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JOHN WILEY & SONS, INC. v. KIRTSAENG
654 F.3d 210 (2011)
JOHN WILEY & SONS, INC., Plaintiff-Appellee,
v.
Supap KIRTSAENG, doing business as Bluechristine99, Defendant-Appellant.
Docket No. 09-4896-cv.
United States Court of Appeals, Second Circuit.
Argued: May 19, 2010.
Decided: August 15, 2011.
John T. Mitchell, Interaction Law, Washington, DC, for amici curiae Entertainment Merchants Association and National Association of Recording Merchandisers.
Norman H. Levine (Aaron J. Moss, on the brief), Greenberg Glusker Fields Claman & Machtinger LLP, Los Angeles, CA, for amicus curiae Costco Wholesale Corporation.
Charles A. Weiss, Kenyon & Kenyon LLP, (Mark A. Abate, Goodwin Proctor LLP, on the brief), New York, NY, for amicus curiae New York Intellectual Property Law Association, in support of plaintiff-appellee.
Before: CABRANES and KATZMANN, Circuit Judges, and MURTHA, District Judge.*
Judge MURTHA dissents in a separate opinion.
JOSÉ A. CABRANES, Circuit Judge: The "first sale doctrine" in copyright law permits the owner of a lawfully purchased copy of a copyrighted work to resell it without limitations imposed by the copyright
holder.1 The existence of the doctrine dates to 1908, when the Supreme Court held that the owner of a copyright could not impose price controls on sales of copies of a copyrighted work beyond the initial sale.2 Congress codified the doctrine in successive Copyright Acts, beginning with the Copyright Act of 1909.3 The principal question presented in this appeal is whether the first sale doctrine, 17 U.S.C. § 109(a), applies to copies of copyrighted works produced outside of the United States but imported and resold in the United States. Under another basic copyright statute, it is ordinarily the case that "[i]mportation into the United States, without the authority of the owner of copyright under [the Copyright Act], of copies... of a work that have been acquired outside the United States is an infringement of the [owner's] exclusive right to distribute copies...."4 Defendant contends, however, that individuals may import and resell books manufactured abroad pursuant to 17 U.S.C. § 109(a), which provides that "the owner of a particular copy ... lawfully made under [the Copyright Act], 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." Defendant's claim is an issue of first impression in our Court.5 BACKGROUNDA. The Parties
* The Honorable J. Garvan Murtha, of the United States District Court for the District of Vermont, sitting by designation.
1. The first sale doctrine is codified at 17 U.S.C. § 109(a) which reads, in relevant part:
Notwithstanding the provisions of section 106(3) [of the Copyright Act], the owner of a particular copy ... 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....
17 U.S.C. § 109(a).
As defined in the Copyright Act, a "cop[y]" is the "material object[] ... from which [a] work can be perceived, reproduced, or otherwise communicated." Id. § 101. As one commentator has explained, "the physical object `copy' is distinct from the incorporeal `work of authorship' that the copy embodies." Jane C. Ginsburg, Essay: From Having Copies to Experiencing Works: The Development of an Access Right in U.S. Copyright Law, 50 J. Copyright Soc'y U.S.A. 113, 126 (2003); see also 17 U.S.C. § 202 (distinguishing the copy from the work).
2. See Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350, 28 S.Ct. 722, 52 L.Ed. 1086 (1908).
3. See Copyright Act of 1909, ch. 320, § 41, 35 Stat. 1075, 1084 (1909); Copyright Act of 1947, ch. 391, § 27, 61 Stat. 652, 660 (1947); Copyright Act of 1976, ch. 1, § 109, 90 Stat. 2541, 2548 (codified at 17 U.S.C. § 109(a)) (1976).
4. 17 U.S.C. § 602(a)(1).
5. District courts within our Circuit have addressed this issue. See Pearson Educ., Inc. v. Liu, 656 F.Supp.2d 407, 416 (S.D.N.Y.2009) (Holwell, J.) (holding "dubitante" that § 109(a) does not apply to foreign manufactured goods imported into the United States); Pearson Educ., Inc. v. Liao, No. 07-Civ-2423 (SHS), 2008 WL 2073491, at *3-4 (S.D.N.Y. May 13, 2008) (Stein, J.) (holding that § 109(a) does not apply to foreign manufactured goods imported into the United States). In addition, the Ninth Circuit recently held that § 109(a) does not apply to foreign-manufactured goods unless they were previously imported and sold in the United States with the copyright holder's permission. See Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir.2008), aff'd by an evenly divided Court, Costco Wholesale Corp. v. Omega, S.A., ___ U.S. ___, 131 S.Ct. 565, 178 L.Ed.2d 470 (2010).
6. As a standard practice, Wiley obtains from its authors the assignment of U.S. and foreign copyrights of reproduction and distribution. The assignment of these copyrights allows Wiley to produce and distribute its works in both domestic and foreign markets.
7. 17 U.S.C. § 501(a) provides, in relevant part:
Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 122 [of the Copyright Act] or of the author as provided in section 106A(a), or who imports copies ... into the United States in violation of section 602, is an infringer of the copyright or right of the author, as the case may be.
17 U.S.C. § 501(a).
Wiley holds registered United States copyrights for the American editions of the works at issue in this case. Although the foreign editions probably would not be protected by United States copyright law if infringement occurred abroad, see Robert Stigwood Grp. Ltd. v. O'Reilly, 530 F.2d 1096 (2d Cir.1976), the sale of the foreign editions in the United States allegedly infringes the U.S. copyrights held by Wiley on its American editions.
8. Wiley later abandoned its trademark and unfair competition claims.
9. 17 U.S.C. § 502(a) provides, in relevant part:
Any court having jurisdiction of a civil action arising under this title may, subject to the provisions of section 1498 of title 28, grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.
17 U.S.C. § 502(a).
10. 17 U.S.C. § 504(c)(1)-(2) provides, in relevant part:
Except as provided by clause (2) of this subsection, the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just.... In a case where the copyright owner sustains the burden of proving, and the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.
17 U.S.C. § 504(c).
We have recently observed that "the total number of awards of statutory damages that a plaintiff may recover in any given action depends on the number of works that are infringed... regardless of the number of infringements of those works." WB Music Corp. v. RTV Commc'n Grp., Inc., 445 F.3d 538, 540 (2d Cir.2006) (internal quotation marks omitted).
11. See John Wiley & Sons, Inc. v. Kirtsaeng, No. 08 Civ. 7834, 2009 WL 3364037, at *9 (S.D.N.Y. Oct. 19, 2009) (DCP).
12. Perry v. Dowling, 95 F.3d 231, 235 (2d Cir.1996) (citing White v. Shalala, 7 F.3d 296, 299 (2d Cir.1993)).
13. In 2008, Congress amended the statute, resulting in the re-designation of what had been § 602(a) as § 602(a)(1). Act of October 13, 2008, Pub.L. 110-403, Title I, § 105(b)-(c)(1), 122 Stat. 4259.
14. The first sale doctrine was first endorsed by the Supreme Court in the landmark 1908 case of Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350-51, 28 S.Ct. 722, 52 L.Ed. 1086 (1908). In that case, the publishers of The Castaway, a popular novel, inserted the following notice after the title page of the book: "The price of this book at retail is $1 net. No dealer is licensed to sell it at a less [sic] price, and a sale at a less [sic] price will be treated as an infringement of the copyright." Id. at 341, 28 S.Ct. 722. The publishers subsequently sued a department store that had purchased copies of the books at wholesale and sold them each at retail for eighty-nine cents. The Supreme Court held:
The purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it.
. . . .
In our view the copyright statutes, while protecting the owner of the copyright in his right to multiply and sell his production, do not create the right to impose, by notice, such as is disclosed in this case, a limitation at which the book shall be sold at retail by future purchasers, with whom there is no privity of contract.
Id. at 350, 28 S.Ct. 722.
The Supreme Court made clear that the matter before it "was purely a question of statutory construction." Id. The relevant statute provided that copyright owners had "the sole liberty of printing, reprinting, publishing, completing, copying, executing, finishing, and vending" their copyrighted works. Copyright Act of 1891, § 4952, 26 Stat. 1107 (emphasis added). Congress promptly codified the holding in Bobbs-Merrill — which became known as the first sale doctrine — in the 1909 Copyright Act. Copyright Act of 1909, ch. 320, § 41, 35 Stat. 1075, 1084 (1909) ("[N]othing in this Act shall be deemed to forbid, prevent, or restrict the transfer of any copy of a copyrighted work the possession of which has been lawfully obtained.").
The current version of the first sale doctrine — as codified in § 109(a) — differs in two noticeable respects from the version Congress first passed in 1909. First, under current copyright law, the exclusive right to "vend" granted to copyright holders has been replaced by the exclusive right to "distribute." See § 106(3). However, the Supreme Court has indicated that, at least for purposes of the first sale doctrine, nothing of consequence turns on this alteration. See Quality King v. L'anza Research Int'l, 523 U.S. 135, 152, 118 S.Ct. 1125, 140 L.Ed.2d 254 (1998). The second change is that the first sale doctrine no longer applies to "any copy of a copyrighted work," but rather, only to any copy "lawfully made under this title."
16. Id. at 140, 118 S.Ct. 1125 (quotation marks omitted).
17. Id. at 138, 118 S.Ct. 1125.
18. Id. at 145, 118 S.Ct. 1125.
19. Id. at 154, 118 S.Ct. 1125 (Ginsburg, J., concurring).
20. Id. at 148-49, 118 S.Ct. 1125 (majority opinion).
21. Id. at 148, 118 S.Ct. 1125.
22. Id.
24. Id. at 990.
25. Costco Wholesale Corp. v. Omega, S.A., ___ U.S. ___, 131 S.Ct. 565, 178 L.Ed.2d 470 (2010).
26. Universal Church v. Geltzer, 463 F.3d 218, 223 (2d Cir.2006).
27. Again, § 109(a), in relevant part, provides:
Notwithstanding the provisions of section 106(3) [of the Copyright Act], the owner of a particular copy ... 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....
17 U.S.C. § 109(a).
28. A simple and authoritative dictionary definition of "made" is "artificially produced by a manufacturing process." Webster's Third New International Dictionary 1356 (1976).
29. Kucana v. Holder, ___ U.S. ___, 130 S.Ct. 827, 835, 175 L.Ed.2d 694 (2010).
30. Brief for the United States as Amici Curiae in Support of Respondent, at 5, Costco Wholesale Corp. v. Omega, S.A., ___ U.S. ___, 131 S.Ct. 565, 178 L.Ed.2d 470 (2010) (No. 08-1423).
31. The Supreme Court has previously defined "under" to mean "subject to" and "governed by." Ardestani v. INS, 502 U.S. 129, 135, 112 S.Ct. 515, 116 L.Ed.2d 496 (1991) (defining the meaning of the word "under" in the Equal Access to Justice Act).
32. See Morrison v. Nat'l Austl. Bank Ltd., ___ U.S. ___, 130 S.Ct. 2869, 2877, 177 L.Ed.2d 535 (2010) ("It is a longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States." (quotation marks omitted)).
33. See, e.g., Update Art, Inc. v. Modiin Pub., Ltd., 843 F.2d 67, 73 (2d Cir.1988) ("It is well established that copyright laws generally do not have extraterritorial application.").
34. 17 U.S.C. § 104(b)(2) (emphasis added). Quality King also explained how certain provisions of Title 17 might apply to activity occurring abroad. 523 U.S. at 145 n. 14, 118 S.Ct. 1125 ("[T]he owner of goods lawfully made under the Act is entitled to the protection of the first sale doctrine in an action in a United States court even if the first sale occurred abroad. Such protection does not require the extraterritorial application of the Act any more than § 602(a)'s `acquired abroad' language does.").
35. At oral argument before the Supreme Court in Costco, the United States tried to argue that its interpretation of § 109(a) (which, again, is also Wiley's) is not perfectly interchangeable with "lawfully made in the United States," "because at least in theory, it would be possible for the creation of a copy to entail a violation of environmental laws, workplace safety laws, minimum wage laws, et cetera." Transcript of Oral Argument at 38, Costco Wholesale Corp. v. Omega, S.A., ___ U.S. ___, 131 S.Ct. 565, 178 L.Ed.2d 470 (2010) (No. 08-1423). This argument, while clever, is unpersuasive.
36. 17 U.S.C. § 1006(a)(1)(A).
37. See Digital Audio Recording Technology (DART) Factsheet on Filing Claims for Royalty Distribution, U.S. Copyright Office, http:// www.copyright.gov/carp/dartfact.html (last visited June 23, 2011).
38. Kirtsaeng would prevail if we adopted either of the latter two definitions, but these definitions, like Wiley's, are at best merely consistent with a textual reading of § 109(a). To further complicate the matter, both of these possible formulations are explicitly employed elsewhere in Title 17. See 17 U.S.C. § 401 ("Whenever a work protected under this title is published in the United States or elsewhere by authority of the copyright owner, a notice of copyright as provided by this section may be placed on publicly distributed copies from which the work can be visually perceived...." (emphasis added)); 17 U.S.C. § 602(b) ("In a case where the making of the copies and phonorecords would have constituted an infringement of copyright if this title had been applicable, their importation is prohibited." (emphasis added)). Once again, if Congress had intended § 109(a) to reflect either one of those formulations, it could have employed their language with precision.
39. See Davis v. Mich. Dep't of Treasury, 489 U.S. 803, 809, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989) ("It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.").
40. Under Kirtsaeng's definition, § 602(a)(1) would only permit U.S. copyright holders to control the importation of copies of their works into the United States when (i) the individual importing the copy of the work does not legally "own" the copy in question, or (ii) the work in question was produced in a country where United States copyright is not protected. While these remaining categories would ensure that § 602(a)(1) would not be rendered useless, copyright holders would have little control over the importation of copies of their works under Kirtsaeng's theory. Specifically, in order to exclude certain copies from entering the United States, copyright holders would be required either to (i) not sell their goods, or (ii) produce them in countries that may not honor their copyright in the first place.
41. 523 U.S. at 147, 118 S.Ct. 1125.
42. This interpretation seems to be confirmed by language later in the opinion explaining that § 602(a) has a broader scope than § 109(a) "because it encompasses copies that are not subject to the first sale doctrine — e.g., copies that are lawfully made under the law of another country[.]" Id. at 148, 118 S.Ct. 1125.
43. We do note, however, that while all the books in question were printed abroad, they all bore American copyright notices. The same was true of the watches at issue in Costco. See Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982, 983 (9th Cir.2008). One difference between the two cases is that at least two of the foreign editions at issue in the instant case contain explicit warnings invoking Title 17. For example, the back cover of Fundamentals of Heat and Mass Transfer (Sixth Edition) states: "No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act...." Joint App'x at 387. Since this book was "[p]rinted in Asia," and prohibited from ever being imported into the United States, we are admittedly somewhat puzzled as to why Title 17 is invoked. Nevertheless, to the extent Title 17 governs at all, we have no reason to conclude that every provision, including § 109(a), applies to the manufacture of works made abroad.
44. Kirtsaeng argues that this holding is undesirable as a matter of public policy because it may permit a plaintiff to vitiate the first sale doctrine by "manufactur[ing] all of its volumes overseas only to then ship them into the U.S. for domestic sales." Defendant-Appellant's Br. at 21. Phrased differently, it is argued that any such decision may allow a copyright holder to completely control the resale of its product in the United States by producing its goods abroad and then immediately importing them for initial distribution. In this sense, the copyright holder would arguably enjoy the proverbial "best of both worlds" because, in theory, the consumer could not rely on the first sale doctrine to re-sell the imported copy. In other words, the copyright holder would have an incentive to "outsource" publication to foreign locations to circumvent the availability of the first sale doctrine as a defense for consumers wishing to re-sell their copies in the domestic market. The result might be that American manufacturing would contract along with the protections of the first sale doctrine. Kirtsaeng argues that this could not possibly have been Congress's intent. We acknowledge the force of this concern, but it does not affect or alter our interpretation of the Copyright Act.
45. United States v. Amato, 540 F.3d 153, 164 (2d Cir.2008).
46. Jarvis v. Ford Motor Co., 283 F.3d 33, 57 (2d Cir.2002) (quotation marks omitted); see also Fed.R.Civ.P. 51.
47. Lavin-McEleney v. Marist Coll., 239 F.3d 476, 483 (2d Cir.2001).
48. See N.A.S. Import, Corp. v. Chenson Enters., Inc., 968 F.2d 250, 252 (2d Cir.1992) (holding that infringement is "willful" for the purpose of awarding enhanced statutory damages only if the defendant had "knowledge that [his] actions constitute[d] an infringement" or if the defendant exhibited "reckless disregard of the copyright holder's rights" (quotation marks omitted)); cf. LNC Invs., Inc. v. First Fid. Bank, N.A., 173 F.3d 454, 468 (2d Cir. 1999) (holding that the jury was properly instructed to consider the unsettled state of the law in determining whether the defendants' actions were prudent).
49. But cf., e.g., Hearst Corp. v. Stark, 639 F.Supp. 970, 980 (N.D.Cal.1986) (holding that there could be no finding of willful copyright infringement as a matter of law where the wrongfulness of the defendant's actions depended on an unsettled question of law).
50. Fed.R.Civ.P. 51(d)(2).
51. SEC v. DiBella, 587 F.3d 553, 571 (2d Cir.2009) (quotation marks omitted). Rule 403(b) provides: "Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence." Fed. R.Evid. 403(b).
52. DiBella, 587 F.3d at 571; cf. Sims v. Blot, 534 F.3d 117, 132 (2d Cir.2008) (explaining the term of art "abuse of discretion").
53. United States v. Downing, 297 F.3d 52, 59 (2d Cir.2002) (quotation marks omitted).
1. Congress also demonstrated it could differentiate based on the place a copy was "acquired," see § 602(a) (applying to copies "acquired outside the United States"), further supporting the conclusion that its omission of a phrase indicating the place of manufacture was not accidental.
2. Wiley argues its interpretation of § 109(a) would not lead to perpetual control over imported works because once the U.S. copyright owner imports its copies into the United States, they are lawfully within the United States and, as § 602 applies only to "importations without the authority of the copyright owner," any further sales would not be covered. Appellee's Br. at 24-25. This argument is not persuasive because the copyright holder seeking to prevent its copies from entering the United States retains exclusive control no matter how many foreign sales may have been made. Wiley's rule allows it to protect the disparity in its pricing structure despite free market forces. Indeed such a rule, by differentiating based on place of manufacture, would encourage the manufacturing of copies abroad to the detriment of American workers.
3. The Amici argue, based on the discussion at oral argument of Quality King, the Court was actually discussing the situation where the copy is made — presumably abroad, but could be domestically — by someone other than the U.S. copyright holder, for example, a British copyright holder who manufactures under British law. Entm't Merch. Assoc. Amici Br. at 10-12.
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