Supreme Court in US rules against publisher on copyright protections

By Lawrence Hurley and Jonathan Stempel, Reuters

WASHINGTON–The U.S. Supreme Court on Tuesday said U.S. copyright holders cannot block products they make elsewhere from being resold in the United States, a blow to publishing companies and other creators of copyrighted content that market their products globally. By a 6-3 vote, the country’s highest court said the “first sale doctrine” applies to copies of a copyrighted work lawfully made abroad.

The decision will provide support for the US$63 billion gray market, in which third parties import brand-name goods protected by trademark or copyright into the United States. These products often sell at higher prices in the U.S. market than overseas. The ruling is a loss for U.S.-based copyright holders well beyond the publisher involved in the case, John Wiley & Sons. Stephen Smith, the president and CEO of Wiley, said in a statement that the ruling is a “a loss for the U.S. economy, and students and authors in the U.S. and around the world.” Shares of publishers fell after the decision, with McGraw-Hill Cos dropping as much as 1.7 percent in New York and Pearson PLC closing down 1.1 percent in London. In a research note, analysts at Liberum Capital called the ruling “very negative” for Pearson, given that U.S. higher-education textbooks account for at least one-third of its profit.

A representative for Pearson did not immediately respond to a request seeking comment. Tom Allen, president and CEO of the Association of American Publishers, said in a statement that the ruling “ignores broader issues critical to America’s ability to compete in the global marketplace.” The ruling will have “significant ramifications for Americans who produce the books, music, movies and other content consumed avidly around the world,” he added. The decision was a big win for e-commerce companies and the online merchants who sell through marketplaces such as eBay Inc. If the decision had gone the other way, sellers might have been reluctant to list items for sale online because they would have been unsure whether the item was made outside the United States, exposing them to potential lawsuits from the copyright holders, according to Andrew Shore, executive director of the Owners’ Rights Initiative, a lobbying group partly backed by e-commerce companies. “You could have had copyright holders sending cease and desist letters to online sellers, creating a chilling effect on other sellers,” he said. EBay shares climbed 2 percent to US$51.50 on Tuesday.

The case arose after Supap Kirtsaeng, a Thai national who studied math at Cornell University and the University of Southern California, helped pay for his education by reselling textbooks through eBay that family and friends had bought in Thailand and shipped to him. Eight textbooks came from an Asian unit of John Wiley & Sons Inc., which sued Kirtsaeng for copyright infringement and won a US$600,000 damages award from a federal jury. The 2nd U.S. Circuit Court of Appeals in New York upheld the award in August 2011, saying foreign copies can never be resold in the United States without permission of copyright owners. The Supreme Court ruling overturns the 2nd Circuit. Kirtsaeng said the “first-sale” doctrine of copyright law protected him and other owners of “lawfully made” copies who sell them without the copyright owners’ permission.