The Issues Behind Kirtsaeng v. Wiley

Tuesday, 23 October 2012 |

The Right of US Copyright Owners to Restrict Importation of Versions of Their Works Acquired Abroad and Made Under Foreign Law for Sale and Use in Other Countries

  • What is Kirtsaeng v. Wiley?

John Wiley & Sons, Inc., a well-known education and scholarly publisher, sued businessman Supap Kirtsaeng for illegally importing copies of international editions of Wiley textbooks into the US without its permission. According to court documents, he had sold those copies of works through commercial websites and exploited the price differential between the foreign and domestic editions to earn revenue of between $900,000 and $1.2 million.

The US Court of Appeals for the Second Circuit ruled that the unauthorized importation of textbooks produced under foreign law for foreign markets, and acquired outside the US, infringed the exclusive rights of Wiley as the textbooks’ US copyright owner. The Supreme Court of the United States has agreed to review the Second Circuit's decision and will hear oral arguments on October 29, 2012.

The Association of American Publishers filed an amicus brief in support of John Wiley & Sons, the publishing company that created, produced and distributed these works.

This case is considered a significant milestone in upholding the rights and interests of content creators in a global digital society. It raises a number of critical contemporary issues while being the subject of unsubstantiated speculation and misconceptions.

  • What are “grey market goods?”

Grey market goods are products typically acquired by persons or companies who then sell them through distribution channels that are unregulated and not authorized by the goods’ manufacturer or producer; the seller also has no relationship with the producer. This kind of acquisition and sale of goods is usually intended to exploit price differentials between the domestic and foreign markets. According to published reports, the U.S. market for grey goods tops $63 billion annually.

  • Why is such activity illegal?

Unlike “black -market” goods, which are invariably illegal, the legality of grey market products may depend upon the nature of the goods, the circumstances in which they were acquired and sold by the sellers and the kind of distribution channels involved.

When grey market goods are US copyrighted works produced for and intended for sale only in foreign markets, the importation of these copies into the US without the permission of the copyright-holder constitutes an infringement of the owner’s distribution and importation rights under US copyright law. The U.S. Copyright Act, as amended in 1976, gives copyright-holders exclusive rights over how their products are reproduced and distributed and grants them rights against acts of importation. Such actions violate those rights.

  • Should this aspect of US copyright law, established more than 30 years ago, be reconsidered in light of our digital culture?

US copyright law has always been platform-neutral and amended to serve emerging media and technologies. The fact that it has become easier today to find, buy and import books and other creative content from foreign sources cannot legalize the practice at issue or detract from enforcement of the law as Congress intended. It does, however, magnify the extent of potential harm to consumers, booksellers, educators, authors and publishers.

  • Why would such activity have negative impact on publishers?

The potential longterm damage is not exclusive to publishers. It would have devastating consequences for authors, publishing industry employees and businesses directly supported by the industry, retailers, students and educators. Some examples of the damage:

Authors would be deprived of their rightful compensation because the royalties they receive from foreign versions of books, to the extent they are able to receive them, are typically lower than the royalties from US editions. The prospect of diminished earnings is likely to make academic authors and publishers less willing to engage in the labor-intensive process to create textbooks. The availability, quality and diversity of these critical educational tools would undoubtedly suffer.

It could affect high-quality, highly-educated US jobs which contribute millions to the economy in tax revenue.

There would be revenue loss suffered by artists, designers, tech companies, supply chains, manufacturers and other services — often start-up and small businesses — that rely on publishing for their livelihoods.

At a time when our culture is encouraging creativity and innovation, such activity would threaten the survival of small, independent and/or not-for-profit publishers as well as emerging authors and other content creators.

The mass importation and sales of foreign editions by unauthorized resellers will divert profits from brick-and-mortar and online retailers of new US editions as well as the entire emerging rental and second-sale industry around used US editions

A narrowed market through unauthorized sales will shift the burden of cost onto legitimate book buyers — it will drive up prices for US students using domestic editions.

Sales to ancillary markets currently help support the extensive research and development investments of publishers in creating textbooks. A new textbook can take up to three years to research, write, test, peer review, digitize and market; that excludes the supplemental content and new online resources universities seek to improve student success. A loss of market share would lead to significant changes in publishers’ business models causing a ripple effect across the entire book buying and reading market, particularly in higher education. Textbooks would be published less frequently, publishers would be less willing to include new or developing research and content would not be vetted to the level of quality faculty and students expect.

  • If the Supreme Court upholds the lower appellate court decision in favor of the copyright-holders, will US libraries lose their ability to purchase and lend books?

No. This is one of the biggest misconceptions about this case. Libraries have continued to buy and lend books for over three decades under US copyright law without any interference from publishers, notwithstanding these exclusive rights of copyright owners. Since publishers are simply asking the court to uphold their rights under existing law, libraries’ longstanding practices will remain unchanged.

  • Would a ruling in favor of the publisher mean that copyright-holders will seek to exploit the ruling for unlimited control over global sales of their products in perpetuity? In other words, would it mean that I can’t buy or sell copies of copyrighted works such as used books?

No; this is another fallacy with no basis in reality. Educational publishers have never challenged the sale and purchase of used books generally and have not taken action against the thriving resale and rental markets currently serving students across our nation. These activities occur in the US pursuant to the limitations that the “first sale” doctrine places on the rights of US copyright-holders. Under that doctrine, such activities have been going on for years in libraries and used book stores.

There has been a great deal of ill-founded speculation and fear-mongering about the potential consequences of this case, mainly driven by retail and digital industries whose business models are built on the availability of an unlimited marketplace for used products. And there’s also a big difference between your resale of a book or device purchased in the U.S. and produced for the U.S. market as compared to hugely-profitable businesses such as Supap Kirtsaeng’s which are created and operated on a mass scale of copyright infringement..

Publishers make business decisions based on customer demand. For instance, they continue producing books in all print formats, despite the increasing popularity of eBooks, to provide all the formats sought by buyers and readers. It’s illogical to assume that publishers would now seek to suddenly change their business models to exploit legal rights that the law has provided to them for over 30 years.

  • Aren’t US and foreign editions of books, including higher education textbooks, identical? Why are they priced differently?

There are various — often numerous — differences between domestic and foreign versions of books produced by US publishers. Content, format and quality are affected by such factors as market educational priorities, foreign censorship or marketing considerations. There might be a staggered rollout strategy to serve distinct international market opportunities, different formats or to diminish the potential of piracy.

Additionally, in order to make textbooks affordable in developing foreign territories, publishers might create additional editions in less-expensive formats, that omit supplemental learning tools or online testing and assessment resources desired by US educators or exclude illustrations, graphics and other features.

When there are pricing differentials, these can be due to a number of factors. Among them: pricing structures for developing nations, local demand and regulations, international treaty obligations, local manufacturing and distribution costs and piracy concerns.

A benefit of expanding sales to ancillary markets is that publishers can recoup some of the significant costs of the actual content creation; a basic tenet of the Copyright Act has always been to promote creative expression by allowing content creators to recognize economic benefit from their works. In turn, a higher quantity of sales on a book allows publishers to spread the recovery of their costs over a broader number of customer transactions and maintain lower prices for American consumers, including students.

It’s worth noting that while most higher education costs for students are increasing annually, student spend on college and university textbooks has now declined for the fourth year in a row according to the independent higher education research company Student Monitor. While the numerous cost-effective options that publishers now make available to US students — including black and white editions, customizable editions, e-format textbooks and even individual chapters available online for as little as $1.99 — are a major factor in these cost savings, publishers’ ability to lower cost through the production and distribution of ancillary foreign versions also contributes.