Recently, the Supreme Court heard oral argument in Kirtsaeng v. John Wiley & Sons, Inc. The case deals with the interplay of two provisions of the Copyright Act: Section 109(a) and Section 602(a)(1). Section 109(a) allows, “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.” Section 602(a)(1) provides that, “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 section 106.”
In this case, the petitioner Kirtsaeng is a student in the United States. Family members living in Thailand purchased books there and sent them to Kirtsaeng, who resold them in the United States at a profit. Wiley, a major textbook manufacturer, then sued for copyright infringement. The district court found for Wiley and the Second Circuit affirmed.
The particular language at issue comes from Section 109(a), “lawfully made under this title.” Wiley suggests that because the books were manufactured and sold abroad, they were not made under the U.S. Copyright Act. Kirtsaeng argues that “under this title” modifies “lawfully”, and since the books were manufactured under a license from Wiley they were lawfully made under the U.S. Copyright Act.
Oral argument began with Joshua Rosenkranz for the Petitioner. In an exchange with Justice Ginsburg, Rosenkranz articulated the Petitioner’s position that “lawfully made under this title” means, “made wherever, in a way that satisfies U.S. copyright standards.” Justice Ginsburg expressed concern that adopting this idea of “International Exhaustion” would go beyond what any other country had adopted. Rosenkranz countered that Congress had in fact already adopted international exhaustion with respect to microchips, and that there was no norm dictating against adoption of international exhaustion, but rather the international community had “agreed to disagree” by codifying a “to each his own” policy in the TRIPS Agreement.
Justice Scalia then questioned Rosenkranz on his exact interpretation of the statutory language. Scalia asked if the Petitioner was arguing for language “lawfully made if the United States copyright law had applied where it was made”? Rosenkranz rejected this language, stating that the “if U.S. law had applied” language would seem to exclude products made in the United States (where the U.S. Copyright Act does apply), something that all parties agreed was covered under the first sale doctrine. Mr. Rosenkranz further clarified his position during questioning from Justice Sotomayor, “the only question under our definition is, was the making lawful, which is to say, was it authorized, whether it’s by transfer of licensing or by transfer of copyright or in any other way?” The focus for the Petitioner, he stated, is “not…on whether the making was under this title; we’re focusing on whether it was lawful under this title.”
Justice Kagan then questioned Mr. Rosenkranz about the Court’s previous decision in the Quality King Distributors, Inc. v. L’anza Research Intern., Inc. case (“Quality King”), noting that “there is that passage in Quality King, which is, I think it’s fair to say, unfortunate to your position.” Quality King dealt with a similar issue, but one particular factual difference was that the products in question were manufactured in the United States, sold abroad, and then imported back into the United States. The Court in Quality King held that the importation was protected under the first sale doctrine in Section 109.
Justice Kagan was likely referring to the Court’s discussion that “602(a) applies to a category of copies that are neither piratical nor ‘lawfully made under this title.’ That category encompasses copies that were ‘lawfully made’ not under the United States Copyright Act, but instead, under the law of some other country.” The Court went on to give an example of this category of works that they thought would come under the coverage of 602 but not 109:
If the author of the work gave the exclusive United States distribution rights-enforceable under the Act-to the publisher of the United States edition and the exclusive British distribution rights to the publisher of the British edition,20 however, presumably only those made by the publisher of the United States edition would be “lawfully made under this title” within the meaning of § 109(a). The first sale doctrine would not provide the publisher of the British edition who decided to sell in the American market with a defense to an action under § 602(a) (or, for that matter, to an action under § 106(3), if there was a distribution of the copies).
The suggestion from the Court in Quality King appears to be that the “round trip” importation in that case is covered under the first sale doctrine because the items were originally made under U.S. law, while items manufactured elsewhere under the law of a different country would not be covered by Section 109.
Rosenkranz responded to this by agreeing with Kagan’s suggestion that he considered this passage of the Court’s opinion “ill-considered dicta that we should ignore.” He goes on to state “the whole driving logic of Quality King is about 109 trumping 602.”
Mr. Rosenkranz then argued that if Wiley’s interpretation were to prevail, U.S. manufacturers would have a massive incentive to send jobs overseas and manufacture their products outside the U.S. in order to maintain greater downstream control of sales and rentals. Justice Ginsburg questioned whether this had occurred in practice, to which Mr. Rosenkranz responded, “Your Honor, I’m sure it has. They haven’t announced it.”
After Mr. Rosenkranz reserved the rest of his time for rebuttal, Theodore Olson began his argument on behalf of the Respondent. He began by arguing that the Court’s reasoning in Quality King was not dictum, but rather that it was the holding of the case “in the sense that it was necessary, the Court felt.” Justices Breyer and Kagan expressed skepticism about this proposition, stating, “You don’t need that,” and “It wasn’t necessary, was it?”
Justices Breyer and Sotomayor then began to question Mr. Olson on some of the “parade of horribles” that the petitioner asserted would result from a ruling in favor of Wiley. Justice Breyer questioned Olson on whether someone who, while on a trip, purchased a book at a British bookstore and then returned to the United States could give that book to his wife without the permission of the copyright holder. Mr. Olson appeared to struggle to give a direct answer to this, citing that there are exceptions such as fair use that may provide a defense to infringement. Justice Breyer then brought up Toyota, noting that the company sells millions of cars in the United States that contain copyrighted elements such as sound systems and GPS systems.
Breyer then asked Olson whether someone who buys a Toyota could, under Wiley’s reading of 602(a), sell the car without seeking permission of the copyright holder of every copyrighted element in the vehicle. Olson again seemed to struggle with the question, stating, “There are other defenses, but that is not this case.”
As Olson attempted to allay the Justices’ concerns by stating that the suggested horribles were not this case, Justice Kennedy chimed in, “You’re aware of the fact that if we write an opinion with the – with the rule that you propose, that we should, as a matter of common sense, ask about the consequences of that rule.”
Ultimately, Olson’s response to concerns about the parade of horribles that would result from Wiley’s reading seemed to boil down to “that is not this case” and, if problems do result from the interpretation, “there is a body of the government of the United States that is entitled and capable of fixing this.” His argument focused on the language of the statute. “[T]here is only one real way to interpret under this title in the provisions in 109(a)…in conjunction with 602(a)(1), and that is the way the Court decided it in the Quality King case, specifically looking at this question.”
Justice Kagan questioned this insistence on only one possible reading, noting that she “can kind of see it both ways,” – with the focus on “made under this title” meaning made in the U.S., as Respondent argued, or the focus on “lawfully made” as opposed to unlawfully made, as Petitioner argued. In response, Olson argued that Petitioner’s reading would lead to increased confusion in litigation, “I can’t imagine the difficulties that would ensue with litigation over whether or not something made in another country, made under another country’s different laws…whether that was somehow compatible with the laws of the United States.”
Justice Breyer steered the questioning back toward the horribles Petitioner had suggested, wondering if the litigation over those issues might be just as troublesome. Mr. Olson again noted that there may be other defenses, including fair use, to which Chief Justice Roberts responded by asking which of the situations Justice Breyer had suggested, such as reselling the Toyota, would be covered under fair use. Olson responded that while the sale of the Toyota would not be fair use, implied licenses, or a broader interpretation of “made” as suggested by the government in this case (with “made” meaning to put in the flow of commerce) could cover the various situations.
With respect to the Petitioner’s assertion that a ruling in favor of Wiley would result in manufacturers sending jobs overseas, Olson responded that there was no evidence that such a change would occur, and if it did occur, Congress would have the ability to act to resolve the problem.
Malcolm Stewart then argued the government’s position as amicus curie. He agreed with Justice Kagan’s assertion that the government’s goal was to allow “the copyright holder to have some control over importation, but at the same time you don’t want the copyright holder to have control over all downstream sales.”
Mr. Stewart presented a common law argument based on the Court’s ruling in the 1908 Bobbs-Merrill case. Justice Alito was skeptical, stating “[T]he 1909 Act said that it was codifying the holding in Bobbs-Merrill, and the 1976 statute, which is now before us, said it wasn’t changing the meaning of the earlier law…So how does some sliver of Bobbs-Merrill still survive all of this?”
Stewart explained that Bobbs-Merrill would serve to resolve one of the hypothetical problems suggested by the petitioner were Wiley to succeed. The scenario would play out as such: a book manufacturer manufactures a book abroad, imports it, and then sells it subject to restrictions on resale. Someone purchases that book and then resells it; the manufacturer sues for copyright infringement because the restrictions in resale weren’t followed. The defendant in that case could then assert that the holding in Bobbs-Merrill said his actions did not infringe in the exclusive right to vend, and there would be no copyright infringement.
Justice Alito asked if the Court decided to reject the government’s position and choose either the Petitioner’s or the Respondent’s position, which set of consequences would be worse – the Petitioner’s horribles or the Respondent’s frustration of market segmentation? Mr. Stewart responded that the horribles Petitioner suggested would result from a finding in favor of the Respondent would be worse. The suggestion that, were the government forced to choose, it would support the Petitioner’s concerns may result in the Court resolving the question in favor of the Petitioner if they find the government’s position untenable.
In his rebuttal, Mr. Rosenkranz was dismissive of the government’s argument, stating that it “has absolutely no basis in the statute.” He went on to re-iterate the Petitioner’s understanding of the statutory language. “Our view is that under this title modifies lawfully. You use the U.S. metric of U.S. law to figure out whether it’s lawful.” The Respondent, on the other hand, wants “under this title” to apply both to “lawfully” and “made,” something that Mr. Rosenkranz suggested was inconsistent with proper grammar.
As reactions to the argument from the Electronic Frontier Foundation and SCOTUSblog note, it can be dangerous to predict the results of cases from the Justices’ questioning during oral argument. Breyer, Sotomayor, and Roberts seemed particularly concerned with the “parade of horribles” and didn’t appear to receive convincing responses from Mr. Olson. The fact that the government, when pressed, cited the horribles as the greater concern may also bode well for Kirtsaeng. However, the Court will still have the deal with the reasoning of Quality King. Whether enough of the Justices will view parts of the opinion as “ill-considered dicta” for Kirtsaeng to prevail remains to be seen.
 523 U.S. 135
 Id. at 147
 Id. at 148
 Id. at 148
 210 U.S. 339