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EcommerceBytes-NewsFlash, Number 2843 - July 09, 2012 - ISSN 1539-5065    1 of 3

eBay Weighs in on Gray Market Case Headed for Supreme Court

By Kenneth Corbin
EcommerceBytes.com
July 09, 2012




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Ahead of a U.S. Supreme Court case that could establish a major precedent for the ecommerce industry, eBay is calling on sellers to sign a petition urging the Obama administration to affirm the right to resell legally acquired merchandise.

The case concerns an eBay seller who was sued successfully by publisher John Wiley & Sons for copyright infringement. The seller, Supap Kirtsaeng, at the time was a graduate student who had been importing textbooks that friends and family purchased in Thailand, where Wiley was selling them at a discount through a subsidiary, and then resold them at a profit on eBay.

The case figures to clarify what is known as the first-sale doctrine, which holds that manufacturers can only set pricing for the first transaction in which the merchandise changes hands. After making a legal purchase, the owner is then entitled to resell or give the product away without obtaining the permission of the rights holder.

In Kirtsaeng vs. Wiley, the high court will consider whether the first-sale doctrine applies to goods purchased overseas and then imported into the United States, a case that could have a major impact on the vitality of secondary marketplaces such as eBay or Craigslist.

"eBay supports the efforts of the Internet users and consumer organizations that have launched and supported the citizens petition for ownership rights," Amanda Williams, a spokesperson for the company, wrote in an email. "The federal government should protect the right of each citizen to buy and sell the goods they legally own."

In that spirit, eBay has thrown its weight behind Citizens for Ownership Rights, a coalition of digital-rights groups that is collecting signatures for a petition it intends to deliver to President Obama and the U.S. attorney general asking for broad support of the ownership principles associated with the first-sale doctrine.

"When you purchase an item on eBay, you should be able to resell it, give it away, or use it as you see fit," eBay wrote in a post on its Main Street blog. "Likewise, when you sell an item on eBay, ownership of the item should transfer to the buyer."

Wiley won a jury award of $600,000 in its case against Kirtsaeng in a lower court, a ruling that was upheld by the appellate court of the Second Circuit.

Members of Citizens for Ownership Rights are warning that if the high court upholds strict limitations on the first-sale doctrine concerning imported merchandise, potentially any product with a component that was produced overseas could be subject to resale restrictions. That would give manufacturers dramatically expanded powers over pricing and distribution, and could significantly curtail secondary markets - both online and off.

"Would this ever actually be used? I think actually it could be," said Sherwin Siy, vice president of legal affairs at Public Knowledge, one of the groups backing the petition. "You see certain companies that are very eager to control the whole retail chain."

Carried to its most restrictive extent, a Supreme Court ruling that rejects the first-sale doctrine as it relates to so-called gray markets abroad could give manufacturers leverage to impose licensing agreements on resellers of their copyrighted works. With such an agreement in hand, rights holders could pursue litigation against sellers not only for breach of contract, but copyright infringement, which Siy said can entail much higher damages awards.

"You have these threats of lawsuits," he said. "You're going to be able to eliminate an entire secondary market."

"Otherwise, you're going to look for a "Made in the USA" label on everything you buy on eBay," he added.

The Supreme Court is expected to hear oral arguments in Kirtsaeng vs. Wiley this fall.

About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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