Supreme Court Poised To Rule On Important First Sale Case

June 15, 2012 -

The First Sale Doctrine has been an important part of copyright law for well over a hundred years now and an important part of the gaming culture for the last 30 years or so. Unfortunately, these last few decades have also seen a lot of effort to erode what protections consumers have to resale their property without the permission of the copyright owner. Once again, the Supreme court is poised to rule on how far the protections the First Sale Doctrine go when it comes to copyright.

In recent history, we had the Autodesk vs Vernor case that clarified that if software is sold as a license, it cannot be resold if the license forbids it, but also helped clarify that when something is clearly a sale it is still protected by the First Sale Doctrine. We also had a strange case in which watch maker Omega sued to stop Costco from importing cheaper Omega watches and selling them in the US and won. In that case, Omega convinced the District Court that because it had a logo on the watch that was covered by copyright and the watches were manufactured and sold outside the US, they were not protected by US First Sale. Unfortunately, the Supreme court hit a stalemate and the lower court ruling stands.

Now we have a similar case involving the sale of imported text books. GameTrailers (thanks for all who brought it up) takes a look at this case and concludes that if the Supreme Court lets the ruling stand, it could negatively effect and potentially block the sale of used games. Sadly, if the Supreme Court upholds the lower court's ruling without clarification, that could be the outcome.

In this case, a college student, by the name of Supap Kirtsaeng, decided to make some extra money by having his family in Asia buy copies of text books sold there and ship them to him. Then he would resell those imported copies for a profit, but for less than those books are sold in the US. The publisher of those text books, John Wiley & Sons, was not going to stand for it and sued Supap for copyright infringement. Supap tried to claim a First Sale defense but John Wiley was able to convince the court that the language of the First Sale Doctrine is worded in such a way that it only applied to copyrighted works manufactured in the US. Thus books, games and other copyrighted works manufactured outside the US were not protected by First Sale and thus could only be resold if authorized by the copyright holder.

What is really frightful about this ruling is that it is very broad in nature. It doesn't just cover works manufactured and sold outside the US, it also covers works manufactured outside the US and sold in the US. Basically, if this ruling stands, even if you bought a game at Walmart or Gamestop in one of the 50 states, if that disk and case were manufactured in China or anywhere else in the world, you could not resell it without the permission of all copyright holders.

Now, there is some hope here. The Supreme Court has just accepted the case at this point and has not yet reviewed or ruled on it. So there are several outcomes to this case, some good and some bad. For instance:

  • The Supreme Court could uphold the lower court ruling thus removing First Sale protection for all works manufactured outside the US. This is obviously the worst possible outcome as it would have the potential to block all secondhand sales of copyrighted works.
  • The Supreme Court could overturn the lower court and rule in the opposite. Meaning, that all products sold in the US, whether second or first hand, are protected by First Sale. This means that even if you bought it outside the US, you could still resell it in the US regardless of where it was manufactured. The best possible outcome.
  • The Supreme Court could rule in a more narrow way in which only goods authorized for sale in the US could be resold in the US. This one would still prevent the type of reselling that Supap was doing, but would protect games and other works bought in the US. However, this would mean that if you import a game into the US, such as games promoted by Operation Rainfall, you would not be able to resell those imports later. While not the worst outcome, it could still limit First Sale.
  • Finally, the Supreme Court could stalemate once again and leave the waters as murky as they currently stand.

Regardless of how the Supreme Court rules, Congress could still pass a bill with language clarifying what is protected by First Sale. As the law stands, it is ambiguous on what is actually meant by products made "under this" law. 

This is definitely a case worth watching.

Original source - The Atlantic


Comments

Re: Supreme Court Poised To Rule On Important First Sale Case

If to goes like it should the guy importing and reselling  the books will be forced to stop. Someone needs to bust the text book racket but sadly they will just give them more protections...


Copyright infringement is nothing more than civil disobedience to a bad set of laws. Let's renegotiate them.

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Re: Supreme Court Poised To Rule On Important First Sale Case

Well, we have to be careful not to swing too far the other direction.

While the high price of textbooks is annoying, the publishers (and writers) are generally not exactly rolling in dough, so if they are bilking people they do not seem to be walking away with monstrous profits (though they are generally not in trouble either).

The international price though is a tricky issue.   The US is a very wealthy nation, per capita even our poor are doing a lot better then a good percentage of the world.  If they priced the books the same regardless of region, we in the US would get a small discount but people in some other areas would have the product priced out of their range completely.  So being able to set asymmetric prices allows them to supply materials to countries that, if prices were more even, would not be able to afford their products.

While I am always wary about laws against grey markets, I at least acknowledge why they are important and if we had no controls at all the US's wealthy status would render much more of the world unable to purchase a lot of products... and I think that is worse for humanity on the whole then American consumers being forced to pay a little more.

Re: Supreme Court Poised To Rule On Important First Sale Case

The problem with those "protections" are that they are based on an analog society. One in which the ability to purchase cheaper products elsewhere and import them in is outside the reach of most individuals. 

Today, the ability to do that is as easy as typing in "amazon.ru" in the url bar of a browser and making a purchase. A recognition by the Supreme Court that such region restrictions are incompatible with the internet would be a great first step toward bring greater equality through out the world.

What this will do is make it near impossible for copyright holders to control price through out the world, something that is already happening as more and more products go completely digital. Without analog restrictions, like region restrictions, prices fall. That is a fact of life and economics.

Re: Supreme Court Poised To Rule On Important First Sale Case

Oh I agree the protections have problems, but they also have reasons, that was my point.
 

For the short term I agree, the new ability order things from anywhere in the world for reasonable shipping costs or even obtain things digitally will make prices fall... here.  This is not sustainable though and will likely result in prices going up in countries with lower standards of living.  Again, American consumers don't really care since it reduces their price, but people elsewhere will.  This will probably result in a decrease of sales volume which, depending on the economics of the particular item, will result in a long term price increase for Americans since we (plus a few other high standard of living nations) will bare the full brunt of the real cost.... which will be bad for us.

One of the problems with economics is consumers are inherently short term thinkers, ones that are not get ripped off in favor of ones that are.  This is where popular economics and actual economics tend to split, pop economics tend to state that this short term thinking will always optimize to lower prices in general... actual economics has it go almost the opposite direction, constant short term thinking raises prices over time.  I think this is a case of that, we want lower prices now, and there is this idea that the markets will sort themselves out and prices will continue to go down or at least stay low, but there is a significant chance that seeking lower prices will only result in short term dips but long term increase.

Re: Supreme Court Poised To Rule On Important First Sale Case

The interesting thing is, it is no one's responsibility to protect the profits of a business but the business owner. Same for a copyright holder, it is their responsibility to profit from their work if that is what they desire.

That said, yes consumers are short sighted when it comes to economics. They want things now and want it cheap. However, that collective shortsightedness has long term ramifications on the economy in the market place. If a business, or copyright holder, cannot profit based on that reality, they do not have a right to bend reality to fit their needs. That is what these attempts to weaken first sale and other consumer rights are about. They want to fight and bend the current realities to fit their desired outcome.

As for works becoming more expensive in rising countries, that is a possibility. However, it is still possible to have multiple channels to meet the needs of different regions, you just should not be surprised to see other take advantage of it.

Now, are low prices really that bad? It has been shown, that it is possible to earn far more income on a low price than you will on a high one (barring consumer lock in, such as text books, which always results in a higher price). Take Steam sales as an example. Valve has shown that its sales bring is many hundreds of percent more in revenue than at normal price. Of course, if you go this route at a constant price, you will need to work to keep sales high.

 
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