Case(s): Quality King Distributors, Inc. v. L’Anza Research Int’l, Inc., 523 U.S. 135 (1998)
Respondent Uanza, a California manufacturer, sells its hair care products in this country exclusively to distributors who have agreed to resell within limited geographic areas and only to authorized retailers. Uanza promotes its domestic sales with extensive advertising and special retailer training. In foreign markets, however, it does not engage in comparable advertising or promotion; its foreign prices are substantially lower than its domestic prices. It appears that after Uanza’s United Kingdom distributor arranged for the sale of several tons of Uanza products, affixed with copyrighted labels, to a distributor in Malta, that distributor sold the goods to petitioner, which imported them back into this country without Uanza’s permission and then resold them at discounted prices to unauthorized retailers.
District Court Decision & Ninth Circuit Appeal
Uanza filed suit, alleging that petitioner’s actions violated Uanza’s exclusive rights under the Copyright Act of 1976 (Act), 17 U. S. C. §§ 106, 501, and 602, to reproduce and distribute the copyrighted material in the U.S. The District Court rejected petitioner’s “first sale” defense under § 109(a) and entered summary judgment for Uanza. Concluding that § 602(a), which gives copyright owners the right to prohibit the unauthorized importation of copies, would be “meaningless” if § 109(a) provided a defense, the Ninth Circuit affirmed.
Supreme Court Decision
The Supreme Court held that the first sale doctrine endorsed in § 109(a) is applicable to imported copies.
(a) In Bobbs-Merrill Co. v. Straus, this Court held that the exclusive right to “vend” under the copyright statute then in force applied only to the first sale of a copyrighted work. Congress subsequently codified Bobbs-Merrill’s first sale doctrine in the Act. Section 106(3) gives the copyright holder the exclusive right “to distribute copies … by sale or other transfer of ownership,” but § 109(a) provides: “Notwithstanding … [§ ]106(3), the owner of a particular copy … lawfully made under this title … is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy …. ” Although the first sale doctrine prevents Uanza from treating unauthorized resales by its domestic distributors as an infringement of the exclusive right to distribute, Uanza claims that § 602(a), properly construed, prohibits its foreign distributors from reselling its products to American vendors unable to buy from its domestic distributors.
(b) The statutory language clearly demonstrates that the right granted by § 602(a) is subject to § 109(a). Significantly, § 602(a) does not categorically prohibit the unauthorized importation of copyrighted materials, but provides that, with three exceptions, such “[i]mportation … is an infringement of the exclusive right to distribute … under [§ ]106 … ” Section 106 in turn expressly states that all of the exclusive rights therein granted-including the distribution right granted by subsection (3) – are limited by §§ 107 through 120.
One of those limitations is provided by § 109(a), which expressly permits the owner of a lawfully made copy to sell that copy “[n]otwithstanding the provisions of [§ ]106(3).” After the first sale of a copyrighted item “lawfully made under this title,” any subsequent purchaser, whether from a domestic or a foreign reseller, is obviously an “owner” of that item. Read literally, § 109(a) unambiguously states that such an owner “is entitled, without the authority of the copyright owner, to sell” that item. Moreover, since § 602(a) merely provides that unauthorized importation is an infringement of an exclusive right “under [§ ]106,” and since that limited right does not encompass resales by lawful owners, § 602(a)’s literal text is simply inapplicable to both domestic and foreign owners of Uanza’s products who decide to import and resell them here.
(c) The Court rejects Uanza’s argument that § 602(a), and particularly its exceptions, are superfluous if limited by the first sale doctrine. The short answer is that this argument does not adequately explain why the words “under [§ ]106” appear in § 602(a). Moreover, there are several flaws in Uanza’s reasoning that, because § 602(b) already prohibits the importation of unauthorized or “piratical” copies, § 602(a) must cover nonpiratical (“lawfully made”) copies sold by the copyright owner.
First, even if § 602(a) applied only to piratical copies, it at least would provide a private remedy against the importer, whereas § 602(b)’s enforcement is vested in the Customs Service. Second, because § 109(a)’s protection is available only to the “owner” of a lawfully made copy, the first sale doctrine would not provide a defense to a § 602(a) action against a nonowner such as a bailee. Third, § 602(a) applies to a category of copies that are neither piratical nor “lawfully made under this title”; those that are “lawfully made” under another country’s law.
(d) Also rejected is Uanza’s argument that because § 501(a) defines an “infringer” as one “who violates … [§ ]106 … or who imports … in violation of [§ ]602,” a violation of the latter type is distinct from one of the former, and thus not subject to § 109(a). This argument’s force is outweighed by other statutory considerations.