The Kirtsaeng Oral Argument

One of the very interesting things about the oral arguments before the Supreme Court yesterday in the Kirtsaeng case is that there was very little discussion of the facts in this case.  See Joe Hodnicki’s post AALL's Interest in the Owners' Rights Initiative and Today's SCOTUS Oral Arguments in Kirtsaeng and links therein for background on the issues in this case.  Most of it focused on the consequences of a ruling one way or the other on the viability of the First Sale doctrine as applied to foreign made goods.  The problem for the Court is that both sides are essentially asking for an all or nothing ruling.  Either the §109(a) consumer First Sale rights trump the rights of a foreign copyright holder to limit importation of copyrighted goods under §602(a)(1) or they don’t. 

Kirtsaeng’s counsel argued essentially that the words “lawfully made under this title” in §109(a) applies to works made in a foreign jurisdiction if they satisfy American copyright law.  Wiley’s counsel, former Solicitor General Ted Olsen argued that §602(a)(1)’s limitations on imports applies to goods manufactured under the laws of another country, thus the language of §109(a) does not come into play in these situations. 

Several of the Justices seized on this position and posited what happens when a library buys a foreign book, a museum buys a foreign painting, or when a Toyota contains copyrighted elements.  Can these be sold downstream?  Mr. Olson suggested other parts of the copyright cover those situations, such as application of the fair use defense.  The Justices weren’t buying it:

JUSTICE BREYER: Now, explain to me, because they're horribles if I summarize them, millions and millions of dollars' worth of items with copyrighted indications of some kind in them that we import every year; libraries with three hundred million books bought from foreign publishers that they might sell, resale, or use; museums that buy Picassos that now, under our last case, receive American protection as soon as that Picasso comes to the United States, and they can't display it without getting permission from the five heirs who are disputing ownership of the Picasso copyrights.

Those are some of the horribles that they sketch. And if I am looking for the bear in the mouse hole, I look at those horribles, and there I see that bear.   So I'm asking you to spend some time telling me why I'm wrong.

MR. OLSON: Well, I'm -- first of all, I would say that when we talk about all the horribles that might apply in cases other than this -- museums, used Toyotas, books and luggage, and that sort of thing -­ we're not talking about this case. And what we are talking about is the language used by the statute that does apply to this case. And that -­

JUSTICE BREYER: But we need -­

JUSTICE SOTOMAYOR: Don't those horribles -­

JUSTICE BREYER: -- interpretation -­

JUSTICE KENNEDY: But you have to look at those hypotheticals in order to decide this case.

 MR. OLSON: Well, and that's -­

JUSTICE KENNEDY: 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. And that's what we are asking.

Olson finally said:

MR. OLSON: But the problem is -- the statutes may not be perfect with respect to this, and there may be horribles that occur under one set of interpretations of the statute, and the other interpretation of the statute is to interpret it as -­ as the petitioner -­

The Court does not seem to want to adopt an absolute rule if it can avoid it.  I’m not sure if it can craft something that comes between the two positions.  Kirtsaeng was not a sympathetic character in the case, but the alternative consequences by holding against him seemed worse.

The Government filed a brief in support of Wiley and argued that the Bobbs-Merrill case applies.  In this argument a distributor has the ability to segment markets but doesn’t control all downstream sales.  The Court was skeptical and noted that the statute codified the Bobbs-Merrill decision.  The Government ultimately stated that the consequences would be worse if the Court adopted Wiley’s interpretation:

JUSTICE ALITO: Which of the following is worse: All of the horribles that the Petitioner outlines to the extent they are realistic, or the frustration of market segmentation, to the extent that would occur, if Petitioner's position were accepted?

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

The other couple of things I would say as to why a first sale by itself -­

JUSTICE ALITO: If the -- if that middle ground is -- were found to be not viable, which of the two sets of consequences is worse from the government's perspective, or can you not say?

MR. STEWART: I would say that the consequence that all foreign-made goods, even if imported into the United States with the authorization of the U.S. copyright owner, are subject to continuing licensing requirements, etc., I would say that would be worse than the frustration of market segmentation that would occur under Petitioner's view.

The American Association of Law Libraries is a member of the Owners’ Rights Initiative.  The organization issued a statement after the argument:

The Owners’ Rights Initiative hopes that the Supreme Court will take this opportunity to defend owners’ rights and clarify that if you buy something, you own it. We believe when you purchase something you should have the right to sell it, lend it, or donate it, regardless of whether that good was made in the US or elsewhere. If the Court rules in favor of Wiley, libraries may be unable to lend books, individuals could be restricted from donating items to charities, and businesses and consumers could be prevented from selling a variety of products, from electronics, to books, to jewelry, to used cars.  ORI looks forward to the Court’s decision in 2013 and regardless of the outcome, we will continue to be a champion for owners’ rights in America.

A very similar issue was decided squarely in favor of §109(a) in Quality King Distributors Inc., v. L'anza Research International Inc., 523 U.S. 135 (1998) in a 9-0 decision.  That played a part in the argument though the facts in the case did not completely align.  The Justices split 4-4 in the Costco case, keeping the 9^th Circuit opinion holding for import rights in place for the time being.  It’s going to be a hard case.  [MG]