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EcommerceBytes-NewsFlash, Number 2923 - October 29, 2012 - ISSN 1539-5065    0 of 9

Supreme Court Weighs First-Sale Case Affecting eBay, Online Sellers

By Kenneth Corbin
EcommerceBytes.com
October 29, 2012




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The U.S. Supreme Court on Monday heard oral arguments in an intellectual-property case involving an eBay seller that could define the scope of the first-sale doctrine, or the right to resell copyrighted works purchased in a legitimate transaction without first obtaining permission from the rights owner.

The case, Kirtsaeng v. John Wiley & Sons, concerns Supap Kirtsaeng, a graduate student who arranged to import textbooks legally purchased at a discount in his native Thailand and then resold them to U.S. buyers on eBay to help pay for his school expenses. The publisher, John Wiley & Sons, sued, arguing that the first-sale doctrine does not apply to works purchased overseas in so-called gray markets.

Lower courts sided with Wiley, and the Supreme Court agreed to hear the case in an effort to sort out conflicting interpretations of copyright statute that at once protect resellers' rights under the first-sale doctrine while at the same time requiring permission from the rights owner to import protected works.

"The question presented is how these provisions apply to a copy that was made and legally acquired abroad and then imported into the United States," the court said in a statement of the issues at play in the case.

The Associated Press reported Monday that "the court seemed to struggle with whether it matters where the books were produced and first sold," adding that "the justices did not appear entirely comfortable with either side's arguments."

The wire service reported that Kirtsaeng's attorney was challenged over whether his dire warnings about the impact a ruling in favor of Wiley would have on secondary markets were overstated. Conversely, the publisher's counsel was asked whether a first-sale restriction on imports could indeed be extended to bar the resale of foreign cars or even the display of artwork in museums, as Kirtsaeng's supporters contend.

The court is expected to deliver its ruling in 2013.

The high court last considered the right to import copyrighted works from overseas for domestic resale in 2010, when it deadlocked four to four in Costco v. Omega, with Justice Elena Kagan, who had been involved in the case as an attorney with the Justice Department, having recused herself. Kagan is participating in the Kirtsaeng case.

eBay, along with a number of other ecommerce players and trade associations, has joined in a coalition advocating for a liberal interpretation of the first-sale doctrine, warning that a ruling against Kirtsaeng, carried to its logical extent, would amount to a substantial restriction of the flow of commerce.

In a statement, Andrew Shore, executive director of the Owners' Rights Initiative, said the group "hopes that the Supreme Court will take this opportunity to defend owners' rights and clarify that if you buy something, you own it."

"We believe when you purchase something you should have the right to sell it, lend it or donate it, regardless of whether that good was made in the U.S. or elsewhere," Shore said. "If the court rules in favor of Wiley, libraries may be unable to lend books, individuals could be restricted from donating items to charities, and businesses and consumers could be prevented from selling a variety of products, from electronics, to books, to jewelry, to used cars."

The group's concern, echoed by prominent digital-rights advocates like the Electronic Frontier Foundation (EFF) and Public Knowledge, is that an interpretation that limits the first-sale doctrine to products manufactured and purchased in the United States ignores the reality of a global supply chain, where components from overseas with intellectual-property rights are routinely found in all manner of goods.

"First sale provides the legal framework for marketplaces like used bookstores, flea markets, garage sales, and eBay," Parker Higgins, an activist with the EFF, wrote in a blog post outlining the group's support of the doctrine.

"The Kirtsaeng case specifically deals with textbooks, but the court's decision is likely to affect a range of markets and consumers. First, many of the goods that people purchase every day are manufactured overseas and have some components or logos on the packaging that are subject to copyright law," Higgins wrote. "Second, if the Supreme Court rules in Wiley's favor, U.S. copyright holders will likely ensure that as many of their works as possible are manufactured outside the United States, so that they, too, can escape that pesky first-sale doctrine."

Wiley contends that the importation of the textbooks was itself illegal. The Association of American Publishers, which filed an amicus brief supporting Wiley's position, maintains that the unauthorized importation and resale of goods bound for foreign markets, where producers employ different pricing structures, threatens to undermine the economic foundation of industries built on intellectual property. What's more, the group counters that the slippery-slope arguments about the far-reaching implications of the case like those raised by the EFF are dramatically overstated.

"There has been a great deal of ill-founded speculation and fear-mongering about the potential consequences of this case, mainly driven by retail and digital industries whose business models are built on the availability of an unlimited marketplace for used products," the association said in a post describing the Kirtsaeng case. "And there's also a big difference between your resale of a book or device purchased in the U.S. and produced for the U.S. market as compared to hugely-profitable businesses such as Supap Kirtsaeng's which are created and operated on a mass scale of copyright infringement."

But without strong protections for resellers' rights, the EFF argues, the act of purchasing a product would essentially become a licensing agreement with the terms set by the original rights holder, dealing a major blow to the viability of secondary markets like eBay.

The EFF has joined with Demand Progress in launching the "You've Been Owned" campaign, calling on members of Congress to enact legislation that would clarify and strengthen the first-sale doctrine.

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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