Supreme Court Copyright Case Could Change Nature of Ownership

Lisa Shuchman

Corporate Counsel

2012-11-06 00:00:00.0

Last Monday, while most federal government offices and businesses were closed in anticipation of the arrival of Hurricane Sandy, it was business as usual at the U.S. Supreme Court, which was hearing arguments in Wiley v. Kirtsaeng—a copyright case that could change the fundamental view of property ownership in the United States.

Even after the oral arguments, however, it's impossible to predict how the justices will rule in the high-stakes case. And lawyers on both sides say some issues will likely remain unresolved no matter what. So a diverse coalition, which includes library associations, museums, bookstores, and online retailers, has established the Owners' Rights Initiative (ORI)—a group created to educate members of Congress about how changes to copyright law might affect them. 

"When you have a situation where there is lack of clarity in the law, the most likely outcome is that the issue will fall into Congress's lap," said Andrew Shore, executive director of ORI. 

ORI members include: American Free Trade Association; American Library Association; Association of Research Libraries, Association of Service and Computer Dealers International and the North American Association of Telecommunications Dealers; Association of Research Libraries; Computer and Communications Industry Association; Chegg; eBay Inc.; Goodwill Industries International Inc.; Home School Legal Defense Fund; Impulse Technology; International Imaging Technology Counsel; Internet Commerce Coalition; Network Hardware Resale; Overstock.com; Powell's Books; Quality King Distributors; Redbox; United Network Equipment Dealers Association; and XS International.

The case, considered one of the most important intellectual property matters to come before the high court, concerns the "first sale" doctrine in copyright law—a concept that leaves owners free to resell, lend, or give away copyrighted items without permission from the copyright holder. The doctrine has long been interpreted as one that applies to all goods, regardless of where they originated. But book publishers, software companies, and the movie and music industries, looking to protect their practice of setting different prices for different markets, argue that the doctrine should apply only to goods produced in the U.S. 

These ideas now under consideration by the Supreme Court stem from a case that pits textbook publisher John Wiley & Sons against Supap Kirtsaeng, a student who came from Thailand to study at Cornell University and later at the University of Southern California. Discovering that textbooks almost identical to those in the U.S. were considerably less expensive in Asia, he had friends and family members send multiple copies of needed books to him, which he resold to students in the U.S. at a profit. Wiley sued Kirtsaeng for infringing its copyrights; the Court of Appeals for the Second Circuit ruled in Wiley's favor.

Like most cases heard by the nine justices, the impact of the decision will go beyond one student and one publisher. And ORI—with its slogan declaring "You Bought It, You Own It. (You Have a Right to Resell It)" splashed across its website—wants policymakers and the public to know what's at stake. 

"When we purchase something, we assume it is ours," said Mark Griffin, general counsel of Overstock.com Inc., a member of the coalition. "What is proposed is that we change the fundamental notion of ownership rights." 

Several coalition members—including librarians, professors, and corporate lawyers—recently spoke to reporters about the issue, painting a bleak picture of what might happen if the high court decides the first sale doctrine does not apply to goods produced overseas.

Libraries, whose collections include vast numbers of books bought abroad, could be prevented from lending certain books to the public. Museums would not be able to display works of modern art that are still under copyright but were produced abroad. Even Goodwill Industries, which sells and distributes used items, would have their right to operate freely curtailed. Large online retailers like eBay and Overstock.com would also find it difficult to sell goods if they cannot determine where those goods originated, according to ORI.

Also, if the burden of determining the origin of goods falls to the seller, it will lead to a mountain of litigation—much like we see in patent suits today, Overstock's Griffin said. It's often difficult to determine which goods come from overseas, and if a retailer such as Overstock inadvertently sells something made overseas "it's an easy layup for a lawyer to go after us," he said. Griffin added that the litigation likely to follow, should sellers and lenders be made responsible for determining the origin of something, will create "a lawyers' retirement program."

Book publishers and the film and music industries say they have no intention of going after libraries or museums. They merely want to be able to continue their practice of market segmentation without being undermined by imports of their lower-priced goods intended for other markets. In court briefs, they argued that scenarios depicted by groups supporting Kirtsaeng are unrealistic. And in court last Monday, their lawyers said the scenarios were merely an imagined "parade of horribles." 

The justices gave no indication of how they will rule, but their questions indicated they had concerns about consequences on both sides. With almost 30 amicus briefs filed in the case from such groups as the American Library Association, the Association of Art Museum Directors, the Motion Picture Association of America, the American Intellectual Property Law Association, and Goodwill Industries International Inc., it's clear that interest is widespread. Whoever loses will likely try to get policymakers in Washington to come to their aid. 

ORI says it wants to be ready for the case's outcome. "We expect to start meeting with policymakers on Capitol Hill and in the [White House] in the very near future," Shore said.