Kagan could sway Supreme Court decision on copyright case

All eyes will be on Justice Elena Kagan on Monday, when the Supreme Court considers a copyright case that some fear could prevent people from reselling goods that they own such as iPhones, DVDs or, as in this case, books that have been purchased abroad.

In a case that tests the boundaries of copyright law, some merchants and consumers say they have the right to resell what they own while the creators of the original content argue they should be protected from shady dealers.

The case revolves around Thailand native Supap Kirtsaeng, who moved to the U.S. for college and found that it was cheaper to buy textbooks back home than here. He also made a business out of it, having his family buy the less expensive Asian textbooks and ship them to the U.S. for him to sell on eBay.

He sold about $1.2 million worth of books by undercutting the publisher’s prices for the more-expensive U.S. editions. The Supreme Court is reviewing the case after a lower court ordered him to pay John Wiley & Sons $600,000 by ruling that the “first-sale doctrine,” a rule in copyright law that lets the owner of any particular product resell it, didn’t apply to products made overseas.

The Supreme Court heard a near-identical case two years ago, but Justice Kagan had to recuse herself and that case deadlocked 4-4. No such conflicts appear in Kirtsaeng v. John Wiley & Sons.

“Most likely her vote will be the one that is on the winning side,” said Ronald Mann, professor of law at Columbia Law School. “We’ll know more after the arguments. The justices will ask questions, and often the questions will give you insight into what they think about it.”

Both sides will also be watching the other justices “to see if they are consistent with the past,” he said.

Depending on the outcome, the impact could be huge for online retailers such as eBay and Craigslist, thrift shops like Goodwill and Salvation Army, or ordinary people who want to hold a garage sale.

Overstock.com, an online discount retailer, has joined the Owners’ Rights Initiative in supporting the first-sale doctrine as applying to goods bought overseas. Company president Jonathan Johnson said in an interview it’s not fair to make stores figure out which products can be resold and which products need manufacturers’ permission, and possibly fees, to be resold.

“They will make retailers be the policemen for manufacturers,” Mr. Johnson said. “Of course, we’ll have to police it, unless we’re willing to spend our life mired in litigation. Manufacturers should be policing their own sales.”

It could also lead to higher prices for consumers, because the manufacturers would face less competition from the secondary market.

“The real loser is the American consumer,” Mr. Johnson said. He gave the scenario of a luxury watch that is sold at retail price in the U.S. for $300. “We can go buy that same watch in Southeast Asia for $100, bring it back to the customers here and we won’t sell it for $300, we’ll sell it for a lot less.”

But manufacturers complain that resellers are taking advantage of them and say there should be a foreign exception to the “first-sale” doctrine. Particularly in the book, electronics and movie industries, content creators say scammers will buy their products from poorer countries where their goods have to be cheaper because they can’t be sold at the prices they can fetch in the U.S., Europe or similarly wealthy nations.

The Motion Picture Association of America and the Recording Industry Association of America filed a joint brief with the Supreme Court in favor of a foreign exception to the “first-sale” doctrine.

“Copyright protection is essential to the health of the motion picture and music industries and the U.S. economy as a whole,” they wrote. “Like the sale of ’pirated’ copies, unauthorized importation of copies of protected works made overseas and intended only for sale in a foreign market can undercut or eliminate the economic benefit that Congress intended to provide under the Copyright Act.”