U.S. Supreme Court Gives Green Light to Gray Market Goods

U.S. Supreme Court Gives Green Light to Gray Market Goods

The U.S. Supreme Court recently issued its decision in Kirtsaeng v. John Wiley & Sons, Inc. The closely watched copyright infringement case considered how the first sale doctrine applies to so-called “gray market” goods that are purchased legally overseas and re-sold in the United States.

The conflict involved two potentially contradictory copyright laws. Under the first sale doctrine, the owner of a lawfully made work is entitled to resell the work without the authorization of the copyright owner. Meanwhile, the Copyright Act prohibits the importation of copyrighted goods without the authority of the copyright owner.

In a 6-3 decision, the majority concluded that first-sale doctrine applies regardless of where the goods are manufactured. Thus, the Second Circuit Court of Appeals erred in concluding that an individual who purchased and imported foreign-made editions of U.S. textbooks into the United States and then sold them on eBay could not avail himself of the first sale doctrine.

The court’s decision relied on the statutory language, legislative history and common-law interpretations of the first sale doctrine. Taken together, the justices concluded that they all favor a non-geographical interpretation.

As explained by the Court, an alternative interpretation of the first sale doctrine not only “bristles with linguistic difficulties,” but would also fail to further basic constitutional copyright objectives.  The opinion further noted the practical implications, stating that “reliance on the ‘first sale” doctrine is also deeply embedded in the practices of booksellers, libraries, museums, and retailers, who have long relied on its protection.”

For businesses that rely on the grey market, the decision is clearly good news. For copyright holders who sell products like books and DVDs internationally, it is time to consider alternative methods of limiting distribution, such as contracts.

If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Jay Surgent, or the Scarinci Hollenbeck attorney with whom you work.