Foreign Manufactured Goods and the First Sale Doctrine

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On July 9, 2012, The Association of Art Museum Directors along with nearly 30 American museums including MoMA, LACMA, the Guggenheim, the Getty, the Whitney, SFMOMA,the Art Institute of Chicago, and the Dallas Museum of Art submitted an amicus brief  to the Supreme Court. The brief comes as a response to a recent decision by the Second Circuit to limit the protections under Section 109 of the Copyright Act to works created within the United States in John Wiley & Sons v. Kirtsaeng. As a result, many museums feel that the way they operate may be in jeopardy, much like libraries and many gray market businesses.

The Kirtsaeng case follows the Supreme Court’s December 2010 decision in Costco Wholesale Corp. v. Omega, which centered on the first-sale doctrine, which usually entitles the owner of a lawfully produced copyrighted work to resell it without permission from the copyright holder. The Supreme Court split 4-4, with Justice Elena Kagan not taking part. The court did not issue a written opinion, but held that the first-sale doctrine did not apply to foreign goods. The Second Circuit’s Kirtsaeng decision relied on the Supreme Court’s Costco ruling.

In the present case on appeal, Supap Kirtsaeng, a graduate student at the University of Southern California, sold John Wiley textbooks on eBay. The books were purchased in Asia by his family and friends and shipped into the U.S. to be sold on eBay. The Second Circuit upheld a verdict against Kirtsaeng and held that the first-sale doctrine only applied to goods manufactured in the U.S. The decision by the Second Circuit may have some strange implications that give foreign manufacturers greater control over their products than U.S. manufacturers. In particular, the Association of Art Museum Directors is concerned that museums may be barred from displaying foreign works of art.

According to the brief, the American museums believe they could lose their ability to acquire and display foreign-made, copyrighted pieces. Under the ruling, the museums argue, any gallery that displays a foreign work is potentially infringing on a copyright. The museums were long protected under Section 109, but would now have to rely on fair-use arguments with little precedent.

The museums also argue that any foreign works protected by copyright law should also be subject to the law’s limitations. Section 109 limits the protections under the Copyright Act by allowing owners to manage lawful copies of a copyrighted work without permission from the copyright holder.  Normally, public performance without permission is a clear violation of copyright, but Section 109(C) provides an exception for owners of lawful copies:

(c) Notwithstanding the provisions of section 106 (5), the owner of a particular copy lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to display that copy publicly, either directly or by the projection of no more than one image at a time, to viewers present at the place where the copy is located.

This exception allows museums to display works publically without obtaining a license from the copyright holder, a practice that could be prohibitively expensive. The museums may have no choice when it comes to foreign art, however, since the Second Circuit ruled that Section 109 applies only to American-made works. In addition to being wildly expensive, licensing could be impossible for museums when the copyright holder is unknown or unavailable.

One argument made in the amicus brief is that Section 104 of the Copyright Act makes all eligible works subject all protections and limitations of the act. There is no distinction for works based on origin in the act; therefore, Section 109 limits the rights of every copyrighted work, regardless of where it was produced. The court below, according to the brief, erred by finding that the text of Section 109 was ambiguous. Instead of finding ambiguity and selectively interpreting the text of the Copyright Act, the court should have read Section 104 as establishing that all protections, remedies, and limitations of the entire Copyright Act apply to all works and all copies by extension.

The brief also argues that the broad interpretation of Section 109 does not conflict with Quality King Distribs., Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135, 150 (1998). In that case, the Supreme Court left open the possibility that all copies that receive protection under U.S. law are subject to the limitations of Section 109. The exception for foreign works, the museums argue, is a result of unnecessary judicial interpretation. The brief argues that no foreign work should receive more or less than a domestic work since there is no clear grant in the statute, since, in the few times Congress has prescribed special treatment for foreign works, they have done so with explicit language. For example, the brief argues that Congress could have chosen the words “lawfully made in the United States,” rather than “lawfully made under this title,” for Section 109. Therefore, there is no reason to interpret the statute differently for foreign made works than for domestic ones.
In its conclusion, the brief pleads for the Supreme Court to reverse the decision below. The museums believe that the court should find that if the copyright owner authorized the first distribution abroad, then imported foreign copies can be distributed or publicly displayed within the U.S. without permission. Doing so would preserve the statutory exception that allows museums across the country to display works of art without fear of unnecessary copyright litigation.

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