Supreme Court to decide the fate of eBay, Craigslist
Even if you don’t usually monitor political news, you’ll want to keep a close eye on the upcoming Supreme Court case Kirtsaeng v. John Wiley and Sons; the court will start hearing oral arguments on Oct. 29. Depending how the court rules, it’s possible almost the entire U.S. secondhand market will be outlawed: no more buying or selling used stuff on eBay or Craigslist, at yard sales or thrift stores – and maybe no more lending or borrowing in public libraries, either.
Like most Supreme Court cases, Kirtsaeng is a complex issue comprising a number of smaller ones, including copyright law, first sale doctrine, and the “gray market” (buying legal, low-priced items overseas and selling them in the U.S. at a markup).
In 1997, Supap Kirtsaeng left his native Thailand to study at Cornell University, where he had the quintessentially American college experience of discovering his required course textbooks were extremely expensive. But those books sold for much lower prices in Thailand, so he asked relatives back home to buy cheap copies and mail them to him. In addition to the books he used in his own classes, he also sold copies to bargain-hunting American students on eBay, making almost $1.2 million in profit.
Textbook manufacturer John Wiley sued Kirtsaeng, arguing that his actions violated Wiley’s copyrights on the books; Kirtsaeng countered that his actions were legal under the first sale doctrine.
The Department of Justice’s criminal resource manual says this about copyright and first sale [italics lifted from the original]:
“The first sale doctrine, codified at 17 U.S.C. § 109, provides that an individual who knowingly purchases a copy of a copyrighted work from the copyright holder receives the right to sell, display or otherwise dispose of that particular copy, notwithstanding the interests of the copyright owner. The right to distribute ends, however, once the owner has sold that particular copy.”
In other words, a copyright owner only controls the first sale of a copyrighted item. If you write, publish and sell a book, you have the exclusive right to print new copies of it, and you collect a royalty the first time a particular copy of your book sells. Whoever buys your book owns that particular copy, and henceforth can lend it to others, resell it, or even destroy it, without interference from you, the copyright holder. That’s why it’s legal for libraries to buy books and lend them out, and also legal for secondhand shops to buy and sell used books and DVDs, without payment to the original copyright holders.
So at first glance, Kirtsaeng v. Wiley seems pretty straightforward: Copyright holder Wiley got its cut at point of first sale (which happened to be in Thailand), then buyer Kirtsaeng owned the books and the right to resell them. Why must the Supreme Court get involved?
Because, after Wiley sued Kirtsaeng for copyright infringement in lower courts, the courts ruled that first sale doctrine – the idea that once you legally buy stuff, it’s legally your stuff to sell as you please – only applies to stuff manufactured and first sold in the U.S.
The business-technology blog Channelnomics noted, “In effect, everything with any sort of foreign trademark—from an Apple Inc. iPhone to an Omega watch to a piece of period furniture crafted in France—now requires express permission of, and presumably additional payment to, the foreign entity that created it in order to be sold.”
That mention of Omega watches alludes to a 2010 Supreme Court decision, Costco v. Omega, which Wiley’s attorneys will likely cite as precedent against Kirtsaeng. The Swatch watch company sells its Omega-brand luxury watches in overseas markets for much lower prices than in the U.S. Discount retailer Costco took advantage of this price differential by buying relatively inexpensive watches overseas, then selling them in U.S. stores at a profit. When other stateside retailers complained, Omega began putting copyrighted designs on its watches, then cited copyright law as a reason why Costco could no longer import foreign-bought watches for U.S. resale.
The Supreme Court ruled against Costco in December 2010, at which time the Daily Finance noted: “part of the copyright law makes it unclear if the ‘first sale doctrine’ applies when the product is manufactured outside the U.S. and the ‘first sale’ is out of the U.S. It's this issue that the Court effectively failed to decide this time.”
And it’s this issue the court will presumably decide in Kirtsaeng. There’s a lot more at stake here than whether Americans can legally resell their foreign-made possessions; back in 2010 the Daily Finance mentioned another implication of the Omega ruling:
“As Google, eBay and others supporting Costco noted, letting Omega control the resale price of goods manufactured and first sold abroad, but not the resale price of goods manufactured in the U.S. and first sold abroad (that was a different case decided before this one) provides a strong incentive (on top of any others, like cheaper labor, lack of environmental laws, etc.) to move manufacturing jobs out of the U.S.”
In other words, if the Supreme Court sides with Wiley against Kirtsaeng, copyright holders would actually be foolish to produce anything in the US: if they manufacture and sell items here, they only get paid at the point of first sale. But if they make something overseas to sell here, they effectively control it forever.
This would surely benefit foreign manufacturers. But what would it mean for ordinary US citizens? Library Journal noted that “Taken to its extreme, this approach might also enable publishers to prohibit a library from circulating foreign-printed books,” though “both Wiley and the U.S. solicitor general are at pains to provide legal theories that accommodate library lending in particular.”
But even if libraries are exempt from the rule, it would still be detrimental to ordinary US citizens wishing to buy or sell secondhand items. In a brief filed in the Kirtsaeng case, eBay observed that “imposing a place of manufacturing requirement on the first sale doctrine infringes consumers’ rights to redistribute goods ... copyright owners who have already been compensated for these goods [at point of first sale] are now attempting to use copyright law to hamper the ability of consumers and re-sellers to redistribute goods and comparison shop from different vendors.”
People who buy certain software already experience similar limitations: it’s illegal to sell your used copies of Microsoft Office or Rosetta Stone because you can’t officially buy the software; you only buy a license to use it. If Wiley gets its way in the Supreme Court then, technically speaking, almost everything you have (unless it’s stamped “Made in USA”) will be subject to similar restrictions: you won’t really “own” your UK-edition Harry Potter books or made-in-Switzerland watches anymore than you “own” the latest edition of Windows; they’re still under control of their copyright holders, and you only have permission to use them.
After all – if you’re legally forbidden to sell something, how can you really say it’s “yours”?
Photo by Gaelx/Flickr