Transcript Standard Setting in High

Class 11
Copyright, Spring, 2008
Distribution and
First-Sale Doctrine
Randal C. Picker
Leffmann Professor of Commercial Law
The Law School
The University of Chicago
773.702.0864/[email protected]
Copyright © 2005-08 Randal C. Picker. All Rights Reserved.
106. Exclusive rights in
copyrighted works

Subject to sections 107 through 121, the
owner of copyright under this title has the
exclusive rights to do and to authorize any
of the following:
…
(3)
to distribute copies or phonorecords of
the copyrighted work to the public by sale or
other transfer of ownership, or by rental,
lease, or lending;
July 16, 2015
Copyright © 2005-07 Randal C. Picker
2
The First-Sale Doctrine

109(a)
Notwithstanding
the provisions of section
106(3), the owner of a particular copy or
phonorecord lawfully made under this title,
or any person authorized by such owner, is
entitled, without the authority of the
copyright owner, to sell or otherwise
dispose of the possession of that copy or
phonorecord.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
3
Bobbs-Merrill v. Straus

210 U.S. 339 (1908)
July 16, 2015
Copyright © 2005-07 Randal C. Picker
4
1870 Copyright Act: 2nd
General Revision
That any citizen of the United States, or resident
therein, who shall be the author, inventor, designer,
or proprietor of any book, map, chart, dramatic or
musical composition, engraving, cut, print, or
photographs or negative thereof, or of a painting,
drawing, chromo, statue, statuary, and of models or
designs intended to be perfected as works of the
fine arts, and his executors, administrators, or
assigns,
July 16, 2015
Copyright © 2005-07 Randal C. Picker
5
1870 Copyright Act
shall, upon complying with the provisions of this
act, have the sole liberty of printing, reprinting,
publishing, completing, copying, executing,
finishing, and vending the same; and in the case of
a dramatic composition, of publicly performing or
representing it, or causing it to be performed or
represented by others; and authors may reserve the
right to dramatize or to translate their own works.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
6
The Cassilis Engagement
(1907)
July 16, 2015
Copyright © 2005-07 Randal C. Picker
7
The Cassilis Engagement
(1907)
July 16, 2015
Copyright © 2005-07 Randal C. Picker
8
More Rights Reservation
July 16, 2015
Copyright © 2005-07 Randal C. Picker
9
Bobbs-Merrill v. Straus

Selling The Castaway by Hallie Ermine
Rives
July 16, 2015
Copyright © 2005-07 Randal C. Picker
10
The Castaway
July 16, 2015
Copyright © 2005-08 Randal C. Picker
11
Copyright Page
July 16, 2015
Copyright © 2005-08 Randal C. Picker
12
Selling the Book

Core Facts
Bobbs-Merrill
sells The Castaway with the
reservations notice beneath the copyright
statement in each copy of the book
Macy’s is selling the book for 89 cents
Macy’s bought the book from wholesalers;
everyone knew of the notice; no contracts
regarding sales price
July 16, 2015
Copyright © 2005-07 Randal C. Picker
13
Reading Sec. 4592

From the Opinion

“Sec. 4952. Any citizen of the United States or resident therein,
who shall be the author, inventor, designer, or proprietor of any
book, map, chart, dramatic or musical composition, engraving,
cut, print, or photograph or negative thereof, or of a painting,
drawing, chromo, statute, statuary, and of models or designs
intended to be perfected as works of the fine arts, and the
executors, administrators, or assigns of any such person, shall,
upon complying with the provisions of this chapter, have the
sole liberty of printing, reprinting, publishing, completing,
copying, executing, finishing, and vending the same.” U.S.
Comp. Stat. 1901, p. 3406.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
14
Meaning?

Says the Court
“In
our view the copyright statutes, while
protecting the owner of the copyright in his
right to multiply and sell his production, do
not create the right to impose, by notice,
such as is disclosed in this case, a limitation
at which the book shall be sold at retail by
future purchasers, with whom there is no
privity of contract.”
July 16, 2015
Copyright © 2005-07 Randal C. Picker
15
Meaning?

Says the Court
 “To
add to the right of exclusive sale the authority
to control all future retail sales, by a notice that
such sales must be made at a fixed sum, would
give a right not included in the terms of the statute,
and, in our view, extend its operation, by
construction, beyond its meaning, when
interpreted with a view to ascertaining the
legislative intent in its enactment.”
July 16, 2015
Copyright © 2005-07 Randal C. Picker
16
[Amazon: The Castaway]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
17
Sec. 41: 1909 Copyright Act
“That the copyright is distinct from the property in
the material object copyrighted, and the sale or
conveyance, by gift or otherwise, of the material
object shall not of itself constitute a transfer of the
copyright, nor shall the assignment of the copyright
constitute a transfer of the title to the material
object; but nothing in this title shall be deemed to
forbid, prevent, or restrict the transfer of any copy
of a copyrighted work the possession of which has
been lawfully obtained.”
July 16, 2015
Copyright © 2005-07 Randal C. Picker
18
Organizing Secondary
Markets

Three Situations
Sequential
ownership (used books)
One owner, many users (rental markets)
One owner, many users (libraries)
July 16, 2015
Copyright © 2005-07 Randal C. Picker
19
[SC: Amazon: GT&L]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
20
[SC: Used Prices]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
21
[SC: Author’s Guild]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
22
Music Rental

Hypo/History
I
buy music CDs
Customers rent those from me; I sell blank
cassettes

Where do I stand under 109(a)? 109(b)?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
23
Types of Works

102(a)
Works
of authorship include the following
categories:
(2) musical works, including any
accompanying words;
 …
 (7) sound recordings

July 16, 2015
Copyright © 2005-07 Randal C. Picker
24
Musical Works?

Undefined (H.R. 94-1476)
 Of
the seven items listed, four are defined in
section 101. The three undefined categories—
“musical works,” “dramatic works,” and
“pantomimes and choreographic works”—have
fairly settled meanings. There is no need, for
example, to specify the copyrightability of
electronic or concrete music in the statute since
the form of a work would no longer be of any
importance, nor is it necessary to specify that
“choreographic works” do not include social dance
steps and simple routines.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
25
101: Sound recording

“Sound recordings” are
works
that result from the fixation of a series
of musical, spoken, or other sounds, but not
including the sounds accompanying a
motion picture or other audiovisual work,
regardless of the nature of the material
objects, such as disks, tapes, or other
phonorecords, in which they are embodied.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
26
101: Phonorecords

“Phonorecords” are
 material
objects in which sounds, other than those
accompanying a motion picture or other
audiovisual work, are fixed by any method now
known or later developed, and from which the
sounds can be perceived, reproduced, or
otherwise communicated, either directly or with the
aid of a machine or device. The term
“phonorecords” includes the material object in
which the sounds are first fixed.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
27
Controlling Sound Recording
and Software Rental

109(b)(1)(A)
Notwithstanding
the provisions of
subsection (a), unless authorized by the
owners of copyright in the sound recording
or the owner of copyright in a computer
program (including any tape, disk, or other
medium embodying such program), and in
the case of a sound recording in the musical
works embodied therein,
July 16, 2015
Copyright © 2005-07 Randal C. Picker
28
Controlling …
 neither
the owner of a particular phonorecord nor
any person in possession of a particular copy of a
computer program (including any tape, disk, or
other medium embodying such program), may, for
the purposes of direct or indirect commercial
advantage, dispose of, or authorize the disposal
of, the possession of that phonorecord or
computer program (including any tape, disk, or
other medium embodying such program) by rental,
lease, or lending, or by any other act or practice in
the nature of rental, lease, or lending.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
29
Controlling …
Nothing
in the preceding sentence shall
apply to the rental, lease, or lending of a
phonorecord for nonprofit purposes by a
nonprofit library or nonprofit educational
institution.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
30
[BA Audiobook Home]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
31
[Personal Use Edition]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
32
[Library Edition]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
33
[LE: Free Fixes]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
34
[LE: Discounts]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
35
[HCC Home]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
36
[HCC Library Downloads]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
37
Getting to the Case I

Hypo
BA
sells two editions of music CDs:
personal edition and library edition at higher
price

Copyright issues? Why?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
38
Answer
July 16, 2015
Copyright © 2005-07 Randal C. Picker
39
Getting to the Case II

Hypo
BA
sells two editions of music CDs:
personal edition and library edition at higher
price
HCC buys personal editions and attempts to
resell them to libraries

Copyright issues?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
40
Answer
July 16, 2015
Copyright © 2005-07 Randal C. Picker
41
Getting to the Case III

Hypo
BA
sells two editions of music CDs:
personal edition and library edition at higher
price
HCC buys personal editions and attempts to
rent them to libraries

Copyright issues?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
42
Answer
July 16, 2015
Copyright © 2005-07 Randal C. Picker
43
Getting to the Case IV

Hypo
BA
sells two editions of audio books:
personal edition and library edition at higher
price
HCC buys personal editions and attempts to
rent them to libraries

Copyright issues?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
44
Answer
July 16, 2015
Copyright © 2005-07 Randal C. Picker
45
Organizing Domestic and
Foreign Markets

Two Examples
DVDs:
Technological Separation
Quality King: Legal Separation
July 16, 2015
Copyright © 2005-07 Randal C. Picker
46
[SC: Amazon Incred US]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
47
[SC: Amazon Incred UK]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
48
Comparing Prices

Same DVD
US:
$17.99
UK: £14.99


Exchange Rate (as of April 21, 2005): $1 =
£0.510915, $1.91969 = £1
Matching Prices
$17.99
= £9.37
£14.99 = $28.77
July 16, 2015
Copyright © 2005-07 Randal C. Picker
49
[SC: US Encoding]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
50
[SC: UK Encoding]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
51
[SC: Amazon on Encoding]
July 16, 2015
Copyright © 2005-07 Randal C. Picker
52
601. Manufacture, importation,
and public distribution of
certain copies

(a)
 Prior
to July 1, 1986, and except as provided by
subsection (b), the importation into or public
distribution in the United States of copies of a work
consisting preponderantly of nondramatic literary
material that is in the English language and is
protected under this title is prohibited unless the
portions consisting of such material have been
manufactured in the United States or Canada.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
53
602. Infringing importation
of copies or phonorecords

(a)
Importation
into the United States, without
the authority of the owner of copyright under
this title, of copies or phonorecords of a
work that have been acquired outside the
United States is an infringement of the
exclusive right to distribute copies or
phonorecords under section 106, actionable
under section 501.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
54
501. Infringement of
copyright

(a)
Anyone
who violates any of the exclusive
rights of the copyright owner as provided by
sections 106 through 121 or of the author
as provided in section 106A(a), or who
imports copies or phonorecords into the
United States in violation of section 602, is
an infringer of the copyright or right of the
author, as the case may be.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
55
Quality King

Core Facts
L’anza
makes shampoo; labels are
copyrighted works
L’anza sells at higher prices in the US than
in foreign markets
Quality King acts as middleman to bring
shampoo back to US
July 16, 2015
Copyright © 2005-07 Randal C. Picker
56
Quality King
Ninth
Circuit rules for L’anza, saying that
applying 109 first-sale defense would gut
602
July 16, 2015
Copyright © 2005-07 Randal C. Picker
57
Making, Selling, Importing

Hypo
I
print a copyrighted book in the US
I sell copies in the US for $50
I export copies to the UK and sell them
there myself for $25
Importer buys in the UK for $25, takes the
book to the US and sells for $35

How does Sec. 602 apply to this situation?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
58
Quality King Result

This is the “round trip” case
Books
started in US, left and returned
Under Quality King, 109(a) first-sale rights
“attach”
Attach based on location of printing in US—
“lawfully made under this title”
 That is independent of where the particular
copy of the book is sold (see fn. 14 on p.
661)

July 16, 2015
Copyright © 2005-07 Randal C. Picker
59
Making, Selling, Importing

Hypo
I
print a copyrighted book in the US and sell
copies in the US for $50
I print copies in the UK and sell them there
for $25
Importer buys in the UK for $25, takes the
book to the US and sells for $35

How does Sec. 602 apply to this situation?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
60
Analysis

This is the one-way case
109(a)
doesn’t attach, seemingly, to the
books printed in the UK
602(a) should apply and should block
imports

Does this make it possible to enforce price
discrimination in this case?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
61
Analysis
Only
way to enforce the across-country
price discrimination is by moving the
printing overseas

Contrary to US interests?; compare Sec.
601
July 16, 2015
Copyright © 2005-07 Randal C. Picker
62
602(a) Rewrite

(a)
Importation
into the United States, without
the authority of the owner of copyright under
this title, of copies or phonorecords of a
work that have been acquired outside the
United States is actionable under section
501.

How would Quality King come out?
July 16, 2015
Copyright © 2005-07 Randal C. Picker
63
Analysis

109 and First-Sale Doctrine
Irrelevant

under Rewrite
Overinclusive?
Would
cover US tourist buying book
covered by 602(a) in England to read on
plane home
July 16, 2015
Copyright © 2005-07 Randal C. Picker
64
But See 602(a)(2)

This subsection does not apply to(2)
importation, for the private use of the
importer and not for distribution,


July 16, 2015
by any person with respect to no more than one
copy or phonorecord of any one work at any one
time, or
by any person arriving from outside the United
States with respect to copies or phonorecords
forming part of such person’s personal baggage
Copyright © 2005-07 Randal C. Picker
65
Legislative History

From the Congressional Report
 Section
602(a) first states the general rule that
unauthorized importation is an infringement merely
if the copies or phonorecords “have been acquired
outside the United States,” but then enumerates
three specific exceptions … If none of the three
exemptions applies, any unauthorized importer of
copies or phonorecords acquired abroad, could be
sued for damages and enjoined from making use
of them, even before any public distribution in this
country has taken place.
July 16, 2015
Copyright © 2005-07 Randal C. Picker
66