohibition. Id. at 2. Relying on its decision in Quality King, the Court held that the first sale doctrine applies to foreign-made works, and that the authorized manufacture and sale of a copyrighted work abroad exhausts the copyright owner’s rights to control the distribution of the work in the United States.

In reaching its conclusion in Kirtsaeng, the Court first considered whether the textual language of the first sale doctrine supports a geographic restriction that allows a copyright owner to control foreign-made goods sold abroad. The Court held that the conclusion turns on the meaning of the phrase “lawfully made under this title,” which it determined means “made ‘in accordance with’ or ‘in compliance with’ the Copyright Act” and does not contain any geographical restrictions. Slip op. at 8-9. The Court concluded that that this interpretation is “simple” and promotes a “traditional copyright objective” of combatting piracy. Id. at 9.

The Court next rejected the “geographical interpretation” advocated by the dissent, arguing that it “bristles with linguistic difficulties.” Id. For example, the geographical interpretation requires “under this title” to mean “in conformance with the Copyright Act where the Copyright Act is applicable.” Id. The majority dismissed the dissent’s interpretation of this clause because it introduces “uncertainty and complexity” about where the Copyright Act is “applicable.” Id. at 10. The Court determined that the plain language of “lawfully made under this title” in § 109(a) weighs in favor of a nongeographical interpretation.

Second, the Court examined the context surrounding the enactment of § 109(a). Comparing the predecessor statute with the current statute, the Court concluded that the predecessor applied to works that were “lawfully obtained” whereas the present version applies to “the owner of a particular copy” that is “lawfully made.” Id. at 12-13. The Court also reasoned that the change in statutory language was intended to alter the scope of the first sale doctrine to preclude non-owners, such as lessees, from asserting the defense because lessees may have “lawfully obtained” a copy, but are not “owners.” Id. at 13-14. Moreover, this change weighed against a geographical interpretation of the first sale doctrine because a geographical interpretation did not exist in the predecessor statute and none was implied by this change. The Court, therefore, rejected a geographical interpretation because it “would grant the holder of an American copyright permanent control over the American distribution chain in respect to copies printed abroad but not in respect to copies printed in America.” Id. at 15 (internal citations and parentheticals omitted).

Third, the Court examined § 109(a) under statutory construction principles in light of the first sale doctrine’s common-law roots and “impeccable historic pedigree.” Id. at 17. The Court restated its canon of interpretation that “‘when a statute covers an issue previously governed by the common law,’ [the Court] must presume that ‘Congress intended to retain the substance of the common law.’” Id. Because the common law first sale doctrine did not contain any geographical restrictions, this principle of construction weighed against importing such a restriction into § 109(a). The Court also asserted that its own nongeographical interpretation “frees courts from the administrative burden of trying to enforce restrictions upon difficult-to-trace, readily movable goods.” Id. at 18.

Fourth, the Court examined the arguments of several associations of libraries, used-book dealers, technology companies, consumer-goods retailers, and museums, and their claims that a geographical interpretation of § 109(a) “would fail to further basic constitutional copyright objectives, in particular ‘promot[ing] the Progress of Science and useful Arts.’” Id. at 19. The Court found these arguments persuasive and rejected Wiley’s position that the parade of horribles offered by the associations was speculative because the “problems have not occurred.” Id. at 22. The Court proposed that the lack of occurrences could be due to uncertainty in the law, or because a “reliance upon the ‘first sale’ doctrine is deeply embedded in the practices of [the associations]” who are not in the habit of seeking copyright owner approval. Id. at 23. The Court acknowledged that a geographical interpretation could break this reliance, but declined to provide that change in view of the “intolerable consequences” that would result. Id.

Lastly, the Court addressed several of the dissent’s arguments. It first rejected the dissent’s position that the Court’s Quality King decision “strongly supports” a geographical interpretation. Id. at 24. The Court noted that Quality King “held that the importation provision did not prohibit sending products back into the United States (without the copyright owner’s permission).” Id. at 25 (emphasis in original). Quality King further “noted that § 109(a)’s ‘first sale doctrine’ limits the scope of the § 106 exclusive distribution right.” Id. Dismissing the dissent’s reliance on certain statements made in Quality King regarding § 109(a) as ill-considered dictum the Court refused to be bound by them. Id. at 27. Second, the Court rejected the dissent’s legislative history argument, because the legislative history for § 109(a) is silent as to whether a geographical limitation was intended. Third, the Court conceded the dissent’s assertion that a nongeographical interpretation of the first sale doctrine “would make it difficult, perhaps impossible” for publishers to divide domestic and foreign markets. Id. at 31. However, it noted that neither the Constitution nor the Copyright Act suggest that the “limited exclusive right should include the right to divide markets.” Id. at 32. Rather, the first sale doctrine “limits copyright holders’ ability to divide domestic markets” and that this limitation is “consistent with antitrust laws that ordinarily forbid market divisions.” Id. Finally, the Court rejected the dissent’s concern that the Court’s opinion creates an “unprecedented regime of ‘international exhaustion.’” Id. Under Quality King, the dissent’s proposed geographical interpretation of the first sale doctrine was “already significantly eroded.”

In summary, Kirtsaeng extended Quality King to apply to foreign-manufactured copies sold abroad and later imported into the United States, and held that the first sale doctrine applies to limit the copyright owner’s right to control the distribution of those copies.

Justice Kagan’s Concurrence

Justice Kagan, joined by Justice Alito, concurred with the Court’s opinion, but wrote separately to discuss “that the combination of [the Court’s] decision and [Quality King],” which constricts the scope of the ban on unauthorized importation. Concurring op. at 1 (Kagan, J.). Justice Kagan asserted, however, that “any problems” stem from Quality King, not the Kirtsaeng opinion, because applying Quality King “unavoidably” diminishes the importation ban to “a fairly esoteric set of applications.” Id. at 2. The result flowing from Quality King gives “pause about Quality King’s holding that the first-sale doctrine limits the importation ban’s scope,” but she concludes that the Court “correctly declines the invitation to save [the importation ban] from Quality King by destroying the first-sale protection that § 109(a) gives every owner of a copy manufactured work abroad.” Id. at 3-4.

Justice Ginsburg’s Dissent

Justice Ginsburg, joined by Justice Kennedy, dissented from the Court’s opinion, with Justice Scalia joining in part. The dissent asserted that the Court’s opinion is “at odds with Congress’ aim to protect copyright owners against unauthorized importations” and “places the United States at the vanguard of the movement for ‘international exhaustion’ of copyrights.” Dissenting op. at 1 (Ginsburg, J.). Like the Court, the dissent recognized that the resolution of this case turns on the three statutory provisions relating to the “‘exclusive rights’ of a copyright owner,” the “first sale doctrine,” and the “importation ban.” Id. at 2-3. The dissent also acknowledged that Quality King held that “the importation of copies made in the United States but sold abroad did not rank as copyright infringement under [the importation ban].” Id. at 3. However, relying on dictum in Quality King (describing the copies at issue as “‘lawfully made’ not under the United States Copyright Act, but instead under the law of some other country”), the dissent concluded that the importation ban “authorize[s] a copyright owner to bar the importation of a copy manufactured for sale abroad.” Id. at 5.

Like the Court, the dissent focused on the phrase “lawfully made under this title” in § 109(a), but concluded that this phrase means “referring to instances in which a copy’s creation is governed by, and conducted in compliance with,” the Copyright Act. Id. at 6. Because copyright law “does not apply extraterritorially,” then the foreign printings are “not governed by [the Act].” Id. According to the dissent, the Court’s interpretation reduces the importation ban to “insignificance” and does not give the ban Congress’s intended scope. Id. at 10. Rather, it “overwhelms” the statutory exceptions to the importation prohibition, which would otherwise permit importation of copies without the copyright owner’s authorization. Id. at 11. To avoid these results, the dissent ultimately concluded that the first sale doctrine should be read to “apply to copies made in the United States, not to copies manufactured and sold abroad.” Id. at 12.