This post was revised at 3:20
The Court’s last argument before the arrival of Hurricane Sandy presented the latest chapter in a seemingly intractable problem of copyright law: whether a U.S. copyright holder can prevent the importation of “gray-market” products manufactured for overseas markets. When the Court tried to address this question two Terms ago – in Costco Wholesale Corp. v. Omega, S.A. – the Court was equally divided (with Justice Kagan recused). A full Court returned to the question this week in Kirtsaeng v. John Wiley & Sons, Inc.
The facts are almost too good to be true. A Thai national (Kirtsaeng) came to this country to study at Cornell and U.S.C. To subsidize his educational expenses, he resold textbooks purchased by his family at bookstores in Thailand. All in all, he sold several hundred thousand dollars’ worth of textbooks imported in this way, reaping a net profit in the range of $100,000. When his activities came to the attention of Wiley (a major American textbook publisher), a suit for copyright infringement predictably ensued. The district court found for Wiley and imposed statutory damages of $600,000. The Second Circuit affirmed.
The case turns on a provision of the Copyright Act that permits the owner of a copy that was “lawfully made under this title” to resell the work. The publisher argues that the Thai books, printed in Thailand, were not made “under this title,” and thus that Kirtsaeng cannot lawfully resell them. Kirtsaeng, on the other hands, argues that the books were “lawfully made,” because they were made under a license from Wiley.
Moments after Joshua Rosenkranz (arguing for Kirtsaeng) started to present his argument, Justice Ginsburg stopped him to express her concern that the regime he proposed (“universal exhaustion,” as she termed it) would have the United States giving more limited rights to copyright owners than any other country in the world. Despite his best efforts, Rosenkranz seemed to make little headway against her concerns.
Justice Scalia was next into the fray, challenging Rosenkranz on the plain meaning front. When he asked Rosenkranz if he read “lawfully made under this title” to mean “lawfully made if this title had applied,” Rosenkranz contended that this was not his position; he argued instead that his position was that “lawfully made under this title” means “made in accordance with U.S. law” The most interesting part of that discussion (given her presumptive status as the swing vote) was Kagan’s interruption – and suggested revision – of Rosenkranz’s argument. In passing, he suggested that “piratical” meant “unlawful under the laws of other countries,” but Justice Kagan interrupted him with a quick “No. . . . [A]s defined by U.S. copyright law.” This let Rosenkranz explain in detail his view that the point of Section 109’s reference to goods “lawfully made under this title” is to refer to goods that are lawfully made (wherever they are made) under the rules U.S. law establishes for lawfulness. As he put it in an excellent (and rarely interrupted) colloquy with Justice Sotomayor: “[W]e are not focusing on whether the making was under this title; we’re focusing on whether it was lawful under this title.”
Justice Kagan also inquired pointedly about the Court’s discussion in Quality King v. L’Anza Research International (an earlier decision on a closely related subject). In her words, the discussion in that case was, “I think it’s fair to say, unfortunate to your position.” Confronted with her benevolent suggestion that Rosenkranz’s “basic view of that passage that it was simply ill-considered dicta that we should ignore,” he readily agreed.
When Rosenkranz reserved the rest of his time, Ted Olson (for Wiley) took the argument straight back to Quality King. Somewhat surprisingly, he tried to argue that the language that Justice Kagan had just characterized as dictum was in fact a holding. When Justice Alito gently asked if he “really want[ed] to argue it wasn’t dictum,” Olson stuck to his guns, contending that the passage “was the holding of the case in the sense that it was necessary, the Court felt. . . . I don’t feel I want to spend a lot of time arguing what the word ’dicta’ means, but it was a necessary ingredient to what the Court felt was an explanation for why it was deciding the case that [way].” But Justices Breyer and Kagan were having none of that, as they piped in to say that “[y]ou don’t need that” and that it “wasn’t necessary, was it?”
Justice Breyer then forced Olson down a parade of “horribles” (Justice Breyer’s term). His central hypothetical was Toyota cars with copyrighted sound systems. Where in his reading of the law, he asked Olson, did the copyright law permit the initial retail purchasers of those cars to resell them (as they so plainly intend to do). When Olson attempted to avoid the question by suggesting it was a different case, Breyer was insistent: “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 tried again to avoid the question as not presented by the case before the Court. At this point, Justice Kennedy joined the fray: “You’re aware of the fact that if we write an opinion with the . . . rule that you propose, that we should, as a matter of common sense, ask about the consequences of that rule. And that’s what we are asking.” Similarly, Justice Sotomayor, plainly disturbed by Justice Breyer’s horribles (as well as a hypothetical of her own about books bought overseas) asked: “Isn’t it incumbent on us to give the statute what is plainly a more rational plain meaning than to try to give it a meaning and then fix it because we understand that the meaning doesn’t make sense.”
Justice Kagan (again, the presumptive swing vote) then asked Olson if she could take him back to Rosenkranz’s assertion that the emphasis is on the “lawfulness” rather than the “making.” Seemingly dismissive of the question, Olson suggested that Rosenkranz’s reading was simply unworkable, in large part because he couldn’t “imagine the difficulties that would ensue with litigation” under that reading. Justice Kennedy, among others, was openly skeptical about that response, given the likely litigation to sort out the parade of horribles that Olson’s reading brings with it.
When Deputy Solicitor General Malcolm Stewart rose for the government, attempting to discuss a common-law argument from the government’s brief, Justice Ginsburg immediately asked him if he could explain why the Government had shifted its view since Quality King. When he explained that the adverse decision in Quality King had motivated the shift of view, Justice Kagan (herself coming to this question with a prior position as Solicitor General) asked him if “in your heart of hearts [he thought] that we got it wrong in Quality King.” Admitting that he couldn’t easily ask the Court to overturn a nine-to-zero decision, he agreed that the government’s position in this case was designed as closely as possible to replicate the outcome it had sought in Quality King, while acknowledging the Court’s rejection of the statutory reading the government had supported there.
The most interesting aspect of Stewart’s argument was how little support the publisher’s position seemed to have with several of the Justices. Justice Alito, for example, asked the loaded question: “Which of the following is worse: All of the horribles that [Kirtsaeng] outlines to the extent they are realistic, or the frustration of market segmentation, to the extent that would occur, if [Kirtsaeng’s] position were accepted.” Attempting to thread the needle to find a suitable answer, Stewart deftly answered: “Well, if they actually happened, then I think the horribles would be worse. But . . . we feel that we have offered a reading of all the statutory provisions that would avoid both.” When pressed, however, he agreed that in the end the bad consequences attendant on Mr. Olson’s position would make the government prefer Kirtsaeng’s free-importation view to the publisher’s argument.
It’s obviously risky to predict results in cases this close based on oral argument. Clearly the Justices will be mulling the case carefully before the opinions ultimately are released. But one thing is certainly clear: the publishers did not win over any new votes with the argument today, and the government’s concession that it could not accept the publisher’s position well might have sealed their defeat.
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