Tag Archives: copyright litigation

U.S. Supreme Court Interprets the “First Sale” Doctrine

Supreme Court

By: Joe Carnicella, intellectual property attorney with Picadio Sneath Miller & Norton, P.C.

On March 19, 2013, in Kirtsaeng v. Wiley & Sons, Inc., No. 11-697, the U.S. Supreme Court held that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad.  Specifically, a buyer or other lawful owner of a copy (of a copyrighted work) lawfully manufactured abroad is protected under the “first sale” doctrine and such buyer may bring that copy into the United States (and sell it or give it away) without obtaining permission to do so from the copyright owner.

Section 106 of the Copyright Act grants the owner of copyright exclusive rights including the right to distribute copies of the copyrighted work to the public by sale or other transfer of ownership.  One limitation on these exclusive rights falls under Section 109(a) of the Copyright Act (commonly referred to as the “first sale” doctrine), which provides that the owner of a particular copy lawfully made under this title is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.  Thus, once a copy has been lawfully sold or its ownership otherwise lawfully transferred, the buyer of that copy and subsequent owners are free to dispose of the copy as they wish.  Section 602(a)(1) further provides that importation into the United States, without the authority of the owner of copyright under this title, of copies of a work that have been acquired outside the United States is an infringement of the exclusive rights to distribute copies under Section 106.

Wiley & Sons publishes academic books and assigns rights to publish, print and sell the English language textbooks abroad to its wholly owned foreign subsidiary.  Supap Kirtsaeng, while studying in the United States, asked his friends and family to purchase copies of foreign edition English-language textbooks at Thai book shops, which sold the books at low prices, and to mail the books to him in the United States, wherein he used the books, sold them, reimbursed his family and friends and kept the profit.

In 2008, Wiley initiated a lawsuit against Kirtsaeng for copyright infringement on the grounds that Kirtsaeng’s unauthorized importation of its books and his later resale of those books amounted to an infringement of Wiley’s Section 106(3) exclusive right to distribute as well as the Section 602 related import prohibition.  Kirtsaeng defended against the claim on the ground that the books he had acquired were “lawfully made” and that he had acquired them legitimately.  His position was that the “first sale” doctrine under Section 109(a) permitted him to resell or otherwise dispose of the books without the copyright owner’s further permission.  The District Court ruled that the “first sale” defense was not available to Kirtsaeng because the doctrine does not apply to “foreign-manufactured goods.”  The Second Circuit agreed with the District Court.

The Court analyzed the language within these statutes, and in particular the phrase “lawfully made under this title.”  Wiley argued that the phrase imposes a form of geographical limitation and that the “first sale” doctrine does not apply to copies of American copyrighted works manufactured abroad.  Kirtsaeng argued that the phrase imposes a non-geographical limitation, and in particular, that the intention was for the phrase to mean “made in accordance with” or “in compliance with the Copyright Act.”  In this case, Kirtsaeng asserted that the “first sale” doctrine would apply to copyrighted works as long as their manufacture met the requirements of American copyright law, e.g. copies manufactured abroad with the permission of the copyright owner.  The Court considered the language of Section 109(a), its context and the common-law history of the “first sale” doctrine and concluded that Section 109(a) favors a non-geographical interpretation.  The U.S. Supreme Court determined that, while Section 602(a)(1) makes clear that importing a copy without permission violates the owner’s exclusive distribution right, it also refers explicitly to Section 106(3), which is by its terms is subject to various limitations including the “first sale” limitation under Section 109(a).

A complete copy of the Court’s Opinion can be found on the United States Supreme Court’s website.

Court Threatens to Sanction Copyright Troll Righthaven LLC

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

Yesterday, Chief Judge Roger Hunt of the United States District Court for the District of Nevada issued a stern ruling threatening sanctions against Righthaven LLC in one of the numerous copyright infringement lawsuits brought by Righthaven in Nevada (Righthaven LLC v. Democratic Underground, LLC, No. 2:10-cv-01356-RLH-GWF). In dismissing the case, the Court found that Righthaven misrepresented its rights in the underlying copyrighted works and did not have standing to sue for infringement. The Court further ordered Righthaven to show cause why it should not be sanctioned for failing to disclose another party’s (Stephens Media LLC) pecuniary interest in this and hundreds of other cases filed in Nevada.

Who Is Righthaven LLC?

Righthaven is a Nevada company that acquired limited rights from a variety of copyright holders, including Stevens Media LLC and News Media Group, to file hundreds of lawsuits against individuals and entities that allegedly infringe copyrights by posting excerpts of articles from newspapers such as the Las Vegas Review-Journal and the Denver Post. Righthaven has filed suit in a variety of jurisdictions throughout the United States, including Nevada, Colorado, and South Carolina.

Righthaven does not create or publish the works it is suing on. Instead, it acts as an enforcement arm of the original copyright holders that it has a relationship with. It scours the web looking for individuals, typically bloggers, that have reposted all or portions of articles appearing in newspapers such as the Las Vegas Review-Journal or Denver Post. It then files suit, threatening substantial sanctions, including damages up to $150,000 and forfeiture of web site domain names. Righthaven has sued everyone from political candidates to charities, individuals, bloggers, and companies—even those that a newspaper featured in the very article that was copied.

Because Righthaven does not create or publish the content that it is suing on, Righthaven is often referred to as a “copyright troll,” in an apparent tip to how many people refer certain types of non-practicing entities in the patent infringement arena.

Righthaven Lacks Standing to Sue

With respect to copyrights from Stevens Media, Righthaven entered into a Strategic Alliance Agreement (“SAA”) in 2010 that was made public for the first time this year as a result of discovery in one of the lawsuits. The agreement purported to assign all rights to the copyrighted materials to Righthaven. In fact left all of the rights with Stephens Media except for the bare right to sue. For example, Stephens Media expressly retained the rights to license, receive royalties, and exploit the copyrighted works. In addition, Stephens Media receives 50% of any of the litigation proceeds (minus costs) that Righthaven receives for lawsuits involving Stephens Media’s copyrights.

The Copyright Act only allows the legal or beneficial owner of an exclusive right to the copyrighted work to sue for infringement, and a copyright holder cannot (under Ninth Circuit law) assign the bare right to sue to another. In the Court’s decision yesterday, it found that the SAA gave Righthaven only a bare right to sue, so it was ineffective and Righthaven lacked standing—“ The plain and simple effect of this section was to prevent Righthaven from obtaining, having, or otherwise exercising any right other than the mere right to sue as Stephens Media retained all other rights.”

Righthaven Faces Sanctions

The Court was very troubled by Righthaven’s actions during this and other lawsuits brought in federal court in Nevada. In particular, the Court called some of Righthaven’s arguments and statements “disingenuous,” “inaccurate,” and “dishonest.” Most troubling to the Court was Righthaven’s failure to disclose that Stephens Media had a pecuniary interest in the litigation, despite Local Rule 7.1-1’s explicit requirement that all parties disclose anyone that has a direct, pecuniary interest in the outcome of the case. The Court believed that Righthaven also failed to disclose this information in approximately 200 other cases it filed in Nevada. Therefore, the Court ordered Righthaven to show cause within two weeks “why it should not be sanctioned for this flagrant misrepresentation to the Court.”

Is Righthaven Finished?

The Court’s decision yesterday is a stinging rebuke to Righthaven and its tactics. It will be interesting to see if it can survive this ruling and the likely challenges by defendants in the hundreds of other cases around the country. What may have appeared to be an easy way to make money off of these copyrights could end up costing Righthaven significant amounts of money in sanctions and attorneys’ fees.

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