Supreme Court to rule on “grey market” goods in books case

U.S. Supreme Court

Is it legal to buy books or watches overseas and then ship them back to America to sell at a profit? For a long time, the law has been unclear. Now, the Supreme Court is set to weigh in on a case that will have big implications for publishers, retailers, and consumers.

On Monday morning, the court broke a logjam when it agreed to hear the appeal of entrepreneur, Supap Kirtsaeng, a California man whose family in Thailand had sent him textbooks to resell. He reportedly sold $37,000 worth of John Wiley textbooks in the US.

The publisher sued Kirtsaeng for copyright infringement in eight textbooks and won to the tune of $75,000 in damages for each book.

Kirtsaeng argues that he is protected by the first sale doctrine — a rule that lets copyright owners exercise their right only the first time an individual book or record is sold. The first sale rule is what allows used book and record stores to do business.

While the first sale doctrine has long been an accepted in the case of goods made in the US, it gets more complicated when it comes to overseas goods — should the rule apply when the first sale in question took place in another country?

The Supreme Court had a chance to resolve the question in 2010 but failed to do so after it deadlocked in a rare 4-4- tie. The tie came after Justice Kagan had recused herself, leaving only eight judges to decide.

The 2010 case involved Costco reselling Omega watches in the US that it had legally purchased overseas.

The new John Wiley case, in which Justice Kagan will take part, will shape brand owners’ ability to maintain pricing power in the face of so-called “grey market” goods from overseas.

Public interest groups had urged the Supreme Court to take the appeal. Public Knowledge, for instance, has warned:

“[The appeal’s court] ruling could cripple markets for used books, movies, CDs, toys, and any other goods that contain copyrighted works.”

The Supreme Court will likely hear the case in the fall.

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