Today, the Supreme Court decided the Kirtsaeng case. The Court held that the first sale doctrine limits a copyright holder’s ability to control distribution of copies lawfully purchased by the defendant, even when the defendant lawfully obtained the copies outside the United States. In so ruling, the Court clarified questions left behind by cases such as Quality King v. L’Anza, which many thought stood for the proposition that the first sale limited the right of distribution only for copies originating within the United States.
The 6-3 majority opinion, written by Justice Breyer, relies primarily on a textual analysis. The Court also noted that the plaintiff’s interpretation of the Copyright Act would, if accepted, lead to a number of unacceptable results such as libraries needing to get permission to circulate copies of books purchased overseas. The Court acknowledged that its ruling would make it hard for copyright holders to engage in price discrimination, stating that it could find nothing in the statute of the Constitution amounting to a preference in favor of “market division.”
As an academic, I’m particularly curious about effects of this latter statement in the future interpretation of para-copyright provisions. To the extent that the Copyright Act has been interpreted in ways that support the use of Digital Rights Management to limit free use of copyrighted works for the purpose facilitating price discrimination, it’s possible that the Supreme Court has sent a signal that these interpretations stand on shaky ground. Of course, we can’t know that until the proper case makes its way to the Court, but Breyer’s opinion at least opens the door to the possibility that the Court is making its opinion about these issues known.
Yes, that question intrigues me too Fred. In that vein, I particularly noticed the comments in Ginsburg’s dissent that the consumer downstream market issue for “bundled” goods (eg cars, TVs etc that include copyrightable software) would not have been impacted negatively if Wiley’s argument had been successful because “principles of fair use and implied license … would likely permit the car to be resold without the copyright owners’ authorization”. (pp 29-30 dissent, slip opinion). I’m not so sanguine that principles of fair use and implied license would help if the software developers in these situations started to sue for copyright and/or anti-circumvention infringement. While the Lexmark and Chamberlain courts ultimately held against companies using copyrighted software to make DMCA-related claims in downstream markets, it would be relatively easy for upstream vendors to design the products to get around the reasoning in Lexmark. Chamberlain is more helpful here because it more obviously holds that para-copyright law is not intended to create new rights of the kind the plaintiff was claiming, but I think it’s an open question as to how readily that interpretation will be followed by later courts. Additionally, that reading is limited to DMCA anti-circumvention claims and wouldn’t necessarily apply to a basic copyright infringement claim.