More Scrutiny for First Sale

First comes suit, then comes jury, then comes appeal after appeal after appeal.

A defendant previously found liable for copyright infringement has filed an appeal for an en banc rehearing of his last appeal.  A jury found Supap Kirtsaeng was liable for willful infringement of eight copyrighted works belonging to John Wiley and Sons.  Faced with a rather large damages bill ($600,000), Kirtsaeng did the usual thing and appealed.  The Second Circuit affirmed, in a 2-1 majority, the District Court.  Now Kirtsaeng has filed another appeal, asking for an en banc rehearing in the Second Circuit.

Infringing Acts

Kirtsaeng, a Thai student studying in the US, had friends and family ship him books legally printed in other countries but not authorized for importation into the United States.  He then sold those books on eBay, reimbursed his friends and family for their trouble and kept the remainder of the proceeds.  We’re not talking small change here where the books were used for his studies and then sold after the semester.  Kirtsaeng took in somewhere between $900,000 and a million dollars doing this.

First Sale – What does “made under” mean?

The first sale doctrine in the US Copyright Act allows people to resell copyrighted works “lawfully made under this Act.”  The Second Circuit held that “made under” means made domestically and so the reselling copyrighted items made elsewhere is not protected by the first sale doctrine.  This is the same issue that came up in Costco where the Supreme Court upheld the 9th Circuit on a 4-4 split.

The Second Circuit looked at Costco and found it rather unhelpful, being a Supreme Court 4-4 split.  The court also tried to do a statutory analysis of the “made under” clause and decided the statute was rather ambiguous.  In the end, the court’s decision that “made under” means made domestically rests on language from a 1998 Supreme Court case, Quality King Distributors, Inc. v. L’anza Research International and some jockeying with the Copyright Act trying to make sense of the first sale doctrine language (§ 109(a))  in conjunction with part of the Act prohibiting unauthorized importation (§ 602(a)(1)).  Then the court punted:

If we have misunderstood Congressional purpose in enacting the first sale doctrine, or if our decision leads to policy consequences that were not foreseen by Congress or which Congress now finds unpalatable, Congress is of course able to correct our judgment.

Kirstaeng’s New Appeal

In his appeal for en banc, Kirstaeng argues that Quality King was misinterpreted and that the Second Circuit’s decision is in conflict with decisions from other Circuits (note: as a matter of legality, this is allowed but it is often grounds for a Supreme Court review of the issue).

Kirstaeng argues that the text of the first sale doctrine is not ambiguous because the Supreme Court found that it was “unambiguous” in Quality King.  Basically, Kirstaeng attempts to show the court’s arguments are really in favor of allowing the first sale doctrine as a defense for imported goods but the court just didn’t want to admit it.

The majority’s opinion conflicts with the text, history, and purpose of the Copyright Act, as well as the Supreme Court’s reading of those sources in Quality King. The opinion’s most remarkable feature, however, is that the majority all but conceded those points. Indeed, it repeatedly expressed deep skepticism about the correctness of its own interpretation. It offered a decision at odds with itself.

We’ll keep you posted if the en banc rehearing is granted.