Copyright Law – Supreme Court rules gray market goods don’t violate copyright law

In a somewhat surprising ruling, the US Supreme Court recently ruled that “gray market” goods manufactured overseas can be sold in the US without violating copyright law in the case of Kirtsaeng v. John Wiley & Sons, Inc. (see the court’s ruling here).  “Gray market” goods are genuine (not counterfeit) goods that are sold outside authorized distribution channels.

While Kirtsaeng, a native of Thailand, was attending Cornell University and USC (as a math major!), he found that identical versions of college textbooks published by John Wiley & Sons could be purchased in Thailand for much less than what they were sold for in the US (mostly because they can charge a higher price for US goods: see this Association of American Publishers article on the case that was published before the Supreme Court ruling).  Kirtsaeng began importing textbooks from Thailand, re-selling them on eBay, and sold as much as $1.2 million in textbooks.

The basis for the Supreme Court’s ruling mostly concerns whether the “first sale doctrine,” which states the owner of a legally-obtained copyrighted work (such as a book) can re-sell the book without violating copyright law, applies to goods made outside of the US.  The Supreme Court held that there was no geographical restriction to the first sale doctrine, and the lack of geographical restriction made sense in today’s interconnected world where products are easily exported and imported.

Now, before everyone starts rushing off to start their own book import business, there a some things to keep in mind.  One, this ruling only applies to genuine gray market goods (made with authorization of the publisher) vs. counterfeit goods.  Two, this ruling only applies to copyright law: selling gray market goods can violate trademark law.  This means that gray market sellers risk being having their goods seized by US Customs and/or being sued for trademark infringement if the gray market goods are materially or physically different from authorized goods sold in the US.

For more on this case, see this NPR article; this Forbes commentary supporting the ruling; and this Publishers Weekly commentary stating what may happen next.

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