First-Sale Doctrine: Authorized Foreign Sales Exhaust US Copyrights [and US Patents]

By Dennis Crouch

Kirtsaeng v. John Wiley & Sons (Supreme Court 2013)

In a 6-3 decision, the Supreme Court here holds that the first-sale doctrine applies to copies of a copyrighted work lawfully made abroad. Although the decision does not mention patent law, the case has obvious implications for patent law by weakening the ability of a patentee to legally enforce country-by-country market segmentation. The case may also have some implications for streaming of copyrighted content based on national origin.

Kirtsaeng moved to the US from Thailand and set up a side business of importing textbooks from Thailand and reselling them in the US for a substantial profit. To be clear, the imported books were not counterfeit but actual authorized versions of textbooks. Still, Wiley sued Kirtsaeng for copyright infringement and argued that the first-sale doctrine did not apply to its authorized foreign sales.

The first sale doctrine – also known as “exhaustion” – is a core feature of both copyright and patent law. The doctrine holds that intellectual property (IP) rights associated with a particular copy of a work are exhausted once there is an authorized sale or manufacture of the that copy. This doctrine allows for a robust chain of distribution and secondary market where distributors and resellers don’t need to worry about IP infringement so long as they are not dealing in counterfeit copies. One difference between copyright and patent law is that the first-sale doctrine is codified in the Copyright Act but is purely federal common law for patents. 17 U.S.C. §109(a).

In holding that a foreign authorized sale exhausts a company’s U.S. copyright, the Supreme Court obviously walked through some amount of statutory interpretation. However, the court held that its decision is also consistent with common law ideals of “impeccable historic pedigree.” The result here is that this case strongly challenges the Federal Circuit’s precedent in cases such as Jazz Photo that reject the notion of international exhaustion. To be clear, however, the Kirtsaeng decision does not actually mention patent law.

The Supreme Court is sitting on the first-sale patent case of Bowman v. Monsanto. Although that is not an international exhaustion case, parts of this decision have implications there. First, the court favorably discussed old common law doctrines that refuse to permit or enforce restraints on the alienation of chattels. In addition to citing Lord Coke, the court also wrote that the first-sale doctrine fits within that sphere of thought because it “frees courts from the administrative burden of trying to enforce restrictions upon difficult-to-trace, readily movable goods. And it avoids the selective enforcement inherent in any such effort.”

The patent case most directly impacted is Ninestar Tech. v. ITC that is pending a decision from the Supreme Court on Ninestar’s petition for writ of certiorari. That case asks the exact parallel question of “Whether the initial authorized sale outside the United States of a patented item terminates all patent rights to that item.” At this point, the Court will do well to ask the Federal Circuit to take a fresh look at their decision in that case.

The court did recognize that the decision weakens the value of the given intellectual property right. In that regard, the court basically said “tough luck” – writing that “the Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book, say to increase or to maximize gain.” We can expect some amount of push-back from right-holders on this case. And, Congress would certainly be able to change the law through a new statute.

117 thoughts on “First-Sale Doctrine: Authorized Foreign Sales Exhaust US Copyrights [and US Patents]

  1. Hi Dennis,

    Can the market-division problem be solved by assigning particular national copyrights to the distributors in those countries?

    For example, if Wiley had assigned their Taiwanese copyright to their Taiwanese distributor, would Wiley’s US copyright have been exhausted through the sale of the books in Taiwan?

    We actually had a case like that in South Africa where the international exhaustion problem was solved by assigning the South African copyright to a local distributor.

  2. Non Seq, I think we need to reverse Quality King. In doing so, I have no real problem with limiting the ban on importation to re-imports so that if a company were to make products offshore, they could not prevent them from being imported due to the first sale doctrine.

  3. This case doesn’t encourage products to be manufactured abroad, which is what Quality King did. This case was about foreign-made goods sold in a foreign country. The result of this case is that American-made goods are on equal footing with foreign-made goods. Otherwise, Wiley would have had more rights by manufacturing goods abroad. That incentive has been taken away.

    Regardless of where products are manufactured or sold, this case requires publishers to compete with their US market for that same product. The only thing this case affected was profits for a US company.

  4. I don’t care if all the prices are the same.
    I don’t care if all the prices are different.

    A true libertarian would care to not have to pick up anyone else’s market risk for a purposeful decision to alter prices based on segmentation. That’s a pure business decision and is completely (and rightfully) separate from IP law.

  5. Anon, good point. That is why I suggest reversing Quality King, a case that involved US made goods sold abroad and re-imported. I am less sanquine about foreign made goods.

  6. Your limited view that the question here is driven by US (only) firms and US (only) jobs is more than a bit Pollyanna, Ned.

    Just look at Wiley – those foreign books were not made in the US.

  7. Anon, I don't understand your thinking about "subsidy." Allowing a US manufacturer to sell abroad without damaging his US market seems to favor United States economy rather than particular businesses. It promotes jobs, here in United States. It makes you and I better off. This is something that Congress really needs to look at.

  8. Yes.
    Because there is nothing like having some actual real data on hand.
    A dozen or so over the MidWest.

    Thanks.

  9. Lionel, the prices of a product the same regardless of where it is sold? Worldwide?

    Check gasoline prices. They vary from region to region and indeed the one gas station to another. There's a reason for that.

    One cannot have free markets without price variances depending on location and other criteria. The only way you can impose worldwide price controls is to have a worldwide government and worldwide socialism. If that is what you advocate, that I oppose you politically. I believe in freedom. I am a libertarian.

  10. But that is what your position basically is.

    Not at all Ned. Not by a long shot. I am merely saying I do not believe in subsidizing Big Corp’s sole responsibility for the market risk that they choose to take.

    I do not buy for one minute the sheepskin you are trying to place over the real powers involved who have no allegiance at all to the US.

  11. Yeah but that’s just because all the “almost poor” but not quite really poor (thus no medicaid) drag the results down.

  12. Anon, why we just tell all American companies that they can't sell America manufactured products abroad? That makes a lot of sense. But that is what your position basically is.

    Anon, if we do not manufacture here in United States, United States will soon become an impoverished nation. We need to promote foreign sales, and this case, in combination with Quality King, does a lot to do harm to America.

  13. However, when I surveyed grain operators after this case broke, all of them indicated that uses for the seed they sold included planting.

    You surveyed grain [elevator] operators after this case broke? Why? And how many?

  14. That is something that will change eventually. Apple will be forced to allow people to pass on their iTunes collections. It is really out of line that they do not now.

    If you buy a digital copy of something, no license can restrict you from redistributing that item. To the extent such licenses are enforced now, the SC will eventually change that (Thank God).

  15. I believe shrinkwraps are still unenforceable in many jurisidictions, aren’t they? Clickwrap is another story.

  16. I mean archaic in that I believe prices should be the same globally barring shipping costs and currency fluctuations.

  17. can I use a patented grinding wheel that I purchased from the patentee to form numerous identical new grinding wheels

    LOL – Actually, if the purpose fo the patented feature is for the grinding wheel to make additional grinding wheels, the answer is yes – THAT WOULD BE THE REASON FOR THE SALE IN THE FIRST PLACE.

    In other words – your exmaple is a fallacy, already exposed for being a fallacy.

    Thanks, and try again.

  18. I will take your word for it Mr. Farmer.

    However, when I surveyed grain operators after this case broke, all of them indicated that uses for the seed they sold included planting.

    As to the “thousands of years” comment – that was from someone else. I did not check out how long the practice of even having grain elevators in commerce has been in place.

  19. can I use a patented grinding wheel that I purchased from the patentee to form numerous identical new grinding wheels?

    Only if that’s what you bought it for. Assuming I misunderstand the law correctly.

  20. it will be impossible for companies to sell into those countries at market prices in those countries

    I. Don’t. Care.

    Perhaps when those countries are forced to go without because corporations cannot subsidize by charging me higher prices, and are unwilling to assume THEIR market risk, then the governments in those countries might have more impetus to actually put in place the appropriately strong IP protections.

  21. If use=make, can I use a patented grinding wheel that I purchased from the patentee to form numerous identical new grinding wheels? No, I cannot. The purpuse of a grinding wheel is to shape material. Am I limited as to how I can use the grinding wheel? Yes I am. I cannot use it to form a new identical grinding wheel.

  22. anon, your argument is that farmers typically go to the elevator to buy seed for planting. This is not correct. Being a farmer myself, this is the first time that I had ever heard of someone going to the grain elevator to buy commodity soybeans for replanting.

    Yes, farmers have traditionally saved seed for replanting from their own harvest. However, farmers do not go to the elevator to buy seed like Mr. Bowman has done. To rely on thousands of years of agriculture is actually incorrect in this instance because that is not how agriculture has happened for thousands of years.

  23. Ain’t right

    Sorry AC, but I have seen no compelling argument to support your view that the result in this case is anything but right.

    But I am willing to listen to any cogent reasoning you may want to provide.

  24. Anon, the reason prices are lower in other countries for any number of reasons that include general lack of enforceable IP. In less we prevent gray market practices, it will be impossible for companies to sell into those countries at market prices in those countries. This Supreme Court case is abysmally wrong and practical realities even though I might be right on the law of exhaustion.

  25. Lionel, what do you mean by archaic? You mean try to tell me that the rest of the world has functioning IP systems like the United States? You gotta be kidding. Truly.

     
     
     

  26. Does anyone want to buy mu itunes library? How about my apps? my digital books? I can only sell them once, no copies. It will go to the highest bidder.

    Would this be o.k. under this ruling?

    Does anyone think Apple or Amazon is going to like this?

  27. It is a stretch too far to equate patents with new laws and then spin that into talking about actual laws and their effects on businesses.

    Simply bad spin.

  28. All you are doing is proposing to make secondary markets illegal and then punish that illegality.

    You have assumed your conclusion and ignored reality.

  29. I sincerely hop not. How can you be ao archaic in your thinking. Don’t you support a global marketplace?

  30. Right, but the problem is that the increased cost there would have greatly lowered literacy in large areas of the world. The Western world can afford to pay a little more for books.

    Excuse me for sounding calloused, but I have no interest in paying higher prices to subsidize such benefits outside of the US.

    Sorry, but I consider such to be a hidden tax. One that brings ‘me’ no benefit (and arguably only more harm as jobs are then shipped out from the US based on (subsidizing) high US cost factors.

    The bottom line is that Big Multi-national Corp benefits while owing no allegiance to any of the countries involved. Wrapping their pure profit motivated actions is a skin of some type of altruism is a bit delusional.

  31. Right, but the problem is that the increased cost there would have greatly lowered literacy in large areas of the world. The Western world can afford to pay a little more for books.

    Which is not to say that I disagree with this opinion. Working in the corporate world, many problems are caused by the whole grey market BS.

    Further, with respect to books, much is online now and access everywhere is getting cheaper.

  32. Look at the majority in the flag burning case, I forget the name, but I believe it was the first case in which Kennedy participated. I cannot remember the exact combination, but Kennedy, Scalia, and Brennan all were in the 5-person majority asserting that the action was protected by free speech.

  33. The US ranks 38th in the world for health care, just below Costa Rica and just above Slovenia and Cuba.

  34. And yet, IANAE cannot see that the patent is on this reiterative effect. The patent is for multi-generational seed.

    See Univis Lens: actions downstream of the sale, even if those actions “complete” the product, fall into protection from patents because of exhaustion due to sale of an earlier item that EMBODIED the invention. Monsanto was too clever by half by placing the invention in the replicative capabilities of the seed, whose initial sale and purpose was to make more seed.

    If Monsanto’s invention was for better tasting tofu, or heartier chicken feed, then a case may have possibly been made that the sale for those items – but the use of the seed to make more seed – had no nexus between the invention and the sale.

    The nexus exists.

    Use =make.

    The patent is exhausted when the item is sold that embodies the complete invention with a full nexus for what the purpose of the invention is.

  35. This type of thinking is probably why SimCity V, a single-player game, requires a persistent internet connection in order to play.

  36. If a feature of my product that I sell you is that it automatically duplicates itself every year, and will do so more effectively than my competitors’ products, then I fail to see why I would have any business complaining when the product I sold you does exactly what I designed it to do in your field.

    Maybe they should spend less money on lawsuits and more money on developing a seed that loses its roundup resistance after a year.

  37. MM, if Monsanto wins, farming as we knew it will be Gone with the Wind, proverbally. Farmers who replant seed will be forced to stop because their fields will be contaminated by DNA from patented plants exposed to the environment. This is exactly what happened to that farmer in Canada, who for 50 years had carefully culled the best seed and replanted so that he had created his own variety. His field was contaminated, and he was forced to destroy his own crop and begin again, or begin to buy from Monsanto. His own variety was destroyed by Monsanto’s patented variety and the acts of nature.

    That case was the worst case of injustice related to patent laws I have ever seen. Monsanto was not harmed in any way because the court found that the farmer never used RoundUP ready on his own crops. His was a technical infringement at best, but he was hugely damaged by Monsanto and its wandering seed.

    Imagine you are a rancher and have bread champion races horses forever. One day Monsanto knocks on your door and says that you have to destroy all your horses because one of your sires several generaltions back was of the patented variety that was resistant to cold. Since your ranch is in Florida, you gain no benefit. But still you have to destroy your entire herd. What a mockery of justice.

  38. Undifferentiated commodity seed is sold from grain elevators to be eaten, isn’t it?

    Amongst other things, including second season planting.

    You missed that tidbit. Maybe you believed Monsanto (if so, I have some choice beachfront property in Montana you would be very interested in).

  39. mmmm: The point is: the seed was a permitted, unrestricted sale.

    True, in the sense that Bowman could have used the seeds he purchased for gravel. He could have eaten the seeds he purchased. He could have planted the seeds he purchased. He could have re-sold the seeds he purchased. He could have eaten the resulting plants from the seeds he purchased. But he can’t plant the seeds produced by those plants or sell them without infringing the patent.

    The use was the conventional use of a seed: plant, replant, etc.

    That’s nice. These aren’t “conventional” seeds, however. They’re patented seeds. What do you suppose the point of a patented seed is if anyone can make their own seed and sell it?

    The whole thousands of years point isn’t one of patent law, it’s a demonstration that he used freely acquired seeds and used them in the perfectly conventional way.

    Why is that so hard to understand?

    Your point is very easy to understand. I found it very unpersuasive for the reasons I gave you. Here’s another counterpoint: for how many thousands of years were farmers spraying their fields with glyphosphate?

    Have you heard of plant patents by the way? Do they also offend your sensibilities? They should, according to your “conventional” logic.

  40. That’s right up there for banality with Malcolm’s example of a magic screwdriver and then replying that there really aren’t any magic screwdrivers.

  41. Seriously? You are trying to make an analogy from seed to seed in one instance to a lump of metal to something completely different in another?

    Do you even think before you post?

    Now if the lump of metal you sold was sold because the natural use (nexus of reason sold and the patent) was that the lump of metal made more lumps of metal, then your analogy may (but most likely still not), just may have some sense.

  42. You seem to be having trouble with this nexus between the patented good and the reason for the sale in the first place thing.

    Undifferentiated commodity seed is sold from grain elevators to be eaten, isn’t it?

    Maybe there should be some sort of rule against buying patented seed in bulk.

  43. Big Bob, I'm not quite certain I fully understand your point about foreign manufacture, but I have proposed that we level the playing field regarding wages and impose upon all imports a tariff that would essentially make up the difference between the legal or average wage rate of making an item and the US minimum wage. This would equalize the playing field between US manufacturers and foreign manufacturers regarding wage rates to a great degree.

  44. No it’s not. It’s for herbicide resistance.

    You are as incorrect here as you are in your next statement. The correct answer is 180 degrees from your view.

    You seem to be having trouble with this nexus between the patented good and the reason for the sale in the first place thing.

  45. Kirtsaeng certainly did buy in bulk. It is my understanding that he was making $1 million per year off of purchases and resale of schoolbooks.

    Regarding buying in bulk, I think one can make illegal bulk purchases and resales while preserving the right to buy small quantities for personal use.

  46. In the Bowman case, the patent owner is not deprived of anything.

    Just like in the vast majority of all patent cases, whether or not anything was originally purchased from the patentee.

    Except that Monsanto probably does have provable losses in this case, because they’re in the business of authorizing individual plantings for money, and he did a bunch of those without paying them money.

    he used freely acquired seeds and used them in the perfectly conventional way.

    That’s never been a defense to infringement by copying. Why is that so hard to understand?

    What if Bowman had freely acquired a lump of metal and had it stamped or cast into patented car parts in a perfectly conventional way? He’s free to use the metal the same way people have been freely using metal for centuries, right? After all, it’s his metal. And the lump of metal is consumed in the process.

  47. I might agree w/ Ned Heller if those same “businessmen” were not allowed to exploit that same “civilized” vs. “uncivilized” price differential during manufacturing. Buy low / sell high = capitalism. Also, as a a recent grad I am offended by the unjustifiably high cost of text books that is largely subsidized by the US Government (in the form of loans).

  48. Nah, just restrict the first sale with a license, software/Monsanto- like. Problem solved. There’s no reason to suspect that such a license would be unenforceable. It just has to be something more than a notice published on the inside cover. Shrinkwrap, perhaps?

  49. “What if you make a bunch of copies of a lawfully purchased patented device, and then smash the original with a hammer? Legally relevant?”

    That is a ludicrous argument. One use of a seed is to make more seeds. That’s the point. We’ve had thousands of years of that behavior. To say somehow the unrestricted sale of a good for it’s customary and intended purpose creates infringers of second comers is an unnecessary hole.

    In your case, unless you’re saying that the purpose of the patented device is to make more patented devices, you have no analogy. Even if it were, then your opportunity to extract what the market will bear happens at the first device and you’re free to restrict, by contract, the manufacture and sale of other patented devices. That one is super easy to contract around.

    In some ways, Monsanto tried that and failed.

  50. Further incentive for publishers to further push licensed digital copies that can be controlled via DRM.

  51. One for example buys in bulk. Which one?

    Good question. Kirtsaeng didn’t buy in bulk.

    What’s illegal about buying in bulk when it’s legal to fill one prescription, anyway?

  52. The point is: the seed was a permitted, unrestricted sale. The use was the conventional use of a seed: plant, replant, etc. In the Bowman case, the patent owner is not deprived of anything. They got what they could from the market. Bowman was a second purchaser of a seed that was without restriction.

    The whole thousands of years point isn’t one of patent law, it’s a demonstration that he used freely acquired seeds and used them in the perfectly conventional way.

    Why is that so hard to understand?

  53. mein Gott but do you have your thinking cap on backwards.

    You should try it sometime. It won’t obstruct your peripheral vision as much, and you’ll be better able to see the big picture.

  54. Anon, I think it is easy to distinguish a person buying and selling drugs from a person who is buying for personal use. One for example buys in bulk. Which one?

  55. should be protected against gray market Pirates.

    Problem is Ned, that that bath is inseparable from the baby of secondary markets, which is inseparable from our larger notion of property.

    Perhaps you can achieve your desire on your home world, but here on planet Earth, secondary markets are not going anywhere.

  56. the very purchased use

    Can somebody please translate? I thought we were talking about purchased seed. Now someone is apparently selling uses, or something.

    the seed is consumed in the ‘make’ process.

    And produces 20-80 times as many seeds, typically.

    the distinction here that the seed is consumed in the ‘make’ process.

    What if you make a bunch of copies of a lawfully purchased patented device, and then smash the original with a hammer? Legally relevant?

  57. (and the fact that the patent is for regeneration)

    No it’s not. It’s for herbicide resistance.

    And even if it were, it would only make growing a new generation a clearer case of infringement.

  58. Except when the very purchased use IS to make.

    That’s where your analogy breaks down IANAE.

    Lets not forget the focus by the Supremes on the conditional sales portion, and the distinction here that the seed is consumed in the ‘make’ process. This is very much NOT like a factory, or creating copies of something that leaves the master intact.

  59. when the “patented use” is a feature that makes the patented article easier to copy

    Not only is it NOT ‘Which isn’t really as big a deal as you make it out to be
    THAT is the crux of the matter – the nexus between the sale and the patented item (and the fact that the patent is for regeneration). THAT is what the sale was about. If you wanted non-patented seed, you always could go somewhere other than to Monsanto to buy the seed.

    Wait. That is exactly what Bowman did.

  60. Selling at different prices in different places is a business decision, and a business risk. The purpose of patents is not to eliminate business risks, but to encourage people to take them.

    Indeed. The whole theory on which patents are premised is that competitors will evolve (“progress”) more quickly if forced to compete (as opposed to copy). Every patent is a new “law” which says, in effect: “you can’t do/make this thing without risk unless you have permission of the owner.”

    And yet when a change in the law presents some other challenge to the same businesses who routinely benefit from the legal obstacles they set up for others, those laws are seen as “anti-business” and declared to be “bad for America”, generally.

    Soon the other foot will drop: we’ll hear about how companies are “forced” to raise their prices on domestic sales to account for the change. They don’t want to strike back at consumers. They “have to” because of the those “onerous regulations” and the bad Supreme Court that “doesn’t understand business”. It’ll be a replay of the banksters’ response to the slap on the wrist (e.g., restrictions on credit card/ATM fees) that they received after they destroyed the economy.

  61. let me just clarify

    That didn’t need to be clarified. At all.

    What does need to be clarified is the legal basis for why we should protect some people who take advantage of the price differential by charging Americans more than the product costs abroad, but not other people who take advantage of the price differential by charging Americans more than the product costs abroad after the patentee has already taken his cut.

  62. IANAE, I don't think you understand that Global Tech was about inducing infringement and was not about direct infringement.

    Under the law as clearly defined by the Supreme Court in today's case, the rightful owner of a seed has the right to use it for the patented purposes completely free of the patent. That is the pith and essence of exhaustion. The patent owner has no control over the use to which the owner of the patented seed may put that seed, including its patented use.

    NONE!

  63. IANAE said, "Why should some capitalists be able to take advantage of the price differential but not others? It's a market inefficiency, and it's available to whoever is resourceful enough to lawfully profit from it.

    As you say, the price differential is a happenstance that results from current economic and social conditions. If those conditions ceased to exist, for example because the rest of the world got "civilized", what recourse would the patentee have? I'm thinking none at all, which means he has no fundamental exclusive right to the price differential per se."

    I don't think I understand your point here, but let me just clarify that I believe that all copyright owners and all patent owner should be protected against gray market Pirates.

  64. Why should that purchaser not be free to alienate the seeds or offspring that results? That runs counter to thousands of years of agriculture.

    But it’s entirely consistent with patent law, including plant patent law.

    As for “thousand of years of agriculture”, farmers are perfectly free to continue to farming as they did for “thousands of years.” Many farmers do in fact follow the ancient methods. I buy food from those farmers whenever I can (i.e., nearly always).

    Genetically engineered seeds are new. Patent law and the farmers who use those seeds need to evolve accordingly. Gosh, that reminds me of another change that is soon to come.

  65. They were claiming infringement for making their own copy of it.

    Yes, exactly. Thank you.

    Remind me again of what Bowman does for a living.

    That runs counter to thousands of years of agriculture.

    All of patent law runs counter to thousands of years of commerce that had previously been unfettered by patents. The thing about implementing patent legislation is that it changes the law.

    Incidentally, spraying a potent herbicide all over a field of grain also runs counter to thousands of years of agriculture. But it’s still happening.

  66. You also need to get it out of your head that knowledge of the patent is relevant for direct infringement. It is legally irrelevant.

    I’m not relying on knowledge of the patent at all.

    I’m relying on active and deliberate copying of a patented article, which is what happened in Global-Tech. The reason the case wasn’t “about” that is because it was completely uncontroversial that the copying of an article lawfully purchased from the patentee was an act of infringement. The buyer can’t “legally use” it to make more. Exhaustion doesn’t go that far.

  67. Businessmen should be able to sell into any of these markets without some virtual pirate ripping the businessman off by reselling in US thereby undercutting his profits here.

    Why should some capitalists be able to take advantage of the price differential but not others? It’s a market inefficiency, and it’s available to whoever is resourceful enough to lawfully profit from it.

    As you say, the price differential is a happenstance that results from current economic and social conditions. If those conditions ceased to exist, for example because the rest of the world got “civilized”, what recourse would the patentee have? I’m thinking none at all, which means he has no fundamental exclusive right to the price differential per se.

    I once saw a chart that showed that drug companies made all the necessary profits to support R&D only in the US.

    How does that make you feel, as an American consumer?

  68. IANAE, Global Tech involved implied knowledge of the patent. It has no implication at all about exhaustion whether the only question is whether the patent sold or authorized the sale of the patented item. If he did, patent rights are exhausted in that item. The buyer can legally use it for the patented purpose.

    You also need to get it out of your head that knowledge of the patent is relevant for direct infringement. It is legally irrelevant.

  69. The price differential is an artifact of relative civilization (or better, lack of it)…

    Ouch. Are you sure that’s what you meant to say, Ned?

  70. IANAE, with all due respect, you really do not get it. The price differential is an artifact of relative civilization (or better, lack of it) or degree of socialism. Businessmen should be able to sell into any of these markets without some virtual pirate ripping the businessman off by reselling in US thereby undercutting his profits here.

    I once saw a chart that showed that drug companies made all the necessary profits to support R&D only in the US. Sales in every other jurisdiction we essentially at very little or no profit at all. It is a wonder that they even put patents in countries other than the US. It makes no sense at all.

  71. “Defendant bought a patented chattel and copied it. Infringement. Damages. Willfulness. Controversy? Not so much.”

    What kind of reasoning is that?

    I don’t think that the plaintiff was claiming infringement as it related to the lawfully acquired device or its use. They were claiming infringement for making their own copy of it.

    At some level, both Bowman and Kirtsaeng both involve the alienation of the good bought without restriction on the market in a manner that one would expect. Why should that purchaser not be free to alienate the seeds or offspring that results? That runs counter to thousands of years of agriculture.

  72. I’m not so sure that they do it arbitrarily, they do it such that it maximizes profits from their legal monopoly which each of the big four leverages via their oligopoly.

    Funny thing is that the authors don’t usually make bank off of them so far as I hear. Though some do.

    It’s basically all just a government sanctioned scam created and enforced by law ltards.

  73. It tells one that a patentee cannot impose restraints on chattles once sold for any number of reasons.

    I think you’ll find that a patentee can impose restraints on copying a patented chattel. Remember Global-Tech? Defendant bought a patented chattel and copied it. Infringement. Damages. Willfulness. Controversy? Not so much.

    The Supremes will have to do some very fancy footwork to hold otherwise in the case of patented seed.

  74. but not because on jurisdiction has no effective copyright or patent protection, or has price controls.

    It doesn’t really matter why. A price differential exists only for as long as it exists. Capitalism inherently arbs away market inefficiencies, and when they’re gone they’re gone.

    It’s not the business of the US courts to enforce US patents abroad. Selling at different prices in different places is a business decision, and a business risk. The purpose of patents is not to eliminate business risks, but to encourage people to take them.

  75. IANAE, but not because on jurisdiction has no effective copyright or patent protection, or has price controls. Quality King shall be reversed, mark my words.

  76. IANAE, I urge you to read the common law provisions of Kirtsaeng. It tells one that a patentee cannot impose restraints on chattles once sold for any number of reasons. The Supremes will have to do some very fancy footwork to hold otherwise in the case of patented seed.

    The handwriting is on the wall, Mr. Examiner, not.

  77. Mark my words, IANAE, Quality King will legislatively be refeversed just as Kagan suggested in her concurrence. I think Congress will carve out small fry, but realistically, the defendant here was in the business for profit of buying books abroad cheap and selling them here dear. That to me is offensive.

  78. the basis of the Federal Circuit’s holding was that the authorized purchaser of seeds from the grain elevators could not even use them for the patented use.

    Which isn’t really as big a deal as you make it out to be, when the “patented use” is a feature that makes the patented article easier to copy.

    The freedom to copy patented articles by the acre during the patent term is a far greater affront to the patent system than some imagined slight against infringers who think they should get a free ride because copying feels like “using”.

  79. seek a reversal of this case so that market segmentation is legal,

    It’s perfectly legal, it’s just not enforceable.

    This is one of those situations where the economy is inefficient and you’re welcome to squeeze as much profit out of the opportunity as you can, but once the opportunity is gone the courts won’t reconstruct it for you. You know, “capitalism”.

  80. But, Malcolm, the basis of the Federal Circuit’s holding was that the authorized purchaser of seeds from the grain elevators could not even use them for the patented use.

    If this is correct, even a farmer who purchased seed directly from Monsanto would need further permission to plant.

    The case did not directly involve second generation seed generated from seed that was sold to Bowman. It involved the very seed Bowman sold to Bowman.

  81. This does not bode well for patented drugs. I think the drug companies might band together with publishers to seek a reversal of this case so that market segmentation is legal, and to make it clear that Congress intends this to apply to patents as well.

  82. This seems like the right outcome and hopefully foreshadows the outcome in Bowman as well.

    Nope. The distinction between this case and Bowman will make all the difference: the alleged infringer in this case was selling the very same books that were purchased. He was not making new copies of the books.

  83. I was hearing on a video and a TED talk the other day that life saving drugs are actually a really bad deal per dollar spent on how much of an impact you could have by instead providing basic necessities of life.

    No doubt. That is why healthcare in the US compares poorly that of other so-called “first-world” countries.

  84. This seems like the right outcome and hopefully foreshadows the outcome in Bowman as well. In essence, the court held that an unrestricted sale of a tangible good gives the purchaser the right to sell it and to use it which cannot, and should not, be restricted by an upstream intellectual property rights holder. The market already set the price and the producer took the value that the market would bear.

    What it doesn’t do, of course, is say that you can’t impose such limitations by way of contract. For example, require the purchaser of a Thai textbook to agree not to resell it by license — not just a notice in the book (as in Bobbs Merril).

    I think that that’s the next likely thing to come. And I’d be super surpised if you don’t see that in form contracts for cars, movies, and other tangible goods.

  85. “The latest big pharma offerings are pretty much the last thing that third-world countries need.”

    Yeah I was hearing on a video and a TED talk the other day that life saving drugs are actually a really bad deal per dollar spent on how much of an impact you could have by instead providing basic necessities of life.

  86. “refuse to permit or enforce restraints on the alienation of chattels”

    I ha te it when people try to restrain on my alienation of my chattels.

  87. Seems to me that Congress should take the hint from Justice Kagan and amend the Act to overrule Quality King and provide that the first sale doctrine doesn’t apply to importation under Section 602(a)(1). No need to touch Section 109. That would place liability on those who attempt to unlawfully import cheap drugs (books, etc.) into the United States, but not on those who innocently purchase them.

  88. they would lose incentive sell medicines in third-world countries at around the marginal cost because those products could be then shipped to the US to undercut the high monopoly-like profit margin being earned here

    Two points:

    1) The latest big pharma offerings are pretty much the last thing that third-world countries need.

    2) Profit is profit. If the current companies can’t figure out how to develop and sell new drugs to people who need them (and more importantly, people who don’t need them) and make a profit, then some other company can step in and take their place.

  89. From what I’ve seen corporations have surprisingly used their ability of price differentiation to help under developed countries and to help foster intellectual property rights.

  90. The concern here is not that the pharmaceutical companies would lose profit but that they would lose incentive sell medicines in third-world countries at around the marginal cost because those products could be then shipped to the US to undercut the high monopoly-like profit margin being earned here. 

  91. we also have the issue of patented medicines that are sold cheaply abroad and that could be imported into the US for a substantial profit.

    More substantial than the profit that is being earned by the patentees who gouge US consumers in order to keep the CEO’s private jets nice and shiny?

  92. Thanks NWPA

    There are certainly some important policy issues here. In addition to cheap books in third-world-countries, we also have the issue of patented medicines that are sold cheaply abroad and that could be imported into the US for a substantial profit.

  93. And, I will say Dennis, that when I read a post from you I don’t get the feeling that you have a dog in the fight. And, you address concerns over your academic scholarship.

  94. I don’t know. Seems like allowing publishers to charge less to less developed countries has done much for the literacy of the under developed countries.

Comments are closed.