Prof. Randal C. Picker, University of Chicago Law School
April 1, 2013

The Supreme Court’s recent decision in Kirtsaeng will undoubtedly receive a great deal of attention from copyright lawyers.  Jim Gibson took a run at the decision last week on the blog and you should be sure to read that.  The decision involves three opinions running a total of 70 pages, so any blog post can do only partial justice to the case.  I will just jump into the middle of Justice Breyer’s opinion for the majority and consider a situation that he raises regarding the application of the U.S. Copyright Act:

Thus, ordinary English permits us to say that the Act “applies” to an Irish manuscript lying in its author’s Dublin desk drawer as well as to an original recording of a ballet performance first made in Japan and now on display in a Kyoto art gallery.  Cf. 4 M. Nimmer & D.  Nimmer, Copyright §17.02, pp. 17–18, 17–19 (2012) (hereinafter Nimmer on Copyright) (noting that the principle that “copyright laws do not have any extraterritorial operation” “requires some qualification”).

That is quite a statement.  There is nothing obviously distinctive about U.S. law here, so we should think, if the statement is right, that the laws of many, many countries apply to our Dublin author as he is typing his new manuscript.  Given all of that law bearing down on him, the wonder is that he can type at all.

I don’t think this is quite the right way to put it and I think that the statement doesn’t get extraterritoriality quite right.  It isn’t that U.S. copyright law applies, as it were, as our English author is creating his manuscript.  We should expect that copyright arises in the manuscript under his local domestic copyright laws.  Instead, the point is that when a U.S.-based firm starts selling his book in the United States without his permission, the Dublin author wants the U.S. court system to put a stop to that.  That is a reasonable fear, of course: The early days of U.S. copyright law restricted protection to U.S. authors and enabled much piracy of foreign works.  It is through the emergence of various international conventions that that core problem has been resolved.

Operationally, that means that when the UK author brings suits in a U.S. court on his UK copyright, he expects to win just as a U.S. author would if the piracy involved a book subject to a U.S. copyright.  This is what Section 104 of the U.S. Copyright Act accomplishes.  That is somewhat different than saying that U.S. law applies outside the country or applies extraterritorially.  The relevant infringing acts here are occurring in the United States and those are the acts in issue, not acts occurring in a different country.  We apply U.S. law to the foreign copyright and the U.S.-based infringing acts as if the copyright were a U.S. copyright.  This is a regime of equal status or equal recognition – also called national treatment – for the foreign copyright.

To understand what is at stake in Kirtsaeng, perhaps we should do a little shopping.  Start with a bookseller or art gallery in London or Bangkok.  You are a United States citizen and plan to return home soon and you would like a nice souvenir for your trip, perhaps a book or a poster.  Before you buy, you of course stop to think about the copyright implications of what you are doing.  Well, in truth, no normal tourist does that, though a professional purchaser might very well consider the relevant copyright issues.

Consider three situations.  In our first case, the book was written in the United States by a U.S. citizen and was printed in the United States.  It was sold in the United States to a wholesaler who exported it to England for retail sale in a London bookstore.  When you return to the United States with the book, the book will have made a round trip back and forth to the United States.  This is a version of the Quality King case, decided by the U.S. Supreme Court in 1998.  The legal issue presented in Quality King turned on the so-called first-sale doctrine set forth in Section 109 of the U.S. Copyright Act and how that matched up with the rights of the copyright holder to control distribution under Section 106 and importation under Section 602.  The first-sale doctrine has a number of intricacies, but the core of it in Section 109 is that the owner of, in our example, a particular copy of a book can sell it without the copyright holder’s permission so long as the copy was “lawfully made under this title,” meaning title 17 of the United States Code, the copyright title.

The actual language of Sections 106, 109, and 602 is tricky, but in Quality King, the Supreme Court held that in the so-called round-trip case, the first-sale doctrine applied and the copyright holder couldn’t block the return of the work to the United States.  Quality King involved a rather untraditional copyrighted work, shampoo, or, in truth, the copyrighted images on the shampoo bottles.  L’anza wanted to charge high prices for shampoo in the United States, low prices abroad, and hoped to keep the markets separate.  Foreign purchasers wanted to buy outside the United States and bring the shampoo back to the Unites States and the result in Quality King made that possible.

But Quality King resolved the case for U.S.-copyrighted works that were originally produced in the United States.  That is clearly the easiest case for the “lawfully made under this title” language.  Return to our London bookseller.  You look at the book in your hands more carefully.  It is a book that seems to bear a United Kingdom copyright and it indicates that it was printed in London.  The book has no ties to the United States, at least none until you buy it and take it home to Chicago.  Where do you stand as to this book?  When you seek to quote from the book on your U.S.-based blog, do you invoke U.S. fair-use doctrine?  Or does the book stay in the UK system, and instead do you need to consult fair use’s UK cousin, the law of fair dealing?

And, to return to first sale, when you bring the book to Chicago and seek to resell it to a dealer in used books, can you do so without the permission of the UK copyright holder?  Consider how a lawsuit might play out.  The UK copyright holder appears in a U.S. court seeking to block your sale to the Chicago used-book dealer.  In Articles 5(1) and 5(2) of the Berne Convention, countries that are signatories to Berne are to take steps to ensure that foreign copyright holders enjoy the same protections available to their national authors.  But as the U.S. decisions emphasize (see, for example, the Itar-TASS case from the Second Circuit in 1998), the Berne Convention isn’t operative on its own (and see Section 104(c) for more on this).  However, the most natural result consistent with Berne is that the U.S. court would treat the UK-copyrighted work as if it were a U.S.-copyrighted work.  That probably means that Section 109’s first-sale doctrine would apply to the UK-copyrighted work just as it would to a U.S.-copyrighted work.  That seems like something of a stretch to the language “lawfully made under this title,” but the national treatment principle captured in the Berne Convention piggybacks the protection of foreign authors onto that of the local national authors.  U.S. authors are stuck with first sale and we might expect that foreign authors would face the same limit.  That said, you are never quite sure what courts are going to do as they start mixing and matching across different domestic copyright laws.

That still leaves my third case of interest, so we should return to the London bookshop.  Again you look at the book in your hands but this time you note that the book appears to carry a U.S. copyright.  The book also indicates that it was printed in London.  If you buy that book and return to the United States, what rights will you have?  This is the case left open in Quality KingQuality King itself in a number of passages seemed to intimate that the “lawfully made under this title” language would not apply to this case, and Justice Ginsburg seemed to suggest that in her brief concurrence in Quality King.  This is the issue decided by the Supreme Court in Kirtsaeng.

To set the situation in that case briefly, publisher John Wiley & Sons thought that it was a good business strategy to sell the same book at different prices in the United States and abroad.  That could be because, as Justice Ginsburg suggests in her dissent in Kirtsaeng, Wiley recognized that it couldn’t begin to sell its textbooks in poorer countries at the prices it charged in the United States.  If Wiley and other publishers were forced, by law or economics, to charge the same prices in the United States and, say, Thailand, it might move to a high price in both locations.  Wiley and, perhaps more importantly, local Thai students, would both be worse off from that.

But, as promised, this post isn’t about the virtues and vices of price discrimination.  Wiley sold books in Thailand at much lower prices.  Supap Kirtsaeng, a Thai student studying in the United States, knew of the price difference for textbooks in the United States and Thailand and sought to take advantage of that by buying low and selling high.  Kirtsaeng asked his friends and family to buy books in Thailand and then ship them to the United States, where Kirtsaeng resold the books.  The books purchased in Thailand were sold by a Wiley foreign affiliate, were printed outside of the United States, and were sold with a legend that limited the location of the sale of those particular books.

Return to the “lawfully made under this title” language.  This isn’t the Quality King situation where we have a work copyrighted in the United States and printed in the United States.  This also isn’t my hypothetical with the UK-copyrighted book printed in London, where the focus is on extending national protection to foreign authors.  This is really just a question of the operation of domestic copyright law and whether we want the place of manufacture of a U.S.-copyrighted work to matter.  The majority opinion concludes that we do not.  Part of the analysis is driven by the concern about creating an intermediate category of copyrighted works.  Works by foreign citizens are to be treated as if those works were in U.S. copyright; that is the national treatment principle in the Berne Convention.  U.S.-copyrighted works printed in the United States fall readily into U.S. domestic copyright law.  But if U.S.-copyrighted works printed outside the United States don’t fit neatly under U.S. domestic copyright law, then we have created this category that is neither fish nor fowl; the Court declined to do that without a clear statement from Congress that it was seeking to do just that.