High court hears closely watched copyright case

WASHINGTON — Supreme Court justices on Monday weighed copyright protections for publishers, creative artists and manufacturers in a global marketplace in a case that has attracted the interest of Costco, eBay and Google. The outcome has important implications for consumers and multibillion dollar annual sales online and in discount stores.

The court was about the only Washington institution open on Monday. The justices and spectators who braved the rain and wind saw a book publisher face off against a Thai graduate student in the U.S. who resold the publisher’s copyrighted books on eBay after relatives first bought nearly identical, cheaper versions abroad.

The court seemed to struggle with whether it matters where the books were produced and first sold.

The justices’ answer to those questions is of enormous interest to discount sellers like Costco and online business like eBay and Google that offer good prices on many products that were made abroad.

Publisher John Wiley & Sons won a copyright infringement lawsuit against the student, Supap Kirtsaeng. The high court is considering Kirtsaeng’s appeal, which argues that Wiley lost its right to control resale of the books once his relatives bought them legally.

Kirtsaeng used eBay to sell $900,000 worth of books published abroad by Wiley and others and made about $100,000 in profit. The international editions of the textbooks were essentially the same as the more costly American editions. A jury in New York awarded Wiley $600,000 after deciding Kirtsaeng sold copies of eight Wiley textbooks without permission.

The issue at the Supreme Court concerns what protection the holder of a copyright has after a product made outside the United States is sold for the first time. In this case, the issue is whether U.S. copyright protection applies to items that are made abroad, purchased abroad and then resold in the U.S. without the permission of the manufacturer. The high court split 4-4 when it tried to answer that question in a case in 2010 involving Costco and Swiss watch maker Omega.

Justice Elena Kagan sat out the Costco case, but is taking part in the new dispute. She signed the government’s legal brief in the Costco case that took Omega’s side. The government is backing the publisher against Kirtsaeng, but it advocates something of a compromise in laying down a rule for other disputes.

The court already has rejected copyright claims over U.S.-made items that were sold abroad and then brought back to the United States for resale.

The justices did not appear entirely comfortable with either side’s arguments, or the government’s middle ground.

E. Joshua Rosenkranz, Kirtsaeng’s lawyer, ran into skepticism from Justice Ruth Bader Ginsburg when he suggested that a ruling for Wiley would allow publishers and other copyright holders control over repeated resale of their products if only they made them abroad.

“So a U.S. manufacturer who wants to sell into the U.S. market has this incentive to go and send jobs overseas. It’s an irresistible incentive if this court says the law is what Wiley says,” Rosenkranz said.

Ginsburg replied, “Has that ever happened?”

Rosenkranz said he is sure it has, but could not come up with any specifics.

On other hand, Theodore Olson, representing Wiley, struggled to satisfy justices who wondered whether Rosenkranz might be right.

Justice Stephen Breyer asked Olson whether, without seeking permission, people could resell their foreign cars, libraries could sell or lend books bought from foreign publishers or museums could display paintings by Pablo Picasso. “Those are some of the horribles that they sketch. And if I am looking for the bear in the mouse hole, I look at those horribles, and there I see that bear. So I’m asking you to spend some time telling me why I’m wrong.”

Olson did not allay Breyer’s concerns with his answer. “I would say that when we talk about all the horribles that might apply in cases other than this, museums, used Toyotas, books and luggage, and that sort of thing, we’re not talking about this case.”

When Rosenkranz returned to the podium to conclude the argument, he said, “To Justice Breyer’s question, the bear is there. It is very much there.”

The current case has attracted so much attention because it could affect many goods sold online and in discount stores. The resale of merchandise that originates overseas often is called the gray market, and it has an annual value in the tens of billions of dollars.

Consumers benefit from this market because manufacturers commonly price items more cheaply abroad than in the United States.

The federal appeals court in New York sided with Wiley in this case.

EBay and Google say in court papers that the appellate ruling “threatens the increasingly important e-commerce sector of the economy.” Art museums fear that the ruling, if allowed to stand, would jeopardize their ability to exhibit art created outside the United States.

Conversely, the producers of copyrighted movies, music and other goods say that their businesses will be undercut by unauthorized sales if the court blesses Kirtsaeng’s actions.

A decision is expected by June.

The case is Kirtsaeng v. John Wiley & Sons, 11-697.