The Supreme Court’s decision in Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519 (2013), resolved one of the most commercially significant copyright questions of the internet age: does the first sale doctrine apply to goods manufactured abroad and lawfully purchased in foreign markets? The Court held that it does. The decision validated the business model of countless internet retailers who import and resell goods purchased at lower prices in international markets, and it forced copyright owners to rethink how they structure global pricing strategies.
The first sale doctrine, codified at 17 U.S.C. § 109(a), provides that the owner of a lawfully made copy of a copyrighted work may sell or otherwise dispose of that copy without the copyright holder’s permission. This doctrine is what makes used book stores, DVD rental shops, and the secondary market for physical goods legally possible. Once a copyright owner sells a copy, their distribution right with respect to that copy is exhausted.
Prior to Kirtsaeng, the lower courts had divided on whether the first sale doctrine applied only to copies manufactured in the United States or whether it also extended to copies lawfully manufactured abroad. The Second Circuit had held that Section 602(a)(1)—which prohibits unauthorized importation of copies—essentially trumped the first sale doctrine for foreign-made copies, making parallel importation a form of copyright infringement.
Supap Kirtsaeng, a Thai student studying at Cornell University, had friends and family purchase textbooks in Asia—where John Wiley & Sons sold them at lower prices than in the United States—and ship them to him. He resold the books on eBay at below-market U.S. prices, earning approximately $900,000 before Wiley sued him for copyright infringement.
Wiley argued that the first sale doctrine did not apply because the textbooks were manufactured outside the United States, and that the importation of foreign-manufactured copies constituted infringement under Section 602(a)(1) regardless of whether they had been lawfully purchased.
In a 6-3 decision written by Justice Breyer, the Supreme Court reversed the Second Circuit and held that the first sale doctrine applies to all copies lawfully made under the Copyright Act, including those manufactured abroad. The Court examined the text, structure, and history of the Copyright Act and concluded that the phrase “lawfully made under this title” does not restrict the doctrine’s application to copies made in the United States.
The Court was also persuaded by the practical consequences of the Second Circuit’s ruling. If the first sale doctrine did not apply to foreign-made copies, it would effectively give copyright owners control over the resale of any product containing a copyrighted element—including foreign-manufactured cars with copyrighted software and labels, imported clothing with embroidered copyrighted designs, and a vast range of ordinary consumer goods.
The Kirtsaeng decision legitimized the practice of parallel importation—purchasing goods lawfully in foreign markets and reselling them domestically. This is the business model underlying many internet marketplace sellers, importers, and discount retailers who source products where prices are lower.
For copyright owners, the decision created a pricing problem. A manufacturer who sells the same product at different prices in different countries can no longer use copyright law to prevent arbitrage. Goods sold cheaply in developing markets can now be purchased and resold in the U.S. market without copyright infringement liability.
The Kirtsaeng decision addressed copyright law, not contract law. Copyright owners responded by including contractual restrictions in their foreign sales—prohibiting resale outside the purchasing territory or requiring destruction of foreign-market copies. Whether such contract terms are enforceable against downstream purchasers who had no contractual relationship with the original seller is a separate legal question.
If your business model involves importation and resale of goods, or if you are a copyright owner trying to manage international pricing strategies, Revision Legal’s intellectual property attorneys can advise on the legal frameworks applicable to your situation. Contact us today.
Following the Supreme Court’s decision, copyright owners who relied on Section 602 to prevent parallel importation shifted their enforcement strategies. The most effective response has been contractual: building geographic resale restrictions directly into the terms of sale in foreign markets. A buyer who agrees not to resell outside the purchasing territory is bound by that contract, and breach of that contract gives the seller a breach of contract claim against the contracting party.
The limitation of this approach is that contract restrictions bind the immediate purchaser but typically do not bind downstream buyers who purchased in the secondary market without knowledge of the original restriction. Courts have generally declined to impose contractual restrictions on downstream purchasers who had no contractual relationship with the original seller, particularly in commercial markets where goods change hands multiple times.
Kirtsaeng directly affected the ability of copyright owners to maintain systematic international price discrimination. When U.S. consumers can readily access foreign-market versions of products at lower prices—whether through online grey-market retailers or their own international purchases—the market premium that U.S. pricing commands erodes.
The textbook publishing industry, which was directly affected by Kirtsaeng, responded by accelerating the shift to digital textbook licensing and rental models that make grey-market arbitrage impossible. Digital licenses are personal to the purchaser, platform-specific, and often time-limited—none of which are characteristics that support a resale market.
Kirtsaeng addressed physical copies of copyrighted works. The application of the first sale doctrine to digital goods—ebooks, digital music files, licensed software—remains contested. Courts have generally held that the first sale doctrine does not apply to digital transmissions because transmitting a digital file necessarily involves making a copy, and the copyright owner’s reproduction right controls copying.
The Second Circuit addressed this in Capitol Records, LLC v. ReDigi Inc., 910 F.3d 649 (2d Cir. 2018), holding that ReDigi’s service for reselling pre-owned digital music files was copyright infringement because the transfer required copying. The practical result is that the robust secondary market that exists for physical copies of books, records, and DVDs does not exist for digital equivalents.
For e-commerce businesses that source inventory internationally, Kirtsaeng is a protection, not a concern. Purchasing legitimate copies of copyrighted goods in foreign markets at lower prices and reselling them domestically is not copyright infringement under U.S. law, provided the copies were lawfully made and lawfully purchased.
The practical risks for parallel importers involve trademark law rather than copyright law. Trademark-based grey market claims can arise where the domestic trademark owner is a different entity than the foreign seller, or where the imported goods differ materially from domestically sold goods. Review your sourcing practices with both trademark and copyright counsel before building a business around parallel importation.
Revision Legal advises importers, e-commerce businesses, content distributors, and copyright owners on the legal frameworks governing distribution rights, first sale doctrine, and parallel importation. Contact us today to assess your situation.
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