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>> ALERT SUPREME COURT’S COPYRIGHT DECISION GIVES A BOOST TO GRAY MARKET RETAILERSThe United States Supreme Court has ruled in Kirtsaeng v. John Wiley & Sons, Inc. that the federal copyright law’s “first sale” doctrine – which allows a lawful owner of a copy of a protected work to sell, rent, or give away that copy – trumps the provision in the copyright law that limits the importation of copyrighted works into the United States. The court’s decision permits gray market goods to be brought into, and sold in, the United States without violating copyright law. 

BACKGROUNDBook publisher John Wiley & Sons, Inc. (Wiley) sued graduate student, Supap Kirtsaeng (Kirtsaeng) after discovering that Kirtsaeng had been importing copies of foreign edition English language textbooks from Thailand to the United States and selling them for a profit.  Wiley asserted that the unauthorized importation and resale of its books constituted infringement of its exclusive right to distribute the books under Section 106(3) of the Copyright Act, as well as a violation of the Copyright Act’s import prohibition as codified in Section 602(a). 

Kirtsaeng argued that, because he was the rightful owner of legally-created copies of the books, the “first sale” doctrine permitted him to resell or otherwise dispose of the books without Wiley’s further permission.  Kirtsaeng relied on Section 109(a) of the Copyright Act, which provides that the owner of a particular copy “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.

The district court held that Kirtsaeng could not assert the “first sale” defense because, in its view, the “lawfully made under this title” language of Section 109(a) excludes “foreign-manufactured goods” from the doctrine.  With the “first sale” doctrine out of the equation, a jury found that Kirtsaeng had

willfully infringed Wiley’s copyrights and assessed statutory damages of $600,000.  Kirtsaeng appealed, and a divided panel of the U.S. Court of Appeals for the Second Circuit affirmed.  The Supreme Court granted certiorari in order to clarify the interplay between the first sale doctrine and the Copyright Act’s import restrictions.

APRIL 2013

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THE BOTTOM LINE

Manufacturers and other businesses with an interest in dividing the international

market for their works may find doing so more difficult as a result of the Supreme

Court’s decision.  However, the decision does not forbid such entities from including

geographical restrictions in agreements with international retailers.  Nor does the

decision affect copyright owners’ ability to restrict licensees from importing copies of

works manufactured abroad, as the “first sale” doctrine only applies to owners of a

copy of a work.  Thus, copyright owners who sell hard goods in international markets

may wish to consider business and contractual safeguards to protect against the

economic pitfalls associated with the import of gray market goods.  On the other hand

(absent contractual restrictions), wholesalers, retailers, and other businesses that

regularly sell hard goods in the international arena should find it easier to reap the

economic benefits of dealing in gray market goods. 

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>> ALERT

APRIL 2013

ADVERTISING, MARKETING & PROMOTIONS

THE SUPREME COURT’S DECISIONRelying primarily on the text and legislative history of Section 109(a), the court held that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad.  In other words, a buyer or other lawful owner of a copy of a copyrighted work lawfully manufactured outside the United States can bring that copy into the United States and sell it,

or give it away, without obtaining permission to do so from the copyright owner.  The court noted that holding otherwise would have far-reaching consequences, including requiring libraries and art galleries to track down and obtain permission from copyright owners before lending foreign-published books or displaying foreign-created artwork.

FOR MORE INFORMATION Brooke Erdos Singer Partner 212.468.4940 bsinger@dglaw.com

Joy J. Wildes Counsel 212.468.4974 jwildes@dglaw.com

Kevin Blum Associate 212.468.4842 kblum@dglaw.com

or the D&G attorney with whom you have regular contact.

Davis & Gilbert LLPT: 212.468.48001740 Broadway, New York, NY 10019www.dglaw.com

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