The First Sale Doctrine: It’s Still Under Attack In the US

The First Sale Doctrine, on its face, seems like a pretty basic principle.

It states that after legitimately purchasing an item, an individual can resell, lend, or donate that item without express permission from the original manufacturer or rights owner.  So why is this currently the focus of a Supreme Court battle?

Turns out the First Sale Doctrine works for cars, but in the confusing terrain of copyright law, your right to resell music, film, games, or other intellectual property remains a minefield.  And that includes very active resale areas like imported vinyl, CDs, artist merchandise, and even digital downloads.

The battleground case is Kirtsaeng v. John Wiley & Sons, and the argument surrounds the resale of foreign-purchased textbooks on eBay.  However, this goes far beyond Psych and Physics doorstops, which is why the RIAA, MPAA, eBay, and even Costco are actively watching and participating in this case.  The defendant – Thai native Supap Kirtsaeng – is protesting a $600,000 fine from a Manhattan federal jury for re-selling textbooks purchased overseas to Americans.  The plaintiff, textbook manufacturer Wiley, says this falls outside the bounds of acceptable resale.

Kirtsaeng isn’t an innocent grad student offloading some books.  Instead, he was purchasing cheaper – but largely identical – textbooks overseas, and selling them to Americans.  By the time of the lawsuit, he’d raked in about $900,000 in revenues, and $100,000 in profits.  It’s classic cross-border arbitrage, but should Kirtsaeng be penalized for smartly exploiting a loophole?

In music, this has been a wrestling match since at least the 90s, when Garth Brooks led an ill-conceived campaign to stop the resale of his used CDs.  Brooks famously refused to supply CDs to stores peddling used discs, arguing that artists, songwriters, and other contributers were getting bilked out of royalties. It’s now a forgotten battle from a dusty, pre-digital era (for a good time, check out this article from 1993).

Back then, it would be far more difficult to effectively sell foreign-purchased textbooks, or track the ones that were sold.  Fast-forward two decades and the process couldn’t be easier, which raises the question: isn’t this just another example of copyright law lagging decades behind technology?  Commerce is increasingly borderless, so why can’t companies like Wiley & Sons adapt instead of suing people to death?

The panel of Supreme Court justices is pondering a similar set of issues that stem from overly-restrictive First Sale rules (the case was heard Monday, though the Court is taking Tuesday off in light of Hurricane Sandy).  For example, Justice Stephen Breyer wondered whether a pro-Wiley decision would affect something basic like car resale.  What about a Toyota that has foreign-purchased electronics in the dash?  Would that merit a fine as well?

And what about used vinyl being sold at your local retailer – right now?  Hillary Brill, eBay’s global policy counsel, put the issue into black-and-white terms.

That’s a straightforward Doctrine that applies to every purchase – whether intellectual property, an overseas good, whatever.  But it’s not a principle the RIAA, MPAA, or other content industries particularly like.

4 Responses

  1. beetsnotbeats

    This is clearly a case of parallel importation, not first sale doctrine.

  2. Visitor

    If an artist doesn’t want people to resell their work they should have the right to stop this. Selling used CDs deprives the artists of revenue and should be considered piracy. I don’t see why this idea shouldn’t extend to other goods as well, it harms many businesses to resell their stuff.

    • Sequenz_

      So if all of a sudden I’m short on cash and I decide that I want to sell a few of my cds, you’re suggesting that I shouldn’t be able to do it?

      Or if I buy clothes for my kids, and one year later, my kids grew up and no longer can wear such clothes, I can’t resell them or give them away?