First Sale Doctrine Not Available as Defense to Copyright Infringement, Where the Works were Foreign-Made

The Second Circuit Court of Appeals recently held that the “first sale doctrine” cannot be used as a defense to a claim of copyright infringement where the defendant distributed copies in the U.S. of the plaintiff’s works that were manufactured in a foreign country. John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896-CV, 2011 U.S. App. Lexis 16830 (2d Cir. Aug. 15, 2011).

First Sale Doctrine, Defined

Under U.S. law, a defendant can avoid liability in copyright infringement case if what he or she distributed was a copy of the work that was obtained legitimately. 17 U.S.C. § 109(a). In other words, once you purchase a paperback copy of a book, you may sell your copy of that book at any price you determine is fair without violating the copyright owner’s exclusive rights to distribute its works. This is called the “first sale doctrine.” This defense is generally described as follows: “the owner if a particular copy . . . lawfully made under this title . . . is entitled, without authority of the copyright owner, to sell or otherwise dispose of the possession of that copy . . . .” Id. There is a separate provision for sound recordings and computer programs, but it is not applicable here. See generally 17 U.S.C. § 109(b).

According to the Second Circuit, this defense is only available when the work at issue was made in the U.S. John Wiley & Sons, Inc., No. 09-4896-CV at 16 (“In sum, we hold that the phrase ‘lawfully made under this Title” in § 109(a) refers specifically and exclusively to works that are made in territories in which the Copyright Act is law, and not to foreign-manufactured works.”).

Facts of the John Wiley & Sons Case

In John Wiley & Sons, the defendant, Supap Kirtsaeng was a Thai student who first attended Cornell University, and then moved to California to pursue a doctoral degree. Between 2007 and September 2008, Kirtsaeng allegedly funded his educational expenses by receiving foreign edition textbooks from his family and friends in Thailand, and then selling them on commercial sites such as eBay. He reimbursed his family and friends for their acquisition and shipping costs and kept the profits for himself. Apparently, Kirtsaeng received about $1.2 million in revenue, a fact he tried to withhold from the jury as unduly prejudicial (see below). Id. at 7. In his defense of the lawsuit that followed, Kirtsaeng claimed that he had sought advice from friends in Thailand and on the Internet (using “Google Answers“) to determine that his actions would be lawful. (Factual discussion appears in the opinion in pages 4-5).

Complaint & Trial

On September 8, 3008, the textbook publisher, John Wiley & Sons, filed suit in the federal district court in Manhattan (Southern District of New York) claiming copyright infringement (17 U.S.C. § 501) and trademark infringement (15 U.S.C. § 1114(a)) under federal law, and unfair competition under New York state law. John Wiley & Sons sought preliminary and permanent injunctive relief under 17 U.S.C. § 502(a) and statutory damages under 17 U.S.C. § 504(c). At trial, the jury found Kirtsaeng “liable for willful copyright infringement of all eight works and imposed damages of $75,000 for each of the eight works.” Id. at 8. Kirtsaeng appealed to the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”), alleging that the judge erred in (1) finding the “first sale defense” not to apply to this situation; (2) in not instructing the jury that the “first sale doctrine” constituted a complete defense to the claims and (3) allowing certain evidence to be introduced regarding his gross receipts, which he claimed to be improper and unduly prejudicial.

Available Precedent

On appeal, the Second Circuit considered both Quality King Distr., Inc. v. L’anza Res. Int’l, Inc. (523 U.S. 135 (1998)) and Omega S.A. v. Costco Wholesale Corp. (541 F.3d 982 (9th Cir. 2008)) as potential precedent, and found both to be inapposite. Quality King dealt with works that were made in the U.S. for export to other countries, being returned to the U.S. and sold without authorization by the copyright owner. In that case, in a concurring opinion, Justice Ginsberg explained, “This case involves a ’round trip’ journey, travel of the copies in question from the United States to places abroad, then back again” and explicitly noted that “we do not today resolve cases in which the allegedly infringing imports were manufactured abroad.” Id. at 11 (citing Quality King Distr., Inc. v. L’anza Res. Int’l, Inc., 523 U.S. 135, 154 (1998)). As a result, the Second Circuit concluded that Quality King did not address precisely the situation posted by the John Wiley case, although its analysis could be borrowed for guidance about what the Supreme Court might do were this issue squarely presented before it.

The Second Circuit also considered a recent decision from the Ninth Circuit, Omega S.A. v. Costco, for the proposition that the first sale doctrine (§ 109(a)) “does not apply to items manufactured outside of the United States unless they were previously imported and sold in the United States with the copyright holder’s permission.” Id. at 12 (citing Omega S.A., 541 F.3d at 990). This case had been appealed to the U.S. Supreme Court, which affirmed the judgment by an equally divided panel (with Justice Kagan recused). In other words, four of the nine justices voted to overturn the opinion, but without a majority of votes, the opinion was essentially affirmed.

Court’s Ruling

In reaching its ruling, the Second Circuit conceded that the statutory text was simply “utterly ambiguous.” Id. at 15. The phrase “lawfully made under this title” could mean any of the following: “(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.'” The last two meanings would have supported Kirtsaeng’s position, but the court explained, “these definitions, like Wiley’s, are at best merely consistent with a textual reading of § 109(a)” but are not mandated by the statute. Id.

Following its analysis, the Second Circuit concluded that it was most appropriate to “adopt an interpretation of § 109(a) that best comports with both § 602(a)(1) and the Supreme Court’s opinion in Quality King.” Id. (Section 602(a)(1) provides that unauthorized importation into the U.S. of works that were acquired outside the U.S. constitutes infringement.) The Second Circuit explained that the “mandate of § 602(a)(1) . . . would have no force in the vast majority of cases if the first sale doctrine was interpreted to apply to every work manufactured abroad that was either made” under definition number 2 (“subject to protection under Title 17”) or 3 (“consistent with the requirements of Title 17 had Title 17 been applicable”) above. Thus, the only definition that could apply – and still allow § 602(a)(1) to have any teeth – must be definition number (1) (“manufactured in the U.S.”).

In reaching this conclusion, the Second Circuit also distinguished the Omega v. Costco decision by finding that it was based largely on Ninth Circuit precedent that has not been widely adopted by other appellate courts.

As to the remaining bases for appeal, the Second Circuit held that it “could not conclude that the District Court plainly erred in declining to give Kirtsaeng’s proposed jury instruction” and “we see no reason to conclude that the District Court’s decision [regarding admission of evidence of Kirtsaeng’s gross revenues] was improper under Rule 403(b).” Id. at 18, 20.

Accordingly, all three of Kirtsaeng’s arguments failed and he lost the appeal.

Dissenting Opinion

The Honorable J. Garvan Murtha, a Vermont district court judge sitting by designation, filed a dissenting opinion, basically concluding that “the first sale doctrine should apply to a copy of a work that enjoys United States copyright protection wherever manufactured.” Id. at 1 (dissent). As in the majority opinion, the dissent focused on the “lawfully made under this title” phrase, and noted a circuit split over the interpretation of this phrase. One definition (as articulated by the majority) adopted the “legally manufactured . . . within the United States” construct.  Id. at 2 (dissent). The other (to which Judge Murtha subscribed) “refers not to the place a copy is manufactured but the lawfulness of its manufacture as a function of U.S. copyright law.” Id. at 3 (dissent).

Judge Murtha described his disagreement rather plainly:

A U.S. copyright owner may make her own copies or authorize another to do so. 17 U.S.C. § 106(1). Thus, regardless of place of manufacture, a copy authorized by the U.S. rightsholder is lawful under U.S. copyright law. Here, Wiley, the U.S. copyright holder, authorized its subsidiary to manufacture copies abroad, which were purchased and then imported in to the United States.

Id. (dissent) at 3. Under this construct, therefore, the first sale doctrine should apply to exempt Kirtsaeng from liability for copyright infringement for distributing these valid copies of a U.S. copyrighted work that he acquired lawfully before further selling them.

Judge Murtha further supported his position by relying on the initial Supreme Court case that articulated the first sale defense, in which the Court held that the “defendant-retailer’s sales of a copyrighted book for less than the price noted on the copyright page was not a copyright violation.” Id. at 4 (dissent) (citing Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 341 (1908)). “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.” Id. at 4-5 (dissent) (citing Bobbs-Merrill Co., 210 U.S. at 350). Thus, the copyright owner cannot control the terms of subsequent sales, if the initial sale was authorized.

In sum, Judge Murtha pointed to the Supreme Court’s lack of guidance as to its views of the Ninth Circuit’s “imperfect solution” in the Omega case because at least four justices “did not agree
the Quality King dicta [by Justice Ginsberg, cited above] directly addresses [this issue] or constitutes the Court’s current view.” Id. at 8 (dissent). In his view, they would have overturned the Omega decision, which was upheld only because it was not overturned by a majority of votes of the justices. Thus, while this is a “close call,” it should have been decided the other way — that the first sale doctrine applies to foreign manufactured copies. Id.


Given the circuit split articulated by the dissent, the statutory text’s “utter ambiguity” as conceded by the majority and the Supreme Court’s narrow upholding of the Ninth Circuit’s opinion in the Omega case, it is possible that this issue may see further consideration by the Supreme Court. This, of course, assumes that either Kirtsaeng further appeals or another case with similar facts is presented for the Supreme Court’s consideration – and that the Supreme Court grants certiorari.

Until then, future litigants should consider whether the John Wiley & Sons case operates as binding precedent to their case or whether under the facts and circumstances presented, the first sale doctrine (despite foreign manufacture of the works at issue) could act as a defense to claims of copyright infringement for the subsequent sale of a validly obtained copy.