MVS Filewrapper® Blog: Supreme Court Decides Foreign First Sale Doctrine

            The Supreme Court recently decided a much anticipated case, finally answering a long awaited question:  Does the first sale doctrine apply to copyrighted works manufactured in other countries?  According to the Supreme Court in Kirtsaeng v. John Wiley & Sons, Inc., the answer to this question is yes.

            John Wiley & Sons sued Supap Kirtsaeng for selling textbooks on eBay that he imported from foreign countries.  The books were printed by a wholly-owned subsidiary of Wiley, Wiley Asia, and were marked with a legend designating them for sale only in Europe, Asia, Africa, and the Middle East.  Wiley alleged that selling the foreign textbooks in the United States infringed its U.S. copyrights on its American editions.  Kirtsaeng attempted to assert that the first sale doctrine precluded liability, but was denied the ability to raise the defense by the district court judge.  The jury found that Kirtsaeng was liable for willful copyright infringement for eight works and awarded $75,000 in damages for each work.

            Kirtsaeng appealed the jury's verdict to the Second Circuit Court of Appeals.  The Second Circuit concluded that the district court was correct to preclude Kirtsaeng from raising the first sale doctrine because the books at issue were manufactured outside the United States.  The appellate court based its decision on the language of the 1976 Copyright Act and the Supreme Court's decision in Quality King Distributors, Inc. v. L'anza Research Int'l, Inc., 523 U.S. 135 (1998).  In Quality King, the Supreme Court held that § 602(a)(1), by referencing the exclusive distribution right of § 106(3), incorporates the later subsections' limitations including, in particular, the "first sale" doctrine of § 109.  However, the Supreme Court in Quality King expressly decided not to answer the question of whether or not a copyright work manufactured abroad was eligible for the first sale doctrine exemption of § 109. 
 

            In reviewing the Second Circuit’s decision, the Supreme Court took Quality King one step further, holding that the first sale doctrine applies to copyrighted works both manufactured in the U.S. and abroad, notwithstanding the 1976 Act's provision against importation of copyrighted works in §§ 602 and 603.  As some have noted, this unique situation occurred because, as written, the 1976 Act—as it relates to the importation of foreign works and the first sale doctrine—has two equally plausible statutory constructions, as evidenced by the fact that the circuit courts are divided on the issue.

            The Supreme Court's decision in Kirtsaeng focused mainly on the correct statutory interpretation of § 109(a) of the 1976 Act. Specifically, the Court answered "whether the words 'lawfully made under this title' restrict the scope of §109(a)'s 'first sale' doctrine geographically." Wiley's interpretation of  § 109(a) follows the Second and Ninth Circuit which apply "a form of geographical limitation" on the imposition of the first sale doctrine, stating that the doctrine only covers works manufactured and created in America.  Kirtsaeng, on the other hand, suggests the words "lawfully made under this title" impose a "non-geographical limitation" on the first sale doctrine.  The Supreme Court agreed, stating:

In our view, §109(a)'s language, its context, and the common-law history of the "first sale" doctrine, taken together, favor a non-geographical interpretation. We also doubt that Congress would have intended to create the practical copyright-related harms with which a geographic interpretation would threaten ordinary scholarly, artistic, commercial and consumer activities. We consequently conclude that Kirtsaeng's nongeographical reading is the better reading of the [1976] Act.

In making its decision, the Court relied on what it considered to be a proper reading of “'lawfully made under this title” in § 109(a) of the 1976 Act.  The Court found "linguistic difficulty" with previous circuit's interpretations of § 109(a).  The Ninth Circuit's interpretation was particularly difficult to reconcile in the Court's opinion, as the interpretation contained a "half-geographical/half-nongeographical interpretation" of the phrase "lawfully made under this title."  The Ninth Circuit, for example in Denbicare U.S.A. Inc. v. Toys "R" Us, Inc., has interpreted the first sale doctrine to cover both (1) copies manufactured aboard but first sold in the United States and (2) copies manufactured abroad but first sold in the United States with the American copyright owner's permission.  According to the Court, "it would seem that those five words either do cover copies lawfully made abroad or they do not" and declined an attempt to read a half-geographic limitation in § 109(a) of the Act.

The Court also looked to the common law to solidify what it held to be the proper statutory interpretation of § 109(a).  "The 'first sale' doctrine is a common-law doctrine with an impeccable historic pedigree . . . [and] makes no geographical distinctions [in the application of the 'first sale' doctrine."  The Court drew on the conclusion reached in Bobbs-Merrill v. Straus, the first case to discuss and interpret the 'first sale' doctrine.  In Bobbs-Merril the Court stated "that the copyright laws were not 'intended to create a right which would permit the holder of the copyright to fasten, by notice in a book . . . a restriction upon the subsequent alienation of the subject-matter of copyright after the owner had parted with the title to one who had acquired full dominion over it."

           The Court's decision in Kirtsaeng provides a clarification of the 'first sale' doctrine as it applies to copyrighted works manufactured in other countries.  It remains to be seen how this long-awaited decision will affect both book publishers and the public at large.

MVS Filewrapper® Blog: Changes to Implement and Guidelines for Examination under AIA

The United States Patent and Trademark Office has released its rules regarding changes under first inventor to file provisions of the Leahy-Smith America Invents Act. The rules published by the USPTO in the Federal Register on March 16, 2013 provide guidelines for implementing the new patent law and guidelines for examination of patent applications under the new standards.  The documents cover a broad range of topics, with a high degree of specificity, but we provide highlights from both of the Federal Register publications are as follows:

-          First-to-file standards only apply to applications filed on or after March 16, 2013

If an application claims priority to an application filed prior to March 16, 2013, it will be examined under the pre-AIA guidelines, i.e., first to invent standard.  The application may not claim new matter, i.e., matter not supported by the originally filed application (priority application).  If the application does have new matter, it will be examined under the first-to-file standards.

-          Required statements from the applicant in transition applications

Transition applications are those where a non-provisional application is filed on or after March 16, 2013 that claims priority or the benefit of the filing date of an earlier application.  If the application contains, or at any time contained, a claim to an invention that has an effective filing date of March 16, 2013 or after, the applicant is required to file a statement indicating that there is matter or was matter claimed that has an effective filing date on or after March 16, 2013.  The guidelines clearly state that the particular limitation does not have to be specified.  Thus, if any new matter is added to the claims of a transition application, the Applicant must inform the patent office in a statement.

-          In certain respects, prior art under the statute is broader than before

For applications being examined under the first-to-file standards, prior art is broader than before.  Now any patent or published patent application is prior art as of its earliest effective U.S., foreign, or international filing date.  Furthermore, the first-to-file standard eliminates the requirement that prior public use or sale be “in this country,” and therefore may now be anywhere in the world.

-          Interference proceedings have been replaced by the new derivation proceedings

      Under the first-to-invent standards interference proceedings existed to determine who invented first.  Under the new first-to-file patentability standards, interference proceedings have been replaced by derivation proceedings.  The derivation proceedings are instituted to determine if a prior public disclosure of an invention was actually derived from the inventor and is one that does not bar the invention from patentability

MVS Filewrapper® Blog: New and Useful - March 15, 2013

  • In Brilliant Instruments, Inc. v. GuideTech, LLC, the Federal Circuit reversed a district court’s order granting summary judgment of non-infringement of three related patents.  The three asserted patents relate to circuits that measure the timing errors of digital signals in high-speed microprocessors.  The inventor of the three patents left employment with the plaintiff, GuideTech, and founded the defendant Brilliant Instruments.  Plaintiff alleged that two of Brilliant’s products infringed its patents.  The district court granted summary judgment of non-infringement GuideTech argued that the district court erred in concluding no genuine issue of material fact existed with respect to infringement of the three patents, particularly in light of GuideTech’s expert reports describing the defendant’s products and delineating a theory of literal infringement and infringement under the doctrine of equivalents.  Ultimately, the Federal Circuit concluded that the evidence, particularly the expert reports, provided a sufficient basis for a genuine issue of material fact.
  •           In Move, Inc. v. Real Estate Alliance, Ltd., the Federal Circuit vacated the district court’s grant of summary judgment of non-infringement.  Plaintiff owns a patent directed to methods for locating available real estate properties using a zoom-enabled map on a computer.  Defendant operates and maintains multiple interactive real estate websites.  In granting summary judgment of non-infringement the district court held that the “search by map” and “search by zip code” functions on the defendant’s websites did not meet the “selecting” steps required by the asserted claim.  The Federal Circuit agreed that there was no genuine issue of material fact regarding literal infringement; however, the Court faulted the district court for not analyzing induced infringement under 35 U.S.C. § 271(b).  The Federal Circuit highlighted its precedent in Akamai noting that a lone defendant can still be liable for induced infringement.

  • In Radio Sys. Corp. v. Lalor, the Federal Circuit affirmed in-part and reversed in-part a district court’s order granting summary judgment of non-infringement.  The plaintiff is the owner of two patents directed to improvements on electronic animal collars—the ’014 patent and ’082 patent.  Based on the claim construction, the district court awarded summary judgment of non-infringement of the ’014 patent.  The Federal Circuit agreed with the claim construction and affirmed the non-infringement based on the claim construction.  The Federal Circuit also affirmed the district court’s holding that the plaintiff was equitably estopped from asserting ’014 patent, due to the fact that the plaintiff had previously sent the defendant a cease and desist letter based on the ’014 patent and then remained silent for some years.  The Federal Circuit, however, disagreed with the district court’s finding that the plaintiff was equitably estopped from asserting the ’082 patent, which had not issued at the time the first cease and desist letter was sent.  Thus, the Federal Circuit held that the elements of equitable estoppel had not been met with respect to the ’082 patent

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