Magazine article Information Today

Kirtsaeng's Impact Still Resonates

Magazine article Information Today

Kirtsaeng's Impact Still Resonates

Article excerpt

* It's often called the "gray market," the practice of obtaining products and goods at lower prices overseas, then reselling those goods in the U.S. at retail prices that are lower than normally charged in the U.S. markets.

The products are obtained overseas legally (these goods are not stolen, counterfeit, or otherwise pirated) in quantities that range from just a few to larger shipping containers where the goods are sold in marketplaces from flea markets to eBay to Costco. Gray marketing exists because products are sold at different price points in different countries, and they are sold at enough of a difference so that gray marketers can exploit the pricing differences for profit.

The term "gray market" came out of some questionable legality of these practices. (In contrast, "black markets" are where products or their sale is clearly illegal in either the original sales location or the new resale location.) Gray markets raise a number of legal issues including compliance with import or export laws, acceptance of warranty claims, and regional lockouts such as with DVDs that are coded by region.

Copyright Sections 106, 109, and 602

Copyright was also a questionable legal issue in the gray market economy. Copyright owners are empowered to control the distribution of their works under Section 106 of the Copyright Act and to control importation of their works under Section 602 of the Copyright Act. (Both sections are available online at

The issue arose when owners of copyrighted material objected to gray market activities and sued for copyright infringement. In response, the purchasers of the works frequently claimed that copyright's First Sale doctrine protected their activities. First Sale (Section 109 of the Copyright Act) notes that once the "first sale" of a particular copy of has been made, the owner ofthat particular copy can resell, lend, or otherwise dispose of the work without interference by the copyright holder.

Over the past several years, various lawsuits have arisen from gray market copyright conflicts with inconsistent results. In some cases, courts found that the First Sale doctrine applied, and the sales were legal. In other cases, the opposite decision was made: First Sale did not apply because the works were made overseas where U.S. law did not apply, and the gray market sales constituted copyright infringement. Yet, other cases resulted in a splitthe-baby solution where sales were only legal if the copyright owner specifically authorized the first sale of the item in the U.S.

Regardless of the Manufacture Origin

These inconsistent results were the reason the U.S. Supreme Court took on the issue in the case of Kirtsaeng v. John Wiley & Sons, Inc. The court's decision (www.supremecourt .gov/opinions/12pdf/ll-697_dlo2 .pdf), released on March 19, 2013, provided a resounding holding that the First Sale doctrine applied to legally copyrighted works regardless of where they were manufactured. But even with 30 pages of reasoning supporting its decision and the support of six of the nine justices of the court, the decision will likely have long-term ramifications for copyright, international copyright, international trade, and U.S. trade policy.

The specifics of the case and the decision have now been well-reported. [See the related NewsBreak at Breaks/A-Total-Victory-for-the-FirstSale-Doctrine-from-the-SupremeCourt-88589.asp.] The case arose from the actions of Supap Kirtsaeng, a student from Thailand, who essentially funded his U.S. education by arranging the purchase of lower-cost textbooks in Thailand, and then reselling them in the U.S.

John Wiley & Sons, Inc. owned the copyright for the works and had licensed them for manufacture and sale through its Asian subsidiary; since sales were limited to selected Asian countries, Kirtsaeng was sued for copyright infringement. Lower courts found that Kirtsaeng's First Sale defense did not apply because the works were made overseas. …

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