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Copyright case could threaten eBay and garage sales

The U.S. Supreme Court, in a case to be argued Monday, wades into a controversy over federal copyright law that could determine the legal rights of American consumers to sell thousands of used products on eBay and at garage sales and flea markets.

Stelios Varias / Reuters file photo

The legal battle involves Supap Kirtsaeng, a student from Thailand who was surprised by the high cost of academic textbooks when he arrived in the U.S. to attend college.  He asked his parents to search bookstores back home and send him much cheaper versions -- published overseas and sold at a fraction of the price -- of the same texts. 

He was soon running what amounted to a small business out of his apartment, helping to pay his way through school by selling textbooks on eBay. The exact amount of his profit is unclear, but court records say it was around $100,000. 

The textbooks his family shipped him each bore this warning: "Exportation from or importation of this book to another region without the publisher's authorization is illegal," but Kirtsaeng wasn't bothered.  He concluded -- based on a search of articles on the Internet -- that he was in no legal jeopardy.  

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The publisher of some of the books he sold, John Wiley & Sons, didn't see it that way. It sued him in federal court, and a New York jury ordered him in 2009 to pay $600,000 in damages.  When he said he had nowhere near that kind of money, he had to hand over personal property, including his computer, printer and golf clubs. A federal appeals court last year upheld the verdict. 

Kirtsaeng was caught between two federal laws, and he's now asking the U.S. Supreme Court to see it his way.

One longstanding provision says when the holder of a copyright offers a work for sale, its legal interest in that specific copy evaporates as the item is sold. It's called the first-sale doctrine, and it means that if you buy the latest John Grisham novel, you can sell it on a website or give it away to the church library without violating copyright laws. 

But another law prohibits importing works "acquired outside the United States ... without the authority of the owner of copyright."  Applying that statue, the federal courts ruled against Kirtsaeng, reasoning that "the first-sale doctrine does not apply to copies manufactured outside of the United States."           

A who's who of companies and groups involved in selling used merchandise is urging the Supreme Court to overturn the publisher's victory. 

EBay warns that leaving the ruling intact would be a blow to "trade, consumers, secondary markets, e-commerce, small businesses, and jobs."  Goodwill Industries says the ruling would have "a catastrophic effect on the viability of the secondary market and, consequently, on Goodwill's ability to provide needed community-based services." 

"There are enough copyright owners out there -- and enough crazy copyright lawsuits," says a group of book store operators in a friend of court brief. "No one should be put to the choice of violating the law and hoping they don't get caught, and losing their business." 

The effect of a victory for the publisher, according to some experts in copyright law, would extend far beyond the market for books and other published materials.  It could also affect sales of thousands of used consumer electronic products made outside the U.S. that contain copyrighted software, perhaps even used cars. 

Kirtsaeng's lawyer makes the same expansive claim in his Supreme Court brief.  "Even cherished American traditions, such as flea markets, garage sales, and swapping dog-eared books are vulnerable to copyright challenge" under the appeals court ruling, argues Josh Rosenkranz of New York.

But could that really be the outcome? 

"It doesn't mean you'd have industry enforcers attending yard sales. You'd just be converting a bunch of people into law breakers," says Prof. Rebecca Tushnet, an expert on copyright law at Georgetown Law Center in Washington. 

Most likely, she says, music and book publishers would be visiting stores and Internet sites that sell used materials. "Anything more organized, like eBay sales or craigslist could be disrupted," she says.  "And I do think it's a very serious threat. They are very clearly willing to do this." 

Not so, argues Washington, D.C. lawyer Ted Olson, representing the publisher that sued Kirtsaeng. If such predictions were right, he says, "those consequences should already have occurred in response to 30 years of judicial decisions and commentary." 

However the court decides the case, it will undoubtedly affect a category known as graymarket sales, in which middlemen legally buy products overseas, then make them available for sale by retailers in the U.S. who can offer the products for lower prices.  

Swiss watch maker Omega and discount retailer Costco have been battling in court for years over this issue. Omega claimed Costco was improperly selling its watches acquired overseas through just such a graymarket mechanism. 

Omega says its authorized US dealers charge prices "that are higher than the prices charged in other, less developed and less competitive markets."  It argues that any erosion of copyright protection for overseas sales would limit a manufacturer's ability to tailor prices to global markets. 

But discount retailer Costco is siding with Supap Kirtsaeng, saying it "often sells copyrighted products that, although genuine, were not purchased directly from the copyright owner."