Law & Policy

US Supreme Court SHOCKS Music & Publishing Industry with Ruling on ‘First Sale’ Doctrine

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US Supreme Court First Sale DoctrineWhere are my true AML fans? Una miss me? Like really miss me? All of you, you know yourselves, come out of your hiding. 🙂 I recently received some emails from some of you AML industry people and y’all put smiles on my face. Thanks. I love hearing from you all and it is extra icing on the cake to hear the impact AML is having in your lives, indeed very inspiring.

Alright for the rest of you who do not miss me, like really, really miss me una no well and I have nothing to say to you guys. BIG SMILE. I am out of the trenches, for now, I think. Then you all know the drill. I do a soft dive in and before you know it, I am completely immersed in deep legal seas of real life legal drama. I am not complaining. What a privilege to have the gift of advocacy and to be able to use it to make a difference both in the emotional and financial pocket books of many. #IamHumbled.

On a different note, let me greet you all proper, proper. What’s good AML people! I am seriously enjoying our AML interns o! Udeme is kicking some serious ‘music’ and ‘industry news’ ikebe (butt) while Ollachi Holman is determined to bring down the house, by fire and by storm. These ladies are fierce and I enjoy reading and editing their works; and also learning a thing or two. If you have not be reading their posts and getting acquainted with these fine legal minds, you don’t know me and I don’t know you i.e. I have nothing to say to you.  🙂

Anyway, let’s get to it shall we. Folks, this case is one you ABSOLUTELY MUST BOOKMARK. It is a huge case on this side of the pond and is actually VERY relevant to you all.

I think both The Economist and Forbes provide a good discussion on the legal issue of ‘First Sale’ doctrine so I will not belabor the point.  However, if it is not as clear cut for you, please leave a comment or ask questions and I will be glad to engage in further discussions and analysis.

For the legal geeks like me, listen to the audio arguments in front of the Supreme Court. Speaking of the Supreme Court, when I was at Georgetown Law, I had the privilege of taking an Appellate Advocacy course and part of that course included editing the legal briefs written by practicing attorneys who argued before the US Supreme Court. It was exciting for me and at some point during the course, I had the opportunity to visit the Supreme court and watch one of the attorneys perform. It was pretty cool.

-Uduak
Photocredit: US Supreme Court Promo pic via Wired.com

“The Supreme Court’s First Sale Ruling Will Spur Price Competition in the Short Run, But Enjoy It While It Lasts

Yesterday, in Kirtsaeng v. John Wiley & Sons ($JW-A), the U.S. Supreme Court ruled that U.S. copyright law doesn’t restrict the importation of legitimate copyrighted works manufactured and sold overseas.  As a result, publishers cannot use U.S. copyright law to enforce their price discrimination schemes of pricing copyrighted works on a per-nation basis.

This ruling is a legal victory for U.S. consumers, who should see cheaper prices in the short run.  This ruling is also a win for museums, libraries and other institutional collectors of copyrighted works, who face less risk now when acquiring copyrighted works (especially those initially sold overseas).  Still, amidst the good news, it’s impossible to ignore the rapid and probably irreversible demise of copyright’s First Sale doctrine, meaning this legal victory is likely short-lived at best.

What Happened

In 1998, the U.S. Supreme Court decided Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U. S. 135 (1998), holding that a copyrighted item manufactured in the U.S. and initially sold outside the U.S. could be legally imported back into the U.S. pursuant to copyright’s First Sale doctrine (17 U.S.C. 109) and without violating the copyright owner’s importation right (17 U.S.C. 602).  The Quality King court expressly declined to resolve the much more common situation where the copyrighted item was initially manufactured overseas and then imported into the U.S.

That well-known issue has remained legally ambiguous for 15 years.  The 2010 Costco v. Omega case squarely raised the issue, but the court deadlocked at 4-4 (Judge Kagan recused) and didn’t definitively resolve the issue, necessitating the court to revisit the issue just 3 years later.  The legal interplay between the First Sale doctrine and the importation right vexes the courts because Congress’ poor statutory drafting supports at least two different but equally plausible interpretations of its language.  Courts often produce inconsistent results and split opinions in those situations.

The Kirtsaeng court concluded that Quality King didn’t apply only to copyrighted goods manufactured domestically.  Instead, copyright’s First Sale doctrine–allowing the unrestricted resale of legitimate copyrighted goods after they are first sold into the market–applies regardless of where the goods are initial made or sold.  This means copyright owners can’t prevent goods sold in cheap markets from competing with the same goods sold in higher-priced markets.  With the emergence of efficient online retail markets such as eBay ($EBAY), a textbook publisher who sells a low-priced book in Thailand won’t be able to sell the same textbook in the U.S. market for a much higher price.  The pricing gap will allow arbitragers to buy the books in Thailand, resell them via eBay or textbook e-tailers, and still make a profit even after shipping and taxes.  Thus, a copyright owner’s trans-border price competition with itself will jeopardize the now-common international price discrimination schemes. . .” – Forbes.com has the full story.

The Economist

Reselling media content

Seconds to go

America’s Supreme Court delights online retailers and appals media firms

“CALL it academic arbitrage. Supap Kirtsaeng, a Thai student who earned a PhD in mathematics from the University of Southern California, made as much as $1.2m with some basic maths. He asked friends and family to ship him cheap textbooks from Thailand, which he sold for a handsome profit in America. The books were intended only for sale in Thailand, and Wiley, a publisher of some of the textbooks he sold, sued him for copyright infringement in September 2008 and won. Mr Kirtsaeng appealed, and the case made its way to America’s highest court.

On March 19th the Supreme Court ruled that American copyright law does not restrict goods produced abroad from being resold in America. The ruling widens the reach of the “first sale doctrine”, which gives copyright-holders control of their goods until their first sale; afterwards the purchaser can lend or peddle them for whatever price he chooses. Previously, the first-sale doctrine protected copyright-holders from their works being imported and resold without their permission. A retailer could legally sell a second-hand “Gone with the Wind” DVD, but could not buy it cheaply in Russia, bring it to America and sell it for a low price. With the Supreme Court’s ruling, that protection has been swept away.

Publishers, record labels, film studios and other content-owners are shocked. They have often sold the same product in poorer countries for less, knowing that it would not hurt their pricing power at home. Now it will. Big online retailers such as Amazon and eBay could start exploiting these pricing differences on a large scale. Ian Whittaker of Liberum Capital, a broker, thinks this ruling will really hurt academic publishers, such as Pearson (a part-owner of The Economist). They tend to sell identical books for eye-watering prices in America and much less in countries where people cannot afford those prices. . .” – The Economist has the full story.

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AFRICA MUSIC LAW™ (AML) is a pioneering music business and entertainment law website and podcast show empowering the African artist and Africa's rapidly evolving entertainment industry through brilliant music business and entertainment law commentary and analysis, industry news, and exclusive interviews.

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ABOUT THE FOUNDER

Credited for several firsts in the fashion and entertainment industry, Uduak Oduok (Ms. Uduak) is a fashion and entertainment lawyer, speaker, visionary, gamechanger, trailblazer, and recognized thought leader, for her work on Africa’s emerging global fashion and entertainment markets, and the niche practice of fashion law in the United States. She is also the founder of ‘Africa Music Law,’ an industry go-to music business and law blog and podcast show empowering African artists. Her work in the creative and legal industries has earned her numerous awards and recognitions, including an award from the American University Washington College of Law for her “legal impact in the field of intellectual property in Africa." She has also taught as an Adjunct Professor at several institutions in the United States. For more information, visit her at https://msuduak.com.

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