Several recent decisions highlight the strategic importance of coordinated worldwide copyright ownership and protection as a tool against unauthorized dealers and resellers. The Second Circuit in John Wiley & Sons Inc. v. Supap Kirtsaeng, 2011 U.S. App. LEXIS 16830 (2d Cir. N.Y. Aug. 15, 2011) recently fell in step with the Ninth Circuit’s decision in Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982, 88 USPQ2d 1102 (9th Cir. 2008), and then immediately affirmed this position in Pearson Educ., Inc. v. Yadav, 2011 U.S. App. LEXIS 19239 (2d Cir. N.Y. Sept. 19, 2011). It found that the First Sale doctrine, which authorizes resale of lawfully purchased copyright protected works, does not apply to works manufactured outside of the United States.
This is a huge win for book publishers in curtailing the First Sale doctrine. The First Sale doctrine allows libraries to lend literary works and contributed to a robust used book market. Prior to these cases, the First Sale doctrine was a shield, used by libraries and resellers of used college textbooks as a defense to copyright infringement claims. Now, that immunity is called into question, as both the Ninth and Second Circuits have found that resale in the U.S. of works manufactured by plaintiffs abroad infringed plaintiffs' U.S. copyrights in the domestic versions of those works. These decisions have far reaching implications for resale markets and other secondary markets as a whole. In this new landscape, an effective enforcement strategy entails: (1) territorial division of the copyright; and (2) manufacturing outside of the U.S. to cut off the First Sale defense for U.S. resellers. The practical focus might be on packaging, including photographs and marketing copy - or the product itself. This strategy could prove most effective for protection of products that are most popular among parallel importers or unauthorized resellers on internet auction sites such as eBay or Alibaba.com. Robert Payne, Scott Allen and Chris Passarelli specialize in I.P. rights enforcement against unauthorized dealers and unauthorized parallel importation. Chris Passarelli can be reached at cpassarelli@lgpatlaw.com.