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Summary:

Publishers and manufacturers want to use copyright to stop people selling books or watches from other countries in the US. The Supreme Court is hearing a major case today that will force it to choose between consumers and sellers.

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Is this the end of the yard sales? News media are making a fuss about a court decision that lets publishers use copyright to prevent consumers from reselling imported goods.

Today, the Supreme Court will take a closer at this “grey marketing” issue — and decide how to balance consumers’ right to use their property against owners’ rights to set prices.

The outcome will affect your right to buy and sell books, music and more. Here’s a plain-English guide to what the case is about and what it means for you:

What do you mean I can’t resell this book? I bought it fair and square

In the past, a publisher’s right to control distribution ended after they sold a book — copyright’s “first sale” rule. But last year, an appeals court said this rule only applied if the book (or other item) was made in the US . This means that if you resell a book or a toy made in China or the UK, you’re infringing copyright.

What led to the ruling?

A Thai-born man studying at a US school realized he could buy his textbooks much cheaper in his home country. He began importing large quantities of books and reselling them on eBay. Other people began doing the same, leading publisher John Wiley to bring a copyright suit to stop this. Last year, an appeals court sided with John Wiley.

Does this apply to just books or to any imports?

It can apply to anything protected by copyright. The case is so important because manufacturers are relying on the rule, too — by putting artistic designs on their products so they qualify for copyright protection. That’s what watch maker Omega did a few years ago; Omega put a tiny picture on its watches  and then sued the retailer Costco for copyright infringement (Omega was upset that Costco was buying the watches overseas and then selling below the suggested price in the US).

Here’s a look at the tiny design that Omega used to make its watches eligible for copyright protection (other companies will likely try the same trick) :

In the bigger picture, the textbook and Omega watch cases show how real time information makes it easier for sellers to engage in arbitrage — buying goods in other markets to resell back here. Publishers and manufacturers believe the resellers are engaged in an unfair business practice and are using copyright to stop this.

But what if I have a yard sale or sell my stuff on Craigslist?

That’s the problem. In the John Wiley textbook case, the appeals court didn’t set out any limits to the “no resale” rule. This means, in theory, that anyone who resells an overseas good could be violating copyright.

In reality, it’s a pretty safe bet that publishers and manufacturers are not going to run around shutting down garage sales. But the ruling could spell trouble for used book stores, consignment stores or other merchants who sell used goods.

If you’re into the legal nitty-gritty, the Copyright Act has two sections that seem to contradict one another: One section says unauthorized imports violate a copyright owner’s exclusive right to distribution (which favors the publisher). The other section limits the rights of the copyright owner by saying the owner of a copy “lawfully made under this title” can sell it (which favors the consumer).

What’s the Supreme Court going to do?

The court can overturn the appeals court case, leaving us to carry on as before. If it decides to uphold the ruling, the vourt may try to limit its effect, perhaps by declaring the rule only applies in special cases. Or it may simply uphold the case and leave it to Congress to clean up the ensuing resale mess.

 

How does the case affect digital book or music sales?

 
It won’t have a big affect because, for better or worse, we don’t really own our digital books and music — we license them from Apple or Amazon. The Supreme Court case — which turns on physical objects we do own — is about non-digital property.

Any predictions on the outcome?

The Supreme Court heard the same issue in 2010 when Omega and Costco argued about the watches. That case resulted in a 4-4 tie which means the lower court ruling against Costco (and consumers) was upheld. The tie came because Justice Elena Kagan recused herself. She will cast a vote this time — likely the deciding one. It’s hard to predict which side she will take.

I can’t get enough of this first sale copyright stuff. Where can I learn more?

Legal reporter Joe Mullin of Ars Technica has a great profile of the facts and legal background: How a Supreme Court ruling may stop you from selling just about anything. And SCOTUSblog has the filings and more for Kirtsaeng v. John Wiley & Sons.

(Image by Monkey Business Images via Shutterstock)

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  1. If something is sold to consumers in another country, why should the US Govt. give it any protection (copyright, patent, whatever) at all? If First Sale Doctrine doesn’t apply, the issue should be moot anyway.

    1. They are arguing that First Sale does not apply because the goods were not made in the US. So they are technically “counterfeit” since they are copyrighted in the US and the re-sellers have not bought US goods.

  2. Nissan B Thomas Tuesday, October 30, 2012

    What jurisdiction does the Court have to prevent domestic sales of foreign items that were likely manufactured and distributed overseas????

  3. Benjamin Philip Wednesday, October 31, 2012

    What the reporter doesn’t point out is that one consequence of this law is that it allows manufacturers to price goods based on what the local economy can afford. If you don’t want goods to be priced beyond the means of the citizens of poorer countries, and you don’t want to harm the US economy by killing overseas sales, you should support upholding this regulation. It will lead to an ORDERLY flattening of the global economy so that, eventually, a uniform global pricing model will be in place.

    1. Benjamin, you can’t stop people buying things abroad at a much cheaper rate. To support local economy, those imports should be charged duty, and any sales should be taxed. But it should be fully legitimate for people to buy goods, transport them across a boarder, and sell them. It’s what technology companies do all the time. Why can’t individuals do that?
      In the EU, even digital copies of books are considered “books” and “personal property” given people the right to re-sell them.

    2. Mr Philip, your statement isn’t entirely accurate nor honest. The decision of the courts would not mandate pricing structure used by copyright holders overseas. Whether the copyright owners decide to pursue flattened pricing models is entirely at their discretion.

      Additionally, you wouldn’t harm the US economy by killing overseas sales. To simplify the model, let’s assume three economies (rather than thousands of localized ones):

      1) Source economy (say the US)
      2) Inflated economy (say EU)
      3) Developing economy (Asia, South America, Central Europe, etc)

      The books for the second and third group are typically produced in the third group. The books for the source group are typically produced either in the first or third group.

      Decision in Wiley’s favor means the following:

      Manufacturers can charge higher prices for groups 1 & 2, since the Courts would have granted them permission to do so. Given that we’re in a capitalist business model, this likely means prices for books/products will rise, significantly.

      Decision in student’s favor means the following:

      Manufacturers will likely continue to charge current prices. If they notice large competition from imported books, they will lower their US prices and raise their foreign prices or sell outdated editions to smaller economies. Someone in the smaller economies will go and manufacture counterfeits to fill the gap. If these counterfeits are then brought into the US, Wiley would have a right to sue, based upon violation of their copyrights.

      I hope that the Court overturns the lower courts.

  4. Do you know what this means, if I sell custom computers, but my parts overseas and assemble it in the US, I can’t sell it! Talk about killing America, you people who support this are out of your frickin mind!

    1. That’s not what it means. The law (even the 1976 version) applies to finished products, not parts. If you are buying laptops overseas, disassembling them, and “tweaking” things, then, yes, you might be in violation of copyright law. However, if you’re buying processors, boards, components overseas and building the computer, no laws have been violated/compromised.

      Your claim is as ridiculous as saying “If I swap out the RAM on my computer, I’m violating this law!!!”

      1. You may be right that a computer built from scratch from overseas parts may still be legal to sell if the ruling is upheld, but it could become illegal to resell a name brand computer whether it was stock or modified, and any modification in the US after import but before sale may become illegal as well, all important to consider.

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