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Second Circuit Makes the First Sale Situation Worse for Libraries

Last Updated on August 17, 2011, 10:05 pm ET

Guest post by Jonathan Band, policybandwidth.

The Second Circuit yesterday issued a decision concerning the first sale doctrine that is even worse for libraries than the Costco decision. The issue in Costco v. Omega was the applicability of the first sale doctrine (FSD) to copies manufactured outside the U.S. The FSD applies to “copies lawfully made under this title,” and the question was whether this meant copies lawfully manufactured in the U.S. or copies manufactured with the authorization of the owner of the U.S. copyright. The Ninth Circuit ruled that it was the former — lawfully manufactured in the U.S. The Supreme Court split 4-4, leaving the Ninth Circuit ruling in place but not binding any other circuit.

Now, the Second Circuit has issued a problematic ruling in John Wiley & Sons v. Kirtsaeng, a case involving a graduate student who imported to the U.S. foreign editions of textbooks for resale. The majority (two judges) sided with Wiley, and ruled that the FSD did not apply to the copies manufactured outside the U.S. The dissenting judge interpreted the FSD as applying to copies lawfully manufactured anywhere with the authority of the owner of the U.S. copyright.

The Second Circuit’s decision is actually worse than the Ninth Circuit’s decision in Costco in a manner significant to libraries. The Ninth Circuit realized that its interpretation had a negative policy impact in that it encouraged the outsourcing of printing jobs and it prevented a resale market in copyrighted goods. So, the Ninth Circuit created an exception to its interpretation, and ruled that the FSD still applied to a foreign manufactured copy if it was imported with the authority of the U.S. copyright owner. Thus, if a library buys a foreign printed book from an authorized dealer in the U.S., the FSD applies to that book and the library can lend it. (In the Library Copyright Alliance amicus brief in Costco, we supported this exception as a fall-back position.)

Unfortunately, the Second Circuit rejected this exception as not having a foundation in the language of the FSD. Accordingly, a library in the Second Circuit that wants to lend foreign manufactured copies must rely on fair use or the ambiguous exception in 17 USC 602(a)(2)(C) that allows a library to import 5 copies (except audiovisual works) for lending purposes, but doesn’t specifically allow the library to actually lend those copies.

The only good thing about the decision is that both the majority and the dissent agree that this interpretation of the FSD is a job-killer because it encourages the exportation of U.S. printing jobs.

The Second Circuit includes New York, Vermont, and Connecticut; the Ninth Circuit includes California, Oregon, Washington, Idaho, Montana, Nevada, Arizona, Alaska, and Hawaii.