Kirtsaeng v. John Wiley & Sons, Inc.: U.S. Supreme Court Reverses Lower Courts and Determines That International Copyright Exhaustion is Now the Rule

Online resellers, used book stores, art galleries, and museums, among others, apparently can now breathe a sigh of relief and continue to display and resell goods originally sold or manufactured outside of the U.S., without the specter of a potential copyright infringement action looming on the horizon.

Last week, in Kirtsaeng v. John Wiley & Sons, Inc., the U.S. Supreme Court, on a 6-3 vote, held that the “first sale” doctrine applies to copies of a copyright-protected work lawfully made abroad. Under copyright law, the “first sale” doctrine states that “the owner of a particular copy or phonorecord 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 or phonorecord.” 17 U.S.C. § 109(a). If a copy is made abroad and imported into the United States without the copyright owner’s permission, there is copyright infringement under § 106(3). In other words, international copyright exhaustion (once an authorized sale of a U.S. copyright-protected work is made outside of the U.S., the copyright in that work is “exhausted,” so subsequent reselling may occur) is now the rule.

Petitioner Supap Kirtsaeng (“Kirtsaeng”), a citizen of Thailand moved to the United States in 1997 to further his education. While studying in the United States, Kirtsaeng began a side business of purchasing and importing foreign edition English language textbooks from Thailand. These textbooks were authorized foreign editions published by a wholly-owned foreign subsidiary of Respondent John Wiley & Sons (“Wiley”). These textbooks were substantially similar to textbooks meant for the United States market, but were less expensive. Kirtsaeng resold these textbooks in the United States for profit.

In 2008, Wiley sued Kirtsaeng for copyright infringement under 17 U.S.C. §§ 106(3) and 602, as Kirtsaeng imported the books without authorization, and later resold them, allegedly infringing on Wiley’s exclusive right to distribution and related import prohibition. Kirtsaeng argued that the books he acquired were “lawfully made” and since he acquired them legitimately, the “first sale” doctrine permitted him to resell them or dispose of them without the copyright owner’s further permission. The District Court held that the “first sale” defense was unavailable because the “first sale” doctrine did not apply to “foreign-manufactured goods” and the Second Circuit agreed.

The key to the Supreme Court’s holding that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad turned on the meaning of the phrase “lawfully made under this title.” The difference between Wiley’s interpretation and Kirtsaeng’s interpretation was whether the phrase imposed a geographical limitation. The Supreme Court agreed with Kirtsaeng that this language imposed a non-geographical limitation made “in accordance with” or “in compliance with” the Copyright Act, thus permitting the doctrine to apply to copies manufactured abroad with the copyright owner’s permission. The Supreme Court looked at the language of 17 U.S.C. § 109(a), its context, and the “first sale” doctrine’s common-law history in determining that Kirtsaeng’s interpretation was correct.

This ruling will have a substantial impact on how the publishing, music, motion picture and other copyright-oriented industries will conduct business overseas. It is likely that these industries will put pressure on Congress to amend the Copyright Act.

In addition, this ruling highlights the dichotomy between the views of international exhaustion in the copyright and patent arenas. International copyright exhaustion is now that law of the land, but this is certainly not the case for patents. The Supreme Court recently denied Ninestar Technology Co. Ltd.’s petition for a writ of certiorari to consider whether an initial authorized sale outside of the United States of a patented item exhausts the patent rights to that item. Furthermore, the Federal Circuit’s recent decisions in patent cases have rejected international exhaustion of patent rights.

Gibbons will continue to monitor developments concerning the “first sale” doctrine and international exhaustion of intellectual property rights.

Jillian A. Centanni, a former Associate in the Gibbons Intellectual Property Department, co-authored this post.