Tuesday, December 14, 2010
Sell a watch... Go to Jail...
For example, ever buy a CD from someone? Sell a CD or book or watch? Check out a library book? Give a book to a friend.
If so you had better be prepared to become a criminal. That's right - these actions could now become crimes - at least if you don't pay a royalty to the original foreign artist or get that foreign artist or authors permission.
Until today in the United States there has always been the concept of the "first sale" doctrine under copyright law. Since things like CD's and books are virtually always copyrighted this doctrine applies.
What it means is that if I, as a copyright holder, create an original work, say a book, and sell that book to you that you, as the purchaser, have the right to later sell my original work to someone else so long as no copies are made in the process. Basically my rights as the copyright holder only extend to the first sale as far as an ownership interest in the work. I am still the copyright holder in the sense that you or the person that purchases the book from you is not entitled to make copies of that work.
Under this doctrine the local library can purchase a best seller and legally lend it out to various people without violating the copyright of the book.
We take these rights for granted - but in fact the law surrounding them is not settled.
Yesterday the US Supreme court chose not to hear the following case:
Costco, a large west coast retailer, purchased and sold a number of Swiss Omega Seamaster watches. Omega has a series of distributors in the US and Omega and requires these distributors to sell the watches for a certain minimum amount of money - in this case about $2,000 USD. Costco did not purchase the watches it sold directly from Omega's US distributors but instead purchased them on the "gray market" in Europe.
The Costco purchases in Europe were perfectly legal but bypassed the US Omega sales channels.
Omega, on the other hand, knew that this sort of "gray market sale" often happens so it imprinted its copyrighted logo on the back of the Seamaster watches and obtained a US copyright their design. When Costco sold the watches in its US stores Omega sued Costco for copyright infringement (reselling Omega's copyrighted design of the watch).
Costco claimed as its defense the "first sale" doctrine of Copyright law- effectively saying that once it purchased the watches it was entitled to resell them just as you or I might buy a book and later sell it on ebay. The "first sale" doctrine in the US says that once you purchase a copywritten work you can freely resell it so long as you do not make copies of it. Thus most copyright things we, as consumers buy, may be resold by us legally to others, e.g., a book or CD.
The Costco/Omega case was just recently decided by the Supreme court, er, well, rather, not decided.
The 9th District Court ruled that the "first sale" Copyright doctrine does not apply to things that are produced or manufactured outside the US. So in this case Costco lost to Omega because the watches where manufactured by Omega outside the US.
Costco appealed the case to the US Supreme court. Justice Kagan was unable to participate having involvement with the case as solicitor general in the Obama administration and recused herself from the case. Her recusal left the court with a 4-4 decision between the remaining justices.
The 9th District Court decision therefore was upheld (the 4-4 decision being the same as if the US Supreme court never took the case to begin with) and Omega is the winner, at least for now.
The decision is only effective in the 9th District Court without a Supreme court decision. (Should another case like this arise the Supreme court may take it to remove ambiguity from the Copyright law and make a country-wide binding opinion.)
So where does this leave you and I?
Well, for one thing if you purchased a CD or book (or computer or car or iPad or anything else) made in a foreign country you may be in violation of copyright law if you sell it. That's right, you could be sued by the manufacturer or forced to pay royalties.
(The "first sale" doctrine does not apply in, for example, Europe where an artist can be entitled to royalties from each successive sale of his or her work of art.)
Now there is a strong case for things to be decided both ways here. For example, Costco was able to evade the legal copyright of Omega's watch design by purchasing them through other means and reselling the watches here in direct violation of that copyright. Similarly, if a European artist is entitled to royalties in Europe no one thinks its legal to bring the work to the US and resell it here to evade paying those royalties.
On the other hand, its probably not practical for you or I to have to research who made the book or CD we are reselling in order to pay royalties. Just imagine if this were the case - there would be paperwork to complete for any person-to-person sale. Ebay would probably not be able to exist. Libraries could not function.
The 9th District Court deemed the "first sale" doctrine to apply only to works "“lawfully made under this title” in Section 109(a) of the Copyright act - which means made in the US. What about books printed in China but written in the US? Many items are the products of US companies but manufactured outside the US.
So what is the solution?
Sadly, I do not believe there is a good one and this ruling may stand.
The US has many copyright treaties with other nations (see this PDF) which is must uphold. I would imagine that these treaties require that the US respect the copyright laws of, say, European artists, if Europe would be expected to uphold our copyright laws.
I suspect that those that can see a practical way to profit from this will. For example, I don't see Toyota or Kia going after people who sell their cars - too much bad press. But others may - say people or companies in Europe who own certain copyrights on painting and images.
Posted by John Gault at 7:51 AM