Resale Case before U.S. Supreme Court Poses Legal Complexities

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The U.S. Supreme Court is unlikely to fully uphold an appellate ruling this month that would have dramatic effects on all levels of the resale economy, local law and economic experts said Thursday.

In the case of Kirtsaeng v. John Wiley & Sons, an appellate court recently found it illegal for someone to resell products that originate from a foreign country without the copyright or patent holder's permission. Oral arguments are scheduled Oct. 29.

The case focuses on the first-sale doctrine in copyright law, which has been upheld by the court for more than 100 years. The doctrine allows the purchase and resale of products without paying royalties to the original developer or intellectual property owner of the product.

Normally this hasn't been much of a problem. Jonathan Willner, an economics professor at Oklahoma City University, said so-called gray markets permeate markets worldwide.

"Within Europe, for example, wholesalers and producers will sell to a retail outlet with an agreement that the retailer will sell at a certain price and won't ship it across borders," Willner said. "But people will go to Country A and buy a lot of Levis (jeans) and then sell them in Country B cheaper than the local store can. It's gray instead of a black market, because retail buyers have never promised to not resell products, so there's really no violation of the law.

"So whatever comes out of this, the economics of it are just massive," he said. "It's a fascinating problem."

In the case under consideration, Thailand native Supap Kirtsaeng, a Cornell University student, discovered that his textbooks produced by Wiley were much cheaper to buy in his homeland than New York, so he had his family buy large quantities and ship them to him for resale on eBay and undercutting Wiley's domestic prices.

"There's going to be a whole lot of people breaking the law," Willner said, if the Supreme Court upholds the appellate ruling in its entirety. "It's going to be virtually impossible to police at the retail level."

Willner said automobiles, for example, are a mess of individually patented parts such as electronic switches, engine parts and windshield wipers. A retail owner can now resell a car without paying any additional licensing fees. …