* Domestic resale of products made elsewhere at issue
* Court deadlocked in similar case two years earlier
By Jonathan Stempel
WASHINGTON, Oct 29 Several justices on the U.S.
Supreme Court voiced concern on Monday about letting U.S.
copyright holders block the resale inside the country of
products they make elsewhere, in one of the court's biggest
copyright cases in years.
The case, likely to result in a close decision, could
profoundly affect the roughly $63 billion gray market, in which
third parties import brand-name goods protected by trademark or
copyright into the United States.
It also gives the court a chance to delineate copyright
protections at the very time that products and information from
international sources become much more freely available, whether
in physical form or downloaded or otherwise available online. A
ruling is expected by June.
At the center of the case is Supap Kirtsaeng, a Thai
national who arrived in the United States to study math at
Cornell University and the University of Southern California.
He subsidized his education by reselling textbooks through
eBay Inc's website that family and friends had bought
in Thailand and shipped to him.
Eight of the textbooks came from an Asian unit of John Wiley
& Sons Inc, prompting the publisher to sue Kirtsaeng for
A jury ordered Kirtsaeng to pay $600,000 in damages. The 2nd
U.S. Circuit Court of Appeals in New York upheld that award in
August 2011, saying foreign-made copies can never be resold in
the United States without permission of copyright owners.
But Kirtsaeng contended that his actions were protected
under the "first-sale" doctrine, a provision of federal
copyright law that lets owners of "lawfully made" copies sell or
dispose of them without copyright owners' permission.
Some justices were receptive to an argument by Kirtsaeng's
lawyer E. Joshua Rosenkranz said that could have a profound
negative impact on the U.S. economy, and cost many jobs.
"The moment that a manufacturer learns that this court says
you get what we've called the Holy Grail of manufacturing,
endless eternal downstream control over sales and rentals, you
can ruin secondary markets," he said. "That will be yet another
reason for manufacturers silently to decide that they're sending
their manufacturing overseas."
WILEY LAWYER IS QUESTIONED
Wiley's lawyer Theodore Olson came under sharper questioning
as he argued that the ban on resales should extend to products
made outside the United States.
Justice Stephen Breyer suggested that used Toyotas could be
covered by a ban, given that they may include copyrighted
components made abroad, such as sound systems and GPS devices.
"When people buy them in America, they think they're going
to be able to resell them," he told Olson. "Under (Wiley's)
reading, the millions of Americans who buy Toyotas could not
resell them without getting the permission of the copyright
holder of every item in that car which is copyrighted."
But Olson said the 2nd Circuit got it right. "For 30 years,
the statute has been interpreted the way that we are suggesting
that it should be," he said.
The court tried to address the same issue two years ago but
deadlocked 4-4, in a case involving Costco Wholesale Corp's
resale of imported watches made by a unit of
Swiss-based Swatch Group SA.
Justice Elena Kagan sat out that case but took part in
Monday's arguments, and also questioned Olson's position.
"As far as I can see, there's really nothing to support your
argument that that language (in the law) was intended to address
this gray market problem," she said.
Justice Anthony Kennedy, often the swing vote on a closely
divided court, also expressed concern. "If we write an opinion
with the rule that you propose, we should, as a matter of common
sense, ask about the consequences, he told Olson.
The United States supported Wiley's position, rejecting
Kirtsaeng's contention that a decision in the publisher's favor
would encourage copyright owners to exercise "eternal" control
over how its copies are resold.
Costco and eBay sided with Kirtsaeng, as did a group of
major bookstores including Powell's Books in Portland, Oregon;
Strand Book Store in New York; and Harvard Book Store in
"There are enough copyright owners out there - and enough
crazy copyright lawsuits - that it is not always reasonable to
rely on forbearance by copyright plaintiffs," the bookstores'
lawyers said in a brief. "No one should be put to the choice of
violating the law and hoping they don't get caught."
The case is Kirtsaeng v. John Wiley & Sons Inc, U.S. Supreme
Court, No. 11-697.