Lead Opinion
Thе “first sale doctrine” in copyright law permits the owner of a lawfully purchased copy of a copyrighted work to resell it without limitations imposed by the copy
The principal question presented in this appeal is whether the first sale doctrine, 17 U.S.C. § 109(a), applies to copies of copyrighted works produced outside of the United States but imported and resold in the United States. Under another basic copyright statute, it is ordinarily the case that “[importation into the United States, without the authority of the owner of copyright under [the Copyright Act], of copies ... of a work that have been acquired outside the United States is an infringement of the [owner’s] exclusive right to distribute copies....”
Defendant contends, however, that individuals may import and resеll books manufactured abroad pursuant to 17 U.S.C. § 109(a), which provides that “the owner of a particular copy ... lawfully made under [the Copyright Act], 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.”
Defendant’s claim is an issue of first impression in our Court.
BACKGROUND
A. The Parties
Plaintiff-appellee John Wiley & Sons, Inc. (“plaintiff’ or “Wiley”) is the publisher of academic, scientific, and educational journals and books, including textbooks, for sale in domestic and international markets. Wiley relies upon a wholly-owned
Authorized for sale in Europe, Asia, Africa and the Middle East Only.
This book is authorized for sale in Europe, Asia, Africa and the Middle East only [and] may not be exported. Exportation from or importation of this book to another region without the Publisher’s authorization is illegal and is a violation of the Publisher’s rights. The Publisher may take legal action to enforce its rights. The Publisher may recover damages and costs, including but not limited to lost profits and attorney’s fees, in the event legal action is required.
Joint App’x at 406 (emphasis in original).
Defendant Supap Kirtsaeng (“defendant” or “Kirtsaeng”) moved to the United States from Thailand in 1997 to pursue an undergraduate degree in mathematics at Cornell University. According to Kirtsaeng, he later moved to California to pursue a doctoral degree.
B. The Instant Action
To help subsidize the cost of his education, Kirtsaeng allegedly participated in the following scheme: Between 2007 and September 8, 2008, Kirtsaeng’s friends and family shipped him foreign edition textbooks printed abroad by Wiley Asia. In turn, Kirtsaeng sold these textbooks on commercial websites such as eBay.com. Using the revenues generated from the sales, Kirtsaeng would reimburse his family and friends for the costs that they incurred during the process of acquiring and shipping the books and then keep any remaining profits for himself. Kirtsaeng claims that, before selling the textbooks, he sought advice from friends in Thailand and consulted “Google Answers,” a website which allows web users to seek research help from other web users, to ensure that he could legally resell the foreign editions in the United States.
On September 8, 2008, Wiley filed this action against Kirtsaeng in the United States District Court for the Southern District of New York (Donald C. Pogue, Judge of the United States Court of International Trade, sitting by designation), claiming, among other things, copyright infringement under 17 U.S.C. § 501,
C. Relevant Pre-Trial Proceedings
In anticipation of trial, Kirtsaeng submitted proposed jury instructions charging that the first sale doctrine was a defense to copyright infringement. By Order dated October 9, 2009, the District Court prohibited Kirtsaeng from raising this defense and rejected the applicability of the first sale doctrine to foreign editions of textbooks, holding that “[t]here is no indication that the imported books at issue here were manufactured pursuant to the U.S. Copyright Act ... [and,] [t]o the contrary, the textbooks introduced as evidence purport, on their face, to have been published outside of the United States.”
On October 23, 2009 and November 3, 2009, Kirtsaeng filed-motions in limine to preclude the introduction at trial of (1) his online “PayPal” sales records, and specifically, evidence of his gross revenues from the sales of the foreign editions of Wiley’s books, and (2) the profits he earned on unrelated sales activities. From the bench during a pre-trial conference on November 3, 2009, the District Court granted the motions in part and denied them in part. The Court explained that Wiley could not introduce evidence of profits earned by Kirtsaeng from the sales of tеxtbooks produced by other publishers, but “in ... anticipation that the net worth testimony [would indicate] that [Kirtsaeng did not have] significant net worth ... [Wiley’s counsel had the] right to inquire about additional revenues and the profits there
D. Events at Trial
At trial, during direct examination, Wiley’s counsel asked Kirtsaeng, “Now sir, if we were to go back and look at January 1st of 2008, what were your financial assets at that point in time?”
The District Court sustained an objection by Kirtsaeng’s counsel and a sidebar discussion followed.
After the sidebar conference and a recess, the first question by Wiley’s counsel to Kirtsaeng was: “Mr. Kirtsaeng, before the break we were talking about your net worth during the period of 1999, correct? Excuse me. 2009.” Kirtsaeng answered “yes.” Wiley’s counsel proceeded to ask Kirtsaeng a series of questions about his “net wоrth” in an attempt to impeach his previous statements. Specifically, he attempted to enter into evidence a record of Kirtsaeng’s PayPal revenues, showing $1.2 million in revenues, in contrast to Kirtsaeng’s previous testimony that he had earned only $900,000 in revenues. Joint App’x at 295-97.
At a second sidebar conference, during which the jury was excused from the courtroom, the District Court excluded the record of the PayPal evidence as “confusing and unfairly prejudicial.” Id. at 298.
When the jury reentered the courtroom, Wiley’s counsel continued to ask Kirtsaeng about his revenues from eBay sales. Although Kirtsaeng’s counsel immediately objected to the line of questioning on the basis that it had already been “asked and answered” — an objection the District Court initially sustained — the Court subsequently allowed the questioning, explaining that it was uncertain whether the same questions had in fact been asked of the witness earlier in the examination.
At the end of the trial, the District Court charged the jury to determine whether Kirtsaeng had infringed the copyrights of each of eight works and whether any such infringements hаd been willful. The District Court explained that, under the statutory damages scheme found at 17 U.S.C. § 504(c), see note 10, ante, if the jury found that Kirtsaeng had infringed Wiley’s copyright, it could award no less than $750 and no more than $30,000 in damages for each infringed work.
The District Court identified two exceptions to this rule. First, the District Court instructed the jury that, if it found that Wiley had proved by a preponderance of the evidence that the infringement was willful, under the statutory scheme the jury had the option of awarding up to $150,000 in damages per infringed work. Second, if the jury found that Kirtsaeng had proved by a preponderance of the evidence “that he was not aware and had no reason to believe that his acts constituted an infringement of copyright,” the jury could choose to impose an award of statutory damages as low as $200 per infringed work. The jury ultimately found Kirtsaeng liable for willful copyright infringement of all eight works and imposed damages of $75,000 for each of the eight works.
Kirtsaeng filed a timely notice of appeal. He claims that (1) the District Court erred in holding that the first sale doctrine was not an available defense in the circumstances presented; (2) the District Court should have advised the jury of the first sale doctrine as a defense to the claim of willful infringement; and (3) with respect to the jury’s assessment of statutory dam
DISCUSSION
A. The first sale doctrine does not apply to goods produced outside of the United States.
1. Standard of review
The threshold question is whether, pursuant to § 109(a) of the Copyright Act, see note 1, ante, the District Court correctly determined that the phrase “lawfully made under this title” does not include copyrighted goods manufactured abroad.
Where the decision of a district court “presents only a legal issue of statutory interpretation ... [w]e review de novo whether the district court correctly interpreted the statute.”
2. Interpreting the First-Sale Doctrine
In the Copyright Act of 1976, Congress enacted what is now 17 U.S.C. § 602(a)(1).
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, actionable under section 501.
Even if the conduct at issue in this case is otherwise covered by this statutory language, Kirtsaeng contends that he is shielded from any liability under the Copyright Act by § 109(a), see note 1, ante. Again, in relevant part, that section provides: “Notwithstanding the provisions of section 106(3) [of the Copyright Act], the owner of a particular copy ... 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.” Section 109(a) is a codification of the longstanding “first sale doctrine.”
Quality King involved the sales practices of L’anza Research International, a California corporation engaged in the business of manufacturing and selling shampoos, conditioners, and other hair care products. L’anza sold its products domestically and internationally, but its prices to foreign distributors were 35% to 40% lower than the prices charged to its domestic distributors. L’anza brought suit against Quality King Distributors, Inc., which had purchased shipments of L’anza’s products from one of L’anza’s foreign distributors and then re-imported the products into the United States for re-sale. L’anza alleged that Quality King’s actions violated its “exclusive rights under 17 U.S.C. §§ 106, 501 and 602 to reproduce and distribute the copyrighted material in the United States.”
In a unanimous opinion, the Supreme Court held that § 109(a), operating in combination with § 106(3), does in fact limit the scope of § 602(a).
Although the majority opinion did not directly address the question of whether § 109(a) can apply to items manufactured
If the author of [a] 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, ... presumably only those made by the publisher of the U.S. 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).22
In these passages, the Court suggests that copyrighted material manufactured abroad cannot be subject to the first sale doctrine contained in § 109(a).
The Supreme Court recently seemed poised to transform this dicta into holding when it granted a writ of certiorari to review the Ninth Circuit’s decision in Omega S.A. v. Costco Wholesale Corp.
Without further guidance from the Supreme Court, we now consider the extent to which the protections set forth in § 109(a) may apply to items manufactured abroad. In doing so, we rely on the text of § 109(a), the structure of the Copyright Act, and the Supreme Court’s opinion in Quality King.
8. Textual Analysis
We start, of course, by turning to the statutory language enacted by Congress. “Statutory interpretation always begins with the plain language of the statute, assuming the statute is unambiguous.”
In arriving at a satisfactory textual interpretation of the statutory language at issue, we focus primarily on the words “made” and “under,” but this task is complicated by two factors: (1) the word “made” is not a term of art in the Copyright Act,
But the extraterritorial application of Title 17 is more complicated than Wiley allows, since certain provisions in Title 17 explicitly take account of activity occurring abroad. Most notably, § 104(b)(2) provides that “[t]he works specified by sections 102 and 103, when published, are subject to protection under this title if the work is first published in the United States or in a foreign nation that, on the date of first publication, is a treaty party[.]”
There are other reasons why a textual analysis alone is not sufficient to support Wiley’s preferred reading of § 109(a). Most obviously, if Congress had intended the first sale doctrine — at least as codified by § 109(a) — to apply only to copies of works made in the United States, it could have easily written the statute to say precisely that.
But while a textual reading of § 109(a) does not compel the result favored by Wiley, it does not foreclose it either. The relevant text is simply unclear. “[Ljawfully made under this title” could plausibly be interpreted to mean any number of things, including: (1) “manufactured in the United States,” (2) “any work made that is subject to protection under this title,” or (3) “lawfully made under this title had this title been applicable.”
lp. Section 602(a)(1) and Quality King
Confronted with an utterly ambiguous text, we think it best to adopt an interpretation of § 109(a) that best comports with both § 602(a)(1) and the Supreme Court’s opinion in Quality King.
In adopting this view, we are comforted by the fact that our interpretation of § 109(a) is one that the Justices appear to have had in mind when deciding Quality King. There, the Court reasoned, admittedly in dicta, that § 602(a)(1) had a broader scope than § 109(a) because, at least in part, § 602(a)(1) “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.”
We freely acknowledge that this is a particularly difficult question of statutory construction in light of the ambiguous language of § 109(a), but our holding is supported by the structure of Title 17 as well as the Supreme Court’s opinion in Quality King. If we have misunderstood Congressional purpose in enacting the first sale doctrine, or if our decision leads to policy consequences that were not foreseen by Congress or which Congress now finds unpalatable, Congress is of course able to correct our judgment.
B. The District Court did not err in its instructions to the jury.
“We review jury instructions de novo, and reverse only when the charge, viewed as a whole, constitutes prejudicial error.”
It is undisputed that Kirtsaeng’s counsel did not object to the final jury instructions during trial. “[FJailure to object to a jury instruction ... prior to the jury retiring results in a waiver of that objection.”
“To constitute plain error, a court’s action must contravene an established rule of law.”
C. The District Court did not err in allowing into evidence the amount of defendant’s gross revenues.
Kirtsaeng argues that admission of evidence regarding his gross revenues prejudiced him by confusing the jury as to the amount of damages that should have been awarded to Wiley. He suggests that the majority of his revenues came from the sale of other publishers’ used volumes, many of which were produced in the United States, and claims that because of the evidence of revenues that the judge permitted to be presented to the jury, he was inappropriately forced to pay high statutory damagеs.
To determine whether evidence of the amount of defendant’s gross revenues was properly admitted, ordinarily we first determine the appropriate standard of review. As stated above, where a party does not contemporaneously object to an evidentiary ruling, that party must demonstrate that the District Court committed “plain error.”
At trial, the jury awarded $75,000 in statutory damages per copyrighted work for Kirtsaeng’s willful infringement of eight works. Under the relevant statutory provision, 17 U.S.C. § 504(c), see note 10, ante, the jury could have awarded damages of up to $150,000 per copyrighted work. Because abundant evidence was available to support the jury’s finding of willfulness, the admission of information about Kirtsaeng’s revenues was not prejudicial — that is, the jury could have imposed the same amount of damages without knowledge of Kirtsaeng’s revenues. For example, the books in question clearly stated the following:
This book is authorized for sale [in a foreign region] only and may not be exported out of this region. Exportation from or importation of this book to another region without the Publisher’s authorization, is illegal and is a violation of the Publisher’s rights. The Publisher may take legal action to enforce its rights. The Publisher may recover damages and costs, including but not limited to lost profits and attorney’s fees, in the event legal action is required.
In these circumstances, it does not seem anomalous or extraordinary that the jury made the findings it did, and we see no reason to conclude that the District Court’s decision was improper under Rule 403(b).
CONCLUSION
To summarize, we hold that (1) the first sale doctrine does not apply to copies manufactured outside of the United States; (2) the District Court did not err in declining to instruct the jury regarding the unsettled state of the first sale doctrine; and (3) the District Court did not err in admitting evidence of Kirtsaeng’s gross revenues.
Accordingly, the judgment of the District Court is AFFIRMED.
Notes
. The first sale doctrine is codified at 17 U.S.C. § 109(a) which reads, in relevant part:
Notwithstanding the provisions of section 106(3) [of the Copyright Act], the owner of a particular copy ... 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....
17 U.S.C. § 109(a).
As defined in the Copyright Act, a "cop[y]’' is the "material object[ ] ... from which [a] work can be perceived, reproduced, or otherwise communicated.” Id. § 101. As one commentator has explаined, "the physical object 'copy' is distinct from the incorporeal 'work of authorship’ that the copy embodies.” Jane C. Ginsburg, Essay: From Having Copies to Experiencing Works: The Development of an Access Right in U.S. Copyright Law, 50 J. Copyright Soc'y U.S.A. 113, 126 (2003); see also 17 U.S.C. § 202 (distinguishing the copy from the work).
. See Bobbs-Merrill Co. v. Straus,
. See Copyright Act of 1909, ch. 320, § 41, 35 Stat. 1075, 1084 (1909); Copyright Act of 1947, ch. 391, § 27, 61 Stat. 652, 660 (1947); Copyright Act of 1976, ch. 1, § 109, 90 Stat. 2541, 2548 (codified at 17 U.S.C. § 109(a)) (1976).
. 17 U.S.C. § 602(a)(1).
. District courts within our Circuit have addressed this issue. See Pearson Educ., Inc. v. Liu,
. As a standard practice, Wiley obtains from its authors the assignment of U.S. and foreign copyrights of reproduction and distribution. The assignment of these copyrights allows Wiley to produce and distribute its works in both domestic and foreign markets.
. 17 U.S.C. § 501(a) provides, in relevant part:
Anyone who violates any of the exсlusive rights of the copyright owner as provided by sections 106 through 122 [of the Copyright Act] or of the author as provided in section 106A(a), or who imports copies ... into the United States in violation of section 602, is an infringer of the copyright or right of the author, as the case may be.
17 U.S.C. § 501(a).
*214 Wiley holds registered United States copyrights for the American editions of the works at issue in this case. Although the foreign editions probably would not be protected by United States copyright law if infringement occurred abroad, see Robert Stigwood Grp. Ltd. v. O'Reilly,530 F.2d 1096 (2d Cir.1976), the sale of the foreign editions in the United States allegedly infringes the U.S. copyrights held by Wiley on its American editions.
. Wiley later abandoned its trademark and unfair competition claims.
. 17 U.S.C. § 502(a) provides, in relevant part:
Any court having jurisdiction of a civil action arising under this title may, subject to the provisions of section 1498 of title 28, grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.
17 U.S.C. § 502(a).
. 17 U.S.C. § 504(c)(l)-(2) provides, in relevant part:
Except as provided by clause (2) of this subsection, the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just.... In a case where the copyright owner sustains the burden of proving, and the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.
17 U.S.C. § 504(c).
We have recently observed that "the total number of awards of statutory damages that a plaintiff may recover in any given action depends on the number of works that are infringed ... regardless of the number of infringements of those works." WB Music Corp. v. RTV Commc’n Gip., Inc.,
.See John Wiley & Sons, Inc. v. Kirtsaeng, No. 08 Civ. 7834,
. Perry v. Dowling,
. In 2008, Congress amended the statute, resulting in the re-designation of what had been § 602(a) as § 602(a)(1). Act of October 13, 2008, Pub.L. 110-403, Title I, § 105(b)-(c)(1), 122 Stat. 4259.
. The first sale doctrine was first endorsed by the Supreme Court in the landmark 1908 case of Bobbs-Merrill Co. v. Straus,
The purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it.
In our view the copyright statutes, while protecting the owner of the copyright in his right to multiply and sell his production, do not create the right to impose, by notice, such as is disclosed in this case, a limitation at which the book shall be sold at retail by future purchasers, with whom there is no privity of contract.
Id. at 350,
The Supreme Court made clear that the matter before it "was purely a question of statutory construction.” Id. The relevant statute provided that copyright owners had "the sole liberty of printing, reprinting, publishing, completing, copying, executing, finishing, and vending " their copyrighted works. Copyright Act of 1891, § 4952, 26 Stat. 1107 (emрhasis
The current version of the first sale doctrine — as codified in § 109(a) — differs in two noticeable respects from the version Congress first passed in 1909. First, under current copyright law, the exclusive right to "vend” granted to copyright holders has been replaced by the exclusive right to "distribute.” See § 106(3). However, the Supreme Court has indicated that, at least for purposes of the first sale doctrine, nothing of consequence turns on this alteration. See Quality King v. L’anza Research Int’l,
.
. Id. at 140,
. Id. at 138,
. Id. at 145,
. Id. at 154,
. Id. at 148-49,
. Id. at 148,
. Id.
.
. Id. at 990.
. Costco Wholesale Corp. v. Omega, S.A., - U.S. -,
. Universal Church v. Geltzer,
. Again, § 109(a), in relevant part, provides:
Notwithstanding the provisions of section 106(3) [of the Copyright Act], the owner of a particular copy ... lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or othеrwise dispose of the possession of that copy....
17 U.S.C. § 109(a).
. A simple and authoritative dictionary definition of "made” is "artificially produced by a manufacturing process.” Webster’s Third. New International Dictionary 1356 (1976).
. Kucana v. Holder,-U.S.-,
. Brief for the United States as Amici Curiae in Support of Respondent, at 5, Costco Wholesale Corp. v. Omega, S.A., -U.S. -,
. The Supreme Court has previously defined "under” to mean "subject to” and “governed by." Ardestaniv. INS,
. See Morrison v. Nat'l Austl. Bank Ltd.,U.S.-,
. See, e.g., Update Art, Inc. v. Modiin Pub., Ltd.,
. 17 U.S.C. § 104(b)(2) (emphasis added). Quality King also explained how certain provisions of Title 17 might apply to activity occurring abroad.
. At oral argument before the Supreme Court in Costco, the United Statеs tried to argue that its interpretation of § 109(a) (which, again, is also Wiley’s) is not perfectly interchangeable with "lawfully made in the United States,” "because at least in theory, it would be possible for the creation of a copy to entail a violation of environmental laws, workplace safety laws, minimum wage laws, et cetera.” Transcript of Oral Argument at 38, Costco Wholesale Corp. v. Omega, S.A., — U.S. -,
. 17 U.S.C. § 1006(a)(1)(A).
. See Digital Audio Recording Technology (DART) Factsheet on Filing Claims for Royalty Distribution, U.S. Copyright Office, http:// www.copyright.gov/carp/dartfact.html (last visited June 23, 2011).
. Kirtsaeng would prevail if we adopted either of the latter two definitions, but these definitions, like Wiley’s, are at best merely consistent with a textual reading of § 109(a). To further complicate the matter, both of these possible formulations are explicitly employed elsewhere in Title 17. See 17 U.S.C. § 401 ("Whenever a work protected under this title is published in the United States or elsewhere by authority of the copyright owner, a notice of copyright as provided by this section may be placed on publicly distributed copies from which the work can be visually perceived....” (emphasis added)); 17 U.S.C. § 602(b) (“In a case where the making of the copies and phonorecords would have constituted an infringement of copyright if this title had been applicable, their importation is prohibited.” (emphasis added)). Once again, if Congress had intended § 109(a) to reflect either one of those formulations, it could have employed their language with precision.
.See Davis v. Mich. Dep’t of Treasury,
.Under Kirtsaeng's definition, § 602(a)(1) would only permit U.S. copyright holders to control the importation of copies of their works into the United States when (i) the individual importing the copy of the work does not legally “own” the copy in question, or (ii) the work in question was produced in a country where United States copyright is not protected. While these remaining categories would ensure that § 602(a)(1) would not be rendered useless, copyright holders would have little control over the importation of copies of their works under Kirtsaeng's theory. Specifically, in order to еxclude certain copies from entering the United States, copyright holders would be required either to (i) not sell their goods, or (ii) produce them in countries that may not honor their copyright in the first place.
.
. This interpretation seems to be confirmed by language later in the opinion explaining that § 602(a) has a broader scope than § 109(a) "because it encompasses copies that are not subject to the first sale doctrine — e.g., copies that are lawfully made under the law of another country!.]” Id. at 148,
. We do note, however, that while all the books in question were printed abroad, they all bore American copyright notices. The same was true of the watches at issue in Costco. See Omega S.A. v. Costco Wholesale Corp.,
. 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 sаle doctrine to resell the imported copy. 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 copies 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.
.United States v. Amato,
. Jarvis v. Ford Motor Co.,
. Lavin-McEleney v. Marist Coll.,
. See N.A.S. Import, Corp. v. Chenson Enters., Inc.,
. But cf., e.g., Hearst Corp. v. Stark,
. Fed.R.Civ.P. 51(d)(2).
.SEC v. DiBella,
. DiBella,
. United States v. Downing,
Dissenting Opinion
dissenting:
As noted by the majority, the application of the first sale doctrine when a copy is manufactured outside the United States is an issue of first impression in this Circuit. The Supreme Court has recently considered the issue but unfortunately provided no specific guidance. See Costco Wholesale Corp. v. Omega, S.A., — U.S. --,
The Copyright Act sections that are pertinent to this appeal — 17 U.S.C. §§ 106(3), 109(a), and 602(a)(1) — are set out in the opinion of the majority. The distribution right of § 106(3) primarily protects a copyright owner’s ability to control the terms on which her work enters the market. The first sale doctrine of § 109(a) limits the scope of this distribution right. Finally, § 602(a)(1) addresses the extent to which the distribution right allows a copyright owner to also control importation of copies of her work.
The Supreme Court has held a copyright owner’s § 602(a) right to control the importation of copies of her work is derivative of § 106(3)’s distribution right, which is subject to the first sale doctrine. Quality King Distrib., Inc. v. L’anza Research Int., Inc.,
The issue is whether this holding can be extended to copies manufactured outside the United States. The Quality King Court held the first sale doctrine applies to imported copies that were made in the United States. Here, the district court held — and the majority affirms — the doctrine does not apply to imported copies that were made abroad because § 109(a) applies only to copies that are “lawfully made under this title,” and that means physically manufactured in the. United States. See John Wiley & Sons, Inc. v. Kirtsaeng, No. 08 Civ 7834,
Even in the absence of a market allocation agreement between, for example, a publisher of the United States edition and a publisher of the British edition of the same work, each such publisher could make lawful copies. 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, 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 Ameriсan market with a defense to an action under § 602(a)....
I respectfully disagree with the court’s analysis. To apply, § 109(a) requires (1) the person claiming protection be the owner of the copy, and (2) the copy was “lawfully made under this title.” 17 U.S.C. § 109(a). Courts have split over the meaning of “lawfully made under this title,” with some holding it means “legally manufactured ... within the United States,” CBS v. Scorpio Music Distrib.,
The statutory text does not refer to a place of manufacture: It focuses on whether a particular copy was manufactured lawfully under title 17 of the United States Code. 17 U.S.C. § 109(a). The United States law of copyrights is contained in title 17. Accordingly, the lawfulness of the manufacture of a particular copy should be judged by U.S. copyright law. Pearson Educ. v. Liu,
This interpretation of “lawfully made” is supported by the language of the Copyright Act as a whole. For example, Congress used the phrase “under this title” in multiple sections of the Act to describe the scope of rights created by the Act. See, e.g., 17 U.S.C. § 104(a) (providing certain works, “while unpublished, are subject to protection under this title without regard to the nationality or domicile of the author”); id. § 105 (providing “copyright protection under this title is not available for any work” of the U.S. government); id. § 106 (providing “the owner of copyright under this title has the exclusive rights to.... ”). However, “[w]hen Congress considered the place of manufacture to be important, ... the statutory language clearly expresses that concern.” Sebastian,
Prior to July 1, 1986, and except as provided by subsection (b), the importation into or public distribution in the United States of copies of a work, consisting preponderantly of nondramatic literary material that is in the English language and is protected under this title is prohibited unless the portions consisting of such material have been manufactured in the United States or Canada.
17 U.S.C. § 601(a)(1) (emphasis added). Also, as the majority points out, § 104(b)(2) provides “[t]he works specified by sections 102 and 103, when published, are subject to protection under this title if the work is first published in the United States or in a foreign nation....” 17 U.S.C. § 104(b)(2) (emphasis added). If Congress intended § 109(a) to apply only to copies manufactured in the United States, it could have stated “lawfully manufactured in the United States under this title.” As Congress did not include “manufactured in the United States” in § 109(a), though it was clearly capable of doing so as demonstrated by § 601(a), the omission supports the conclusion that Congress did not intend the language “lawfully manufactured under this title” to limit application of § 109(a) to only copies manu
As noted in the majority opinion, supra note 14, the first sale doctrine originated in Bobbs-Merrill Co. v. Straus,
The common law policy against restraints on trade and alienation is not limited by the place of manufacture. Pearson,
Economic justifications also support applicability of the first sale doctrine to foreign made copies. Granting a copyright holder unlimited power to control all commercial activities involving copies of her work would create high transaction costs and lead to uncertainty in the secondary market. An owner first would have to determine the origin of the copy — either domestic or foreign — before she could sell it. If it were foreign made and the first sale doctrine does not apply to such copies, she would need to receive permission from the copyright holder.
The Ninth Circuit has attempted to circumvent this perpetual right when a copy is made abroad by holding the first sale doctrine can apply to copies made outside the United States but only after there has been one authorized sale here. Denbicare U.S.A. Inc. v. Toys R Us, Inc.,
Supporters of limiting the application of the first sale doctrine to domestically manufactured copies rely on the argument that applying the doctrine to foreign made copies would render § 602(a) “virtually meaningless.” (Appellee’s Br. at 15-17.) However, § 602(a) will always apply to copies of a work that have not been sold or are piratical copies. It also applies to copies of a work not lawfully manufactured under title 17 but lawfully manufactured under some other source of law, as in the Quality King dicta, and to copies not in the possession of the “owner,” e.g., a bailee, licensee, consignee or one whose possession of the copy was unlawful. Quality King,
Nothing in § 109(a) or the history, purposes, and policies of the first sale doctrine limits it to copies of a work manufactured in the United States. That leaves the question whether the Quality King dicta “sp[eaks] directly to whether the first sale doctrine applies to copies manufactured abroad.” Pearson,
In Quality King, Justice Ginsburg, in a concurrence joined by no other justice, noted: “I join the Court’s opinion recognizing that we do not today resolve cases in which the allegedly infringing imports were manufactured abroad.” Quality King,
For the foregoing reasons, I respectfully dissent.
. Congress also demonstrated it could differentiate based on the place a copy was “acquired,” see § 602(a) (applying to copies “acquired outside the United States”), further supporting the conclusion that its omission of a phrase indicating the place of manufacture was not accidental.
. Wiley argues its interpretation of § 109(a) would not lead to perpetual control over imported works because once the U.S. copyright owner imports its copies into the United States, they are lawfully within the United States and, as § 602 applies only to "importations without the authority of the copyright owner,” any further sales would not be covered. Appellee's Br. at 24-25. This argument is not persuasive because the copyright holder seeking to prevent its copies from entering the United States retains exclusive control no matter how many foreign sales may have been made. Wiley’s rule allows it to protect the disparity in its pricing structure despite free market forces. Indeed such a rule, by differentiating based on place of manufacture, would encourage the manufacturing of copies abroad to the detriment of American workers.
. The Amici argue, based on the discussion at oral argument of Quality King, the Court was actually discussing the situation where the copy is made — presumably abroad, but could be domestically- — by someone other than the U.S. copyright holder, for example, a British copyright holder who manufactures under British law. Entm’t Merch. Assoc. Amici Br. at 10-12.