Today, the Supreme Court issued its opinion in Kirtsaeng v. John Wiley & Sons.
A little background on the case:
Supap Kirtsaeng was a student who came to the U.S. from his native Thailand to study. He noticed, while he was here, that textbooks in the US were substantially more expensive than those same textbooks abroad. Being an enterprising young student, he started his own import business. He had friends and family send him textbooks from home, which he then resold for a profit here.
He thus came to the attention of John Wiley, a publisher of textbooks. They wanted him to stop, for obvious reasons: they didn’t want people in the U.S. buying low-cost books from Thailand when their alternative was to buy high-priced textbooks from the U.S. Even though Wiley was making money on both sales, they wanted to make more money.
What’s a textbook publisher to do?
If you buy a textbook, you’re allowed to resell it, and there’s actually a pretty strong aftermarket for used textbooks in this country. That’s because we have a “right of first sale” in this country. If you’re the copyright holder, you get to control the first sale of your copyrighted article–and only the first sale. There’s nothing that Wiley could do to stop legitimate sales of used books.
Instead, they had to argue that the sales weren’t legitimate. They did that by engaging in legal nitpickery. The right of first sale is enshrined in Section 109 of the Copyright Act, which says: “[T]he owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” Read that a couple of times; it basically says, “If you legitimately sold someone a copy, they have the right to resell it.” (Note that it’s broader than that, but that reading will do for now.)
Except it doesn’t quite say, “if you legitimately sold someone a copy.” It says that the right of first sale applies to copies “lawfully made under this title,” and this case turns on exactly what is meant by those five little words.
Wiley argued–and publishers have actually made this argument for years–that “lawfully made under this title” means “lawfully made, and covered by US copyright law.” The books made in Thailand were not covered by US copyright law–they were covered by Thai copyright law–and therefore, Wiley argued, the right of first sale did not apply to those books.
The Supreme Court said: No. That is bunk.
Actually, this is what the Supreme Court said:
[The words "lawfully made in accordance with this title"] mean made “in accordance with” or “in compliance with” the Copyright Act. In that case, §109(a)’s “first sale” doctrine would apply to copyrighted works as long as their manufacture met the requirements of American copyright law. In particular, the doctrine would apply where, as here, copies are manufactured abroad with the permission of the copyright owner.
Here’s a translation, for those who want it: You are allowed to import books from abroad, in any quantity you wish, so long as the copies manufactured abroad are manufactured with the permission of the copyright owner.
What follows from here is not legal advice, just prognostication.
I sincerely doubt this decision will have almost zero effect in the future on John Wiley, textbook maker. What Wiley will have to do now is differentiate its foreign editions in the same way that it differentiates its editions in time: Add a few charts, change a few paragraphs, alter the font, change the order of some chapters and homework problems–in other words, change things just enough so that if someone buys the Thai edition, they won’t be able to figure out their reading and homework problems assigned by the teacher without spending substantial time. This is the kind of thing that can be mostly automated, and probably will be by the end of the year. This is a problem with a preexisting solution, one already employed by textbook manufacturers, so they’re just going to deploy it.
The place where this will have the biggest effect is fiction. Because frankly, readers don’t care about page numbering with fiction, and you can’t just swap chapters 23 and 25 for different territories. The story is the story is the story.
What this means, though, is that if an author sells English language rights to print her story in India, the publisher could produce massive quantities. And there is nothing stopping the importation of those quantities into the US–or for bookstores to stock and sell those editions and price them at the North American price. (Okay, there is something stopping this; there has to be a sale in the first place, and transfers to wholesalers for technical reasons probably don’t count as sales. But I don’t think it’d be difficult to transform these into sales. It might add a little cost, but you’re already engaging in pretty hefty arbitrage. That’s the hardest part of this arrangement–making sure there’s something that counts as a “sale” and not just a transfer to a non-owner.) The bookstore makes more money; the author/publisher (presumably) make less.
Or, perhaps, the author herself could license an English-language version of her work to be produced in France. (France? Why France? Why not France? It can be anywhere, so long as the author retains the right to publish the work in that territory.) The author prints a bunch of books herself, sells them to a shell company (there has to be a sale) and then has the shell company reimport them into the United States, cutting out her publisher.
I haven’t even begun to chip away at what this would mean for digital sales. I don’t think it’s too hard to devise a two-part system to fake out international marketplaces–one that sells a digital copy (actually sells a digital copy; doesn’t just license it) to a reseller, and then resells that digital copy to the end user who wishes to purchase it. (I think you could even set it up so that they remain owner of the digital copy but license it to the end user if you’re worried about resale problems.) Voila–if you only sold North American rights to your book, someone who sets a system up properly could make it so that a sale in France can be resold in the US, and you can now effectively reclaim worldwide publishing rights to your book.
In a world where author’s interests and publisher’s interests are not aligned, I expect this to happen very, very quickly.
So authors, take note: If you only sold North American rights for your book, keep an eye on the possibilities out there. You may be able to end-run around things.
The Court ends with this lovely note to Wiley:
Wiley and the dissent claim that a nongeographical interpretation will make it difficult, perhaps impossible, for publishers (and other copyright holders) to divide foreign and domestic markets. We concede that is so. A publisher may find it more difficult to charge different prices for the same book in different geographic markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights…. The Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book, say to increase or to maximize gain.
(Put another way: Snap.)
It is unsurprising that the Court didn’t realize that one effect of this ruling is that it could allow authors to reclaim the domestic market that they have sold away. It’s unsurprising because I doubt the legal department of publishers thought about this as a possible side-effect.
But for authors who have sold only domestic rights, and who wish they could utilize those domestic rights? This is a decision of extraordinary import.
Make no mistake: Fiction authors, this just changed how rights in your world will be sold. It might not change it tomorrow, and it might not change it a month from tomorrow. But it did just change.