Last week, I took a look atÂ Kirtsaeng v John Wiley & Sons, a case currently up for review at the Supreme Court, with oral arguments scheduled October 29th. There, the Court is faced with the following issue:
How do Section 602(a)(1) of the Copyright Act, which prohibits the importation of a work without the authority of the copyrightâ€™s owner, and Section 109(a) of the Copyright Act, which allows the owner of a copy â€œlawfully made under this titleâ€ to sell or otherwise dispose of the copy without the copyright ownerâ€™s permission, apply to a copy that was made and legally acquired abroad and then imported into the United States?
The case presents some tricky issues of statutory interpretation. Having read through many of the briefs, I wanted to look at several of these issues in more detail.
Does Â§602 only apply to non-owners?
As noted in my previous post, Â§ 602(a)(1) prohibits importation of both “piratical” and “nonpiratical” works â€” it applies to both infringing copies and copies legally acquired abroad. Wiley and the US argue that Kirtsaeng’s interpretation of the first sale doctrine would render the latter superfluous: if a sale abroad defeats the Â§602 importation prohibition, when, if ever, would it operate to protect against nonpiratical works?
Kirtsaeng relies on Quality King to argue that Â§602 still retains meaning under its interpretation of the first sale doctrine. There, the Supreme Court gave three reasons in support. The second reason it gave was that “because the protection afforded by Â§ 109(a) is available only to the ‘owner’ of a lawfully made copy (or someone authorized by the owner), the first sale doctrine would not provide a defenseÂ to a Â§602(a) action against any nonowner such as a bailee, a licensee, a consignee, or one whose possession of the copy was unlawful.”
I’m not convinced this interpretation is accurate. Â§602(a)(3) provides three exceptions to Â§602(a)(1), the second of which reads, “importation or exportation, for the private use of the importer or exporter and not for distribution, by any person with respect to no more than one copy or phonorecord of any one work at any one time, or by any person arriving from outside the United States or departing from the United States with respect to copies or phonorecords forming part of such personâ€™s personal baggage.” This exception doesn’t explicitly refer to “ownership”, but it’s difficult to imagine a situation where it would apply to anyone but an owner. A “bailee” would not be importing a copy for his “private use”; a “consignee” must necessarily distribute the copy once it’s imported.
It is a basic principle of statutory interpretation that courts should give effect to every clause and word of a statute. 1Yule Kim, Statutory Interpretation: General Principles and Recent Trends, CRS Report for Congress, No. 97-589 (2008). If Â§602(a) does not apply to “owners”, it would not need an exception that applies to no one but owners.
And even if this interpretation is accepted, I’m not sure it would ultimately help Kirtsaeng. Unauthorized importation under Â§602(a) violates the copyright owner’s exclusive right to distribution. 2“Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under sectionÂ 106, actionable under sectionÂ 501. 17 USC Â§602(a)(1).” It is well-settled law that in copyright infringement cases, as with other areas of tort law, “any member of theÂ distributionÂ chainÂ can be sued as an alleged joint tort-feasor.” 3Costello Pub. v Rotelle, 670 F.2d 1035, 1043 (DC Cir. 1981), quotingÂ Stabilisierungsfonds Fur Wein v Kaiser Stuhl Wine Distributors,Â 647 F.2d 200 (DC Cir 1981); but see Enesco v Jan Bell Marketing, 992 F.Supp. 1021 (ND Ill. 1998), holding subsequent distributor cannot be held liable under Â§602.
Under Kirtsaeng’s interpretation, if Â§602 does not apply to owners, and the owner himself acquires a copy lawfully acquired overseas, the first sale doctrine does not prevent importation. But if someone besides the owner â€” a “bailee, a licensee, a consignee” â€” imports the copy without authorization, that party is liable for infringing the distribution right, and, by extension, any other member of the distribution chain, including the owner. And I would imagine, in most cases, a third party is doing the actual importation. That is, even if Kirtsaeng is correct, we’re back where we started at. An “owner” of a copy lawfully acquired overseas may not be personally liable for importation under the first sale doctrine, but he is still liable as a joint tortfeasor for the third party importer’s unauthorized distribution.
Is Importation a Sale or Disposition?
Â§109 gives “the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” (Emphasis added). It doesn’t give any other rights to the owner of a particular copy â€” owning a DVD doesn’t mean you can make additional copies, or show it publicly for profit. 4Reinforcing this interpretation is the fact that Â§109 provides additional exceptions to owners of particular copies. Â§109(c) and (e) provide that the owner of aÂ particularÂ copy can publicly display that copy and the owner of a coin-operated video game machine can publicly perform and display that video game respectively. See also Columbia Pictures v Redd Horne, 749 F.2d 154, 159-60 (3rd. Cir. 1984).
So is Â§109 even relevant to Â§602? Â§602(a) prevents “importation into the United States.” Importation is not a sale, but is it otherwise a disposition? To “dispose” is defined as “to transfer to the control of another;Â to get rid of.” Typically, disposition of property can be accomplished by gift, bequest, devise, etc; under the law, it most commonly refers to a transfer of legal title of the property. This is distinguishable from a mere transfer of possession. 5See, for example,Â UMG Recordings v Augusto, 628 F.3d 1175, 1180 (9th Cir. 2011), “not every transfer of possession of a copy transfers title.” A bailment, for example, involves the transfer of possession but not legal title, and so is distinguishable from a sale. 6Sturm v Boker, 150 US 312, 329-30 (1893).
In the same vein, importation does not necessarily involve a transfer of legal title â€” it is simply the act of “bringing an article into a country from the outside.” 7Cunard SS v Mellon, 262 US 100,122 (1923). Any transfer of title that occurs is independent of this bringing. Read this way, where importing and selling are different types of acts, keeps the first sale doctrine and Â§602 in harmony, allows the market segmentation that Congress intended when it wrote Â§602, and avoids concerns over hypothetical downstream resellers raised by Kirtsaeng and his amici.
But the Supreme Court found an argument similar to this “unpersuasive” inÂ Quality King. It said,
Strictly speaking, an importer could, of course, carry merchandise from one country to another without surrendering custody of it. In a typical commercial transaction, however, the shipper transfers “possession, custody, control andÂ titleÂ to the products”Â to a different person, and L’anza assumes that petitioner’s importation of the L’anza shipments included such aÂ transfer. An ordinary interpretation of the statement that a person is entitled “to sell or otherwise dispose of the possession” of an item surely includes the right to ship it to another person in another country.
This holding would seem to foreclose the same argument being made inÂ Kirtsaeng, and as far as I can tell, no party orÂ amicus has raised the issue. But I would suggest that there is a solid argument the Supreme Court got it wrong inÂ Quality King. The Court held that importation is merely an incident to a sale or disposition. But importation is a distinct act from any sale or disposition. You can, for example, buy or sell food without restraint, but you can’t open a restaurant to buy and sell food without the proper licensing and permits. Those licensing and permits, incidents of the state’s power to regulate health and safety, are not improper restraints on the alienability of property.
Likewise, you can sell or dispose of a lawfully acquired copy of a copyrighted work. Â§602 prohibits the importation of copies into the US without the copyright owners authorization, an incident of Congress’s Constitutional authority to secure copyright owners’ exclusive rights. Conflating the act of importation with a disposition, as the Court did inÂ Quality King, seems erroneous. The right to sell or dispose of an item does not “surelyÂ include the right to ship it to another person in another country” if Congress specifically passed a law saying it doesn’t.Â Keeping the two separate and distinct, however, gives effect to the language of both Â§109 and Â§602 (and other provisions in the Copyright Act) while remaining true to Congress’s intent.
|↑1||Yule Kim, Statutory Interpretation: General Principles and Recent Trends, CRS Report for Congress, No. 97-589 (2008).|
|↑2||“Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under sectionÂ 106, actionable under sectionÂ 501. 17 USC Â§602(a)(1).”|
|↑3||Costello Pub. v Rotelle, 670 F.2d 1035, 1043 (DC Cir. 1981), quotingÂ Stabilisierungsfonds Fur Wein v Kaiser Stuhl Wine Distributors,Â 647 F.2d 200 (DC Cir 1981); but see Enesco v Jan Bell Marketing, 992 F.Supp. 1021 (ND Ill. 1998), holding subsequent distributor cannot be held liable under Â§602.|
|↑4||Reinforcing this interpretation is the fact that Â§109 provides additional exceptions to owners of particular copies. Â§109(c) and (e) provide that the owner of aÂ particularÂ copy can publicly display that copy and the owner of a coin-operated video game machine can publicly perform and display that video game respectively. See also Columbia Pictures v Redd Horne, 749 F.2d 154, 159-60 (3rd. Cir. 1984).|
|↑5||See, for example,Â UMG Recordings v Augusto, 628 F.3d 1175, 1180 (9th Cir. 2011), “not every transfer of possession of a copy transfers title.”|
|↑6||Sturm v Boker, 150 US 312, 329-30 (1893).|
|↑7||Cunard SS v Mellon, 262 US 100,122 (1923).|
I think the law was written how it is– precisely for situations like this.
Kirtsaeng wasn’t importing copies for his own use, he was setting up a distribution shop and taking unfair advantage of regional market segmentation. the people who he bought from had legitimate distribution licenses, Kirtsaeng did not.
Besides the (in my view) obvious skirting of the law, is it known if he was even claiming his income? or was he doing this all ‘under the table’ as well?