First Sale Doctrine of U.S. Copyright Law Does Not Apply to Foreign-Made Works

Considering once again the applicability of the first sale doctrine of the U.S. Copyright Act to goods manufactured abroad, the U.S. Court of Appeals for Second Circuit followed its recent holding in John Wiley & Sons, Inc. v. Kirtsaeng (see IP Update, Vol. 14, No. 9), concluding that the first sale defense does not apply to goods manufactured outside the United States. Pearson Education, Inc. v. Yadav, et al., 10-2610-cv (2d. Cir., Sept. 19, 2011) (summary order).

Defendants Kumar and Dart Air, appealed from the district court’s decision, which found that they infringed copyrighted works owned by plaintiff’s Pearson Education, John Wiley & Sons, Cengage Learning and McGraw-Hill Companies.   The district court also held the defendants liable for about $285,000 in damages.  The defendants argued on appeal that the district court erred in failing to recognize that the first sale doctrine shields the purchaser of a copyrighted work outside the United States from an infringement claim based on the importation and resale of the work in the United States.

The 2d Circuit recently rejected a similar argument in Kirtsaeng.   The first sale doctrine in U.S. copyright law, codified at 17 U.S.C. §109(a), permits the owner of a work “lawfully made under this title” to resell it without limitations imposed by the copyright holder.  In Kirtsaeng, the court addressed a conflict between the first sale defense and 17 U.S.C. §602 (a)(1), which provides that importation, without the owner’s permission, of a copyrighted work acquired abroad is an act of infringement. 

The 2d Circuit in Kirtsaeng acknowledged the ambiguity in the statutory language of the Copyright Act, remarking that §109(a)’s language specifying that it applied to works “lawfully made under this title” neither compelled or foreclosed an application of the first sale doctrine to works manufactured abroad.  However, the court looked to §602 (a)(1) in conjunction with the Supreme Court’s guidance in Quality King Distributors holding that the first sale defense does not apply to products manufactured abroad. 

In Pearson Education, the panel, which consisted of Judges McLaughlin, Calabresiand Raggi, did not expound on the merits of Kirtsaeng.   Rather it issued a summary order noting that judgment of the district court must be affirmed because the panel is bound by the court’s decision in Kirtsaeng, unless it were to be reversed by the Supreme Court or the 2d Circuit en banc. 

Practice Note:   Further consideration of this issue appears likely, as the Supreme Court in Wholesale Corp. v. Omega, S.A. recently considered this issue in an appeal from the U.S. Court of Appeals for the Ninth Circuit.  However, no opinion issued because the Supreme Court divided 4-4 after Justice Kagan recused herself.