Kirtsaeng involves cross-border arbitrage of textbooks. Wiley — the publisher — publishes textbooks (especially college-level textbooks for common courses like introductory calculus) in multiple international editions, and prices them accordingly. The guts of the books are identical across editions; the Thai edition of the Hughes-Hallett calculus textbook is essentially identical to the US edition, but is bound differently (sometimes books like this have different problem sets, but I've not examined this one in the most-recent edition). And costs a helluva lot less, which is the arbitrage opportunity. Enter an enterprising Thai student at Cornell, who had copies shipped in — purchased legitimately and for value by family members back home in Thailand — for resale to US students looking to reduce their textbook bills from $110 for the particular edition in question (it's more now) to a much more palatable, if still excessive, $60 (which, I should add, still provides a pretty significant profit margin over the price in Bangkok, for a new — rather than used — book). Naturally enough, Wiley objected, as it is far more interested in maintaining its preferred pricing structure than not.
Wiley's position is founded, at its core, on whether "lawfully made under" the US Copyright Act means lawfully made in the US or some close variant on it. The Court, in a 63 ruling, quite properly held that Wiley's position fails, because the Copyright Act is not about protecting price points set in different markets for the same works.
The “equal treatment” principle, however, is difficult to square with a geographical interpretation of the “first sale” clause that would grant the holder of an American copyright (perhaps a foreign national, see supra, at 10) permanent control over the American distribution chain (sales, resales, gifts, and other distribution) in respect to copies printed abroad but not in respect to copies printed in America. And it is particularly difficult to believe that Congress would have sought this unequal treatment while saying nothing about it and while, in a related clause (the manufacturing phase-out), seeking the opposite kind of policy goal. Cf. Golan v. Holder, 565 U. S. ___, ___ (2012) (slip op., at 30) (Congress has moved from a copyright regime that, prior to 1891, entirely excluded foreign works from U. S. copyright protection to a regime that now “ensure[s] that most works, whether foreign or domestic, would be governed by the same legal regime” (emphasis added)).
Kirtsaeng v. John Wiley & Sons, Inc., No. 11697 (19 Mar 2013), slip op. at 15 (all emphases in original).
Rather than further dissect the opinion itself — done by Professor Grimmelmann elsewhere — I want to make a few points hanging around the outside of the opinion.
- Of greatest importance, Kirtsaeng brings US treatment in line with international treatment... and, in particular, with treatment of identical-goods-across-national-borders transactions in Europe. See, e.g., JCB Servs. v. European Commission, No. C-167/04 P (2006) (holding that a manufacturer of small-to-medium industrial equipment, such as forklifts, could not enforce exclusive territories within the EU for otherwise-identical goods and prevent an Irish distributor from providing those goods to customers in Spain, even in the face of an exclusive-territory agreement with a different distributor in Spain). Frankly, this is good law and good economics in any event; that it relates to copies of copyrighted goods is essentially irrelevant.
- In turn, this means that territorial rights are essentially dead; only language rights matter. Perhaps — just perhaps — territorial rights matter until the UK (and certain other countries) reform their libel law and so on, but that has little to do with the copyright aspects.
Frankly, I think this a good thing for authors, and particularly for authors of commercial fiction. One of the easiest ways for publishers to mess with the accounting has long been through the mischaracterization of income into a different category... and if "foreign sales" are no longer a legitimate category for otherwise identical goods, then there's one less accounting loophole available. Authors would generally be better off forcing a publisher to buy worldwide Language X rights and account for all sales under those rights identically. If, for insurance/libel/blasphemy/whatever reasons, a publisher needs to release a version of a work that is not substantially identical in a particular market (but still in Language X), that should be explicitly negotiated based upon the particular characteristics of the underlying work — not left as an opportunity for import-edition games.
- Speaking of import-edition games, though, this is going to make it a bit easier for publishers to play games with out-of-print clauses. After all, if the publisher can import a cheap printed-in-India edition for its own warehouse and thereby keep the book "available for sale," why wouldn't it? Taxes, shipping, etc. on 50100 copies won't be extensive, and that can (and has, and will) be used as part of a publisher's negotiating leverage to attempt to retain — or, more frequently, obtain — e-book rights to older works, particularly if the author has a newer work at issue. Holding rights hostage has a long history in the entertainment industry; since I've already seen precisely this strategy used, I expect it to become more widespread now that publishers don't have to worry about undermining their antiarbitrage position (since that position is now invalid as a matter of law, nothing they do will undermine it further).
- Keep in mind that the facts in this particular case relate to the work-for-hire nature of textbooks, and therefore may have some difficult implications in the freelance market. Wiley was in the position of having unitary copyright rights in the textbooks imported by Mr Kirtsaeng and at issue here; things would be rather different for, say, UK editions of the Harry Potter books.
- Together, these last three points make clear that as to copyright the market in e-books is now worldwide. Copyright law no longer provides a shield against a UK e-book vendor selling into the US market... including full-blown marketing campaigns, etc. Instead, any restrictions will be contractual (or, in the worst case, libel/blasphemy/etc.) in nature, and cannot be enforced against third parties without some real shenanigans. Of course, shenanigans are the entire basis of international trade in entertainment products, so this is not quite the same thing as immediately proclaiming a free market!
Later this week, more on the elephant in the room: Treatment of transfers as sales... or as licenses.