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How a Supreme Court ruling may stop you from reselling just about anything (arstechnica.com)
115 points by jseliger 1792 days ago | hide | past | web | 62 comments | favorite



This whole area of law annoys me.

Globalisation has meant that some companies can shop around the entire globe for raw materials and manpower, looking for the best price for both. They then throw up every barrier they can to stop individuals doing the same, region locking and other DRM, bought laws to prevent workarounds etc.

They also try to prevent other businesses taking advantage of market disparities to undercut 'official' prices. The same market disparities that allow them to get their labour and materials for next to nothing. The whole thing stinks.


What kind of solution do you propose?


For areas like DRM and region locking, the answer is quite simple. Actually enforce ownership and property law for consumers.

If I buy a car, I should be able to decide what I want to do with it. Where I want to drive. Who I allow in it. Where I want to buy gas. Where I want to repair it. Where I want to buy parts. If I want to sell it. and so on and so on.

Once sold, the new owner should have complete control, and all rights should belong to him. If an actor (in this case, the manufacture) can exercise control over the product after its been sold, then the manufacture has illegally taken possession of the product.

In this view, disabling "other os" in playstation was an act of sabotage. Deleting books from the kindle was stealing. It really become simple if one would just accept that the owner is the one that should be in full control of his own property.


I very much agree with this sentiment.

The whole PS3 removal of otherOS is a plain "computer crimes" law. Charge Sony with 1 count per device. Nice criminal case there.

Next we have Monsanto, who runs around finding seeds contaminated with roundup resistance. If you, a farmer, try to save seed, you will get bit by this. Since Monsanto argues it's their patent and their seed, I say we agree with them. And when their property is elsewhere, that sounds like trespassing...for.every.seed.


or even criminal negligence, since their seed contaminated your crop, then the contamination was used in a shakedown.


I'm more akin going for cumulative fines and/or jailtime for the executive board.

Trespassing in Indiana can be fined up to $1000 and 6 month jail sentence. Each of these seeds are "their" property. Lets say that a contaminated field is 500,000 seeds. $1000 per seed is $500 Million.

Of course, if Monsanto abandons their "property", or lays no claim to it, there wouldn't be a judgement on trespassing.


Three plausible answers:

1. Remove the barriers. Drop import and export restrictions, drop punitive tariffs, reduce taxes; at the same time, make restrictive DRM and equivalents (copyright controlling imports, in the instant case) illegal. This will reduce production costs and reduce selling prices. Overall, standard of living will rise slightly where production costs are low and sink more dramatically where production was formerly located. Eventually, the markets should reallocate themselves efficiently, but it can be a long and painful process and lots of people will get hurt.

2. Enforce all the barriers more rigorously. Apply import tariffs on everything, support local producers by mandating price floors, don't allow reimportation at all. Smuggling becomes much more lucrative, as does the black market. Advances in miniaturization mean that we can track fractional ownership of everything; instead of buying a coffee machine, you rent one, along with the mugs and spoons. (Clearly we need to reduce frictional costs immensely, or else the inertia drags us to a halt.)

3. We continue to muddle through, with incremental improvements when we (as a society, not we as hackers) recognize the need. Markets get regulated, but not very well or efficiently. Perhaps biases toward the established parties are corrected, perhaps not. If a sufficiently large proportion of the population is enraged, revolution ensues and all bets are off. Otherwise, business as usual.


It's probably not necessary to ban DRM - just to legalize circumvention.


Except then things like warranties get tied to whether you've customized the software on the device. And never mind the herd of people scared into not taking control of their device ("jailbreaking") by nebulous threats of virii or future manufacturer retribution.


The solution then is to ban oppressive warranty terms. Only abusive/negligent care should void warranties like that.



For a start, repeal 17 USC 602 (a) 1.

http://www.copyright.gov/title17/92chap6.html

Then go about repealing other laws that allow companies to slice and dice their markets in this way at the expense of their customers.


Usually I propose a weak maltose, protein and hop-acid solution in a base of ~5% ethanol to 95% water...

I don't know, it's a hugely complex area. All I can say is it sticks in my craw when things like the Lik-Sang debacle happen in Europe, but at the same time we see industry disappearing abroad. At the moment the big interests seem to be having their cake and eating it too.


Sounds like he'd like to see the barriers removed.


Or made consistent. Another way to tackle it would be (IMHO) -

If there are laws about working conditions for (say) electronics assembly plant workers in the UK, then the UK could insist that any imported electronics are made under similarly compliant conditions abroad - i.e. if you want to access out market you play by our rules. This could cover minimum wages also.

Under those circumstances I would be more happy with grey imports being disallowed, and I would be interested to see the economic outcome.


Good discussion of the same case here: http://news.ycombinator.com/item?id=4706572

There's a lot of FUD ("they might" "a ruling could") in this article. The short version is that this case deals with the fact that the Copyright Act prohibits unlicensed copying _and_ importing of copyrighted goods.[1] It comes up because (just like in the textbook case), it behooves a lot of manufacturers to charge a high price in the US and Western Europe and a lower price in the rest of the world. The price difference goes to cover things like research, writing, and other fixed costs that exist no matter how many marginal copies are sold.

The case deals only with the "gray market" importation question --- not what you do with your iPad that you bought in the US from Apple. There's no question (before or after this case) that if you buy an iPad in the US, the "first sale doctrine" still applies. Any copyright interest that Apple had in the device were terminated by their licensed sale to you in the US (even if the device was made in China, shipped directly from China, whatever). Nothing about this ruling would change that. Same for your DVD collection you bought from Amazon. Or any other product you bought in the US.

The only question raised by this case is if you wanted to fly to Manila, buy 1,000 textbooks at the Philippines price and then sell them in the US at the US price, could the textbook manufacturer claim that you imported unlicensed goods into the US?

There's a good economic analysis from the old thread: if the Court rules that publishers cannot prevent gray-market imports of textbooks that sell for $100 in the US but $20 in the Philippines, publishers aren't going to set the price to $20 in the US. They're just going to raise the price in the Philippines to $100 minus whatever it costs to ship from Manila to the US. Students in poor countries just get further screwed.

[1] http://www.copyright.gov/title17/92chap6.html


The only question raised by this case is if you wanted to fly to Manila, buy 1,000 textbooks at the Philippines price and then sell them in the US at the US price, could the textbook manufacturer claim that you imported unlicensed goods into the US?

Regardless of the consequences, it's surprising to me that anybody who doesn't earn money through regional copyright-based price discrimination thinks that it's proper for the government to put the force of law behind such a business model. If the original sale was licensed, what right does the copyright holder have to restrict further transfers of the original copyrighted good, including transfer to another country? I submit that common sense says none.


Common sense says that the copyright holder shouldn't stop you and me from transfering goods from another country (where we are on vacation) to our home countries. It would be absurd that I would have to leave behind my iPod that I bought in Dubai or the magazine I bought in Vietnam.

However, it's quite reasonable to prevent business import of goods from abroad. Then, you're basically preventing the producer from assigning different $-value in different regions. Sometimes, that is desirable (market arbitrage), but sometimes, it's not (phisical goods should more closely follow PPP (purchasing power parity), especially if their marginal costs are low).


However, it's quite reasonable to prevent business import of goods from abroad.

Why is it reasonable? They aren't counterfeit. They weren't produced in violation of copyright. They aren't dangerous. They aren't stolen. The only reason to ban their import is to protect the copyright holder's business model.

Whether the business model is desirable or not is not the question. The question is whether it deserves explicit protection in law, and I believe it does not.


If you mean there are sometimes reasons for import tariffs, then that might be true (it's a large debate in economics). I don't see why copyrighted goods should be treated specially, though. If a country wants an import tariff on books, just like on sugar or on steel, in order to maintain price differences, it should institute it directly, rather than via this roundabout copyright route.


Tariffs actually achieve just the opposite - it increases the cost of foreign imports. Also, it does it for everybody, also for authorized importers/resellers.

Well, sometimes there is hardly anything else but copyright that constitutes products (e.g. media, books). Personally, I would also enable the same kind of protection for trademarks (so that iPad could be sold for different price in West and elsewhere).


Even better, why not set the price of an iPad to production cost + 1% of a person's yearly income? Resale under pain of death.


Wouldn't that be a restraint of trade? According to this: http://www.wto.org/english/thewto_e/countries_e/thailand_e.h... Thailand is a member of the WTO. If you prevent a business in the US from importing goods from Thailand that are not illicit or restricted, then wouldn't that constitute a trade barrier?


Where to begin... No, they are not raising the price in Philippines to $100 and loose the whole Philippine market. That bad economics 101, and bad business. What publishers will do is to have a select few articles with low price to be targeted for the Philippines market, and then use product differentials to push for higher cost products in the US. If you want to see a clear example of this, look at the car market.

The DVD collection from Amazon might be safe, might be unsafe. If your purchase produce tax revenue for somewhere in the USA, sure, it should be safe. Given how evasive some companies has been in regard to purchase location and taxes, it might be fully possible that those films was actually bought from a location at a tax heaven.

But more importantly, products bought in ebay is NOT located in the US. Any such product is likely to be unlawful. If the product include any form of software, art, or design, then that is copyrighted and you need to get permission from the copyright owner to import it to the US.

Last, cars. Cars and trucks are commonly sold on the international market, often through resellers. They might be produce, programmed, and created in Japan, Germany, Sweden, and then bought and directly imported to the US. Now, that importation will require additional permission. Say, you bought 1000 trucks from a reseller in Sweden and imported those to the US. Now all those are illegal. Imagine being a shipping company and suddenly realizing that all your purchased trucks are now illegal. Imagine the cost that can have.

This is why this is not about buying 1,000 textbooks at the Philippines price and then sell them in the US at the US price. It is the sudden realization that buying and importing goods can now come back and bite.


> There's a good economic analysis from the old thread: if the Court rules that publishers cannot prevent gray-market imports of textbooks that sell for $100 in the US but $20 in the Philippines, publishers aren't going to set the price to $20 in the US. They're just going to raise the price in the Philippines to $100 minus whatever it costs to ship from Manila to the US. Students in poor countries just get further screwed.

The problem with that is that they'd loose the PH market which presumably is worth >$0 to them.

An alternative strategy is to "edit" the foreign versions enough to make them unusable in the US, such as changing the homework questions enough that anyone working from the international version will get them wrong, or fiddle the fontsize/linespacing/margins so the page numbers are screwed up. That would automatically enlist the help of TAs to warn against the horrors of foreign books.


Or they could provide a better product for that market that made it naturally distasteful to the US market. Like a book written in the language of the land (The market for CS books written in Filipino should be relatively small in a non Filipino speaking countries). Why make them work when we could just legislate profits their way?


The issue is significantly more complex than "legislat[ing] profits their way".

It's very unlikely that the discounted overseas textbook market constitues a very large amount of profit. Indeed, it could certainly be seen as reasonable CSR project: "Let's sell our books at marginal cost+10% to poor asian students, but have legal make sure those copies can't cannibalise our domestic market". If it turns out legal was wrong, the response is more likely to be "though luck, the global price is now $100" instead of "drat, let's lower the US prices to $20".

Now, being nice, even charitable, should not be a ticket to get to write your own laws. But Wiley is unlikely to celebrate a ruling of global first sale doctrine by convening an editorial committee to produce a Filipino CS textbook (and a dozen other languages times a dozen other subjects), to then go and sell that at $20 there.

Also, on a tangent, as the lingua franca of CS is English, it's convenient to learn the subject in English. I was taught CS mostly in English, but one time where the teacher insisted on speaking Danish, it took me half the class to realize that oversætter (literally translator) was meant to describe a compiler.


> The case deals only with the "gray market" importation question

This is incorrect. Did you read Omega? Did you read earlier Kirtsaeng or the Petition for Certiorari or even Wiley's response?

The core question is basically "what does 'made lawfully under this title' mean in relation to first sale?" The petitioner (the book importer) tried to apply first sale as a defense to the limitations on unauthorized importation. If first sale is invalid because "under this title" mean solely within the territory of the US, then the first sale is likely invalid in all such situations.

The court could rule that anything purchased in the US also gets 'first sale' protection as a matter of interpretation, or it might figure out how to rule so narrowly that the decision only applies to one scenario, but that's exactly the same "could" and "might" that you called FUD earlier.


> The price difference goes to cover things like research, writing, and other fixed costs that exist no matter how many marginal copies are sold.

The price difference is market arbitrage designed to suck the largest profit out of a market. Pointing out research, or writing, or anything else, ignores the reality that if the production cost warrants a sale price of $x, charging $x * 5 or in some cases $x * 100 and using legal protections to do so is inherently greedy and immoral.

> Students in poor countries just get further screwed.

That's fine, as long as there's a more level playing field.


>Pointing out research, or writing, or anything else, ignores the reality that if the production cost warrants a sale price of $x, charging $x * 5 or in some cases $x * 100 and using legal protections to do so is inherently greedy and immoral.

Why is, for example, a student discount, "inherently greedy and immoral"? I don't see why there's intrinsically any moral element to charging groups differently based on their willingness or ability to pay.


That's fine? $200 (a figure I saw quoted somewhere for a single college coursebook) is more than the annual fees for some government-run colleges here (in India.)


If the market is fair but the price is wrong, the price will change.

Creating fair markets should be the #1 goal of capitalism.


>If the market is fair but the price is wrong, the price will change.

You're assuming that a price that no-one in a developing country can afford is the same as a price that is "wrong". It's perfectly possible that a price that no-one in a developing country can afford is "right" from an economic perspective in that it's profit maximizing for the producer.


If you have to sell your product at the "right" price, meaning profit, in a market that can't afford that price then the problem isn't the price; you are selling the "wrong" product.


As far as I can tell, this does appear limited to international trade for business purposes. It's a new, very specific kind of import ban. Protectionism of a sort, but not really that scary.

Problem is, this new ban doesn't actually appear in the copyright act at all.

No, it's not terribly scary and Ebay isn't going to be shut down. But that doesn't mean that the courts should have a license to create a new law that simply and clearly didn't exist before.

And your conjecture that this prevents arbitrage is FUD, as there are numerous ways to version differentiate (simply change order of questions, localizations, etc) that do not require giving the government a gigantic new policing power.


Correct me if I'm wrong, but isn't there a " ... purchased outside the US" missing from the title of the piece?

The article says: "... seeking to knock out the "first sale" doctrine on goods made abroad" (emphasis mine) - surely a product made abroad, but sold in the US by an authorized importer/reseller will still be subject to first sale? And it would still be legal for students to buy books for themselves abroad? Even the example mentioned where US students buy books directly on Amazon UK doesn't seem to be affected - just their right to resell that book in the US?

It's still a big deal, but it seems that Ars is making it quite a bit bigger than it is.


You're quite right.

I've been far from happy with the way this case has been covered in the tech press; the sky is not falling, you can still resell your iPod when you're done with it. What you can't do is start a side business where you become a company's competitor by finding another country where prices are low enough that you can buy bulk and import into the US for less than the US price.

Which should surprise practically nobody, so I guess that's why everybody is rushing to sensationalize the hell out of this.

(and the fact that a sensationalized version of this appears and gets highly upvoted on HN about once a week is a depressing indicator of not just the press, but the state of the community they're feeding)


> What you can't do is start a side business where you become a company's competitor by finding another country where prices are low enough that you can buy bulk and import into the US for less than the US price

Why not? That's the free market economy at work isn't it? How is this different to off-shoring production and supply sourcing to save money?


Because the law says so. I'm all for changing the law, but that's just not what this case is about.


You will need to cite which law says so. If a business decides to import books published in Thailand by Thai publishers into the US, does the law prevent them from doing so? And if it does, could not the importer take the US to the WTO for a ruling that this was a trade barrier?

What if an American living in Thailand purchased books in the US, imported them into Thailand and sold them at a profit? Would that also be illegal under this law?


>Which should surprise practically nobody

Why? You mean corporations can arbitrage production and employment costs, and we can't arbitrage product purchase costs is logical?


If the ruling is narrow enough to allow the resale of goods purchased from the US that were imported under license, and forbid the resale of unlicensed imports; that would be one thing.

But... It won't necessarily be that narrow, and it is but one battle in a long war over who gets to control a good once it has been sold. It certainly would be possible for the Supreme Court to produce a ruling in this case that would see grandmothers being cuffed for illegal reselling at flea markets.


> If the ruling is narrow enough to allow the resale of goods purchased from the US that were imported under license, and forbid the resale of unlicensed imports; that would be one thing.

If the sale happened in the US, it doesn't matter where the product was produced, first sale applies. Apple can't in any form claim that an iPhone purchased in an Apple store in the US was, in fact, an unlicensed import.

Again, correct me if I'm wrong: But "first sale" is a long-lived and fairly unambiguous law. Unless it's found to be unconstitutional (which is not being questioned), the courts can't just change it.

The question before the court is what happens when the sale happened abroad, because US copyright law doesn't trivially apply abroad.

What gets murky, as far as I can tell, if first sale doesn't apply abroad are online merchants that can trivially fulfill your order from abroad, thus making you the importer - just like the Amazon UK case. Then you'd be forbidden from reselling that product in the US without the copyright holders permission.


The Second Circuit decision does seem to say that Apple can deny first-sale rights on things manufactured overseas and sold in the US by Apple. I was skeptical, but the dissent in that case talks at length about it, and I assume the dissenting judge knows more than me about what's at stake.

That said, it's just about a guarantee that SCOTUS won't stomp all over the first-sale doctrine. It can easily keep both the first-sale-in-the-US rule alive as well as maintaining the rights of IP holders against unauthorized imports.


It absolutely is that "narrow". Goods you buy from an authorized distributor are fair game for resale.


It definitely looks like you're right, and that Ars seems to be misstating this. But I also agree, it's still a big deal. What industry hasn't attempted to get every inch out of law that they could, even if it's apparent they will eventually fail? It's in their financial interest to try, after all.


Oh dear, how much linkbait are we going to have to go through with this case? Look, your first sale rights within the US are perfectly safe. This case only affects people who do bulk buys in an overseas market and then try to resell within the US. Claims that it will be impossible to sell anything without an exhaustive audit trail are absurdly overblown. The legal issue here is whether a company has the right to exert control over the distribution of its product.

The USSC will probably find for the publisher on public policy grounds (IMHO), since it would be difficult for publishers/manufacturers to execute agreements with distributors if it were not also prepared to go bat against unauthorized distributors. Not the most consumer-friendly situation since it allows producers to engage in market partition, but on the other hand exclusive distribution agreements are often the key to establishing a market presence in the first place. The arguments in Omega v. Costco (http://en.wikipedia.org/wiki/Omega_S.A._v._Costco_Wholesale_...) are particularly instructive in this regard; amicus briefs in support of Costco offered long parades of horribles, but were built on absurd premises, such as speculation that courts would suddenly start interpreting statutory protections for libraries in direct contradiction of their plain meaning.


Whenever someone tells me that certain ruling only applies to X, and people worrying about Y are misguided, I almost always side with people who are worried about Y.

Court cases set a precedence, and there are unintended consequences for it. Given that a court cases are not 100% exploit-proof, you can bet your bottom dollar that eventually there will be some lawyer referring to previous rulings to justify some other rulings.


Is it just me, or is it a bit odd that copyright is used for market control in regards to importation and exportation? I thought most countries used tariffs to produce this effect.

If you want to stop people from buying TV's cheap from somewhere, the state add a tax to encourage local production. Is this somehow not enough to stop people from buying books cheap and sell them expensively in the US? Isn't the solution then to just increase the tax? Are there a reason why copyright can do a better job at this, and are there a substantial difference between copyright regulation and tariffs?


The US government doesn't want textbooks to be more expensive in the US so a tariff makes no sense. This is corporations wanting their goods to be more expensive where people have more money, which they can legally do. Tariffs are unrelated.


Tariffs purpose is to allow corporations to have higher prices locally. Both tariffs and copyright regulations are laws created by the government, and both increase how expensive a item is in the country. How are they unrelated?


No, the purpose of tariffs is to make domestically-produced goods cheaper than imported goods, not to raise the price for the consumer.


How exactly do you make local prices decrease by making imported goods more expensive? It does not make any sense. If the global market price of a product get artificial higher, one do not lower the local prices. The local prices get increased to match what ever the effective global market price (price + tariff) is.

Of course. The purpose of tariffs is neither to increase nor lower the prices of goods. The purpose of tariffs from the government point of view is to increase self-production, value generating, and self-sustainability. But the practical effect of an tariff is a higher priced product for the consumer. In the word of wikipedia: Typical analyses find that tariffs tend to benefit domestic producers and government at the expense of consumers.


Those companies argue differential pricing schemes are vital to their success, and should be enforced by US courts

I find this sort of reasoning very frustrating. It's not the job of the courts to ensure that anyone's business model can continue to be followed profitably. There may be sound legal reasons to overturn precedent in this case, but "companies are losing money" is not one.


This sure sounds like Corporate Welfare to me. Those damn Socialist Capitalists are pretty good at calling the kettle black.


Please read this for a more through discussion of the issue and applicable laws.

http://us.practicallaw.com/9-519-7148


I'm surprised nobody has mentioned that selling something at below cost (when R&D is factored) is clearly dumping and prevents the emergence of local publishers.


tl;dr:

Student resells textbooks produced in Thailand making $1.2 million. Publishers sue him. They win first two rounds because "first sale" law does not apply overseas. Ebay and a hodgepodge of other groups support student. Case about to start in Supreme Court.


Cannot root, cannot resell - it's America just consume more and more and more !?

Make a pile of old tablets in your life that you cannot legally do anything with.

When are we going to revolt and insist we own what we buy without being criminals?


Arent Big Corporations importing cheap goods and reselling them in USA for a huge profit ? so why an individual could not be able to do the same, even if that good has been produced in US at first place ? why should i pay 150$ for a book produced here while people on the other side of the world get the same book for 40$ ? Because it is not like i can choose the book i need for my studies.


Levis has jeans made abroad. They send these jeans to various regions for sale through a distribution network. Levis claims to be able to control where shops can wholesale buy jeans from.

There's a UK case about Tesco and Levi jeans.

(http://en.wikipedia.org/wiki/Grey_market)

> Manufacturers or their licensees often seek to enforce trademark or other intellectual-property rights against the grey market. Such rights may be exercised against the import, sale and/or advertisement of grey imports. In 2002, Levi Strauss, after a 4-year legal fight, prevented UK supermarket Tesco from selling grey market jeans. However, such rights can be limited. Examples of such limitations include the first-sale doctrine in the United States [...]

That's sort of what's happening here - a publisher is using some form of rights protection law to prevent someone importing many copies of a product from one region and selling them in another region.

That feels to me anti-competitive, but it's pretty well established that region-locking is acceptable.

In the UK you'd be able to buy a textbook from overseas for your own personal use. The problem is that it's hard for someone else to set up a business to do the importing.


Because big corporations generally follow copyright laws.




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