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The Supreme Court to Decide the Fate of the First-Sale Doctrine in Kirtsaeng

by Benjamin Hamborg, UMN Law Student, MJLST Articles Editor

Thumbnail-Benjamin-Hamborg.jpgLater this month, the U.S. Supreme Court is scheduled to hear oral arguments in Kirtsaeng v. John Wiley & Sons, Inc., a case which should decide once and for all whether the first-sale doctrine applies to works manufactured outside of the United States. As I described last spring in volume 13 of the Minnesota Journal of Law, Science & Technology, the case arises from Supap Kirtsaeng's attempt to take advantage of the disparity in pricing between textbooks manufactured for sale in the United States and those manufactured and sold internationally. Kirtsaeng's plan involved purchasing textbooks published by John Wiley & Sons, Inc.'s wholly-owned subsidiary John Wiley & Sons (Asia) Pte Ltd., then reselling the textbooks online to consumers within the United States.

While textbooks published by John Wiley & Sons, (Asia) Pte Ltd. for the international market are nearly identical in terms of content to their U.S. counterparts, the international versions sell for significantly less due to differences in quality and design. When John Wiley & Sons, Inc.--as the registered copyright holder of the United States editions of the works sold by Kirtsaeng--sued for copyright infringement, Kirtsaeng based his defense on the first-sale doctrine, which allows "the owner of a particular copy [of a copyrighted work] . . . lawfully made under this title . . . to sell or otherwise dispose of the possession of that copy" without the permission of the copyright holder.

The question the Supreme Court will face on October 29th is whether the first-sale doctrine applies to works manufactured outside of the United States, a question which the Second--in John Wiley & Sons, Inc. v. Kirtsaeng--and Ninth Circuits have already answered in the negative. The prospect of nationwide denial of the first-sale doctrine to works manufactured outside of the United States has broad implications with regard to the sale of gray-market goods within the United States. Many large United States retailers, particularly online retailers, use gray-market goods to deliver products to customers at a substantial savings. In fact, there exists "an estimated $63 billion annual market 'for goods that are purchased abroad, then imported and resold without the permission of the manufacturer.'"

Narrowing of the first-sale doctrine may even affect the ability of libraries in the United States to lend foreign manufactured books. As Andrew Albanese recently pointed out, "if a library bought a book in the U.S. from a U.S. publisher, and that book happened to be printed in China . . . . the uncertainty the Second Circuit interpretation [of the first-sale doctrine] would create for libraries could deter many libraries from lending [the] materials in question." Finally, if the Second Circuit's holding is affirmed by the Supreme Court, companies that manufacture copyright-protected goods within the United States will have an incentive to move their manufacturing plants abroad so as to gain greater control over the sale of their products.