Does the Supreme Court Have a Free Policy Choice in Wiley v. Kirtsaeng? (Guest Blog Post)

By Guest Blogger Marketa Trimble

Does the Supreme Court Have a Free Policy Choice in Wiley v. Kirtsaeng?

(A Template for an Interpretation of the Copyright Act that Ignores the Place of Manufacture and Provides a Free Choice between the Principles of International and National Exhaustion)

The Supreme Court will make an important decision in Kirtsaeng v. John Wiley & Sons, which the Court has scheduled for oral arguments on October 29, 2012. Although the focus of the controversy has been on distinguishing between foreign-made and U.S.-made copies (see below), the key policy question in the decision should rather be which principle of copyright exhaustion the United States should adopt for all copies: the principle of international exhaustion or the principle of national exhaustion. Under the principle of international exhaustion the first authorized sale of a copy – anywhere in the world – exhausts a copyright owner’s right to distribute the particular copy, and the new owner of the copy may freely resell the copy in the protecting country (in this case in the United States). The principle of national exhaustion says that only if the first authorized sale occurs in the protecting country (in this case in the United States) will the right to distribute under the copyright law of that country (in this case U.S. copyright law) be exhausted.

The problem is that the Copyright Act has been interpreted to distinguish between copies manufactured in the United States and copies manufactured outside the United States. Courts have interpreted the Act as applying the principle of international exhaustion to copies manufactured in the United States and the principle of national exhaustion to copies manufactured outside the United States. Whether it makes sense to treat copies differently based on their place of manufacture is debatable, but it certainly makes no sense as a matter of policy to afford rights more favorable to a copyright owner (under the rule of national exhaustion) for copies manufactured outside the United States. Other countries do not distinguish by places of manufacture when they apply the exhaustion principle; they adopt the principle of either national or international exhaustion for all copies.

The question is whether the Supreme Court could both 1) abandon the distinction between copies based on their place of manufacture, and 2) make a conscious policy choice between the principles of national and international exhaustion. It might seem that the constraints of the language of the Copyright Act would preclude an interpretation that would lead to taking the two steps simultaneously. However, the template below shows that it might be possible for the Supreme Court to focus on the key policy debate and choose freely between the two principles of exhaustion, thereby selecting a pivotal policy for U.S. copyright law. The template suggests that the relevant individual provisions of the Copyright Act could be interpreted in a manner that would permit a choice of one exhaustion principle or the other without having to distinguish among copies based on their place of manufacture.

On the issue of national versus international exhaustion see also Kirtsaeng v. John Wiley & Sons, Reply Brief for Petitioner, Oct. 1, 2012, pp. 20-23.

Related posts:

* Second Circuit Says No First Sale Doctrine for Works Manufactured Outside the U.S. — Wiley & Sons v. Kirtsaeng

* Supreme Indecision: Costco v. Omega Gums up the (Watch)Works

* Resale of International Textbooks to US Students Not Protected by First Sale Doctrine–Pearson v. Liu

Also see the HTLI conference page for Exhaustion and First Sale in IP from 2010.

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The template below is based solely on statutory language and ignores legislative history, case law, and other points of reference for legislative interpretation. The interpretation of the statutory language in the template is simplified to serve the purpose of an overview rather than an in-depth analysis.

U.S. Copyright Act Provision

Interpretation for International Exhaustion

Interpretation for National Exhaustion

§109(a), first sentence

(The First Sale Doctrine)

 

“Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”

The first sale doctrine applies to sales anywhere in the world. A person or entity becomes an “owner of a particular copy or phonorecord” by acquiring the copy or phonorecord anywhere in the world. The phrase “lawfully made under this title” refers to copies or phonorecords that are lawful – or if made under the same circumstances in theUnited States, would have been held lawful – under the U.S. Copyright Act. The first sale doctrine applies only to sales within the United States because section 602(a)(1) makes it an infringement to import copies or phonorecords acquired outside the United States. The phrase “lawfully made under this title” means that the provision applies to any copies or phonorecords, whether manufactured in the United States or abroad, which once in the United States are held to have been lawfully made as measured by the U.S. Copyright Act.
§602(a)(1)

(Infringing Importation of Copies Acquired Abroad)

 

“Importation into theUnited States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside theUnited Statesis an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501.”

 

The exclusive right to distribute under section 106(3) is limited by the first sale doctrine in section 109(a), and therefore it is not an infringement to import copies or phonorecords to which the distribution right was exhausted; even if they have been acquired abroad, the distribution right of the copyright owner is exhausted. Section 602 concerns copies and phonorecords that were never sold by the copyright owner anywhere in the world and are now being imported into the United States. Section 602(a) targets copies or phonorecords “acquired outside the United States,” and the section defines the territorial scope of the distribution right to include the right to distribute outside the United States, which is not limited by the first sale doctrine in section 109(a). Section 602(a) captures copies or phonorecords acquired outside the United States whether or not they were sold outside the United States by the copyright owner.
§602(a)(2)

(Infringing Importation and Exportation of Infringing Copies)

 

“Importation into the United States or exportation from the United States, without the authority of the owner of copyright under this title, of copies or phonorecords, the making of which either constituted an infringement of copyright, or which would have constituted an infringement of copyright if this title had been applicable, is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under sections 501 and 506.” (emphasis added)

 

(1)   The reason for using the longer phrase (in italics) as opposed to the shorter phrase “not lawfully made under this title” is that the provision’s emphasis is on lawful manufacture.

(2)   The interpretation of the first sale doctrine as covering sales in the United States and abroad is consistent with section 602(a)(2) because the doctrine does not cover copies or phonorecords that were not “lawfully made under this title,” meaning not lawful – or if made under the same circumstances in the United States, would not have been held lawful – under the U.S. Copyright Act. The distribution right to such copies and phonorecords is never exhausted in the United States and their importation and exportation is an infringement.

(1)   The reason for using the longer phrase (in italics) as opposed to the shorter phrase “not lawfully made under this title” is that the provision’s emphasis is on lawful manufacture.

(2)   The interpretation of the first sale doctrine as covering sales only in the United States is consistent with section 602(a)(2) because the doctrine does not cover copies or phonorecords, whether manufactured in the United States or abroad, which once in the United States are held to be unlawful under the U.S. Copyright Act. The distribution right to such copies or phonorecords is never exhausted in the United States and their importation and exportation is an infringement.

 

§501(a), first sentence

(Infringement of Copyright)

 

“Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 122 or of the author as provided in section 106A(a), or who imports copies or phonorecords into the United States in violation of section 602, is an infringer of the copyright or right of the author, as the case may be.”

 

It is an infringement to distribute copies or phonorecords that were never sold by the copyright owner in the United States or anywhere in the world (section 106(3) distribution right limited by the first sale doctrine of section 109(a), and section 602(a)). Importation of unlawful copies is also an infringement (section 602(b)). It is an infringement to distribute copies or phonorecords that were never sold by the copyright owner in the United States(section 106(3) distribution right limited by the first sale doctrine of section 109(a)). It is an infringement to import copies or phonorecords that were acquired outside the United States whether or not they were sold there by the copyright owner (section 602(a)). Importation of unlawful copies is also an infringement (section 602(b)).
§109(c) and (e)

(Exceptions to the right to perform publicly and the right to display publicly)

 

“Notwithstanding the provisions of section 106(5), the owner of a particular copy lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to display that copy publicly, either directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located.”

 

“Notwithstanding the provisions of sections 106(4) and 106(5), in the case of an electronic audiovisual game intended for use in coin-operated equipment, the owner of a particular copy of such a game lawfully made under this title, is

entitled, without the authority of the copyright owner of the game, to publicly perform or display that game in coin-operated equipment, except that this subsection shall not apply to any work of authorship embodied in the audiovisual game if the copyright owner of the electronic audiovisual game is not also the copyright owner of the work of authorship.”

 

The exceptions apply to all lawful works – whether made in the United States or elsewhere – because the phrase “lawfully made under this title” refers to copies or phonorecords that are lawful – or if made under the same circumstances in theUnited States, would have been held lawful – under the U.S. Copyright Act. The exceptions apply to all works that are located within the reach of the U.S. Copyright Act because the phrase “lawfully made under this title” refers to any copies or phonorecords, whether manufactured in the United States or abroad, which once in the United States are held to be lawful as measured by the U.S. Copyright Act.
§110(1)

(Educational Exception)

 

“Notwithstanding the provisions of section 106, the following are not infringements of copyright:

(1) performance or display of a work by instructors or pupils in the course

of face-to-face teaching activities of a nonprofit educational institution, in

a classroom or similar place devoted to instruction, unless, in the case of a

motion picture or other audiovisual work, the performance, or the display of individual images, is given by means of a copy that was not lawfully made under this title, and that the person responsible for the performance knew or had reason to believe was not lawfully made;”

 

Same interpretation as for section 109(c) and (e). Same interpretation as for section 109(c) and (e).
§110(2)

(Online Learning Exception)

 

“Notwithstanding the provisions of section 106, the following are not infringements of copyright:…

(2) except with respect to a work produced or marketed primarily for performance or display as part of mediated instructional activities transmitted via digital networks, or a performance or display that is given by means of a copy or phonorecord that is not lawfully made and acquired under this title, and the

transmitting government body or accredited nonprofit educational institution knew or had reason to believe was not lawfully made and acquired, the performance of a nondramatic literary or musical work or reasonable and limited

portions of any other work, or display of a work in an amount comparable to that which is typically displayed in the course of a live classroom session, by or in the course of a transmission, if…”

 

The phrase “a copy or phonorecord that is not lawfully made and acquired under this title” refers to a copy or phonorecord whose origin is not lawful under the U.S. Copyright Act. Even if the copy or phonorecord was manufactured and/or acquired outside the United States, the copy or phonorecord is not “lawfully made or acquired under this title” if its manufacture and acquiring under the same circumstances in the United States would have been unlawful under the U.S. Copyright Act. The phrase “a copy or phonorecord that is not lawfully made and acquired under this title” refers to a copy or phonorecord, which once in the United States is held to be unlawfully made and/or acquired under the U.S. Copyright Act. Regardless of where the copy or phonorecord was manufactured and/or acquired, once in the United States, its lawfulness is measured by the U.S. Copyright Act.
§1001(7) and §1006(a)(1)(A)

(Digital Audio Recording)

 

“An ‘interested copyright party’ is—

(A) the owner of the exclusive right under section 106(1) of this title to

reproduce a sound recording of a musical work that has been embodied in a digital musical recording or analog musical recording lawfully made under this title that has been distributed;

(B) the legal or beneficial owner of, or the person that controls, the right to reproduce in a digital musical recording or analog musical recording a musical work that has been embodied in a digital musical recording or analog musical recording lawfully made under this title that has been distributed;”

 

“The royalty payments deposited

pursuant to section 1005 shall, in accordance with the procedures specified in section 1007, be distributed to any interested copyright party—

(1) whose musical work or sound recording has been—

(A) embodied in a digital musical recording or an analog musical recording lawfully made under this title that has been distributed, …”

 

 The phrase “lawfully made under this title” refers to copies or phonorecords that are lawful – or if made under the same circumstances in theUnited States, would have been held lawful – under the U.S. Copyright Act. The phrase “lawfully made under this title” means that the provision applies to any copies or phonorecords, whether manufactured in the United States or abroad, which once in the United States are held to have been lawfully made under the U.S. Copyright Act.
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