Why The Supreme Court Needs To Make Sure That Selling A Used iPad Isn't A Copyright Violation

from the first-sale,-please dept

Over the last few years, we've been following a series of cases that have challenged the first sale doctrine -- which says that if you buy a product that has some element covered by copyright (i.e., a book) you're able to resell that item at a later date without seeking permission from the copyright holder(s). There was the very troubling ruling in the 9th Circuit in the Omega/Costco case, in which watchmaker Omega put a tiny little image on the underside of its watches -- for which it claimed copyright -- that were sold relatively cheaply outside of the US. When a bunch of those watches were purchased (legally) outside of the US, and then imported and sold by Costco (for less than what Omega was selling watches for directly in the US), the company sued... claiming copyright infringement on that tiny logo no one looks at.

Now, you might think that under the first sale doctrine, it wouldn't matter. But, the statute is inelegantly worded. It says that first sale applies to products made "under this" law. Omega argued that since the products were made outside the US, they weren't made under the US Copyright Act... and thus, were not subject to the Copyright Act or first sale when they showed up on US soil. The Supreme Court heard the case, but split down the middle, because Justice Kagan had filed an argument as Solicitor General in that case, and thus recused herself. Worryingly, as Solicitor General, she has argued that first sale does not apply to foreign goods.

Last year, we had another ruling, over in the 2nd Circuit, which in many ways was even worse. It involved a guy, Sudap Kirtsaeng, who had relatives in Asia purchase cheaper textbooks there and ship them to the US, where he then resold them at a profit (but still for less than what the publishers were charging in the US). Publisher John Wiley & Sons sued... and got a ridiculously broad ruling, saying that any product manufactured outside the US is not covered by the Copyright Act, and thus not eligible for first sale protection.

In fact, in many ways this ruling was even worse that the Omega ruling -- which at least said that if the manufacturer had authorized the product for sale in the US, then first sale rights would apply to all of those products, this ruling even said that this was not true. The court acknowledged that this was kind of a crazy situation, which could have ridiculous consequences (all manufacturing moves overseas immediately to get away from first sale doctrine), but says that's what the Copyright Act appears to say:

Kirtsaeng argues that this holding is undesirable as a matter of public policy because it may permit a plaintiff to vitiate the first sale doctrine by “manufactur[ing] all of its volumes overseas only to then ship them into the U.S. for domestic sales.” Defendant-Appellant’s Br. at 21. Phrased differently, it is argued that any such decision may allow a copyright holder to completely control the resale of its product in the United States by producing its goods abroad and then immediately importing them for initial distribution. In this sense, the copyright holder would arguably enjoy the proverbial “best of both worlds” because, in theory, the consumer could not rely on the first sale doctrine to re-sell the imported work. In other words, the copyright holder would have an incentive to“outsource” publication to foreign locations to circumvent the availability of the first sale doctrine as a defense for consumers wishing to re-sell their works in the domestic market. The result might be that American manufacturing would contract along with the protections of the first sale doctrine. Kirtsaeng argues that this could not possibly have been Congress’s intent. We acknowledge the force of this concern, but it does not affect or alter our interpretation of the Copyright Act.

In other words, yeah, that's crazy, but too freaking bad.

As we noted in April, the Supreme Court has agreed to hear the case.

Constitutional scholar Marvin Ammori has done an excellent analysis over at the Atlantic about some of the ridiculous consequences of such a ruling being upheld:

Here are some things you might have recently done that will be rendered illegal if the Supreme Court upholds the lower court decision:

1. Sold your first-generation iPad on Craigslist to a willing buyer, even if you bought the iPad lawfully at the Apple Store.
   
2. Sold your dad's used Omega watch on eBay to buy him a fancier (used or new) Rolex at a local jewelry store.
   
3. Sold an "import CD" of your favorite band that was only released abroad but legally purchased there. Ditto for a copy of a French or Spanish novel not released in the U.S.
   
4. Sold your house to a willing buyer, so long as you sell your house along with the fixtures manufactured in China, a chandelier made in Thailand or Paris, support beams produced in Canada that carry the imprint of a copyrighted logo, or a bricks or a marble countertop made in Italy with any copyrighted features or insignia.

Basically, if you sell anything that was made overseas that has anything covered by copyright on it... you might need to get permission to legally resell it. That's insane, and there's no way that was the intention of Congress in passing the law. The courts are supposed to avoid obviously nonsensical outcomes, but they don't always understand the consequences of their rulings. While the courts have (correctly) noted that Congress can fix and clarify the law later, Congress isn't very good at acting quickly on stuff like this and any time Congress even touches copyright law, it's something to worry about.

Ammori notes that there's actually a third case, over in the Third Circuit, Sebastian v. Consumer Contacts, in which the court "was reluctant to accept" the idea that first sale only applies to goods made in the US. So there's a pretty clear circuit split for the Supreme Court to work out. But, it's a little scary that it might come down in support of either the Omega or the John Wiley rulings -- and we already know that the Omega case had four of the justices in support of that absurd interpretation. Ammori points out that the Supreme Court has an opportunity to fix things and get it right this time around, and hopes that it will:

But the Supreme Court doesn't have to impose an absurd result on the nation. The first-sale doctrine reflects basic common sense -- and follows from the logic of treating copyrights and other "intellectual property" with no more protection than regular property. Ever since the end of Medieval feudalism, and the writings of John Locke, we have understood the importance of being able to buy and sell one's own property, including books and watches, both for reasons of economics and liberty.

The Court has several legal justifications for reaching the right result. Courts are supposed to interpret laws to avoid "absurd results" and to avoid constitutional problems -- such as infringing on the free speech rights of Americans that want to buy and sell their own books and creative works that are published abroad and taking away the property rights, without compensation, of the millions of Americans who buy and sell their own stuff every day, in person and online.

Ultimately the Court must choose between bringing copyright law into the Internet age or consigning us all to the dark ages. I hope they choose wisely.

I hope so too, though I have little faith on this one, considering that the Supreme Court always gets screwed up when it comes to copyright cases...

Filed Under: constitution, first sale, ipad, john wiley, marvin ammori, scotus
Companies: apple, costco, omega