* Publishers' shares fall on 6-3 court decision
* Reverses decision of lower court
By Lawrence Hurley and Jonathan Stempel
WASHINGTON, March 19 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
The decision will provide support for the $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
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
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
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
"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 $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
$600,000 damages award from a federal jury.
REVERSES LOWER COURT
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.
Writing for the majority, Justice Stephen Breyer said that
"considerations of simplicity and coherence tip the purely
linguistic balance in Kirtsaeng's nongeographical favor."
He noted that certain businesses and other entities,
including booksellers, libraries, museums and certain retailers
"have long relied on its protection," referring to the
The court was not split along ideological lines, with
Justice Ruth Bader Ginsburg, a liberal, writing a dissenting
opinion in which she was joined by Justice Anthony Kennedy and,
in part, Justice Antonin Scalia, both conservatives.
Ginsburg described the majority's ruling as a "bold
departure from Congress' design."
The decision "shrinks to insignificance copyright protection
against the unauthorized importation of foreign-made copies,"
Joshua Rosenkranz of Orrick, who argued the case for
Kirtsaeng, said in an email that Tuesday's ruling resolved an
imbalance that had favored copyright holders.
"If manufacturers want to gouge U.S. customers with higher
prices, they have to accept the reality that the marketplace
will respond," he added.
Wiley's lawyer was Theodore Olson of Gibson, Dunn &
The case is Kirtsaeng v. John Wiley & Sons Inc, U.S. Supreme
Court, No. 11-697.
Another case, involving Pearson, is pending before the court
and will likely be resolved in light of Tuesday's decision. That
case is Ganghua v. Pearson Education Inc, 11-708.