Source: https://www.keionline.org/22159
Timestamp: 2019-04-25 07:46:19+00:00

Document:
Today, 19 March 2013, the Supreme Court released its opinion in Kirtsaeng v. John Wiley & Sons, a case involving the parallel importation of copyrighted works. The case involved the petitioner, Kirtsaeng, purchasing textbooks in Thailand then reselling them in the United States. The Second Circuit held in this case that the first sale doctrine did not apply to foreign made goods, applying national exhaustion principles. The Supreme Court reversed and remanded the case, holding that the first sale doctrine does apply to foreign made works and resolving a three-way circuit split (where the Ninth Circuit took the position that the first sale doctrine applied to foreign made works but only after an authorized first domestic sale in the United States and the Third Circuit suggested that international exhaustion applies). Oral arguments were heard on 29 October 2012 and KEI’s amicus brief in the case can be found here.
The opinion was a 6-3 decision, with the majority written by Justice Breyer. Justices Scalia, Ginsburg and Kennedy dissented. That the opinion was 6-3 is notable considering that the Costco v. Omega case had a 4-4 split (with Justice Kagan recusing herself), thus suggesting that one justice who heard the Costco case changed his mind on the merits of parallel importation.
The majority opinion was authored by Justice Breyer and joined by Chief Justice Roberts, and Justices Thomas, Alito, Sotomayor and Kagan.
Justice Breyer’s opinion notes that a literal reading of the statute, that is, the phrase “lawfully made under this title” means “in accordance with” the Copyright Act and does not impose any geographical limitation. Additionally, the opinion rejects the Ninth Circuit reading as “half-geographical/half-non-geographical” that has no basis in the language of the statute.
The “equal treatment” principle, however, is difficult to square with a geographical interpretation of the “first sale” clause that would grant the holder of an American copyright (perhaps a foreign national, see supra, at 10) permanent control over the American distribution chain (sales, resales, gifts, and other distribution) in respect to copies printed abroad but not in respect to copies printed in America.
Furthermore, because the words “lawfully made under this title” appears elsewhere in the Copyright Act and that upholding the Second Circuit opinion would impact these other sections because of the presumption that the words used once in a statute generally carry the same interpretation and meaning where used elsewhere in the same statute. The Court notes the absurdities that would then result with respect to 1) display rights (those who purchased “art, a poster or even a bumper sticker” abroad could not display the work in the U.S. without authorization from the right holder); 2) performance rights for video arcade games (an arcade owner could not perform or display an arcade game made abroad, such as in Japan, without permission of the right holder); 3) teachers (could not perform or display a copyrighted work if made abroad); and 4) notes that Section 106 of the Copyright Act laying out the exclusive rights of a copyright owner applies to “copyright under this title” and does not support geographical limitations.
Because the first sale doctrine originated as a common law doctrine that was later codified by statute, Congress is presumed to “retain the substance of the common law.” Justice Breyer notes that the common law does not support geographical limitations.
Associations of libraries, used-book dealers, technology companies, consumer-goods retailers, and museums point to various ways in which a geographical interpretation would fail to further basic constitutional copyright objec­tives, in particular “promot[ing] the Progress of Science and useful Arts.” U. S. Const., Art. I, §8, cl. 8.
the fact that harm has proved limited so far may simply reflect the reluctance of copyright holders so far to assert geographically based resale rights. They may decide differently if the law is clarified in their favor. Regardless, 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 copyright law itself.
Thus, we believe that the practical problems that peti­tioner and his amici have described are too serious, too extensive, and too likely to come about for us to dismiss them as insignificant—particularly in light of the ever­ growing importance of foreign trade to America. See The World Bank, Imports of goods and services (% of GDP) (imports in 2011 18% of U. S. gross domestic product compared to 11% in 1980), online at http://data.worldbank.org/indicator/NE.IMP.GNFS.ZS? (as visited Mar. 15, 2013, and available in Clerk of Court’s case file). The upshot is that copyright-related consequences along with language, context, and interpretive canons argue strongly against a geographical interpretation of §109(a).
The majority opinion then moves on to address the dissenting opinion. It argues that, contrary to the dissenting opinion’s reasoning, that both Supreme Court past precedent as well as the legislative history more greatly support a reading of international exhaustion than national exhaustion. Turning to the point that copyright owners will not be able to segment markets, Justice Breyer acknowledges that this result does occur, but asserts that the Constitution and Congress has not granted copyright owners such a right.
Wiley and the dissent claim that a nongeograph­ical interpretation will make it difficult, perhaps impos­sible, for publishers (and other copyright holders) to divide foreign and domestic markets. We concede that is so. A publisher may find it more difficult to charge different prices for the same book in different geographic markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights.
book, say to increase or to maximize gain. Neither, to our knowledge, did any Founder make any such suggestion. We have found no precedent suggesting a legal preference for interpretations of copyright statutes that would pro­vide for market divisions. Cf. Copyright Law Revision, pt. 2, at 194 (statement of Barbara Ringer, Copyright Office) (division of territorial markets was “primarily a matter of private contract”).
To the contrary, Congress enacted a copyright law that (through the “first sale” doctrine) limits copyright holders’ ability to divide domestic markets. And that limitation is consistent with antitrust laws that ordinarily forbid mar­ket divisions. Cf. Palmer v. BRG of Ga., Inc., 498 U. S. 46, 49–50 (1990) (per curiam) (“[A]greements between compet­itors to allocate territories to minimize competition are illegal”). Whether copyright owners should, or should not, have more than ordinary commercial power to divide international markets is a matter for Congress to decide. We do no more here than try to determine what decision Congress has taken.
The dissenting opinion also asserts that the majority opinion “launches United States copyright law into an unprecedented regime of ‘international exhaustion'” but, as Justice Breyer notes, such an assertion does not point to any congressional intent. The majority also refutes the dissent’s claim that the United States opposes international exhaustion, noting that the Solicitor General had not taken such an opinion and in fact conceded that the “parade of horribles” presented by Kirtsaeng and amici were worse than the “horribles” of Wiley & Sons.
While Justice Kagan and Justice Alito fully concurred with the majority opinion, they filed a concurring opinion (authored by Justice Kagan). The concurrence notes full support for the application of the first sale doctrine to works manufactured abroad and “I write to suggest that any problems associated with that limitation come not from our reading of §109(a) here, but from Quality King’s holding that §109(a) limits §602(a)(1).” Justice Kagan suggests that Congress may indeed have intended to permit market segmentation, but that provision is contained under Section 602(a)(1) of the Copyright Act, a question not before the court in the present case. She therefore declines to “misconstrue” the first sale doctrine in favor of rectifying the decision of Quality King.
But if Congress views the shrinking of §602(a)(1) as a problem, it should recognize Quality King—not our decision today—as the culprit. Here, after all, we merely construe §109(a); Quality King is the decision holding that §109(a) limits §602(a)(1). Had we come out the opposite way in that case, §602(a)(1) would allow a copyright owner to restrict the importation of copies irrespective of the first-sale doctrine. That result would enable the copyright owner to divide international markets in the way John Wiley claims Congress intended when enacting §602(a)(1). But it would do so without imposing downstream liability on those who purchase and resell in the United States copies that happen to have been manufactured abroad. In other words, that outcome would target unauthorized importers alone, and not the “libraries, used-book dealers, technology companies, consumer-goods retailers, and museums” with whom the Court today is rightly concerned. Ante, at 19. Assuming Congress adopted §602(a)(1) to permit market segmentation, I suspect that is how Congress thought the provision would work—not by removing first-sale protection from every copy manufactured abroad (as John Wiley urges us to do here), but by enabling the copyright holder to control imports even when the first-sale doctrine applies (as Quality King now prevents).
At bottom, John Wiley (together with the dissent) asks us to misconstrue §109(a) in order to restore §602(a)(1) to its purportedly rightful function of enabling copyright holders to segment international markets. I think John Wiley may have a point about what §602(a)(1) was designed to do; that gives me pause about Quality King’s holding that the first-sale doctrine limits the importation ban’s scope. But the Court today correctly declines the invitation to save §602(a)(1) from Quality King by destroying the first-sale protection that §109(a) gives to every owner of a copy manufactured abroad. That would swap one (possible) mistake for a much worse one, and make our reading of the statute only less reflective of Congressional intent. If Congress thinks copyright owners need greater power to restrict importation and thus divide markets, a ready solution is at hand—not the one John Wiley offers in this case, but the one the Court rejected in Quality King.
Justice Ginsburg wrote the dissenting opinion joined by Justice Kennedy and Justice Scalia (note that Justice Scalia did not join the portions of the dissent reviewing legislative history or the portion where Justice Ginsburg argues that her opinion would not preclude application of foreign made goods from the first sale doctrine forever).
As acknowledged by the concurrence, the dissenting opinion largely relies on section 602(a)(1) of the Copyright Act and the reading of Quality King. Justice Ginsburg acknowledges that the language of Quality King she relies upon is dictum, but argues that it is not “ill-considered dictum” as suggested by the majority of the present case. She further asserts that the “text of the Copyright Act demonstrates that Con­gress intended to provide copyright owners with a potent remedy against the importation of foreign-made copies of their copyrighted works” and argues that “lawfully made” means “subject to the authority of” and therefore the copies must be made domestically because “The Copyright Act, it has been observed time and again, does not apply extraterritorially.” Thus, she argues, that the textbooks purchased and sold by Kirtsaeng were not subject to the Copyright Act.
Justice Ginsburg then points to legislative history to support her opinion (Justice Scalia did not join as to this part of the dissent).
Weighing the competing policy concerns, our Govern­ment reached the conclusion that widespread adoption of the international-exhaustion framework would be incon­sistent with the long-term economic interests of the United States. See Brief for United States as Amicus Curiae in Quality King, O. T. 1997, No. 96–1470, pp. 22–26 (herein­after Quality King Brief).15 Accordingly, the United States has steadfastly “taken the position in international trade negotiations that domestic copyright owners should . . . have the right to prevent the unauthorized importation of copies of their work sold abroad.” Id., at 22. The United States has “advanced this position in multilateral trade negotiations,” including the negotiations on the TRIPS Agreement. Id., at 24. See also D. Gervais, The TRIPS Agreement: Drafting History and Analysis §2.63, p. 199(3d ed. 2008). It has also taken a dim view of our trading partners’ adoption of legislation incorporating elements of international exhaustion. See Clapperton & Corones, Locking in Customers, Locking Out Competitors: AntiCircumvention Laws in Australia and Their Potential Effect on Competition in High Technology Markets, 30 Melbourne U. L. Rev. 657, 664 (2006) (United States expressed concern regarding international-exhaustion legislation in Australia); Montén, Comment, The Inconsistency Between Section 301 and TRIPS: Counterproductive With Respect to the Future of International Protection of Intellectual Property Rights? 9 Marq. Intellectual Property L. Rev. 387, 417–418 (2005) (same with respect to New Zealand and Taiwan).
benefit consumers within their borders but would impact adversely on intellectual-property producers in the United States, the Court embraces an international-exhaustion rule that could benefit U. S. consumers but would likely disadvantage foreign holders of U. S. copyrights.
Justice Ginsburg calls the “parade of horribles” advanced by Kirtsaeng and amici as “imaginary” and asserts that her opinion would not keep foreign made goods forever free from the first sale doctrine (Justice Scalia also did not join this portion of the argument). She argues that the other places where “lawfully made under this title,” such as for museum display rights, would not be impacted.
The United States is currently negotiating a large free trade agreement between eleven countries, known as the Trans-Pacific Partnership Agreement. In a leaked text, it was revealed that the United States proposed a ban on parallel importation despite the fact that the question of whether international or national exhaustion applied to copyrighted goods was unsettled in the United States. The Supreme Court has now resolved the case in the favor of permitting parallel importation, but the question remains of whether the USTR will continue to push for provisions that are contrary to current U.S. law. There are several areas where the U.S. proposal goes beyond the requirements of current U.S. statutory or case law, or treads on controversial areas.

References: v. 
 v. 
 §8
 §109
 v. 
 §109
 §109
 §602
 §602
 §109
 §109
 §602
 §602
 §602
 §602
 §109
 §602
 §602
 §602
 §109
 §2