(NEW YORK) MintPress – The curious case of Supap Kirtsaeng vs. John Wiley & Sons is about to draw a lot of national attention, and for good reason.
Legal experts say it promises to be one of the top business and consumer cases in the current term of the Supreme Court (SCOTUS), which started this month, and will pit supporters of the so-called gray market — consumer advocates, retailers and distributors — against publishers and manufacturers that say their U.S. sales are being illegally undercut.
The court agreed in April to hear an appeal from Kirtsaeng, who was ordered by a jury to pay Wiley $600,000 for violating the company’s copyrights when he imported foreign-edition textbooks from his native Thailand and sold them in the U.S. for a profit.
Wiley publishes academic, scientific and educational journals and books, including textbooks, for sale in domestic and international markets.
It relies on a wholly-own subsidiary, Wiley Asia, to manufacture books for sale in foreign countries.
U.S. copyright law
The “first-sale doctrine” was first recognized by the Supreme Court in the 1908 case of Bobbs-Merrill Co. v. Straus and subsequently codified in the Copyright Act of 1976.
In the Bobbs-Merrill case, the publisher had inserted a notice in its books that any retail sale at a price under $1.00 would constitute an infringement of its copyright. The defendant, Straus, who owned Macy’s department store, disregarded the notice and sold the books at a lower price without Bobbs-Merrill’s consent.
The Supreme Court held that the exclusive statutory right to sell applied only to the first sale of the copyrighted work.
The doctrine thus limited certain rights of a copyright owner and enabled the unfettered distribution of copyrighted products, library lending, gifting, video rentals and secondary markets for copyrighted works, thus allowing individuals to sell their legally purchased possessions to others.
The issue at the Supreme Court is how copyright protection applies to items that are made abroad, purchased there and then resold in the U.S. without the permission of the manufacturer.
Wiley maintains that while the written content of books for the domestic and international markets is often similar or identical, books intended for international markets can differ from the domestic version in design; supplemental content, such as accompanying CD-ROMS; and the type and quality of materials used for printing
Moreover, it has argued, the foreign editions are marked with a legend to designate that they are to be sold only in a particular country or geographic region.
Student’s saga
Supap Kirtsaeng moved to the U.S. from Thailand in 1997 to pursue an undergraduate math degree at Cornell University. According to court documents, he later moved to California to pursue a doctoral degree.
To help subsidize the cost of his education, Kirtsaeng decided to become a textbook dealer. His family would buy overseas editions of textbooks printed abroad by Wiley Asia, at fairly low prices, and send them to him. Kirtsaeng then sold them to students and on commercial websites, such as eBay, and made a small profit. Overall, according to a SCOTUS blog, he sold $47,000 worth of Wiley books.
Kirtsaeng claimed in court documents that before selling the textbooks, he sought advice from friends in Thailand and consulted Google Answers to ensure that he could legally resell the foreign editions in America.
But on Sept. 8, 2008, Wiley sued him in federal court in New York, and Kirtsaeng tried to rely on the first-sale doctrine for his defense. A federal judge rejected the claim, concluding that the doctrine does not apply to goods made in a foreign country.
The jury found Kirtsaeng liable for infringing copyright on eight books, and found that it was an intentional violation of Wiley’s copyright. It awarded Wiley $75,000 in damages for each book.
Kirtsaeng appealed, but the Second Circuit Court upheld the award, agreeing that the doctrine does not apply to a foreign-made product. He then appealed to the highest court in the country.
High stakes
Kirtsaeng contends the 2nd Circuit ruling would have “astounding” consequences. He argued in court papers that, under the 2nd Circuit’s reasoning, movie producers could “demolish” rental services, including Netflix, by manufacturing DVDs in Mexico.
The lower court ruling “affords copyright owners not just one opportunity to sell their works at a bargained-for price but perpetual control,” Kirtsaeng stated in his appeal.
The import of gray market products to the U.S. “represents a multibillion-dollar benefit to American consumers,” according to a brief urging a Supreme Court review of Kirtsaeng v. John Wiley & Sons filed by the Retail Industry Leaders Association, whose members include Wal-Mart, Target and Costco. EBay filed a separate brief asking the court to take the case.
Jonathan Bland, an adjunct professor at Georgetown University Law Center, agreed, saying, “It means that it’s harder for consumers to buy used products and harder for them to sell them.”
Bland filed a friend-of-the-court brief on behalf of the American Library Association, the Association of College and Research Libraries and the Association for Research Libraries. “This has huge consumer impact on all consumer groups,” he explained.
“It would be absurd to say anything manufactured abroad can’t be bought or sold here,” asserted Marvin Ammor, a First Amendment lawyer and Schwartz Fellow at the New American Foundation.
As Christopher Danzig, Assistant Editor of Inside Counsel magazine, opined in a post on Above the Law, “Everyone always talks about how far the law lags behind technology, so it will be interesting to see who comes out on top here: technological innovation or publishing conglomerates with outdated business models. My hope is on the former; my money, not so sure.”
The case is set for argument on Monday, Oct. 29.