Yesterday, despite the hurricane, the Supreme Court held
oral arguments in several cases, including Kirtsaeng v. Wiley. I
wrote a post
last week for DisCo where I explained some of the policy implications of an
adverse ruling on the first-sale doctrine, and why first-sale is essential for
online commerce. CCIA has been following this issue, and filed an amicus
brief [PDF],
and joined as a founding member of the newly-created Owners’ Rights Initiative (ORI).
Below is an excerpt from my post,
highlighting and expounding on a key excerpt from the dissent in the Second
Circuit:
Murtha’s dissent
also made important points on the policy concerns of the majority’s opinion:
Economic justifications also support applicability of the
first sale doctrine to foreign made copies. Granting a copyright holder
unlimited power to control all commercial activities involving copies of her
work would create high transaction costs and lead to uncertainty in the
secondary market. An owner first would have to determine the origin of the copy
— either domestic or foreign — before she could sell it. If it were foreign
made and the first sale doctrine does not apply to such copies, she would need
to receive permission from the copyright holder. Such a result would provide
greater copyright protection to copies manufactured abroad than those
manufactured domestically: Once a domestic copy has been sold, no matter where
the sale occurred, the copyright holder’s right to control its distribution is
exhausted. I do not believe Congress intended to provide an incentive for U.S. copyright holders to manufacture copies of their work abroad.
(Emphasis added on that last sentence, because it’s a
key takeaway from this case.) If Wiley wins this case, it will be SCOTUS
interpreting the copyright statute to say that Congress intended to ship
jobs overseas. If the first-sale doctrine does not apply to goods not
made in the U.S., publishers will export jobs to jurisdictions where they will
receive this more expansive copyright protection. It seems doubtful that
Congress intended to affirmatively disadvantage companies for creating American
jobs.
This issue of companies being incentivized to manufacture overseas came up
during the argument. While Wiley’s attorney, former Solicitor General
Theodore Olson declined to discuss this issue and argued that it was an issue
for Congress:
One, that's Congress's concern. And -- and there is no
evidence that that would really actually happen. . . But it's entirely
speculative as to whether or not people are going to start manufacturing books
or other items outside the United States.
E. Joshua Rosenkranz, Kirtsaeng’s attorney, disagreed, and
brought it at the conclusion of his rebuttal:
Finally, outsourcing: Congress did not want U.S. jobs to go
overseas. Congress in the very same statute in section 601 was hoarding
manufacturing jobs to the United States; and as the government said on the last
page of its Quality King, "it is highly unlikely that the same Congress
that hoarded jobs in the United States was prepared to tolerate a situation in
which there was eternal downstream control" that the copyright owners
would be encouraged to seize by sending jobs overseas.
A full transcript of the oral argument is available here [PDF].
For an excellent in-depth analysis of the intricate copyright law issues
and their history, see Sherwin Siy from Public Knowledge’s post.
It is difficult to predict outcomes based on oral arguments, but the Justices’
questions may reflect their priorities, as a recent SCOTUSblog article commenting on the number
of IP cases granted this term suggested:
It appears that the decided contraction of the Court’s
docket well might bring with it a concerted focus on the kinds of questions
that the Justices think are systemically important. And the focus on
intellectual property certainly should be one of them.
From my perspective, many of the Justices seemed to
recognize the significant consequences if this case were to be upheld.
There were several lines of questions about the “parade of horribles”
that could hypothetically occur, such as concerns with the ability to resell
used Toyotas or display Picassos in museums. This involved several
memorable exchanges about fair use with Olson. CCIA supports a robust
fair use right and has published
several studies on how limitations and exceptions to copyright, like the fair
use doctrine, benefit the U.S. economy, which I’ve also discussed in this DisCo
post.
And still, Olson’s suggestions about relying on fair use in several
situations would lead to fair use being extended to a point that it is
certainly not meant to reach. Fair use should not be regularly necessary
in used car sales or museum displays—that is absurd. Techdirt’s recap
excerpted a lot of these relevant exchanges from the transcript
about the “parade of horribles.”
It will be interesting to see how the opinion comes out, and either way, it is
likely that there will ultimately be action in Congress. CCIA President
and CEO Ed Black had a column
on Kirtsaeng the other day, where he explained this: Regardless of the Court’s decision, people’s property rights are under attack
and in need of protection. A victory for copyright extremists in the Kirtsaeng
case would require us to pass legislation to restore the first sale doctrine
and protect subsequent buyers owners’ rights. A victory for owners’ rights will
likely cause the extremist losers to marshal their massive lobbying resources
to overturn the decision in Congress.
