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Supreme Court to hear arguments in case of student who resold books (cnn.com)
98 points by pwg 1872 days ago | hide | past | web | favorite | 55 comments



Whichever way they rule it is going to be interesting.

If they bless the sales, it legitimizes what is already a very active global gray market.

If they condemn the sales, they strike down the first sale doctrine and it is a massive blow to fundamental property rights. As commenters have already pointed out earlier this year regarding this case, since most electronic goods are made overseas, it would be officially illegal to resell them without permission. Criminalizing the resale of foreign made goods that contain an IP component. It would also provide a massive benefit to moving manufacturing of every kind overseas to obtain this special new protection.


>If they condemn the sales, they strike down the first sale doctrine and it is a massive blow to fundamental property rights. As commenters have already pointed out earlier this year regarding this case, since most electronic goods are made overseas, it would be officially illegal to resell them without permission

You've left out a possibility: they condemn the sale without striking down first sale. They can easily distinguish these book sales from other potential first sale situations because the former involve goods where the first sale occurs outside the US and the goods are then imported without permission of the copyright owner, whereas the later involve goods where the first sale occurs in the US and if the goods were imported before that sale it was by the copyright owner.


Actually, no. If they condemn the sales, then they have effectively restricted what you can and cannot do with overseas produced goods. Then everything gets sold from overseas to bypass first sale.


No. They can condemn the sales by saying that 17 USC 602 controls in this situation, leaving first sale (17 USC 109) applicable to goods that have not been imported without authorization.

Briefly, 17 USC 106 says that copyright owner has the exclusive right to distribute copies. 17 USC 109 (first sale) says that once a particular copy has been distributed under the authority of the copyright owner, it is no longer a violation of the distribution right for others to redistribute that copy. 17 USC 602 says that importing copyrights works into the US without permission of the copyright owner violates the distribution right.


It doesn't matter where it's made. It's where it's authorized to be sold. The publisher will find it difficult to argue that the book they themselves imported was unauthorized.


"If they condemn the sales, they strike down the first sale doctrine "

...only for goods manufactured outside the US and not authorized for import to the US by the manufacturer. Most electronic goods in the US that are made overseas are also authorized for US import. I bought my iPhone directly from Apple. Even if the Supreme Court rules against the sales in this case, I will be able to resell my iPhone because Apple authorized its import...they were the ones that imported it.


Unless the phone was first bought overseas. This may have big implications for second-hand markets like ebay as you can not really be sure where a good sold on ebay was manufactured, which countries it was authorized to import and who has the authority to authorize that. In fact, with such decision, each foreign item becomes potentially a problem for the buyer unless he has a proven certificate from original manufacturer authorizing import into the country the buyer is resident in. This of course would be a huge boon for these manufacturers as they would be able to charge extra for such certificates and suppress secondary markets. But it would not be as good for the consumers.


> electronic goods

But this case is apparently about copyright, and hardware isn't usually subject to copyright. Though I suppose firmware, etc. might be.

Of course, I think it's ludicrous that anyone could be guilty of a copyright violation without having, by any imaginable definition, made a copy of anything.


> But this case is apparently about copyright, and hardware isn't usually subject to copyright. Though I suppose firmware, etc. might be.

There's no might, here. The firmware, OS, hell, even the branding text on a label is subject to copyright. See, for instance, the ruling in Omega v Costco, where a logo was enough to bring copyright infringement charges against Costco for importing foreign-market watches.


Copyright is normally copy and other rights. Thus, for many years, "this edition not available in the United States" was printed in UK editions of many books.

I think (but I'm not sure) that the UK makes a difference between personal sales of out-of-country goods (this is okay) and a business selling out-of-country goods (this is not fine). A notable case is Tesco vs Levi jeans. There have been some other cases involving DVD importing.


Copyright law governs both the creation of copies, and their distribution. This pairing is one of the law's longest-standing and must basic features. It's also the root of the conflict in this case.


> Copyright law governs both the creation of copies, and their distribution.

This is an interesting idea that I haven't heard before. In what ways has copyright law governed the distribution of objects when no copying is involved?


"This DVD is licensed only for private, non-commercial use."

That's backed up by copyright law. If you build a theater, charge people to enter, and program runs of classic movies, you will get sued for violating the commercial-distribution aspects of copyright law, even if you bought the DVD you were charging others to see.


"you will get sued for violating the commercial-distribution aspects of copyright law"

I think that's incorrect. I think this would be infringement due to it being considered a public performance, not commercial distribution. As the copyright act says, "A public performance or display of a work does not of itself constitute publication."

The MPAA also describes the situation as a public performance issue:

http://www.mpaa.org/contentprotection/public-performance-law

Do you know of any cases where a public performance was prosecuted as a commercial distribution case?


I'm a producer, not a lawyer, so I can't quote you legal chapter and verse. But as your own link makes clear

"But suppose you took the same movie or TV episode and showed it to patrons at a club or bar that you happen to manage. In that case, you have infringed the copyright in the video work."

Whether a public performance constitutes legal publication is, of course, a separate issue. The point I was making is that copyright law governs both duplication and distribution, not duplication only.


The distributed object is a copy. This court case does not apply to the sole copy of a manuscript.


"Wiley, with the Justice Department in support, dismiss those scenarios, and say Congress would be in a position to ensure libraries in particular do not suffer from any high court ruling against them."

It's strange that the Justice Department would have a reason to have an opinion in this court case at all. And why would our executive branch be siding with the publishing business and against the average citizen on this case?


Because Obama got convinced that he needs to be a lot "tougher" on copyright issues - meaning, of course, siding with the publishers, studios and labels.


A little known fact is that the Justice Department is required to defend Congress's laws. Congress put the import restriction provisions into the law, and the Justice Department is required to argue in favor of them.


People love to say this, but nobody has ever been able to show me anything supporting this idea that they are 'required to' defend anything. Please cite the legal authority behind this statement.

(As an example: they're not defending DOMA, which was Congress' law.)


It's in the Constitution: http://www.heritage.org/constitution/#!/articles/2/essays/98...

The non-enforcement of DOMA is based on the President's obligation to not enforce unconstitutional laws: http://www.justice.gov/olc/nonexcut.htm

More generally, the Department of Justice is the Attorney General's office, and the Attorney General is the Government's lawyer. Congress is the primary organ of government. Like any lawyer, the Attorney General has a responsibility to vigorously represent his or her client except to the extent it's illegal (unconstitutionality is illegality). This includes arguing for interpretations of the law that favor the client.


Sorry, I don't buy this line of reasoning. The President's (and, by extension, the whole Executive branch's) duty is to 'faithfully execute' the laws.

I can't see how a rational person would read this clause as pushing some sort of obligation on the Executive to defend laws against challenges in the judicial system. That moves beyond 'execution' by several steps.

(That said, I appreciate the pointer and can see how people could interpret the clause in that way. I disagree that it is a correct interpretation, but there's plenty of room for different opinions.)


It goes back to a lawyer's duty to prosecute his case fully. I'm in violation of my obligations if I don't argue for any justifiable interpretation of the law that might favor my client--I don't get to not do so just because I don't think that interpretation is the correct one. It's not my job to pick the correct interpretation, that's the court's job. That's pretty much how the DOJ views their obligations to Congress.


Why do you find it strange that the department in charge of enforcement of the laws of the United States would have an opinion on a case concerning the interpretation of one of those laws?


Because this was a civil lawsuit (Wiley v. Kirtsaeng; a corporation suing an individual for damages), not a law enforcement issue.


Because interpretation is a matter for the judiciary particularly, and a matter of policy to the rest of the department.


That's not always true. For instance, the US Code refers to the US Copyright Office for judgements about fair use.


> It's strange that the Justice Department would have a reason to have an opinion in this court case

No, it's not. The entertainment industry has at its disposal some of the finest politicians money can buy.


Economics 101: If your goods cost $C to produce, and person A will buy them for $C + $5, and person B will buy them for $C + $8, you will sell two copies at $C + $5 for a maximum profit of $10. (If you try raising your prices above this point, you'll make less because your sales volume will go down due to B leaving the market.)

But if you can price-discriminate -- figure out how much each customer is willing (or able) to pay and charge exactly that much -- you can set A's price at $C + $8 and set B's price at $C + $5 and make $13 instead.

The publisher's doing exactly this sort of price discrimination: American customers are much wealthier than Thai customers, and willing/able to pay more, so they charge more.

The crucial point of this analysis, however, is that the seller is still able to make a profit at the lower price level; it's just a smaller profit.

So a ruling against the publisher won't greatly harm them; they'll still be able to profitably sell their books. However, a ruling in favor of the publisher will make it much more complicated for people to determine the restrictions in effect on their property, make their books available to fewer people, and generally stifle economic activity.


Books don't cost $C/book to produce, they additionally cost $X to research, write, market, etc. And $X is much much larger than $C.

So to take your example, assuming X=12 and C=1, if I sell my books for $6 and $9, respectively, I make $1 profit, but if I'm forced to sell them both at $6 I lose $2.

Price discrimination is often a Good Thing, on balance. The takeaway from allowing price discrimination isn't (mainly) that Americans get gouged, it's that Thai students get access to textbooks they wouldn't otherwise be able to afford.


There are two sides to it: the Thai student gets the book at a lower price, and the US student gets it at a higher price, and the two may not balance out. In your example, a publisher might sell 2M copies of that X=12M book, 1M for $6 each in Thailand and 1M in the US for $100 each, making a huge margin of (106-12)/12=785%.

In a free market competition should decrease that margin. However, the markets for books isn't entirely a free one. For many books, competitors cannot make close enough clones to actually compete (Harry Potter and fifty shades of grey inspired 'clones' aren't really clones; a physics textbook may have the same content, but it cannot have the exact same presentation order, questions, etc)

The publishers argue that will be offset by other books that also cost them X=12M of which they sell, say, 10K in Thailand for $6 and 10K in the US for $100 at a huge loss. There probably is truth in that, but should one try and enforce that through regulation? If so, how? Prescribe that publishers can make at most x% on every dollar they spend at a printer every year? That would likely make them find more expensive printers for their US wares.


> The takeaway from allowing price discrimination isn't (mainly) that Americans get gouged,

First of all, no one is talking about disallowing price discrimination. You can always price your books however you'd like. The argument is whether the Federal Government should be involved with providing the artificial means to price discrimination for a specific industry.

> it's that Thai students get access to textbooks they wouldn't otherwise be able to afford.

How do you know this? If there is a viability for local publishers in Thailand you'd never know it, because US publishers can compete unfairly with them by subsidizing their Thai sales with large US margins. If US publishers had healthy international competition, the Thai students would be better served.

How is this not unfair dumping into the international scene?


there are fixed costs to producing the book so it is possible that without price discrimination it would not be possible to sell the book to Thai customers in which case the inability of the company to price discriminate decreases social efficiency.

For example say the book costs $1 per copy to produce and $10 of fixed costs. There are two customers who are willing to buy the book. The American customer is willing to pay $12 for the book and the Thai customer is willing to pay $4 for the book. With price discrimination the publisher sells both books. One to the Thai for $3 marginal profit and one to the American for $11 marginal profit. For a total profit of $4 after fixed costs.

If the publisher cannot price discriminate then they just sell to the American for $11 marginal profit for a total profit of $1 and the Thai person doesn't get a book :(

The wiki page on Price Discrimination says the social efficiency impact is unclear (http://en.wikipedia.org/wiki/Price_discrimination). Maybe it makes us better off. Maybe it doesn't.


at the end of your first paragraph, shouldn't you say 'person a' leaves the market, not b?


Any idea why this is in USA courts?

Surely the sale occurred in another country and the terms and condition of that sale are dictated in that country?

The transfer of ownership happened in the original country. If that breached the law it happened in the other country.

If Ownership of a book is a property that survives crossing international boundaries (that is it is not seized by the state) and ownership in that nation confers certain rights then so be it.

Don't sell something if you still want to own it. Don't give something to someone if you still want to keep it.


There's two sales which occur,the original purchase of the book which happens overseas, there's no dispute here.

The book is then resold in the US from a "distributor" in the US to US customers, thats why this becomes a US issue. Its the secondary sale which is questionable.


Thanks for that - I think I kind of get it.

And the second sale is questionable because of a limitation of the first sale?


There's a difference between personal first-sale and wholesale distribution. It sucks that information - There's no value in the paper, just the printing on it - can cost different amounts in different areas, but it's fairly easy to differentiate between "I bought 1-3 copies of this book in my home country, moved here, and brought them with me" and "I had my parents ship crates of books from my home country, which I resold at a profit". The gray area will remain "I personally bought something from foreign land, even though I do not reside there".


> There's a difference between personal first-sale and wholesale distribution.

I'm not a lawyer, but as far as I know, legally, there isn't, and shouldn't be. You should be able to build a business or nonprofit to give away, sell or lend secondhand games, books, CD's, videos, etc.


I'm sure almost every manufacturer who wishes to remain in business would strongly disagree with you. Many have spent decades and millions of dollars building & supporting their sales channels.

The assertion that people should be able to do whatever they want with products on a scale large enough to damage a manufacturer's business is flawed. I propose that you to start and grow a manufacturing company and tell me if your perspective changes.

*Disclaimer, I work with manufacturers to solve these types of issues.


> I'm sure almost every manufacturer who wishes to remain in business would strongly disagree with you... propose that you to start and grow a manufacturing company and tell me if your perspective changes.

Of course an entrenched industry would disagree with any actions that decrease profit. I'm sure if I grew a manufacturing company, I'd also want the gov't to not tax any of my profits, but that doesn't inform at all about the morality of my position.

Let the market decide how the pricing should happen. Why should the gov't artificially segment the market?


I'm sorry, but that's not an argument, that's just bias. In principle everyone is against policies that are damaging to one's life, but that doesn't mean they're necessarily bad.


It's an argument and a bias. I clearly stated the context of my relationship with manufacturers for a reason. There is plenty of evidence that shows the negative effects of gray markets on manufacturers. The long-term macroeconomic effects that these types of issues have on manufacturers can be devastating.

> In principle everyone is against policies that are damaging to one's life, but that doesn't mean they're necessarily bad.

No doubt. But regulations exist in society for a reason...


There is plenty of evidence that shows the negative effects of gray markets on manufacturers. The long-term macroeconomic effects that these types of issues have on manufacturers can be devastating.

Negative effects may or may not be compensated by the benefits accrued by consumers. Can you point me to the evidence that suggests that it would be devastating?

No doubt. But regulations exist in society for a reason...

Sure; whether this specific one actually solves the problem -and without causing bigger ones- is a different matter, though. Losing first-sales rights seems a rather important problem to me.


I'm not advocating the repeal of the First-sale doctrine. It's the abuse of the doctrine that is troublesome. The doctrine should protect non-commercial isolated sales of goods by consumers. But when the sales transition into a larger scale business is when the problems only begin.

Gray markets can be devastating in an economic capacity (revenue, profitability, brand equity, sales channels, consumer satisfaction, warranty costs, r&d) and in a social capacity (consumer safety, environmental costs, tax revenue, organized crime)

Below is a very small sample of the negative impacts of gray markets:

http://www.kpmg.com.hk/en/virtual_library/Information_Commun...

Osawa & Co. v. B&H Photo

United States v. Hill

Fagan v. AmerisourceBergen Gorp.

Lynn v. Serono Inc.


I know some countries have parallel import restrictions and others have import duties even on personal items. I've paid somewhere between 10-25% tax on my own second hand clothes and books when relocating temporarily to Scandinavia - because they weren't in my luggage. (Edit: I should note the taxable amount was recovered when I demonstrated re-export of the items when I left).


Could it be sold for scrap? ie with a cover note reminding the new owner they own the physical book but be careful not to use its contents?


Sure. Then convince the court your customers were just buying paper to recycle. You could also sell burned DVDs of The Dark Knight to customers interested in expanding their plastic collection.


Don't quite follow the logic - were these books being illegally reprinted in the USA? Or were they originals?


The logic is just that courts aren't stupid.

I've noticed sometimes this tendency in programmers (and in my younger self) to see human systems like computers. A court isn't a VM running the law as a bytecode. It's a bunch of humans, and they operate on common sense, too.

Often there are gray areas and it's possible to sidestep the law, but you need a minimum of plausibility... if you put a note on textbooks to say "for use as fuel only", then go and sell it to students, I doubt that'll fool anyone.

It's the same thing for selling burned CDs with a note to say "for use as recycled plastic only". There's a difference between selling them by the crate to a recycling center, and letting customers buy specific titles individually. The letter of the law may not specify that difference, but that doesn't make it irrelevant.


The question is whether the first-sale doctrine (the right to freely re-sell things that you bought) applies to items originally sold outside the U.S.


Seems that corporations want to profit from globalization but they want to forbid private entities to do so. Kind of unfair, whatever the outcome of the court ruling will be.

The only control they might have is to produce completely different texts for each country - but to profit on global scale this would be inefficient. So they resort to lawyers and tarnishing of their name.


This case is about what happens in the analog world; the interesting thing will be what unintended consequences obtain for the digital world based on this decision. The "law" in this situation is far from clear, and what will happen is that because of the size of the U.S. market, the international consequences of this decision will be severe. It will be interesting to see if any other country files, or attempts to file, an amicus brief.


One thing most people haven't picked up on is how the 'terms' of the first sale typically include that the textbook can't be imported into the US without prior consent.

That could mean a way out without actually solving anything - ruling it an illegal importation or something similar. That would mean the problem would be when he imported the book, not when he resold it.


I believe that such sale conditions aren't binding in the US, except for software licenses. At the dawn of the recording era in the early 1900's, the music industry -- surprisingly similar to today -- tried printing on each record, "Not to be resold for less than five cents" or something similar. And this was struck down by the court system.




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