Copyright

US Supreme Court Supports Parallel Imports: Lessons for India


In a path-breaking development, the US Supreme Court endorsed the concept of international exhaustion and supported the parallel imports of copyrighted works. 

This decision is of significant relevance to India, as a government committee headed by Prof Chadha of the NCAER is now considering whether or not to import international exhaustion principles into Indian copyright law.  
  

Hopefully a ruling from the US, often seen as a very pro IP country should tilt the balance in favour of international exhaustion for India, a developing country and caution it away from restricting trade and granting more protection in favour of rights owners. 
Of course, many argue that even without an explicit legislative amendment, the current text of Indian copyright law is sufficient to read in “international” exhaustion. And perhaps the US Supreme Court ruling below may help support such a reading of the Indian copyright act too which stipulates that copyright owners cannot control “copies already in circulation.” Particularly since we share a common law history and the courts’ ruling appears to rely on common law history of the first sale doctrine.
Copyright owners will no doubt argue that this copy must first circulate within India. Others may, in line with the US Supreme Court ruling below, argue that there is no “geographical” restriction on the first circulation. Although some decisions have touched on exhaustion, our courts are yet to deliver a clear ruling on this count. 
Here are some of the extracts from the US Supreme Courts’ ruling:

The Facts:

Respondent, John Wiley & Sons, Inc., an academic textbook publisher, often assigns to its wholly owned foreign subsidiary (Wiley Asia) rights to publish, print, and sell foreign editions of Wiley’s English language textbooks abroad. Wiley Asia’s books state that they are not to be taken (without permission) into the United States. When petitioner Kirtsaeng moved from Thailand to the United States to study mathematics, he asked friends and family to buy foreign edition English-language textbooks in Thai book shops, where they sold at low prices, and to mail them to him in the United States.

He then sold the books, reimbursed his family and friends, and kept the profit. Wiley filed suit, claiming that Kirtsaeng’s unauthorized importation and resale of its books was an infringement of Wiley’s exclusive right to distribute and §602’s import prohibition. Kirtsaeng replied that because his books were “lawfully made” and acquired legitimately, §109(a)’s “first sale” doctrine permitted importation and resale without Wiley’s further permission.

The District Court held that Kirtsaeng could not assert this defense because the doctrine does not apply to goods manufactured abroad. The Second Circuit affirmed, concluding that §109(a)’s “lawfully made under this title” language indicated that the “first sale” doctrine does not apply to copies of American copyrighted works manufactured abroad.

Held: 

The “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad.In our view, §109(a)’s language, its context, and the common-law history of the “first sale” doctrine, taken together, favor a non-geographical interpretation. We also doubt that Congress would have intended to create the practical copyright-related harms with which a geographical interpretation would threaten ordinary scholarly,artistic, commercial, and consumer activities. We consequently conclude that Kirtsaeng’s non geographical reading is the better reading of the Act.

Common Law Heritage: 

The “first sale” doctrine is a common-law doctrine with an impeccable historic pedigree. In the early 17th century, Lord Coke explained the common law’s refusal to permit restraints on the alienation of chattels……

“If a man be possessed of a horse, or of any other chattell…and give or sell his whole interest . . .therein upon condition that the Vendee shall not alienate the same, the condition is void, because his whole interest . . . is out of him, so as he hath no possibility of a Reverter, and it is against Trade and Traffic…”

A law that permits a copyright holder to control the resale or other disposition of a chattel once sold is similarly “against Trade and Traffic”.

With these last few words, Coke emphasizes the importance of leaving buyers of goods free to compete with each other when reselling or otherwise disposing of those goods.  American law too has generally thought that competition, including freedom to resell, can work to the advantage of the consumer.

The “first sale” doctrine also frees courts from the administrative burden of trying to enforce restrictions upon difficult-to-trace, readily movable goods. And it avoids the selective enforcement inherent in any such effort. Thus, it is not surprising that for at least a century the “first sale”doctrine has played an important role in American copyright law. The common-law doctrine makes no geographical distinctions…
Policy Arguments:

Associations of libraries, used-book dealers, technology companies, consumer-goods retailers, and museums point to various ways in which a geographical interpretation would fail to further basic constitutional copyright objectives, in particular “promot[ing] the Progress of Science and useful Arts.” 

The American Library Association tells us that library collections contain at least 200 million books published abroad (presumably, many were first published in one of the nearly 180 copyright-treaty nations and enjoy American copyright protection… that many others were first published in the United States but printed abroad because of lower costs; and that a geographical interpretation will likely require the libraries to obtain permission (or at least create significant uncertainty) before circulating or otherwise distributing these books. 

How, the American Library Association asks, are the libraries to obtain permission to distribute these millions of books? How can they find, say, the copyright owner of a foreign book, perhaps written decades ago?

Used-book dealers tell us that, from the time when Benjamin Franklin and Thomas Jefferson built commercial and personal libraries of foreign books, American readers have bought used books published and printed abroad. The dealers say that they have “operat[ed] . . . for centuries” under the assumption that the “first sale” doctrine applies.

Technology companies tell us that “automobiles, microwaves, calculators, mobile phones, tablets, and personal computers” contain copyrightable software programs or packaging.  Many of these items are made abroad with the American copyright holder’s permission and then sold and imported (with that permission) to the United States. 

A geographical interpretation would prevent the resale of, say, a car, without the permission of the holder of each copyright on each piece of copyrighted automobile software. Yet there is no reason to believe that foreign auto manufacturers regularly obtain this kind of permission from their software component suppliers, and Wiley did not indicate to the contrary when asked. Without that permission a foreign car owner could not sell his or her used car.

These examples, and others previously mentioned, help explain why Lord Coke considered the “first sale” doctrine necessary to protect “Trade and Traffi[c], and bargaining and contracting,” and they help explain why American copyright law has long applied that doctrine. Neither Wiley nor any of its many amici deny that a geographical interpretation could bring about these “horribles”—at least in principle

And this is my favourite part:

…Wiley claim(s) that a non-geographical interpretation will make it difficult, perhaps impossible, for publishers (and other copyright holders) to divide foreign and domestic markets. We concede that is so. A publisher may find it more difficult to charge different prices for the same book in different geographic markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights.

Patent Law and Exhaustion:
International exhaustion is also being argued at the US Supreme Court in a patent matter, Monsanto vs Bowman. However the tenor of the questions raised by judges appear to indicate that this is likely to go in favour of the patent owner Monsanto. We’ll keep you posted. 

Role of Amicus Briefs:

What is particularly striking about this case (and many others in the US) is the courts’ reliance on amicus curiae briefs filed by a wide variety of experts and associations; library associations, used book groups, technology companies, academics etc. We need to encourage this culture in India, so that courts are exposed to a wide variety of arguments and not necessarily restricted to only those advanced by contesting parties. While there is no right to submit an amicus curiae brief in India, one could take a shot through an intervention petition, as I did in the Novartis case. Hopefully, with more interventions in future, we might effectuate a de-facto amicus curiae culture in India. 

Shamnad Basheer

Shamnad Basheer

Prof (Dr) Shamnad Basheer founded SpicyIP in 2005. He is currently the Honorary Research Chair of IP Law at Nirma University and a visiting professor of law at the National Law School (NLS), Bangalore. He is also the Founder of IDIA, a project to train underprivileged students for admissions to the leading law schools. He served for two years as an expert on the IP global advisory council (GAC) of the World Economic Forum (WEF). In 2015, he received the Infosys Prize in Humanities in 2015 for his work on legal education and on democratising the discourse around intellectual property law and policy. The jury was headed by Nobel laureate, Prof Amartya Sen. Professional History: After graduating from the NLS, Bangalore Professor Basheer joinedAnand and Anand, one of India’s leading IP firms. He went on to head their telecommunication and technology practice and was rated by the IFLR as a leading technology lawyer. He left for the University of Oxford to pursue post-graduate studies, completing the BCL, MPhil and DPhil as a Wellcome Trust scholar. His first academic appointment was at the George Washington University Law School, where he served as the Frank H Marks Visiting Associate Professor of IP Law. He then relocated to India in 2008 to take up the MHRD Chaired Professorship in IP Law at WB NUJS, a leading Indian law school. Prof Basheer has published widely and his articles have won awards, including those instituted by ATRIP and the Stanford Technology Law Review. He is consulted widely by the government, industry, international organisations and civil society on a variety of IP issues. He also serves on several government committees.

One comment.

  1. AvatarMr_Lawwyer

    De facto Amicus Curiae brief! That makes absolute sense but intervention petition needs to be ‘YES’ executed. Parallel imports may be somewhat detrimental to copyright infringement that comes along with the copyrighted works also being contained in the questioned e-waste gizmos. It seems in name of favoring the consumer we as a country have brought a lot of things under the exhaustion umbrella.

    Reply

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