Librarians and book re-sellers say their core activities are now in question after the Second Circuit Court of Appeals on August 15 upheld a lower court decision finding that the “First Sale” doctrine in U.S. copyright law—the provision that enables libraries to lend and consumers to re-sell books they’ve lawfully purchased—does not apply to works manufactured outside the U.S. While the verdict stands as a major victory for the publishing industry, which has long fought the “illegal importation of foreign works,” especially textbooks, critics say the broad decision goes too far, and could harm libraries and encourage the outsourcing of jobs.
The ruling comes in the case of John Wiley & Sons, Inc. v. Supap Kirtsaeng, in which Kirtsaeng, a Thai-born U.S. student was accused of importing and re-selling foreign editions of textbooks, made for exclusive sale abroad, in the U.S. market via online service eBay. In its verdict, a three-judge panel of the Second Circuit affirmed by a 2-1 margin that Kirtsaeng “could not avail himself of the first sale doctrine,” because language in the statute says that products must be “lawfully made.” The court ruled that those two words—“lawfully made”—limits First Sale "specifically and exclusively to works that are made in territories in which the Copyright Act is law, and not to foreign-manufactured works."
The verdict is the second decision in a year to limit the First Sale doctrine. In December, 2010, the Supreme Court deadlocked 4-4 (with Justice Elena Kagan abstaining) in the case of Costco Wholesale Corporation v. Omega, S.A., the net effect of which was to affirm a Ninth Circuit Court of Appeals decision that enjoined big-box store Costco from selling copyrighted, foreign-made Omega watches, authorized for sale only in foreign territories, in the U.S. market. Because the Supreme Court deadlocked, however, the Ninth Circuit ruling is non-binding on other circuits. The Second Circuit ruling, observers say, now goes further than the Omega decision, and could upend decades of common practice for libraries and used booksellers.
“The Second Circuit’s decision is actually worse than the Ninth Circuit’s decision in Costco in a manner significant to libraries,” explained Washington-based attorney Jonathan Band in a recent blog post for the Association of Research Libraries. Basically, the Ninth Circuit ruled that First Sale still applied to a foreign manufactured copy if it was imported “with the authority of the U.S. copyright owner,” Band explained. In other words, if a library bought a book in the U.S. from a U.S. publisher, and that book happened to be printed in China, a library under the Ninth Circuit interpretation would have the right under First Sale to lend that book. “Unfortunately, the Second Circuit rejected this exception as not having a foundation in the First Sale Doctrine language,” Band notes. That means, in the Second Circuit (NY, VT, CT), the First Sale pillar libraries have relied on for decades to lend books does not exist for a book manufactured outside of the U.S., even if it was legally purchased in the U.S. from a U.S. publisher. That doesn't necessarily mean libraries absolutely can't lend foreign-made books, Band adds, but libraries would have to rely on narrower copyright exceptions to do so.
“Libraries do not even know, I am afraid, how much of their collections are manufactured abroad,” Blogged Duke University scholarly communication officers Kevin Smith. “So, a potentially very large, and probably indeterminate, portion of library collections in the Second Circuit may now be in a grey area.”
It seems highly unlikely that publishers would ever seek to stop libraries from circulating books because of where they were printed. But the ruling creates uncertainty, and it gives publishers yet another potential element of control when it comes to library usage, and at a time when the shift to licensed access of e-books is already impacting the ability of libraries to purchase and lend content. “At the very least, libraries must demand information from publishers about where every item has been manufactured,” Smith blogged. “But what I really fear is that publishers will begin to manufacture more of their works overseas and then try to demand a higher price—one that includes public lending rights.”
It does not seem so unlikely, on the other hand, that publishers might use the ruling to stop the sale of used books—especially textbooks, a secondary market at which publishers have long chafed. While the defendant in the Wiley case, Supap Kirtsaeng, is “an unsympathetic party,” Smith concedes, a person who created a lucrative business re-selling cheap foreign textbooks in the U.S. market, the Second Circuit’s overly broad decision, he notes, gives publishers an easy path to shutting down the secondary market for textbooks, and not just for the Supap Kirtsaengs of the world, but for every student: simply print their books overseas.
That outcome is a negative the judges themselves, the majority and the dissent, acknowledged in their opinions. “Both the majority and the dissent agree that this interpretation of the First Sale Doctrine is a job-killer,” Band noted, “because it encourages the exportation of U.S. printing jobs.”