Will New Second Class Status for Copyright's First Sale Doctrine Drive Production Offshore?

17 USC § 109(a) – The Statutory Foundation for the First Sale Doctrine

Section 106(3) of the Copyright Act of 1976 (the “Copyright Act”) grants certain exclusive rights to the owner of a copyright in a copyrighted work, including the exclusive right to distribute (and authorize others to distribute) copies of the work. 17 U.S.C. § 106 (“Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: … (3) to distribute copies … of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; …”). Under Section 602(a) of the Copyright Act, unauthorized importation into the U.S. of a copyrighted work acquired outside the U.S. is an act of copyright infringement because it violates the copyright owner’s exclusive right of distribution. 17 U.S.C. § 602(a) (“Importation into the United States, without the authority of the owner of copyright under this title, of copies … of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies … under section 106, actionable [for infringement] under section 501.”).

The exclusive rights of the copyright owner, including the exclusive right of distribution, are, however, expressly limited by sections 107 through 120 of the Copyright Act. 17 U.S.C. § 106 (“Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: …”). One such express limitation is the so-called first sale doctrine codified in section 109(a), which entitles the “owner of a particular copy” of a copyrighted work that is “lawfully made under this title” to sell or otherwise dispose of that copy without the authorization of the copyright owner. 17 USC § 109(a) (“the owner of a particular copy … lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy …”).¹

When a copyrighted work is made in the U.S. and sold in the U.S. by or under the authority of the copyright owner, the first sale doctrine clearly kicks in, and under section 109(a) the purchaser may, without the authority of the copyright owner, sell or otherwise dispose of that copy of the work. But that was easy. Consider the situation in which the copyrighted work is made abroad by or under the authority of the copyright owner, and sold to a purchaser outside the U.S. Does the first sale doctrine apply when the work is re-sold in the U.S. by the purchaser? Or consider the situation in which the copyrighted work is made in the U.S. by or under the authority of the copyright owner, and then sold to a purchaser outside the U.S. Does the first sale doctrine apply when the work is re-sold in the U.S. by the purchaser? Would your answer to these questions depend on whether the purchaser was authorized by the copyright owner to re-sell the work in the U.S.? In each of those circumstances, the breadth of the first sale doctrine is far from crystal clear. If the work is deemed to have been “lawfully made under this title” within the meaning of that phrase in section 109(a) – even though it was made outside the U.S. or was made in the U.S. but purchased outside the U.S. – then the first sale doctrine allows the purchaser to import the work into the U.S. and sell the work in the U.S. But if not, such importation and sale without the authority of the copyright owner is an act of copyright infringement.

The subject of this writing are the most recent legal authorities on the issue of the proper interpretation of the “lawfully made under this title” clause of section 109(a).

1. Because a licensee is not the “owner of a particular copy,” the first sale doctrine of section 109(a) has no applicability to license transactions in which ownership is of the copy is not transferred. See Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010) (section 109(a) not applicable to copies of software that are licensed and not sold).

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