What does the Kirtsaeng ruling mean?

I’m very pleased to help launch the MLA blog with this inaugural post! As the blog’s Area Co-coordinator for copyright and legislative issues, I’ll be posting periodically on the legal landscape that affects music libraries, either directly or indirectly.

On Tuesday morning, the U.S. Supreme Court issued its ruling in a case called Kirtsaeng v. Wiley.  The case involved a Thai student named Supap Kirtsaeng who, while studying at Cornell University, had arranged for his family to purchase textbooks in Thailand (where the books were cheaper) and ship them to him in the United States, where he sold them for a profit. Much has already been written about the case, but since it is both highly publicized and somewhat confusing, I thought it would be a timely use of this space to try to clarify the case and how it relates to libraries, for the benefit of those who may not have followed it closely.

Legally, the story begins with the right to distribute copies of works.  Under U.S. law, the owner of a copyright in a work is the only person who is permitted to sell, rent, lend, or otherwise distribute copies of that work. An important exception to this is what is known as the First Sale Doctrine, which is codified in Sec. 109 of the Copyright Act. Sec. 109 limits that right to the first transfer of ownership in a given copy of a work.  After a lawfully-made copy is sold, the distribution right for that copy is exhausted, and subsequent sales do not require permission from the copyright owner. The “first sale doctrine” makes resale markets possible in the United States, and arguably makes it legal for you to give your sister a copyrighted book for her birthday.  It also makes library operations possible; without this principle, we would have to obtain permission and/or pay a royalty every time we wanted to lend a copy of a copyrighted work.

Kirtsaeng’s right to resell the books under Sec. 109 would not have been in question had importation not been involved. Publishers have long divided the world into regions and sold materials in different regions under different terms. The plaintiff in this case, John Wiley & Sons, had licensed sale of the text books in question to an overseas subsidiary that sold copies that were authorized for sale only in Europe, Asia, Africa, and the Middle East. Congress gave a nod to market segmentation in Sec. 602(a) of the Act, which states that importation of copyrighted works is an infringement on the copyright holder’s distribution right. Since Kirtsaeng was importing the books, Wiley argued that he was infringing.

However, in a case called Quality King v. L’Anza, the Supreme Court held that importation of a copy is infringing only where Sec. 109 doesn’t apply. The Quality King Court reasoned that because the wording of Sec. 602(a) specifically called importation an infringement of the distribution right, and since the First Sale Doctrine is an exception to the distribution right, Sec. 109 must therefore also be applicable to the importations in question in Sec. 602(a).

What, then, did Congress intend when they passed Sec. 602(a), if not to make importations infringing?  In the present case, Wiley attempted to answer that question by stating that the geographic origin of the copies was where Sec. 109 and Sec. 602(a) diverge. Recall that to be subject to Sec. 109 the copies in question have to be lawfully-made.  In particular, Sec. 109 states that the copies must be “lawfully made under this title.” In Kirtsaeng’s case, the copies were made overseas, and foreign countries are of course not subject to U.S. laws. Wiley sued Kirtsaeng for infringement on the basis that because the copies were made abroad, they could not be said to be made under the auspices of U.S. law. The copies were therefore not subject to Sec. 109, and so were infringing under Sec. 602(a).

Wiley’s interpretation has serious implications for libraries. If the court had sided with Wiley, our loaning of scores, CDs, books, and the like, would not have been protected by Sec. 109 when those items were manufactured outside the U.S.  In some cases, this would be further complicated by uncertainty surrounding the origin of manufacture since many such items do not indicate where they were made.  Sec. 602(a) does have exceptions that permit use by libraries and archives, but those exceptions are limited: they allow only five copies of a work (and only one copy of an audiovisual work), and though the exceptions allow importation for “lending or archival purposes,” they do not explicitly give permission to lend. Library organizations worried that Wiley’s interpretation of the law would mean that the lending of countless items on our shelves would suddenly become infringing, something which might, possibly, force libraries to severely curtail their lending practices. On Tuesday, the Court agreed, stating that to be subject to Sec. 109, an imported item need not be manufactured in the United States, but rather must be manufactured in compliance with U.S. Law as if it had been applicable.

Essentially, what this means is that nothing changes.  Sec. 109(a) allows us to lend the items we have always counted on it to allow us to lend, but the ruling does not expand any rights to lend.  The ruling did not, for example, address items (such as some sound recording re-releases) that may have been manufactured in compliance with the laws of the country of origin, but which would not have been legal had they been produced in the United States.  Since the ruling, as Justice Ginsburg’s dissent emphasizes, does result in rules that did not seem to be intended by Congress, I think we can expect legislation on the subject in the not-too-distant future. Still, it was a good day for libraries.

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