Sunday, October 28, 2012

Will Copyright Law Trump Free Trade and Domestic Resale Rights? Kirtsaeng v. Wiley - US Supreme Court May Decide

(Counsel in black robes preparing for Supreme Court oral argument - with apologies to the IPKat)

All eyes will be on the United States Supreme Court (“SCOTUS”) on Monday, October 29, 2012 when it will hear oral argument in the immensely important case of  Kirtsaeng v. John Wiley & Sons, Inc. This involves parallel importation of text books into the United States that were legitimately manufactured abroad. The American copyrit owner, however, wanted to block them because they were being resold at lower prices than market would bear in the USA. If this fact situation sounds rather familiar to Canadians, it should. That was basically the issue in Euro-Excellence v. Kraft which was decided by the Supreme Court of Canada in 2007. That case involved chocolate bars and the frankly far-fetched argument that copyright in a small logo on the wrapping should suffice to prevent the parallel importation of these products. Our court split in interesting ways on that case, in which I made the prevailing argument on behalf of the Retail Council of Canada. Here’s a brief analysis that I did for the Law Society of Upper Canada the following year. Actually, tomorrow’s issue went to SCOTUS once before in 2010 in the Costco v. Omega case once before, but the Court split 4/4 on it. 

The American lawyers are busy sharpening the fine points of their submissions, which will, if things are normal, will likely be instantly deflected and perhaps shredded by the usually rather vigorous questions of the SCOTUS justices (other than one well known exception, who may perhaps break his seven year long record of silence during oral hearings, given his interest and evident insight into IP matters, which is shown in the very important 2005 eBay v. MercExchange decision which held that  injunctions do not automatically flow from a finding of infringement in patent cases).

The issue of the treatment of parallel imports under copyright law is one that the late, great Sir Hugh Laddie described as “one of the most difficult topics in copyright law.” It must always be remembered that “parallel importation” refers to the importation of completely legitimate goods through channels other than the one preferred by the local rights holder.

It should be noted that Canada has a special sui generis regime for books that allows for the blocking of parallel imports. This flows from well over a century of angst about cultural protectionism for Canadian publishers. While one can envisage such protectionism for cultural products such as books, where local industries may be imperiled, it is difficult to see why a similar doctrine should be used to control and prevent free trade in consumer or commercial goods. That said, there is also an argument that IP regimes that prevents international exhaustion and the application of the “first sale doctrine” permits the sale of products such as books and computer programs at lower prices in developing countries. The American statutory provisions are very different than those of Canada, and do not differentiate between books, chocolate bars or wrist watches.

This is a debate that will not end any time soon, and perhaps should be dealt with one day in a treaty – provided that there is any agreement at all on basic issues. One thing, however, is clear. To suggest that there can be truly “free trade” at the same time that copyright law can be used to prevent the parallel importation of chocolate bars, wrist watches and even text books is at best na├»ve and at worst, disingenuous and oxymoronic.

If SCOTUS reverses the decision below – which ruled in favour of blocking importation – there will likely be intense pressure on Congress to restore free trade for the USA. One of the most cogent arguments before the court is that any interpretation that blocks parallel importation of products made abroad is likely to encourage even more export of jobs and manufacturing overseas. Arguably, much more is at stake tomorrow even than the right of international "exhaustion". Many are arguing that, if SCOTUS upholds the Court below, everything from garage sales to library lending to private sale of used Toyotas could be affected and prevented by excessively aggressive copyright owners. 

Unlike Canada’s Supreme Court, there will not be a live video feed of Monday’s hearing. We will, however, see a transcript shortly after the hearing. A recording of the oral argument will be available in a few days.

There will be a very high powered post-mortem including counsel of record hosted by the very energetic and remarkable faculty at the Washington College of Law, at 3:30 PM on October 29, 2012, which I believe will be webcast live.
Note: This event has been cancelled due to Hurricane Sandy. Is this weather event an example of life imitating art with pathetic fallacy?


PS - Prof. Ariel Katz has an excellent blog about this case here.

PS - 

After a really fast read of the transcript, I think that the key moment may have been:

JUSTICE KENNEDY: But you have to look at those hypotheticals in order to decide this case.
MR. OLSON: Well, and that's --
JUSTICE KENNEDY: You're aware of the fact that if we write an opinion with the -- with the rule that you propose, that we should, as a matter of common sense, ask about the consequences of that rule. And that's what we are asking.
Seems at least six judges are really concerned about "the horribles" (i.e. re-selling used Toyotas and displaying Picassos,  lending library books etc.) and/or exporting jobs. EVen Ginsburg asked about exporting jobs.

There wasn't much discussion of any middle ground.

Olson's best answer to the "horribles" was that they haven't happened, that they are different cases and that there's always "fair use".

The latter point is frankly ridiculous in any situation that readily comes to mind no matter how much one might love fair use. And as to the former points, Supreme Courts exist to decide cases with broad implications as Olson obviously knows. I'm astonished that he tried to confine the implication of this case to these specific facts.

I detected some serious potential sympathy from at least Sotomayor, Kagan, Breyer, Kennedy, Rogers and Alito in the rough chronological order that I noted it.

One can never really read too much into Judges questions - but I'm going out on a limb to predict reversal.

And by at least 6-3.

And I've read some comments from pretty smart people on listserves and blogs who seem to think that the SCOTUS may indeed reverse....


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