A copyright case that’s before the U.S. Supreme Court could have a big impact on online sellers and several others who import items made abroad.
Kirtsaeng v. John Wiley & Sons involves an eBay seller, Supap Kirtsaeng, who sold authentic textbooks on eBay to help pay for his graduate-school tuition at the University of Southern California. The textbooks were purchased in Asia and sent to him by relatives in Thailand.
The venture turned into a legal dispute when Wiley, the publisher of eight of the books the student resold, sued Kirtsaeng for copyright infringement, trademark infringement and unfair competition. A New York court sided with the publisher, and Kirtsaeng was ordered to pay damages. Now the online seller is appealing the case before the Supreme Court. Here, we take a closer look at the case and what it could mean for online merchants and others.The question at issue is whether someone can buy an item overseas, import it and resell it without the permission of the manufacturer
‘Everyone should pay attention’
This case is a big deal, and “everyone should pay attention,” says Sarah Burstein, an associate law professor at the University of Oklahoma College of Law. That includes people who resell items, even if they’re small sellers, and even people who don’t sell items at all.
“Read broadly, the [court's] opinion would apply to everything from garage sales to large-scale, sophisticated operations,” she explains. “Of course, online sellers are potentially visible in a way that, say, a church yard sale would not be—and companies like eBay and Amazon are much more attractive defendants than little old ladies, so I would be surprised if they’re not watching this case very closely.”
The question at issue in Kirtsaeng v. Wiley is whether someone can buy an item overseas, import it and resell it without the permission of the manufacturer or the copyright owner.
According to the first sale doctrine of the U.S. copyright code, when someone buys a copy of a copyrighted work legally, they can sell the item, display it, lend it, etc., without permission from the copyright owner.
Kirtsaeng called on the first sale doctrine as part of his defense, but since the works were printed outside the U.S., the court sided with the publisher. The first sale doctrine says nothing about imported goods. Kirtsaeng was ordered to pay $600,000 in damages—$75,000 per copyrighted work printed by Wiley.Copyright law is to protect creativity… This is using copyright law as a way to stop the traffic of authentic, legitimate goods
A potential chilling effect on ecommerce
eBay Marketplaces and Amazon have been closely following this case, as have several other companies. Hillary Brill, global policy counsel for eBay, says the case is distressing. She notes that the Internet has “transformed” sales, and opened up world markets to buyers and sellers.
“This case is moving in a direction that would hurt the transformative power of the Internet,” if the Supreme Court sides with the publisher, she adds. “It would hurt by creating more barriers for businesses, and it would hurt the ability of consumers to access existing goods that are legitimate and authentic from a variety of different sources.”
Brill explains that when shoppers buy authentic goods, they assume they own them—and assume they have the right to resell them, as the first sale doctrine states. However, if the Supreme Court sides with the publisher, resellers—large or small—that import products may have to first get permission from manufacturers before they can sell items in the U.S. They may even have to buy direct from the manufacturer. In today’s global market, that could be difficult.
“People buy goods from a variety of different places, and when they get to a consumer, whether it’s through Walgreens or an eBay seller, they haven’t come necessarily from the manufacturer,” Brill says.
If forced to get permission or buy directly from the manufacturer, retailers may have to raise their prices, as inventory may cost more to obtain, “or sellers who currently exist online may not be authorized to sell the products,” she adds.
“Copyright law is to protect creativity and try to get people to create new things…” she notes. “This is using copyright law as a way to stop the traffic of authentic, legitimate goods.”
Costco v. Omega: A court divided
A similar case appeared before the Supreme Court in 2010, involving retailer Costco and watchmaker Omega. In that case, Omega sued the retailer for importing its watches and selling them for a lower price than other shops. According to news reports, Costco was selling the watches for $1,200, about $700 less than Omega’s suggested retail price.It means everything is still undecided, and you don’t even know what the judges thought
In the initial hearing, the court sided with the watchmaker. eBay was watching that case, too, Brill tells us. Officials even filed a brief on Costco’s behalf when the case reached the Supreme Court. During that hearing, newly seated Justice Elena Kagan recused herself—meaning she did not vote—because, prior to her confirmation to the court, she wrote the brief for the government and supported the Omega side. That resulted in a 4-4 split vote.
What did that mean for the case and retailers who may have been affected by it? Nothing. No ruling was handed down, and there was no precedent for future, similar cases.
“It means everything is still undecided, and you don’t even know what the judges thought because, in a split decision, [court documents just say] ‘Divided.’ Period,” Brill says.
She notes that eBay hoped the case would go Costco’s way.
If Kirtsaeng v. Wiley goes in favor of the publisher, it could be a very broad reading of the law, she continues. “Once a good is made overseas, the rights owner would have to decide what happens to it again, again and again and again,” Brill explains.
U.S. merchants wouldn’t be able to resell an item made abroad without permission from the manufacturer. What’s more, the consumer of the resold item may also have to get permission from the manufacturer to resell it again.
That makes sense in a very small market, but not in today’s global market, Brill says.
Not just affecting sellers
The American Library Association has also been paying close attention to this case. That’s because libraries, museums and others could be affected by the outcome, says Corey Williams, associate director for the Office of Government Relations for ALA.
Depending on the outcome, it could raise questions about what materials libraries can lend, she notes.
“‘First sale’ allows us to purchase materials, books—no matter where they’re manufactured—and then lend them. That’s the beauty of it,” Williams says. “However, if the Second Circuit decision is upheld, libraries will have to determine which books lawfully may be lent. And that raises real questions. We would have to pay real attention to where the books were manufactured.”The United States admitted that it would be worse if John Wiley’s interpretation won than if Kirtsaeng’s interpretation won
That process is very difficult, she tells us. Though a U.S. author may write a book, and a U.S. publishing house may publish it, the book may be sent overseas for printing, and you can’t always tell where materials were printed just by looking at the inside cover.
“We have no idea how we would go about it,” she continues. “The potential outcome raises alarm bells… It’s just not practical. It doesn’t make sense. The ALA believes when we buy it, we can lend it. Period.”
She says she and others are trying to look into their “crystal balls” to see what may happen in Kirtsaeng v. Wiley, but they’re not sure.
“We’re cautiously optimistic,” Williams continues. “But then, at the same time, looking back at the Costco case, I just don’t know that I accurately predict it either way.”
She is sure of one thing, though: There will be a mad dash to Capitol Hill to start legislation, regardless of which side wins. “I anticipate legislation pretty much no matter how the court rules,” Williams adds. “The question is who will be advocating for it?”
Law professor Burstein says she would be surprised if the Supreme Court affirms the Second Circuit’s interpretation of the law because it is so broad.
“Although it’s always risky to try to read the tea leaves based on oral arguments, the justices seemed to be concerned with the practical effect that their ruling would have,” she says. “And the United States admitted that it would be worse if John Wiley’s interpretation won than if Kirtsaeng’s interpretation won—of course, the United States was urging a third interpretation.”
The court is expected to reach a decision by June. What do you think of this case? Tell us in the comments below.