Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 1 of 18
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`PEARSON EDUCATION, INC.,
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`Plaintiffs,
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`- against -
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`GANGHUA LIU, ET AL.,
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`Defendants.
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`1:08-cv-06152-RJH
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`MEMORANDUM OPINION
`AND ORDER
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`Richard J. Holwell, District Judge:
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`Through this action, two U.S. copyright holders seek to prevent the importation
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`and resale of copies of their works that have been lawfully manufactured and purchased
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`outside the United States, a form of arbitrage sometimes referred to as “parallel
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`importation” through the “grey market.” Defendants have moved to dismiss the
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`complaint on the ground that their activities are protected by the first-sale doctrine, the
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`rule that the purchaser of a physical copy of a copyrighted work may give or sell that
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`copy to someone else without infringing the copyright owner’s exclusive distribution
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`rights. Although the question of whether the first-sale doctrine applies to copies of a
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`copyright work that have been lawfully manufactured abroad is an open question in this
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`circuit, the Supreme Court has said, in unanimous dicta, that the doctrine does not apply
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`to copies of a copyrighted work manufactured abroad. Because the case for a contrary
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`interpretation is not so strong as to justify disregarding the Supreme Court’s considered
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`views, defendants’ motion to dismiss will be denied.
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 2 of 18
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`I.
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`As the case is before the Court on defendants’ motion to dismiss, the Court takes
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`the allegations of the complaint as true and draws all reasonable inferences in plaintiffs’
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`favor. E.g., Rescuecom Corp. v. Google Inc., 562 F.3d 123, 124 (2d Cir. 2009).
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`Plaintiffs, Pearson Education, Inc. and John Wiley & Sons, Inc., publish
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`educational books throughout the world. (Compl. ¶¶ 10, 14-15.) As part of their regular
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`business, plaintiffs require authors to assign them copyrights for works they publish, or to
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`grant to them the exclusive right to reproduce and distribute their works in the United
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`States. (Id. ¶ 11.) Plaintiffs also own a number of well-known trademarks, which they
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`use to differentiate their products in the marketplace. (Id. ¶¶ 17-19.)
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`The textbooks plaintiffs publish are customized for the geographical markets in
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`which they are sold. Editions authorized for sale in the United States are of the highest
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`quality, and are printed with strong, hard-cover bindings with glossy protective coatings.
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`(Id. ¶ 14.) Sometimes, plaintiffs include academic supplements, such as CD-ROMs or
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`passwords to restricted websites, with these books. (Id.) Editions authorized for sale
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`outside of the United States, by contrast, have thinner paper, different bindings, different
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`cover and jacket designs, fewer ink colors, and lower-quality photographs and graphics.
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`(Id. ¶ 15.) These foreign editions are not bundled with academic supplements such as
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`CD-ROMs. (Id.) The cover of a foreign edition may include a legend indicating that the
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`book is a “Low Price Edition” or only authorized for sale in a particular country or
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`geographic region. (Id.) The foreign editions are uniformly manufactured outside the
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`United States. (Id.)
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`Defendants can reasonably be described as small-time internet entrepreneurs.
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`They purchase plaintiffs’ low-priced foreign editions abroad, import them into the United
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 3 of 18
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`States, then sell them to U.S. customers using websites maintained by third parties. (Id.
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`¶¶ 6-9, 20.) Plaintiffs allege that “Defendants have without permission purchased
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`Foreign Editions of plaintiffs’ books manufactured outside of the United States and
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`resold them to purchasers in the United States through the Internet using the username
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`‘JMBooks’ at . . . websites including, but not limited to, Valorebooks.com.” (Id. ¶ 20.)1
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`The complaint does not allege that any of the copies sold by defendants are piratical (i.e.,
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`unauthorized or counterfeit), manufactured without plaintiffs’ consent, or not owned by
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`defendants. Plaintiffs demand preliminary and permanent injunctions enjoining
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`defendants from selling foreign editions of their copyrighted books in the United States,
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`damages, and attorneys’ fees.
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`Defendants have moved to dismiss the complaint. They principally contend that
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`their importation and sale of plaintiffs’ foreign editions does not infringe plaintiffs’
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`copyrights, because their actions are protected by the first-sale doctrine codified in § 109
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`of the Copyright Act, 17 U.S.C. § 109 (2006). Defendants further contend that because
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`plaintiffs’ trademark claims are derivative of their copyright claims, those claims fail as a
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`matter of law.
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`II.
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`Defendants’ motion raises the question whether the importation and sale of copies
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`of a copyrighted work that were lawfully manufactured abroad violates a U.S. copyright
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`owner’s exclusive rights. Three sections of the Copyright Act are relevant to that
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`question: (i) § 106(3), the Act’s rights-granting provision; (ii) § 109(a), the Act’s
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`1 The referenced website describes itself as “the student’s #1 marketplace to buy cheap
`textbooks for college.” Valorebooks homepage, http://www.valorebooks.com/ (last
`visited Sep. 19, 2009).
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 4 of 18
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`codification of the first-sale doctrine; and (iii) § 602(a), which is entitled “Infringing
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`importation of copies or phonorecords.”
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`A.
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`Section 106(3)
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`Section 106(3) grants the owner of a U.S. copyright, “[s]ubject to sections 107
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`through 122,” the exclusive right “to distribute copies or phonorecords of the copyrighted
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`work to the public by sale or other transfer of ownership, or by rental, lease, or
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`lending . . . .” In contrast to the core copyright rights of reproduction and adaptation, the
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`distribution right is a right to control use. See John M. Kernochan, The Distribution
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`Right in the United States of America: Review and Reflections, 42 Vand. L. Rev. 1407,
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`1416-17 (1989). It primarily protects a copyright owner’s ability to control the terms on
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`which her work enters the market by providing a remedy against persons who distribute
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`copies of her work without permission. See 2 Nelville B. Nimmer & David Nimmer,
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`Nimmer on Copyright § 8.12[A], at 8-154 (2008) (“Nimmer”). Thus, although the
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`language of § 106(3) seemingly gives a copyright owner unlimited control over
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`commercial transactions involving copies of her work, it has long been recognized that
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`the principal effect of the distribution right is to give a copyright holder “a right to control
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`the work’s publication.” Id. § 8.11[A], at 8-148 (emphasis added).
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`B.
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`Section 109(a)
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`This limitation on scope of the distribution right, known as the first-sale doctrine,
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`is codified in § 109(a) of the Act. The doctrine originates in Bobbs-Merrill Co. v. Straus,
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`210 U.S. 339 (1908), a case decided under the Copyright Act of 1891. There, a publisher
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`attached a notice to the copyright page of a book which provided that the book could not
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`be sold for less than a dollar. Id. at 341. Acting in defiance of this price control,
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 5 of 18
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`defendants bought copies of the book at wholesale and resold them for eighty-nine cents.
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`Id. at 342. The publisher sued, arguing that defendants’ “unauthorized” (albeit pro-
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`competitive) sales of the book violated its exclusive right to “vend” under § 1(a) of the
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`1891 Act. Id. at 343.
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`The Supreme Court rejected the publisher’s argument, holding that “[t]he
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`purchaser of a book, once sold by authority of the owner of the copyright, may sell it
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`again, although he could not publish a new edition of it.” Id. at 350. As the Court
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`explained, a copyright owner who purposefully transfers ownership of a copy of her work
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`chooses the terms on which the work enters the market. See Bobbs-Merrill, 210 U.S. at
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`351; see also Platt & Munk Co. v. Republic Graphics, Inc., 315 F.2d 847, 854 (2d Cir.
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`1963). The purpose of the distribution right thus having been satisfied, “the policy
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`favoring a copyright monopoly for authors gives way to the policy opposing restraints of
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`trade and restraints on alienation.” 2 Nimmer § 8.12[A], at 8-155. Accordingly, the
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`Court ruled that the publisher’s right to “vend” copies of its work did not encompass the
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`right to control the terms of subsequent sales. Bobbs-Merrill, 210 U.S. at 351.
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`The outcome reached by the Court can also be justified by considering the
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`prohibitive transaction costs of affording a copyright holder an unlimited right to control
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`the terms under which her work is sold. “[S]uccessive possessors of the copy or
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`phonorecord should not be put to the trouble of having to negotiate with the owner each
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`time they contemplate a further sale or other transfer of the copy or phonorecord.” 2 Paul
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`Goldstein, Goldstein on Copyright § 7.6.1, at 7:131 (2005). If a copyright owner wishes
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`to control future sales, she can lease or rent copies of her work rather than selling them,
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 6 of 18
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`see id., or, if copies are sold, contractually limit their distribution (consistent with
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`provisions of the antitrust laws).
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`Congress codified the first-sale doctrine in the Copyright Acts of 1909, 1947, and
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`1976. Section 41 of the 1909 Act, which appears in identical form in § 27 of the 1947
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`Act, provides in relevant part that “nothing in this Act shall be deemed to forbid, prevent,
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`or restrict the transfer of any copy of a copyrighted work the possession of which has
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`been lawfully obtained.” Pub. L. No. 60-349, 35 Stat. 1075, 1084 (1909); Pub. L. No.
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`80-281, 61 Stat. 652, 660 (1947). Section 109 of the 1976 Act provides in relevant part
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`that,
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`Notwithstanding the provisions of section 106(3), the owner of a particular
`copy or phonorecord 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 or phonorecord.
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`17 U.S.C. § 109. In Quality King Distributors, Inc. v. L’anza Research International,
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`Inc., 523 U.S. 135 (1998), the Supreme Court noted that “[t]here is no reason to assume
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`that Congress intended either § 109(a) or the earlier codifications of the doctrine to limit
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`its broad scope.” Id. at 152. This understanding is consistent with the House Committee
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`on the Judiciary’s report on the 1976 Act. See H.R. Rep. No. 1476, at 79 (1979)
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`(“Section 109(a) restates and confirms the principle that, where the copyright owner has
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`transferred ownership of a particular copy or phonorecord of a work, the person to whom
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`the copy or phonorecord is transferred is entitled to dispose of it by sale, rental, or any
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`other means.”), reprinted in 1976 U.S.C.C.A.N. 5659, 5693.
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 7 of 18
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`C.
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`Section 602(a)
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`Section 602(a) addresses the extent to which the distribution right allows a
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`copyright owner to also control the importation of copies of her work. It provides in part
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`that,
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`Importation into the United States, without the authority of the owner of
`copyright under this title, of copies or phonorecords of a work that have
`been acquired outside the United States is an infringement of the exclusive
`right to distribute copies or phonorecords under section 106, actionable
`under section 501.
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`17 U.S.C. § 602(a).
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`In view of § 602(a)’s position in a separate chapter of the Copyright Act, as well
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`as the statute’s unqualified reference to all copies acquired outside the United States, one
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`might suppose that Congress intended to give copyright owners authority to restrict the
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`importation of copies of a work without regard to the first-sale doctrine, and without
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`regard to the other limitations on a copyright owner’s exclusive rights in sections 107
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`through 122 of the Act. The Supreme Court, however, has rejected this broad reading of
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`the statute.
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`In Quality King, a California-based manufacturer, L’Anza Research International,
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`sold several tons of beauty products bearing its copyrighted labels to a distributor in
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`Malta with the apparent understanding that the products would only be offered for sale
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`outside the United States. 523 U.S. at 138-39. Like plaintiffs here, L’Anza charged
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`different prices for its goods depending on the market they would be sold in. See id. at
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`139. After the shipment made its way back to the United States, L’Anza sued salons that
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`had purchased and resold its “unauthorized” products. It contended that “the importation
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`and subsequent distribution” of its copyrighted labels violated its exclusive rights under
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`§§ 106, 501, and 602 of the Copyright Act. Id. at 139-40.
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 8 of 18
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`The Supreme Court rejected this argument and held that a copyright owner’s
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`§ 602 right to control the importation of copies of her work is a species of § 106(3)’s
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`distribution right, which is subject to the first-sale doctrine. See id. at 149. The Court
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`reasoned that the plain text of § 602(a) provides that “importation is an infringement of
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`the exclusive right to distributed copies ‘under section 106.’” Id. at 144 (quoting
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`§ 602(a)). Because § 106 grants a copyright owner exclusive rights “[s]ubject to sections
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`107 through 122,” the copyright owner’s power to limit importation is qualified by the
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`first-sale doctrine. Id. at 144-45.
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`Although Quality King clarified that the first-sale doctrine was not limited by the
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`place where an initial transfer of ownership occurred, the Court did not resolve whether
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`the place a copyrighted good was manufactured mattered for first-sale purposes. As
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`Justice Ginsburg noted in a brief concurrence, the case “involve[d] a ‘round trip’ journey,
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`travel of the copies in question from the United States to places abroad, then back again.”
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`Id. at 154 (Ginsburg, J., concurring). Thus, the Court’s decision did not “resolve cases in
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`which the allegedly infringing imports were manufactured abroad.” Id. In dicta,
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`however, the Court suggested that the first-sale doctrine did not extend to copies of a
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`work manufactured abroad. Id. at 148 (opinion of the Court); see infra § IV.
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`III.
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`In view of Quality King’s holding that § 602(a)’s “distribution right” is subject to
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`the first-sale doctrine in cases involving a “round trip” transaction, the question presented
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`by defendants’ motion is narrow: Is the first-sale doctrine also applicable when a copy of
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`a copyrighted work is manufactured abroad and imported into the United States?
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`If the Court were to limit its consideration to the traditional tools of statutory
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`interpretation, it likely would answer that question in the affirmative. Section 109(a)
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 9 of 18
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`provides that “the owner of a particular copy or phonorecord lawfully made under this
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`title, or any person authorized by such owner, is entitled, without the authority of the
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`copyright owner, to sell or otherwise dispose of the possession of that copy . . . .” By
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`§ 109(a)’s terms, the first-sale doctrine applies if two conditions are satisfied. First, the
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`person claiming the doctrine’s protection must hold title to a particular copy: that person
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`must be “the owner” of the copy. And second, the copy must have been “lawfully made
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`under this title.”
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`Courts have divided over what it means for a copy to be “lawfully made under
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`this title.” § 109(a); compare Columbia Broad. Sys., Inc. v. Scorpio Music Distribs., Inc.,
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`569 F. Supp. 47, 49 (E.D. Pa. 1983) (Green, J.), aff’d without op., 738 F.2d 421 (3d Cir.
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`1984), with Sebastian Int’l Inc. v. Consumer Contacts (Pty) Ltd., 847 F.2d 1093, 1098 n.1
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`(3d Cir. 1988). On one hand, some courts have held that because a U.S. copyright holder
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`cannot sue a foreign manufacturer for violating her exclusive right to reproduce a
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`copyrighted work in copies, see 17 U.S.C. § 106(1); Update Art, Inc. v. Modiin Publ’g,
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`Ltd., 843 F.2d 67, 73 (2d Cir. 1988), a copy manufactured abroad is born in a state of
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`legal limbo, neither legal nor illegal as a matter of U.S. law. On this view, a copy of a
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`copyrighted work is not “lawfully made under this title” unless it also is “legally
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`manufactured . . . within the United States.” Scorpio, 569 F. Supp. at 49. Other courts
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`have “confess[ed] some uneasiness with this construction,” implicitly suggesting that
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`“lawfully made under this title” refers not to the place a copy is manufactured, but to the
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`lawfulness of its manufacture as a function of U.S. copyright law. See Sebastian Int’l,
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`847 F.2d at 1098 n.1.
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 10 of 18
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`In this Court’s view, the second interpretation is the better one. Starting with the
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`language of the statute, the focus of § 109(a) is on whether a particular copy was
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`manufactured lawfully. The statute provides that to be subject to the first-sale doctrine,
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`“a particular copy or phonorecord” must be “lawfully made.” It then specifies which
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`jurisdiction’s law controls this determination. For the first-sale doctrine to apply, a copy
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`must be “lawfully made under this title”—that is, lawfully made under the standards of
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`Title 17 of the United States Code. A copy is not “lawfully made under this title,” by
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`contrast, if its manufacture was only lawful under some other source of law. Stated
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`differently, § 109(a) teaches that for first-sale purposes, the lawfulness of a particular
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`copy or phonorecord should be judged by U.S. copyright law no matter where the copy or
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`phonorecord was manufactured. In the normal run of cases, this condition will be
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`satisfied if the copy was manufactured by the U.S. rightsholder, see § 106(1); if the U.S.
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`rightsholder authorized the copy to be manufactured, see Graham v. James, 144 F.3d
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`229, 236 (2d Cir. 1998); or if the manufacturer’s activities would be privileged under
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`U.S. concepts of fair use, see § 107.
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`The structure of the statute confirms what its text suggests. Throughout the
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`Copyright Act of 1976, Congress used “under this title” to describe the scope of the rights
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`created by the Act, not the place a copy or phonorecord was manufactured. Thus, § 101
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`excludes from the definition of “[a] work of visual art” any work “not subject to
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`copyright protection under this title”; § 104(a) provides that certain works, “while
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`unpublished, are subject to protection under this title without regard to the nationality or
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`domicile of the author”; § 105 provides that “[c]opyright protection under this title is not
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`available for any work of the United States Government”; § 106 provides that “the owner
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 11 of 18
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`of copyright under this title has the exclusive rights to do and to authorize any of the
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`following . . . ”; and § 201(a) provides that “[c]opyright in a work protected under this
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`title vests initially in the author or authors of the work.”
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`In contrast, “[w]hen Congress considered the place of manufacture to be
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`important, . . . the statutory language clearly expresses that concern.” Sebastian Int’l, 847
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`F.2d at 1098 n.1. Most notably, § 601(a) of the Act, the so-called “manufacturing
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`requirement,” provides that:
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`Prior to July 1, 1986, and except as provided by subsection (b), the
`importation into or public distribution in the United States of copies of a
`work consisting preponderantly of nondramatic literary material that is in
`the English language and is protected under this title is prohibited unless
`the portions consisting of such material have been manufactured in the
`United States or Canada.
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`17 U.S.C. § 601(a) (emphasis added). Section 1001, added by the Audio Home
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`Recording Act of 1992, Pub. L. No. 102-563, 106 Stat. 4237 (1992), likewise refers to a
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`copy’s place of manufacture. 17 U.S.C. § 1001(8) (“To ‘manufacture’ means to produce
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`or assemble a product in the United States.”).
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`Turning to the history and purposes of the first-sale doctrine, nothing suggests
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`that the doctrine should not apply when a copy is manufactured abroad. First, the
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`common law policy against restraints on trade and alienation is not limited by the place a
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`chattel is manufactured; a prohibition against selling books manufactured in China is just
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`as much a restraint on trade and alienation as a prohibition against selling books
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`manufactured in Chicago. The early Copyright Acts reflect this principle. Under the
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`1909 and 1947 Acts, the first-sale doctrine applied to “any copy of a copyrighted work
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`the possession of which has been lawfully obtained.” Pub. L. No. 60-349, 35 Stat. 1075,
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`1084 (1909); Pub. L. No. 80-281, 61 Stat. 652, 660 (1947) (emphasis added). Cf. Quality
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 12 of 18
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`King, 523 U.S. at 152 (“There is no reason to assume that Congress intended either
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`§ 109(a) or the earlier codifications of the doctrine to limit its broad scope.”).
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`Justifications for the first-sale doctrine that are framed in explicitly economic
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`terms likewise argue against limiting the doctrine to copies manufactured in the United
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`States. Granting a copyright holder the unlimited power to control commercial
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`transactions involving copies of her work creates high transaction costs regardless of
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`where a copy is manufactured; indeed, the transaction costs of negotiating the terms of
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`future sales will almost certainly be higher when a copy is manufactured abroad. And
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`when a copyright owner manufacturers copies of her work abroad, the Copyright Act
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`fully protects her right to bring her work to market on terms of her own choosing; it is
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`only when someone else becomes the “owner” of a “particular copy or phonorecord” that
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`the first-sale doctrine takes effect. To be sure, it might be objected that a copyright
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`owner who sells her work abroad receives less than the “full” value of the work measured
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`by the prices charged in more affluent markets. But the objection depends on the
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`assumption, unknown to modern economic theory, that a voluntarily-negotiated sale is
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`not “fair” because the seller could have exacted a higher price from an alternative buyer
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`in a more affluent market. Cf. Jamie S. Gorelick & Rory K. Little, The Case for Parallel
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`Importation, 11 N.C. J. Int’l L. & Com. Reg. 205, 207 (1986) (“Parallel importers only
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`buy goods at prices that foreign manufacturers are willing to sell the goods. Original
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`trademark owners are not forced to sell in foreign markets at prices that encourage
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`parallel importation.”).
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`The unusual consequences that follow from limiting the first-sale doctrine to
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`copies manufactured in the United States further argue against limiting the doctrine based
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 13 of 18
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`on the place a copy is manufactured. As the Ninth Circuit has acknowledged, a reading
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`of § 109(a) that equates “lawfully made under this title” with “made in the United States”
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`prevents the first-sale doctrine from ever applying to a copy or phonorecord
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`manufactured outside the United States. Parfums Givenchy, Inc. v. Drug Emporium, Inc.,
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`38 F.3d 477, 482 n.8 (9th Cir. 1994). Because a copy must be “lawfully made under this
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`title” for the first-sale doctrine to apply, a subsequent purchaser can never “sell or
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`otherwise dispose of the possession of that copy or phonorecord” without the permission
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`of the copyright owner. 17 U.S.C. § 109(a).
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`In Parfums Givenchy, the court suggested in dicta that the solution to this
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`dilemma was to hold that a copy or phonorecord manufactured abroad is not subject to
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`the first-sale doctrine “unless and until there has been a ‘first sale’ in the United States.”
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`38 F.3d at 481 n.8 (emphasis in original). Later Ninth Circuit cases adopted this dictum
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`as a holding of the court. Denbicare U.S.A. Inc. v. Toys R Us, Inc., 84 F.3d 1143, 1150
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`(9th Cir. 1996) (“[U]nder the law of the circuit, § 109 applies to copies made abroad only
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`if the copies have been sold in the United States by the copyright owner or with its
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`authority.”); Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982, 986 (9th Cir. 2008)
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`(Ҥ 109(a) can apply to copies not made in the United States so long as an authorized first
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`sale occurs here.”), petition for cert. filed, 77 U.S.L.W. 3657 (May 18, 2009). But the
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`court has never explained how § 109(a)’s text supports a distinction based on where a
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`first sale occurred. And the distinction it has drawn conflicts directly with Quality King’s
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`holding that place of sale is irrelevant for first-sale purposes. See Quality King, 523 U.S.
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`at 145 (“After the first sale of a copyrighted item ‘lawfully made under this title,’ any
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`subsequent purchaser, whether from a domestic or from a foreign reseller, is obviously an
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 14 of 18
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`‘owner’ of that item” protected by the first-sale doctrine.”). Thus even if this Court were
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`tempted to follow the Ninth Circuit’s interpretation of § 109(a) as a way of giving effect
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`to the supposedly conflicting policies of §§ 109(a) and 602(a), it could not do so without
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`disregarding an express holding of the Supreme Court.
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`Lastly, the frequently-repeated argument that applying the first-sale doctrine to
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`copies of a copyrighted work manufactured abroad would render § 602(a) “virtually
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`meaningless,” Scorpio, 569 F. Supp. at 49, provides scant support for limiting the first-
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`sale doctrine to domestically-manufactured copies. The standard citation for that
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`argument is a statement in the House Committee on the Judiciary’s report that “any
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`unauthorized importer of copies or phonorecords acquired abroad could be sued for
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`damages and enjoined from making any use of them . . . .” H.R. Rep. No. 1476, at 170.
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`See, e.g., Parfums Givenchy, 38 F.3d at 482 n.8. But read as a whole, § 602(a)’s
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`legislative history is at best ambiguous as to whether the drafters of the 1976 Act
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`intended that § 602(a) would make the first-sale doctrine inapplicable to copies of a
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`copyrighted work manufactured abroad. Kernochan, supra, at 1418 (“The legislative
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`history . . . is rather ambiguous on the effect of section 602(a) in nonpiracy situations and
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`contains material that could support either [a broad or a narrow reading].”); see also
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`William C. Tyson & Robert P. Parker, Parallel Importation of Copyrighted
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`Phonorecords, 10 N.C.J. Int’l L. & Com. Reg. 397, 406 (1985); Stephen W. Feingold,
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`Parallel Importing Under the Copyright Act of 1976, 17 N.Y.U. J. Int’l L. & Pol. 113,
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`138 (1984). In any event, § 602(a) continues to apply to copies of a work that are not the
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`subject of a first sale, a scenario expressly contemplated by § 602(a)’s legislative history;
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`and there clearly exist circumstances where a copy is not lawfully manufactured under
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 15 of 18
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`the standards of Title 17 but is lawfully manufactured under the standards of some other
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`source of law. A copy, for example, might be manufactured pursuant to a compulsory
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`license required by foreign law, see, e.g., T.B. Harms Co. v. Jem Records, Inc., 655 F.
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`Supp. 1575, 1577 (D.N.J. 1987) (compulsory license under New Zealand Copyright Act),
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`or it might be manufactured in a country with no copyright law at all. In these
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`circumstances, importation of copies without the copyright holder’s authorization
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`remains actionable under § 602(a).
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`For these reasons, the Court provisionally is of the view that nothing in § 109(a)
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`or the history, purposes, and policies of the first-sale doctrine, limits the doctrine to
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`copies of a work manufactured in the United States.
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`IV.
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`
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`This analysis, however, overlooks an important piece of data: In Quality King,
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`the Supreme Court spoke directly to whether the first-sale doctrine applies to copies
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`manufactured abroad. In the course of addressing the argument that applying the first-
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`sale doctrine to § 602(a) would render that section meaningless, the Court noted that even
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`limited by the first-sale doctrine, § 602(a) gives U.S. copyright holders an important
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`bundle of rights. First, § 602(a) gives copyright owners a private remedy against
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`importers of piratical copies, a power absent in previous versions of the Copyright Act.
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`Quality King, 523 U.S. at 146. Second, because the first-sale doctrine is only available to
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`the “owner” of a lawfully made copy, § 602(a) allows a copyright holder to prohibit
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`imports by someone who does not hold title to the copies in question, such as a bailee,
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`licensee or consignee, or a person who acquired possession of a copy unlawfully. Id. at
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`146-47. And third, Ҥ 602(a) applies to a category of copies that are neither piratical nor
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`‘lawfully made under this title.’” Id. at 147.
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 16 of 18
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`This last category clearly includes copies produced under a foreign compulsory
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`license and copies produced in nations with no copyright law. But as a further example,
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`the Court noted that § 602(a) gives a copyright owner the power to prohibit the
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`importation of copies manufactured abroad with the U.S. rightsholder’s authorization.
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`Citing a variety of extratextual sources, the Court stated:
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`If the author of the work gave the exclusive United States distribution
`rights—enforceable under the Act—to the publisher of the United States
`edition and the exclusive British distribution rights to the publisher of the
`British edition, . . . presumably only those made by the publisher of the
`United States edition would be “lawfully made under this title” within the
`meaning of § 109(a). The first sale doctrine would not provide the
`publisher of the British edition who decided to sell in the American market
`with a defense to an action under § 602(a) (or, for that matter, to an action
`under § 106(3), if there was a distribution of the copies).
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`Id. at 148 (emphasis added and footnote omitted) (citing Copyright Law Revision Part 4:
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`Further Discussion and Comments on Preliminary Draft for Revised U.S. Copyright Law,
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`88th Cong., 2d Sess., 119, 209 (H.R. Judiciary Comm. Print 1964) (statements of Mrs.
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`Pilpel and Mr. Manges)). Thus, the Court appears to have specifically considered the fact
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`pattern presented by this case: one in which books manufactured by a foreign publisher
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`for sale abroad are imported into, and distributed within, this country without the consent
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`of the U.S. copyright holder. The Court expressed the view that in these circumstances,
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`the U.S. copyright holder is entitled to maintain an infringement action against the
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`importer under § 602(a).
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`
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`As this Court has reasoned previously, “if dicta this be, it is of the most
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`persuasive kind.” Arnold’s Wines, Inc. v. Boyle, 515 F. Supp. 2d 401, 412 (S.D.N.Y.
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`2007) (Holwell, J.), aff’d, 571 F.3d 185 (2d Cir. 2009). When the Supreme Court
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`addresses an unsettled question of federal law in unanimous dicta, respect for the
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`Supreme Court as an institution and the dedicated jurists who serve on it mandates
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`Case 1:08-cv-06152-KBF Document 24 Filed 09/25/09 Page 17 of 18
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`deference in all but the most exceptional circumstances. “[L]anguage the Supreme Court
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`uses when it explicitly announces its holding must be assumed to have been crafted with
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`care . . . .” Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 250 (2d Cir.
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`1999). See, e.g., Jones v. St. Paul Cos., Inc., 495 F.3d 888, 893 (8th Cir. 2007); Sierra
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`Club v. EPA, 322 F.3d 718, 724 (D.C. Cir. 2003).
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`In this Court’s view, this case comes close to demonstrating such exceptional
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`circumstances—but not quite. As demonstrated by the decades-old tension in circuit law,
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`reasonable jurists can, and do, disagree about the first-sale doctrine’s application to
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`copies manufactured abro