A Few (Not Fifty!) Shades of Grey

The Supreme Court will be taking another crack at solving the grey market conundrum in a copyright infringement case that started here in California.
In 2010, the Supreme Court granted certiorari in Costco v. Omega, a Ninth Circuit case in which the maker of Omega watches sued Costco for legally buying Omega watches overseas at a far lower price, then importing them to sell to Costco customers in the US. The Supreme Court deadlocked at 4-4 — Justice Kagan had recused herself because she had worked on the matter while she was the federal government’s Solicitor General. While that upheld the Ninth Circuit’s ruling in favor of Omega, it did not do anything to dispel the many shades of grey involved in this grey market question.
In Kirtsaeng v. John Wiley and Sons, John Wiley & Sons published textbooks overseas that were sold in Thailand at a fraction of the cost found here in the United States — but seemed to be identical to those published and sold here in the US. Mr. Kirtsaeng was a graduate student at USC. In 2007 and 2008, he had his family buy the textbooks in Thailand (and printed outside the US) and sent them to him to sell here in the United States on eBay and similar sites. The publisher then sued him in New York, and won a judgment of $75,000.
The Second Circuit affirmed the judgment, finding that section 602 of the Copyright Act, forbidding the importation of copyrighted works, takes priority over section 109, which allows the buyer of a copyrighted work to dispose of the work without interference from the copyright owner. This is called the “First Sale” Doctrine, and allows you to resell videos, books, and the like without needing the permission of the copyright owner.
Mr. Kirtsaeng’s will likely turn on whether he could argue the First Sale Doctrine in an era when some items are made in the United States, while identical copies are made overseas. When is an article “made” under American copyright law — when it is prepared in the United States, or when it is printed in a foreign country? Under current law, the US copy could be resold after being bought overseas, and the foreign copy (because it had not been subject to American jurisdiction before) could not. In an era when producing and moving goods between countries is growing ever cheaper, the production location distinction is quickly losing its validity — at the cost of American consumers and workers. We’ll see if this grey market issue will turn Justice Kagen’s hair grey.