The Supreme Court will decide whether secondhand items copyrighted abroad can be legally sold within the United States.
The Supreme Court will soon hear a case that will affect whether you can sell your iPad -- or almost anything else -- without needing to get permission from a dozen "copyright holders." 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.
Here is what's going on.
The Supreme Court case concerns something called the "first-sale doctrine" in copyright law. Simply put, the doctrine means that you can buy and sell the stuff you purchase. Even if someone has copyright over some piece of your stuff, you can sell it without permission from the copyright holder because the copyright holder can only control the "first-sale." The Supreme Court has recognized this doctrine since 1908.
To use a classic example, imagine you buy a novel by Sabina Murray. Sabina owns the copyright to the book, so you can't make a copy of the book. But you bought a copy of the book, and can sell the copy to anyone who'll pay you for it. You can sell it to a neighbor, to a fellow student, or to someone else on Craigslist or on eBay.
But the first-sale rule doesn't just make it possible to sell your books and other creative works like CDs, paintings, or DVDs. Almost every product made now has a copyright logo on it. That logo, alone, empowers manufacturers to sue people for copyright infringement for unlawful sales.
The first-sale doctrine is one thing that makes it lawful to sell almost any good. The companies that have gone to court and sued over selling their "copyrights" include a watchmaker and shampoo producer. They have gone to court arguing that one part of the Copyright Act -- which gives them a right against unauthorized imports -- invalidates the first-sale doctrine.
In 1998, the Supreme Court ruled that the first-sale doctrine applies to any product manufactured in the United States, sold in the U.S., even if the first sale by the copyright holder was abroad and the item was imported back into the U.S. This decision was unanimous and rejected the interpretation preferred by the U.S. government's lawyer -- and the biggest copyright holders.
The legal confusion today concerns only products made abroad.
Continuing a long string of similar cases, the Supreme Court will review a New York federal court decision that decided, in short, that the first-sale doctrine does not apply to any copyrighted product manufactured abroad. That case concerns textbooks.
John Wiley & Sons, a textbook publisher, sells expensive versions of the textbooks here and less expensive versions abroad. Supap Kirtsaeng, a foreign graduate student at University of Southern California, decided to help pay for his schooling by having relatives buy him copies of the foreign versions abroad, send them to him, whereupon he'd sell those books on eBay to willing students. He'd make money, the students would save money, but Wiley might have fewer sales of its pricey American versions. The case is styled Kirtsaeng v. John Wiley & Sons.
Both the District and Second Circuit courts held that any product manufactured abroad is not subject to the first-sale doctrine. For instance, that iPad you sold. You noticed this statement: "Designed by Apple in California. Assembled in China." Same for the iPods you've owned, the iPhones, and the MacBooks. Because those products were manufactured abroad, according to the Second Circuit, the first-sale doctrine doesn't apply to them. You need the permission of every copyright holder to sell the iPad.
That means, you need to ask Apple for permission, and probably Google, whose Maps software comes bundled with the iPad, and includes Google copyrights. Under this rule, when you sell some of your stuff on eBay or Craigslist (a couch, some books, electronics, posters, an old television, a toaster), you have to look up whether it has a copyrighted logo anywhere and find out whether the product was manufactured in the U.S. or abroad.
The lower court decision did acknowledge "the force of the concern" that the rule would lead more companies moving manufacturing abroad, and noted that the law was particularly unclear. But it decided that, if its interpretation of the law should lead to these bizarre conclusions, Congress could sort it out later, which is little comfort considering Congress has a lot to do, and relies on courts not interpreting laws in ways that lead to completely absurd results.
The Omega example comes from a real decision in a California case from the Ninth Circuit. Omega, the Swiss maker of fancy watches, sued Costco, a major retailer, for selling real Omega watches that had a copyrighted logo underneath the watch face. A distributor bought the Omega watches abroad and eventually Costco bought them to sell at a price still lower than what you would pay at an Omega store here in the U.S.
To ensure that Americans pay more for Omegas than people in other parts of the world, Omega sued Costco. That court decided that anything manufactured abroad and authorized only to be sold abroad, not in the U.S., is not subject to the first-sale doctrine in the U.S. The Supreme Court decided to review the Costco v. Omega case back in 2010, but deadlocked at four votes against, four in favor, with Justice Elena Kagan having to sit out the decision because of previous government work on the case.
There is actually a third court decision out there, from the Third Circuit that suggests a different answer. In this case, Sebastian Int'l v. Consumer Contacts (PTY) Ltd., the court was somewhat reluctant to accept the limitation of the First Sale doctrine only to products manufactured in the U.S. The court also expressed concern about courts unilaterally strengthening copyright protections to address the issues raised by "gray markets."
Three courts came out three different ways because the language of the law is confusing and it appears to lead to "absurd" results (in the Ninth Circuit's words).
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.