Supreme Court Rules on First Sale Doctrine

This week, the Supreme Court ruled on the First Sale Doctrine. Not exactly fashion law but extremely important and thus, worth discussing. For those who need a quick reminder, in terms of copyright, the First Sale Doctrine is an exception to a copyright holder's exclusive right to distribute copies of his work. Essentially, it enables the distribution of copyrighted products by individuals other than the copyright owner. Thus, an individual that purchases a copy (or copies) of a copyrighted work receives the right to sell, display or otherwise dispose of that particular copy. The Supreme Court held that individuals who purchase copyrighted goods made in the U.S. and/or abroad may legally resell them without violating federal copyright law.

This case: Kirtsaeng v. John Wiley & Sons. Supap Kirtsaeng was basically buying textbooks that were lawfully printed overseas by a U.S. publisherfor cheap, importing them to the U.S., and then selling them on eBay for American prices. Publisher, John Wiley & Sons, caught on and sought to block the import of the legally purchased overseas editions of its books, arguing that the first sale doctrine (the right to resell copyrighted works) only applies to goods made in the US.

Basically, the court was deciding what the language in Section 109(a) of U.S. copyright law actually means. Namely, what it means when it says the First Sale Doctrine applies to any work "lawfully made under this title." The Supreme Court ruled in favor of Kirtsaeng. In an opinion authored by Justice Breyer, the court held that "the first-sale doctrine applies to copies of a copyrighted work lawfully made abroad."

What does this mean? Essentially for the fashion world, this means that sellers of grey market goods have more freedom than before. (FYI - Grey market goods are those goods that are manufactured overseas, sold legally by the manufacturer or distributor on the "grey market," and then imported into the U.S. for resale at places such as Costco (as demonstrated in the Michael Kors v. Costco caseor another seller outside of the manufacturer's authorized network). As a result of Kirtsaeng, the first sale doctrine makes it perfectly legal for goods made outside of the U.S. to be imported into the U.S. and resold.

The recent history: In 1998, the U.S. Supreme Court decided Quality King Distributors v. L’anza Research, holding that a copyrighted item manufactured in the U.S. and initially sold outside the U.S. could be legally imported back into the U.S. according to the First Sale doctrine. Then in 2008, the Ninth Circuit heard the Omega S.A. v. Costco Wholesale Corp. case. Omega features a copyrighted globe design on the back of each of its watches and only sells through authorized retailers.

When Omega discovered that Costco was selling Omega watches without the permission to do so, the Swiss watchmaker Omega sued Costco for violating its right to distribute the watches and for the unauthorized importation or resale in the U.S. Costco claimed that it was covered by the First Sale Doctrine and thus, was not infringing Omega's rights (as it had purchased authentic Omega watches). The Court ruled in Omega's favor, holding that in copyright law, the first sale doctrine does not act as a defense to claims of infringing distribution and importation for unauthorized sale of authentic, imported watches that bore a design registered in the Copyright Office. The Supreme Court affirmed this ruling (by way of a 4-4 split) in 2010.