A Foreign Affair: First-Sale Doctrine Inapplicable to Works Manufactured Outside the U.S.

Importers of copyrighted works purchased overseas – even works legally produced and purchased – may not be protected from infringement claims by the works’ United States copyright owners. On August 15, 2011, the United States Court of Appeals for the Second Circuit ruled that the “first-sale doctrine” does not apply to works manufactured outside of the United States.

In John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896 (2d Cir. Aug. 15, 2011), the Second Circuit addressed two seemingly inconsistent sections of the Copyright Law. The case involved Supap Kirtsaeng, a native of Thailand who moved to the United States in 1997. To subsidize the cost of his education, Kirtsaeng had friends and family ship textbooks legally manufactured outside the United States that he then sold on-line in the United States. Kirtsaeng reimbursed his friends and family for their expenses and kept any remaining profits.

In September 2008, John Wiley & Sons, Inc., a United States book publisher with a publishing and manufacturing subsidiary in Asia, sued Kirtsaeng for copyright infringement pursuant to Section 501 of the Copyright Law. Section 501(a) provides that “[a]nyone . . . who imports copies . . . into the United States in violation of section 602, is an infringer of the copyright or right of the author, as the case may be.” Section 602(a)(1) provides:

Importation into the United States, without the authority of the owner of a 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.

Kirtsaeng responded to these allegations by invoking the “first-sale doctrine,” codified at Section 109(a), which 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 or phonorecord.

Thus, the Court had to relieve “the 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.” “Confronted with an utterly ambiguous text,” the court sought to adopt an interpretation of Section 109(a) that was consistent with Section 602(a)(1). The court’s determination turned on its interpretation of the phrase “lawfully made under this title,” which the court ultimately concluded “refers specifically and exclusively to works that are made in territories in which the Copyright Act is law, and not to foreign-manufactured works.” Applying this interpretation, Kirtsaeng would not be permitted to avail himself of the first sale doctrine in defense of the copyright infringement claim.

This ruling clarifies (in the Second Circuit) the applicability of the first-sale doctrine to individuals importing works from abroad. However, the courts appear split as to their interpretation of the law, with the Third Circuit previously finding the first-sale doctrine applicable to copyrighted works produced abroad. See Sebastian Int’l, Inc. v. Consumer Contacts, Ltd., 847 F.2d 1093 (3d Cir. 1998). Given the potential inapplicability of “first-sale” protection, booksellers and other importers of copyrighted works must act with caution when deciding whether to sell foreign-published or foreign-manufactured works in the United States.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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