Today, the Supreme Court released its decision in Kirtsaeng v. John Wiley & Sons, reversing the Second Circuit’s decision that held the first sale doctrine does not allow importation without the authorization of the copyright owner of copyrighted works manufactured and acquired outside of the U.S. Justice Breyer penned the 6-3 decision, with a concurrence by Kagan (joined by Alito) and a dissent by Ginsburg (joined by Kennedy and Scalia).
What’s interesting about this case, from an academic perspective, is that the amici arguments of both sides were not actually opposing. Both sides wanted different things that put them against each other only because of how three interrelated statutory provisions acted. Copyright owners who supported John Wiley wanted the ability to differentiate foreign markets that the importation provision of Â§602(a)(1) purported to protect. Those who supported Kirtsaeng, including libraries and resellers, wanted clarification thatÂ Â§109(a) prevented restraints on downstream sales and other disposition for goods manufactured outside the U.S. Taken separately, neither argument on its face contradicts the other. The conflict only occurs when the provisions, along with Â§106(3), are read together.
This suggests that there is a resolution to the outcome of this case that would be satisfactory to all parties. And fortunately, Justice Kagan shines a light on one possible way forward in her concurrence.
Kagan begins by noting that, even though she joins the majority opinion, she is concerned about the effect it has on the Copyright Act’s importation provisions, which are now limited “to a fairly esoteric set of applications.”
But if Congress views the shrinking of Â§602(a)(1) as a problem, it should recognize Quality Kingâ€”not our decision todayâ€”as the culprit. Here, after all, we merely construe Â§109(a); Quality King is the decision holding that Â§109(a) limits Â§602(a)(1). Had we come out the opposite way in that case, Â§602(a)(1) would allow a copyright owner to restrict the importation of copies irrespective of the first-sale doctrine [Emphasis added].
How so? Kagan explains in a footnote that Quality King erroneously interpreted the statutory text to foreclose this outcome. A more “cogent” argument was provided by the Solicitor General in Quality King, who made the case “that Â§109(a) does not limit Â§602(a)(1) because the former authorizes owners only to ‘sell’ or ‘dispose’ of copiesâ€”not to import them: The Actâ€™s first-sale provision and its importation ban thus regulate separate, non-overlapping spheres of conduct.”
This interpretation would result in a win-win. Kagan explains that it “would enable the copyright owner to divide international markets in the way John Wiley claims Congress intended when enacting Â§602(a)(1). But it would do so without imposing downstream liability on those who purchase and resell in the United States copies that happen to have been manu- factured abroad.”
In other words, that outcome would target unauthorized importers alone, and not the â€œlibraries, used-book dealers, technology companies, consumer-goods retailers, and museumsâ€ with whom the Court today is rightly concerned. Assuming Congress adopted Â§602(a)(1) to permit market segmentation, I suspect that is how Congress thought the provision would workâ€”not by removing first-sale protection from every copy manufactured abroad (as John Wiley urges us to do here), but by enabling the copyright holder to control imports even when the first-sale doctrine applies (as Quality King now prevents).
Kagan concludes by emphasizing that, “If Congress thinks copyright owners need greater power to restrict importation and thus divide markets, a ready solution is at handâ€”not the one John Wiley offers in this case, but the one the Court rejected in Quality King.” On a personal note, I find this argument compelling. Following oral arguments in Kirtsaeng last October, I even suggested the Supreme Court consider this very idea of overturning this portion of Quality KingÂ (as well as going into more detail about the argument Kagan makes here). Congress could restore the original purpose ofÂ Â§602(a)(1) without touching the first sale doctrine by making it clear that “importation” is not considered a sale or other disposition. This way forward would not only be elegant, but likely agreeable to both sides.