Opinion ID: 223136
Heading Depth: 1
Heading Rank: 5

Heading: Interpreting the First-Sale Doctrine

Text: In the Copyright Act of 1976, Congress enacted what is now 17 U.S.C. § 602(a)(1). [13] That section provides: Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501. Even if the conduct at issue in this case is otherwise covered by this statutory language, Kirtsaeng contends that he is shielded from any liability under the Copyright Act by § 109(a), see note 1, ante. Again, in relevant part, that section provides: Notwithstanding the provisions of section 106(3) [of the Copyright Act], the owner of a particular copy ... lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy. Section 109(a) is a codification of the longstanding first sale doctrine. [14] There is at least some tension between § 602(a)(1), which seemingly seeks to give copyright holders broad control over the circumstances in which their copyrighted material may be imported (directly or indirectly) into the United States, and § 109(a), which limits the extent to which the copyright holder may limit distribution following an initial sale. The Supreme Court first had occasion to address the interplay between § 602(a)(1) and § 109(a) in Quality King Distributors, Inc. v. L'anza Research International, Inc. [15] Quality King involved the sales practices of L'anza Research International, a California corporation engaged in the business of manufacturing and selling shampoos, conditioners, and other hair care products. L'anza sold its products domestically and internationally, but its prices to foreign distributors were 35% to 40% lower than the prices charged to its domestic distributors. L'anza brought suit against Quality King Distributors, Inc., which had purchased shipments of L'anza's products from one of L'anza's foreign distributors and then re-imported the products into the United States for re-sale. L'anza alleged that Quality King's actions violated its exclusive rights under 17 U.S.C. §§ 106, 501 and 602 to reproduce and distribute the copyrighted material in the United States. [16] The Supreme Court heard the case in order to decide the question of whether the `first sale' doctrine endorsed in § 109(a) is applicable to imported copies. [17] In a unanimous opinion, the Supreme Court held that § 109(a), operating in combination with § 106(3), does in fact limit the scope of § 602(a). [18] However, there was a key factual difference at work in Quality King that is of critical importance to our disposition of the instant appeal. In Quality King, the copyrighted items in question had all been manufactured in the United States. Indeed, this important fact provided the basis for Justice Ginsburg's brief concurring opinion, in which she explained: This case involves a `round trip' journey, travel of the copies in question from the United States to places abroad, then back again. I join the Court's opinion recognizing that we do not today resolve cases in which the allegedly infringing imports were manufactured abroad. [19] Although the majority opinion did not directly address the question of whether § 109(a) can apply to items manufactured abroad, the opinion contains instructive dicta that guides our disposition of the issue. In particular, the Court took pains to explain ways in which § 109(a) and § 602(a) do, and do not, overlap. As the Court stated: [A]lthough both the first sale doctrine embodied in § 109(a) and the exceptions in § 602(a) may be applicable in some situations, the former does not subsume the latter; those provisions retain significant independent meaning. [20] For instance, § 602(a) encompasses copies that are not subject to the first sale doctrine  e.g., copies that are lawfully made under the law of another country[.] [21] The Court even pondered the following hypothetical: If the author of [a] work gave the exclusive United States distribution rights  enforceable under the Act  to the publisher of the United States edition and the exclusive British distribution rights to the publisher of the British edition, ... presumably only those made by the publisher of the U.S. edition would be `lawfully made under this title' within the meaning of § 109(a). The first sale doctrine would not provide the publisher of the British edition who decided to sell in the American market with a defense to an action under § 602(a) (or, for that matter, to an action under § 106(3), if there was a distribution of the copies). [22] In these passages, the Court suggests that copyrighted material manufactured abroad cannot be subject to the first sale doctrine contained in § 109(a). The Supreme Court recently seemed poised to transform this dicta into holding when it granted a writ of certiorari to review the Ninth Circuit's decision in Omega S.A. v. Costco Wholesale Corp. [23] That case involved the importation into the United States of Omega-brand watches by unidentified third parties without the permission of Omega; the watches were ultimately purchased and resold by Costco Wholesale Corporation. The Ninth Circuit maintained its well-settled position that § 109(a) does not apply to items manufactured outside of the United States unless they were previously imported and sold in the United States with the copyright holder's permission. [24] After hearing oral argument, an equally divided Supreme Court (with Justice Kagan recused) was obliged to affirm the judgment rendered by the Ninth Circuit. [25] Without further guidance from the Supreme Court, we now consider the extent to which the protections set forth in § 109(a) may apply to items manufactured abroad. In doing so, we rely on the text of § 109(a), the structure of the Copyright Act, and the Supreme Court's opinion in Quality King.