At today’s House Judiciary Subcommittee on Courts, Intellectual Property
and the Internet field hearing on “The First Sale Doctrine Under Title
17,” Members of Congress heard that publishers’ “ability to operate
effectively in the global marketplace depends heavily on the protection
provided by copyright law in the US and foreign markets.”
Stephen Smith, President and CEO of Wiley, testified on behalf of the
company. Founded more than 200 years ago, Wiley is one of the world’s
leading publishers of educational, research and scholarly content, with
5500 employees and sales in 211 countries and territories worldwide. In
2008, Wiley filed suit against Supap Kirtsaeng for massive illegal
domestic importation of textbooks produced in and for foreign markets.
Wiley was successful in both the federal district court and court of
appeals in New York but the Supreme Court issued a split ruling on the
appeal in 2013.
“The copyright system plays a significant role in fostering investment
in the development of new content, underpinning innovation and economic
growth,” said Mr. Smith.
In his testimony, Mr. Smith urged Congress to return the US copyright
system to its state prior to the Supreme Court’s interpretation of the
importation prohibition by clarifying longstanding Congressional intent
through an amendment to Section 602(a)(1) of the Copyright Act. He cited
the concurring opinion of Supreme Court Justices Kagan and Alito as the
basis for his recommendation and noted that such an amendment should
impose liability only on unauthorized importers and not on institutions
such as libraries and museums that acquire copies manufactured outside
the US, which would be consistent with existing statutory exceptions
ignored by the Court majority.
He also recommended that Congress reject any proposal to extend the
first sale doctrine to the transmission of digital copies, in order to
guard against adversely impacting thriving new digital markets and
business models and inhibiting the development of new ways to
disseminate digital content to users.
Among his key points:
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Before Kirtsaeng, the Act’s first sale doctrine avoided interference
with copyright owners’ importation rights and ensured that the content
creation supply chain could operate efficiently in world markets. It
did so because it stood for “national” exhaustion of the distribution
right in transactions that transfer ownership of lawfully-made
physical copies of works, rather than “international” exhaustion of
that right as the provision has now been interpreted by the Supreme
Court.
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The Act’s prohibitions on unauthorized importation allow content
owners to manage their rights by allocating them to different markets;
economic interests are endangered if they cannot be exercised
territorially.
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Market segmentation benefits US and international consumers and the
entire content creation value chain:
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Consumers overseas can purchase copies of copyrighted works priced
reasonably for their markets
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The US seller gains effective access to markets which would
otherwise not sustain an unsuitably higher price point
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Prices for US consumers are kept down when US copyright holders
can recoup their investments and extend production costs across a
broader number of transactions
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The Supreme Court Kirtsaeng ruling destroyed copyright owners’
importation rights, was inconsistent with Congressional intent and
longstanding US trade policy and has created new barriers to
participation in developing world markets for authors, publishers,
sellers and customers. Negative impact has already been seen through
an increase in piracy as well as higher costs and, consequently,
pricing.
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“Importation” is not synonymous with “distribution” but is, instead, a
critical aspect of US international trade law. The first sale doctrine
does not provide a defense to the unauthorized importation of works
acquired outside the US.
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Extending first sale to digitally-transmitted copies would ignore
market trends, consumer preferences and critical differences between
physical and digital formats. Digital first sale would also halt
development of new businesses that use licensing to offer multiple
ways and price points for accessing and using creative content.
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Existing license-based business models such as CourseSmart, launched
by publishers to reduce cost and increase portability and access to
digital course materials, would be significantly undermined, if not
impossible to sustain, under an ownership-based model subject to a
digital first sale doctrine.
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Claims that technology could ensure copyright protection in digital
first sale ignore innumerable difficulties in developing and policing
such services and raise privacy concerns.
A Link to Mr. Smith's testimony is below.
Related Links
Mr.
Smith's testimony
