On Monday, the Supreme Court heard oral arguments in Kirtsaeng v John Wiley & Sons, a case dealing with the impact of copyright’s first sale doctrine — 17 USC § 109(a) — on the Copyright Act’s importation prohibition — 17 USC § 602(a)(1). I’ve previously written about the case here, with more thoughts here.
A decision is months away, but before closing the book on this case until then, I wanted to look at one other aspect of the legal issues involved. While Kirtsaeng involves textbooks, one of the traditionally copyright protected works, other cases, including the two previous cases involving these provisions to reach the Supreme Court (Costco v Omega and Quality King v L’anza Research), involve consumer goods, goods that we don’t typically think of as within the subject matter of copyright. Those cases generally rely on an assertion of copyright protection over the goods’ packaging or labels, rather than the good itself. Generally, we would think of such products as relying on trademark law rather than copyright law for any protection.
Trademark law does provide effective protection against grey market goods, but this protection is curtailed in several respects that explains why some companies have turned to the importation provisions of the Copyright Act. Perhaps most importantly, trademark law does not prohibit unauthorized importation of goods that had been manufactured by a foreign subsidiary of a US company.
Whether overlap between copyright and trademark law creates concerns is an interesting academic question. Whether it matters in the real world, especially in the context of parallel imports, is also, I think, a legitimate question.
Regardless, I think it’s worth examining the use of copyright law to police importation of non-piratical goods which aren’t customarily considered within the scope of copyright subject matter. I’ve done so by first surveying §602 case law and then examining several of the defenses raised in actions involving consumer goods.
I’ve looked for published opinions on cases with claims arising under §602 that involved non-piratical, or “authentic” goods (§602 also provides remedies for the importation of piratical, or infringing, goods). The result is a list of 35 cases in total, 27 of which a first sale defense was raised.
John Wiley & Sons v Kirtsaeng, 654 F.3d 210 (2nd Cir. 2011) (books)
Microsoft v Technology Enterprises, 805 F.Supp.2d 1330 (SD Fla. 2011) (software)
Pearson Education v Kumar, No. 1:07-CV-9399 (CSH) (D. Conn. 2010) (books)
Pearson Education v Arora, 717 F.Supp.2d 374 (SDNY 2010) (books)
Pearson Education v Liu, 656 F.Supp.2d 407 (SDNY 2009) (books)
Pearson Educaction v Liao, 2008 WL 2073491 (SDNY 2008) (books)
Omega v Costco, 541 F.3d 982 (9th Cir. 2008), aff’d without op, Costco v Omega, 131 S.Ct. 565 (2010) (watches)
Microsoft v Intrax Group, No. C 07-1840 CW, 2008 WL 4500703 (ND Cali. Oct. 6, 2008) (software)
Microsoft v Cietdirect.com, No. 08-60668-CIV, 2008 WL 3162535 (SD Fla. Aug. 5, 2008) (software)
Microsoft v Big Boy Distribution, 589 F.Supp.2d 1308 (SD Fla. 2008) (software)
Swatch SA v New City, 454 F.Supp.2d 1245 (SD Fla. 2006) (watches)
UMG Recordings v Norwalk Distributors, 2003 U.S. Dist. LEXIS 26302 (CD Cali. 2003) (phonorecords)
Lingo Corp v Topix, 2003 WL 223454 (SDNY 2003) (electronic language translator)
Quality King v L’anza Research, 523 US 135 (1998) (hair care products)
Denibcare USA v Toys’R’Us, 84 F.3d 1143 (9th Cir. 1996) (diapers)
DAISA v Costco, 97 F.3d 377 (9th Cir. 1996) (figurines)
Summit Technology v High-Line Medical Instruments, 922 F.Supp. 299 (CD Cali. 1996) (medical devices)
Parfums Givenchy v Drug Emporium, 38 F.3d 477 (9th Cir. 1994) (perfume)
Parfums Givency v C&C Beauty Sales, 832 F.Supp. 1378 (CD Cali. 1993) (perfume)
Red Baron v Taito, 9 U.S.P.Q.2D (BNA) 1901 (1988) (video games — Double Dragon) (first sale doctrine applied as a defense against unauthorized importation of nonpiratical work first manufactured overseas)
BMG v Perez, 952 F.2d 318 (9th Cir. 1991) (phonorecords); Neutrogena v United States, 7 USPQ.2d (BNA) 1900 (D SC 1988) (cosmetic products)
Sebastian Int’l v Consumer Contact (PTY), 664 F.Supp. 909 (D NJ 1987), rev’d 847 F.2d 1093 (hair care products)
Original Appalachian Artworks v JF Reichert, 658 F.Supp. 458 (ED Pa. 1987) (soft sculptured dolls — Cabbage Patch Kids)
Hearst v Stark, 639 F.Supp. 970 (ND Cali 1986) (books)
Cosmair v Dynamite Enterprises, 226 USPQ (BNA) 344 (SD Fla. 1985) (cosmetic products)
Columbia Broadcasting v Scorpio Music, 569 F.Supp. 47 (ED Pa. 1983), aff’d without op, 738 F.2d 421 (3d Cir. 1984) (phonorecords).
No first sale defense raised
Microsoft v EEE Business, 555 F.Supp.2d 1051 (ND Cali. 2008) (software)
UMG Recordings v Disco Azteca, 446 F.Supp.2d 1164 (ED Cali. 2006) (phonorecords)
U2 Home Entertainment v Lai Ying Music & Video Trading, No. 04-CIV-1233 (DLC) (SDNY 2005) (motion pictures)
Enesco v Jan Bell Marketing, 992 F.Supp. 1021 (ND Ill. 1998) (figurines — Precious Moments)
TB Harms v Jem Records, 655 F.Supp. 1575 (D. NJ 1987) (phonorecords)
Selchow & Righter v Goldex, 612 F.Supp. 19 (SD Fla. 1985) (game board and rules — Trivial Pursuit)
Goebel Porzellanfabrik v Action Industries, 589 F.Supp. 763 (SDNY 1984) (figurines — Hummel)
CBS Inc v Pennsylvania Record Outlet, 598 F.Supp. 1549 (WD Pa. 1984) (phonorecords)
These cases are a mix between the situation where, as in Quality King, a good was first manufactured in the US and, as in Kirtsaeng, a good was first manufactured overseas. Though I haven’t indicated which is which, I will note that, before Quality King, courts were split on whether the first sale doctrine applied to goods first manufactued in the US and then re-imported without authorization. Where goods were first manufactured overseas, however, courts have been virtually unanimous in holding that the first sale doctrine does not apply — I’ve only been able to find one case in the past 30 years that has held otherwise.
Out of these 35 cases, 24 involved traditionally copyrighted works: books, phonorecords, software, and sculptural works. The eleven remaining cases involved situations where the goods themselves would not be copyrightable — instead, copyright protection on labels or packaging was asserted. These cases include everything from perfume, to watches, to diapers.
The first thing you note from this survey is the small usage of this provision, roughly 30 reported cases in 30 years. Compare this to, say, the fair use provision in §107, which has generated over 300 published opinions in the same time-frame. And less than one-third of these involved consumer goods.
Next, I’ll look at some of the defenses that may be raised when the Copyright Act’s importation provisions are used to protect such consumer goods.
The first defense that might be raised is that such goods are outside of copyrightable subject matter. The Copyright Act provides that copyright protection exists in all “original works of authorship fixed in any tangible medium of expression “It is well established that labels are subject to copyright protection, if the label manifests the necessary modicum of creativity.” The statute lists several categories of works which may be protected, including “(1) literary works; (2) musical works, including any accompanying words; (3) dramatic works, including any accompanying music; (4) pantomimes and choreographic works; (5) pictorial, graphic, and sculptural works; (6) motion pictures and other audiovisual works; (7) sound recordings; and (8) architectural works.”
The bar for originality is low; it requires only a “modicum of creativity.” It is well established that product labels and packaging can be protected by copyright.
This avenue, then, would be a non-starter for defending against including consumer goods in the importation provision — indeed, it is precisely because of the low bar for copyrightability that such goods are within its scope. This argument was raised in one case dealing with §602, and the court, confronted with the argument against plaintiff’s hair care product labels, said, “Catch phrases, mottos, slogans and short advertising expressions are not copyrightable. But, of course, the length of a sentence is not dispositive of whether it is subject to protection. … While this text tries the limits of the modicum of creativity necessary for a work to be copyrightable, I find that taken as a whole it comes within the purview of the Copyright Act.”
Design inseparable from useful article
Next, one might argue that any copyrightable matter in consumer goods is inseparable from their function and thus unprotectable. The Copyright Act says of pictorial, graphic, and sculptural works, “Such works shall include works of artistic craftsmanship insofar as their form but not their mechanical or utilitarian aspects are concerned; the design of a useful article, as defined in this section, shall be considered a pictorial, graphic, or sculptural work only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” Courts have interpreted this to mean that copyrightable elements of works must be physically or conceptually separable from utilitarian aspects. Easier said than done — if you think this inquiry could lead you into a metaphysical quandary, you’d be correct.
The Koosh Ball, for example, had its registration for copyright rejected by the Copyright Office, and on appeal, the DC Circuit held that the Office had not abused its discretion. But in most cases, separability would not be an issue since plaintiffs would be asserting copyright protection over labelling or packaging rather than the good itself.
Indeed, the one time I’ve found where a defendant raised this defense, regarding importation of perfume, the court rejected it:
It is well established that an artistic packaging design or label is entitled to copyright protection. Indeed, the Copyright Office regulations make clear that a copyright may be issued for “a print or label that contains the requisite qualifications for copyright even though there is a trademark on it.”
Moreover, the Amarige Box Design is physically separable from the perfume with which it is associated and thus does not even raise an issue of ‘conceptual separability.’ Section 101 of the Copyright Act provides that “the design of a useful article” or a work of art that embellishes a useful article is copyrightable to the extent that it is capable of existing independently of the utilitarian aspects of the article. The legislative history specifies that the design or embellishment may be separable from the useful article either physically or conceptually. The Amarige Box Design is a two-dimensional artistic design, which is physically separable from the utilitarian aspects of Amarige perfume. Thus, the issue of conceptual separability does not even arise.
During oral arguments, Justice Breyer pressed Theodore Olson, attorney for John Wiley & Sons, about the potential liability of downstream users if the first sale doctrine wouldn’t apply to goods manufactured abroad. In response, Olson alluded to the existence of fair use exceptions that would apply. Though I have not seen fair use raised as a defense for unauthorized importation of non-piratical consumer goods, one amici has raised the possibility of its application in its brief in favor of Wiley. The Software and Information Industry Association, arguing that “the Copyright Act contains the flexibility to deal with unforeseen applications of section 602”, says:
In the same way that Congress did not intend to cabin section 602’s application to copies from countries with a shorter term or compulsory licenses, the legislative record provides no evidence that it intended its application to situations where a trademark owner adds a copyrightable insignia or label on goods to protect against their parallel importation into the United States. Amicus SIIA believes that the better way to address the concern raised by these cases is through the fair use defense contained in section 107 of the Act.
Although the Court in dicta suggested that fair use might not be available to the importer who infringed under this circumstance, SIIA respectfully suggests that that is not the case. Fair use is at its core an “equitable rule of reason,” designed to take into account the facts of each case. The flexible and factspecific nature of the defense renders it fully capable of taking into account the practical reality that people do not buy a watch because of an insignia on the back or buy shampoo because of the wording of the instructions. This reality would likely influence a court’s determination of the fourth fair use factor: “the effect of the use upon the potential market for or value of the copyrighted work.”
The fair use doctrine requires that a market for a work be “traditional, reasonable, or likely to be developed” when examining and assessing the effect that a secondary use of a copyrighted work may have on the potential market for or value of that work. In the case of products such as shampoo and watches, there is no economic value severable from the product to which the work is affixed, and no actual or potential market that can be harmed. For example, there is likely no separate licensing market for shampoo labels as the expressive work – the label – has no economic value severable from the product.
This argument is interesting on its surface, though somewhat novel. I’ve been unable to find any cases where fair use has been applied outside the exclusive right of reproduction. There have been cases where a defendant has raised the defense when he was engaged in distribution, but this is always in combination with alleged reproduction. The language of the fair use provision in the Copyright Act itself does not expressly preclude application outside of reproduction, I just don’t know if any court has ever been confronted with its application where there hasn’t been an unauthorized reproduction, as would be the case with an unauthorized importation of a non-piratical work under §602.
Whether the defense of copyright misuse exists at all is an open question. It is a court-created doctrine that has only emerged within the past 30-some years. Only a minority of federal circuit courts have even recognized its existence, with some remaining skeptical, and even less have actually applied the doctrine. But when it is recognized, copyright misuse is typically defined as using a copyright to secure control over something not protected by the copyright in a way which is contrary to public policy.
But despite its shaky foundation as a doctine, the defense of copyright misuse is one of the only defenses to actually defeat a claim of unauthorized distribution under §602 for non-piratical consumer goods.
In Omega v Costco, Omega sought a copyright infringement claim under §602 based on the copyright in its logo, affixed to the back of watches manufactured overseas, which Costco had imported without authorization. Omega succeeded in its claim all the way up to the Supreme Court, which affirmed, without opinion, the 9th Circuit decision that held the first sale doctrine did not protect Costco. But on remand, the district court subsequently granted summary judgment to Costco based on copyright misuse. The court said in its opinion:
Here, Omega concedes the purpose of the copyrighted Omega Globe Design was to control the importation and sale of its watches containing the design, as the watches could not be copyrighted. Accordingly, Omega misused its copyright of the Omega Globe Design by leveraging its limited monopoly in being able to control the importation of that design to control the importation of its Seamaster watches.
Cases that have found copyright misuse have been limited to situations involving antitrust tying agreements and restrictive licensing agreements. However, this is not to say that copyright misuse could not exist in other situations. Indeed, the courts in Lasercomb, Practice Management, and A & M Records all deliberately chose a broad rule for copyright misuse so that the rule could be applied to new situations as they arose. If the contrary were true, then those courts would have made a tying agreement or a restrictive licensing agreement a necessary element of copyright misuse. Finally, “[c]opyright misuse is an equitable defense to copyright infringement, the contours of which are still being defined.”
Omega argues that the Omega Globe Design had multiple purposes. While Omega concedes that one purpose was to control the importation of watches, it argues that another purpose was to promote the creativity and aesthetics of the Omega Globe Design, itself, and to increase the value that the design gives to a watch. While the Omega Globe Design might have its own independent creative and aesthetic values, those aspects of the design are protected by its copyright and are not a defense to copyright misuse.