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Supreme Court Gives Greenlight to Resale of Foreign-Made Works

Studios Fear Disruption of Windows, International Markets

Owners of DVDs, CDs and other goods will have complete leeway to resell lawfully made goods at swap meets, on eBay or in stores, even if they were originally purchased abroad.

On Tuesday, the Supreme Court ruled that the “first-sale” doctrine applies to such foreign-made works, even as studios and record labels had argued that such a ruling could upend distribution windows and cannibalize foreign film releases.

In a 6-3 ruling, the high court said that the “first-sale” doctrine does apply to these products made abroad, and interpreted its statutory and common law interpretation as not applying to geography.

The doctrine gives copyright owners the right to control the first sale of a work, but that exclusive right ends after a buyer purchases it and makes a sale afterward. At issue is whether that doctrine applies to instances when, for example, a consumer buys DVDs or CDs overseas at a reduced price then redistributes them in the U.S.

Writing for the majority, Justice Stephen Breyer wrote that policing the resale of goods made overseas versus those in the U.S. would be unworkable, disrupting retailers, booksellers, museums and others, and that “a copyright law that can work in practice only if unenforced is not a sound copyright law. It is a law that would create uncertainty, would bring about selective enforcement, and, if widely unenforced, would breed disrespect for the copyright law itself.”

The case concerned Supap Kirtsaeng, a Thai native who came to the U.S. to attend Cornell U. and found that the textbooks published in Asia by Wiley & Sons were much cheaper than the same editions available in the U.S. So he got relatives to buy them, ship the books to him in the U.S., and then sold them on eBay and other sites. John Wiley & Sons sued for copyright infringement, won in district court and again in appellate court.

The impact of the decision is widespread in that many businesses depend on different pricing in different markets. But Breyer supported an interpretation of a clause in the Copyright Act — the words “lawfully made under this title” — as not meaning that the doctrine was meant to be limited on geography.

Justice Ruth Bader Ginsburg, in a dissenting opinion, said that the Copyright Act was meant to limit the first sale, as a “remedy against the unauthorized importation of foreign-made copies of their works, even if those copies were made and sold abroad with the copyright owner’s authorization.”

In an amicus brief filed in the case, the MPAA and the Recording Industry Assn of America said that a ruling in favor of Kirtsaeng could impede their ability to divide markets, with consumers instead buying up cheaper imported alternatives of the same title.

In a statement on Tuesday, the MPAA said that they “believe that today’s Supreme Court decision will hinder American businesses’ ability to compete overseas to the detriment of the long-term economic interests of the United States, and particularly its creative industries. We plan to study the decision further before determining the most appropriate action for us to take.”

More vexing to the courts, however, may be a case of the future: Whether the “first-sale” doctrine applies in any way to digital goods, whether they are made domestically or overseas.

Jonathan Steinsapir, partner with the law firm Kinsella, Weitzman, Iser, Kump & Aldisert, suggested that the court’s decision creates a “potential for disruption” in Hollywood, as studios and record labels face having domestic releases of CDs and DVDs competing against the ones produced for foreign markets. He also predicted calls for  revising copyright law to curb such imports yet to make it possible for libraries, art galleries and others to display works without the threat of legal action.

Congress “can make the language read so it avoids broth absurd results,” he said.

In fact, Maria Pallante, the U.S. Register of Copyrights, plans to testify in Congress on Wednesday about the need to revise copyright law, including looking at the “first sale doctrine.”

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