Policy —

Supreme Court seeks a way around “perpetual copyright” on foreign goods

Court shows concern for libraries, museums—but little for Kirtsaeng himself.

Supreme Court seeks a way around

If the Supreme Court is looking for a middle ground in Wiley v. Kirtsaeng, it's going to be hard to find. That copyright case, argued this morning, could have a big impact on resale markets around the country.

It's impossible to know from reading into oral arguments which way the court will go. Questions from the bench today show the justices are seriously concerned about the possible effects on resellers of common goods, as well as legal obstacles that could be created for museums and libraries. At one point, Justice Stephen Breyer grilled Wiley's lawyer about how a victory for his side would avoid interfering with the sale of millions of used Toyotas.

At the same time, at least some justices are concerned with copyright owners' right to engage in "market segmentation," and charge different prices in different countries. As for the grad student turned book-importer who challenged that system, Supap Kirtsaeng, there wasn't much sympathy to be found. Justice Elena Kagan casually referred to him as a "rogue" at one point.

The case started in 2008, when textbook manufacturer John Wiley & Sons sued Supap Kirtsaeng for re-selling textbooks he bought in Thailand on the cheap. Wiley argues that by importing and selling the books without permission, Kirtsaeng violated copyright law—even though the books aren't pirated, they're simply cheap foreign editions. Wiley won its case at the US Court of Appeals for the 2nd Circuit, and now the stakes have become higher. Kirtsaeng's inability to win the case on "first sale" grounds has alarmed an array of groups—from retailers to museums and libraries—all of whom believe copyright owners might interfere with their own resale and lending.

A "parade of horribles" comes to life

Wiley's lawyers said those imagined consequences (content company lawyers messing around with garage sales or library lending) were wild speculation, a 'parade of horribles' used to sway the case their way. Under questioning, though, he admitted that copyright owners might need to be asked permission for some activities—even by non-profits like museums.

The justices weren't quite ready to blow off the 'horribles' so easily, either. Justice Stephen Breyer, in particular, insisted on going through examples of what might happen should Wiley's view carry the day.

"Imagine Toyota, right?" said Breyer. "Millions sold in the United States. They have copyrighted sound systems. They have copyrighted GPS systems. Under [Wiley's] reading, the millions of Americans who buy Toyotas could not resell them without getting the permission of the copyright holder of every item in that car which is copyrighted? Am I right or am I wrong? "

"There are other defenses, but that is not this case," said Wiley's lawyer, famed Supreme Court advocate Ted Olson. "This case is not--"

Breyer interrupted him: "Well, how do you distinguish? How do you distinguish?"

Later, he went in for more examples:

"If you were the lawyer for the Toyota distributor, [or] if you were the lawyer for the Metropolitan Museum of Art, or you are the lawyer for a university library," said Breyer. "Your client comes to you and says, 'My God, I just read the Supreme Court opinion. It says that we can't start selling these old books, or lending them, or putting them in our word processor, or reselling the Toyota, [or] displaying the Picasso without the permission of the copyright holder.' What, as their lawyer, do you tell them? Do you tell them, 'hey, no problem?' Or, do you tell them, 'you might become a law violator?' Or, do you tell them, 'I better litigate this?' What do you tell them?"

"Well, each one of those situations that you posit, Justice Breyer, has a whole panoply—a set of facts," said Olson. "With respect to the museums, with respect to the person bringing books into the United States, there are other defenses, including fair use."

Of course, fair use wouldn't be much of a defense for selling a used Toyota or for displaying a work in public. Chief Justice John Roberts immediately pointed that out.

Other justices showed they took Kirtsaeng's list of 'horribles' seriously, too. "You have to look at those hypotheticals in order to decide this case," said Justice Anthony Kennedy. Justice Sonia Sotomayor noted the Solicitor General and two courts of appeals have already written exceptions "to take care of what they perceive as 'horribles.'" The statute may need to be given "a more rational meaning," she said.

Notably, Olson didn't back away from the more extreme consequences of his client's win at the 2nd Circuit. If Wiley wins, he said, institutions like museums and libraries might need to get licenses from copyright owners for their activities.

"If you're going to use the product... in a way that's contemplated by the copyright laws, maybe it's required that you actually comply with the copyright laws by going to the owner of the copyright and saying, look, here's what I propose to do, can I have a license to do this? It's a nonprofit, it's a museum."

No problem with "market segmentation;" plus little sympathy for Kirtsaeng

While the justices showed great concern for how the case might affect libraries, museums, and used-car dealers, some also seemed sympathetic to the idea that Wiley had a right to engage in "market segmentation."

Kirtsaeng's lawyer, E. Joshua Rosenkranz, explained the intent of including an importation right in copyright law was to go after "rogue distributors"—not to shut down resale markets.

"You said that one of the things that they wanted was the segmentation of market; they got half of it," said Justice Elena Kagan. "They got the rogue distributors' half… that's a crazy half to have gotten. That's the kind they don't need," because they can already attack those distributors with contract law.

She continued: "And then they don't get people like, frankly, your client, who are rogue something elses, with no contractual privity [relationship]. And what sense does that make?"

"It makes perfect sense, Your Honor," answered Rosenkranz. "Obviously, you know, the industry, at least back in 1976, did not get everything that they wanted."

A middle road?

The US government also had a representative in the case, Deputy Solicitor General Malcolm Stewart. He tried to guide the court toward a kind of middle ground, although one that still largely favored Wiley over Kirtsaeng.

By tying their decision to a 1909 case called Bobbs-Merrill, the court could allow copyright owners to shut down unauthorized distributors like Kirtsaeng but avoid the more extreme position that Wiley has found itself fighting for, said Stewart. (If Wiley wins outright, goods manufactured abroad could actually enjoy copyright protection indefinitely.) Copyright owners could get some control over imports, without granting them control over all downstream sales.

While that middle ground may hold appeal for some justices, like Kagan, others expressed skepticism that it could be navigated under existing law.

"That's an awfully difficult maze for somebody to get through," said Roberts. "It's not that complicated under [Kirtsaeng's] approach. It says once you've you had a first sale, that's it."

Near the end of the argument, Justice Samuel Alito got down to brass tacks. Semantics aside, he wanted to know how would Stewart choose between two unappealing options.

"Which of the following is worse," asked Alito. "All of the horribles that [Kirtsaeng] outlines… or the frustration of market segmentation, if [his] position were accepted?"

"Well, if they actually happened, then I think the horribles would be worse," said Stewart. "But, as I say, we feel that we have offered a reading of all the statutory provisions together that would avoid both."

"If that middle ground were found not to be viable, which of the two sets of consequences is worse, from the government's perspective?" Alito continued.

Wiley's position—to subject all foreign-made goods to licensing requirements—would be worse than messing up "market segmentation," Stewart admitted.

With that, the argument wrapped up just after noon. A decision will be made some time in the coming months. In the meantime, everyone at the court has more immediate concerns. Hurricane Sandy left the capital "drenched and desolate" today, and it was somewhat surprising that arguments even took place, since the rest of the federal government had already shut down. Tuesday's arguments have been re-scheduled.

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