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Tip Sheet: Will you need Toyota's permission to sell your car?

While a student at Cornell, Supap Kirtsaeng did something all students do: sell a used copy of one of his textbooks.  He could do this because the “first sale” doctrine in copyright says that the copyright owner can only control the initial sale of a copyrighted work but not subsequent distributions. Once a book is sold, purchasers are free to do what they want with their copy: keep it, lend it to a friend, or resell it.   And “first sale” doesn’t just protect used book stores: it also allows museums to put works of art on public display and makes it possible for libraries to lend books to the public.

 

A Supreme Court case in which oral arguments are scheduled for 29 October may put an end to these practices. At issue is the business that Kirtsaeng began while he was a graduate student.  He would purchase legal copies of American textbooks in his native Thailand.  He realized that publishers sell books for much less abroad than they cost in the US.  Since these are legal copies, however, publishers do receive royalties on each sale. Kirtsaeng then re-sold the books in the US for more than he paid but for less than the American retail price.

 

In the decision finding Kirtsaeng guilty of copyright infringement that is on appeal to the Supreme Court, the Appeals Court took a radical position.  It concluded that the first sale right applied only to items manufactured in the United States; the control of the on-going distribution of foreign-produced items belonged to the copyright owner.  If upheld, the implications of this decision are staggering:

 

  • Libraries could no longer rely on first sale to justify the lending of foreign-published works. And since most American publishers use foreign printers to actually produce books, those, too, may need the permission of the copyright owner in order to be lent.
  • Museums could not display art from Europe, Asia, or Africa without first securing permission and probably paying a fee.
  • Items produced abroad that have copyrighted logos, software, or other features could not be sold on eBay or in flea markets. If your Toyota contained parts made in Japan, those parts are likely to have some copyrighted content, and you would need Toyota’s permission to sell your car.
  • Smart manufacturers would move all production off-shore, since foreign manufacture would give copyright owners an immense set of monopoly rights that are unavailable to domestic manufacturers.

 

“The case highlights the problems that can result when support for specific business models (in this case, differential geographic pricing) is built into the Copyright Act,” says Peter Hirtle, Senior Policy Advisor in the Cornell University Library.  “The Court should make clear that `first sale’ rights apply to all copyrighted works, regardless of place of manufacturing. The issues surrounding the regulation of so-called `gray-market goods’ are best addressed outside of copyright law.”