John Wiley & Sons Inc. v. Kirtsaeng

• Decision Date: 15 August 2011
• Docket Number: Docket No. 09–4896–cv.
• Court: U.S. Court of Appeals — Second Circuit
• Parties: JOHN WILEY & SONS, INC., Plaintiff–Appellee,v.Supap KIRTSAENG, doing business as Bluechristine99, Defendant–Appellant.

654 F.3d 210

2011 Copr.L.Dec. P 30,126

99 U.S.P.Q.2d 1641

JOHN WILEY & SONS, INC., Plaintiff–Appellee,

v.Supap KIRTSAENG, doing business as Bluechristine99, Defendant–Appellant.

Docket No. 09–4896–cv.

United States Court of Appeals, Second Circuit.

Argued: May 19, 2010.Decided: Aug. 15, 2011.

William Dunnegan (Laura Scileppi, on the brief), Dunnegan LLC, New York, NY, for plaintiff-appellee.Sam P. Israel, New York, NY, for defendant-appellant.John T. Mitchell, Interaction Law, Washington, DC, for amici curiae Entertainment Merchants Association and National Association of Recording Merchandisers.Norman H. Levine (Aaron J. Moss, on the brief), Greenberg Glusker Fields Claman & Machtinger LLP, Los Angeles, CA, for amicus curiae Costco Wholesale Corporation.Charles A. Weiss, Kenyon & Kenyon LLP, (Mark A. Abate, Goodwin Proctor LLP, on the brief), New York, NY, for amicus curiae New York Intellectual Property Law Association, in support of plaintiff-appellee.Before: CABRANES and KATZMANN, Circuit Judges, and MURTHA, District Judge.^*Judge MURTHA dissents in a separate opinion.JOSÉ A. CABRANES, Circuit Judge:

The “first sale doctrine” in copyright law permits the owner of a lawfully purchased copy of a copyrighted work to resell it without limitations imposed by the copyright holder.¹ The existence of the doctrine dates to 1908, when the Supreme Court held that the owner of a copyright could not impose price controls on sales of copies of a copyrighted work beyond the initial sale.² Congress codified the doctrine in successive Copyright Acts, beginning with the Copyright Act of 1909.³

The principal question presented in this appeal is whether the first sale doctrine, 17 U.S.C. § 109(a), applies to copies of copyrighted works produced outside of the United States but imported and resold in the United States. Under another basic copyright statute, it is ordinarily the case that “[i]mportation into the United States, without the authority of the owner of copyright under [the Copyright Act], of copies ... of a work that have been acquired outside the United States is an infringement of the [owner's] exclusive right to distribute copies....” ⁴

Defendant contends, however, that individuals may import and resell books manufactured abroad pursuant to 17 U.S.C. § 109(a), which provides that “the owner of a particular copy ... lawfully made under [the Copyright Act], 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.”

Defendant's claim is an issue of first impression in our Court.⁵

BACKGROUND

A. The Parties

Plaintiff-appellee John Wiley & Sons, Inc. (“plaintiff” or “Wiley”) is the publisher of academic, scientific, and educational journals and books, including textbooks, for sale in domestic and international markets. Wiley relies upon a wholly-owned subsidiary, John Wiley & Sons (Asia) Pte Ltd. (“Wiley Asia”), to manufacture books for sale in foreign countries. ⁶ While the written content of books for the domestic and international markets is often similar or identical, books intended for international markets can differ from the domestic version in design, supplemental content (such as accompanying CD–ROMS), and the type and quality of materials used for printing, including “thinner paper and different bindings, different cover and jacket designs, fewer internal ink colors, if any, [and] lower quality photographs and graphics.” Joint App'x at 18. The foreign editions, moreover, are marked with a legend to designate that they are to be sold only in a particular country or geographic region. One example of such a designation reads as follows:

Authorized for sale in Europe, Asia, Africa and the Middle East Only.

This book is authorized for sale in Europe, Asia, Africa and the Middle East only [and] may not be exported. Exportation from or importation of this book to another region without the Publisher's authorization is illegal and is a violation of the Publisher's rights. The Publisher may take legal action to enforce its rights. The Publisher may recover damages and costs, including but not limited to lost profits and attorney's fees, in the event legal action is required.

Joint App'x at 406 (emphasis in original).

Defendant Supap Kirtsaeng (“defendant” or “Kirtsaeng”) moved to the United States from Thailand in 1997 to pursue an undergraduate degree in mathematics at Cornell University. According to Kirtsaeng, he later moved to California to pursue a doctoral degree.

B. The Instant Action

To help subsidize the cost of his education, Kirtsaeng allegedly participated in the following scheme: Between 2007 and September 8, 2008, Kirtsaeng's friends and family shipped him foreign edition textbooks printed abroad by Wiley Asia. In turn, Kirtsaeng sold these textbooks on commercial websites such as eBay.com. Using the revenues generated from the sales, Kirtsaeng would reimburse his family and friends for the costs that they incurred during the process of acquiring and shipping the books and then keep any remaining profits for himself. Kirtsaeng claims that, before selling the textbooks, he sought advice from friends in Thailand and consulted “Google Answers,” a website which allows web users to seek research help from other web users, to ensure that he could legally resell the foreign editions in the United States.

On September 8, 2008, Wiley filed this action against Kirtsaeng in the United States District Court for the Southern District of New York (Donald C. Pogue, Judge of the United States Court of International Trade, sitting by designation), claiming, among other things, copyright infringement under 17 U.S.C. § 501,⁷ trademark infringement under 15 U.S.C. § 1114(a), and unfair competition under New York state law.⁸ Wiley sought a preliminary and permanent injunction under 17 U.S.C. § 502(a), ⁹ and statutory damages under 17 U.S.C. § 504(c).¹⁰

C. Relevant Pre–Trial Proceedings

In anticipation of trial, Kirtsaeng submitted proposed jury instructions charging that the first sale doctrine was a defense to copyright infringement. By Order dated October 9, 2009, the District Court prohibited Kirtsaeng from raising this defense and rejected the applicability of the first sale doctrine to foreign editions of textbooks, holding that “[t]here is no indication that the imported books at issue here were manufactured pursuant to the U.S. Copyright Act ... [and,] [t]o the contrary, the textbooks introduced as evidence purport, on their face, to have been published outside of the United States.” ¹¹

On October 23, 2009 and November 3, 2009, Kirtsaeng filed motions in limine to preclude the introduction at trial of (1) his online “PayPal” sales records, and specifically, evidence of his gross revenues from the sales of the foreign editions of Wiley's books, and (2) the profits he earned on unrelated sales activities. From the bench during a pre-trial conference on November 3, 2009, the District Court granted the motions in part and denied them in part. The Court explained that Wiley could not introduce evidence of profits earned by Kirtsaeng from the sales of textbooks produced by other publishers, but “in ... anticipation that the net worth testimony [would indicate] that [Kirtsaeng did not have] significant net worth ... [Wiley's counsel had the] right to inquire about additional revenues and the profits therefrom and where they went in order to make sure that we had an accurate record about [Kirtsaeng's] net worth.” Joint App'x at 195. The Court further stated that Wiley's counsel “must be careful not to refer to these [unrelated] sales in any way as infringing sales, because that would be entirely improper.” Id.

D. Events at Trial

At trial, during direct examination, Wiley's counsel asked Kirtsaeng, “Now sir, if we were to go back and look at January 1st of 2008, what were your financial assets at that point in time?”

The District Court sustained an objection by Kirtsaeng's counsel and a sidebar discussion followed.

After the sidebar conference and a recess, the first question by Wiley's counsel to Kirtsaeng was: “Mr. Kirtsaeng, before the break we were talking about your net worth during the period of 1999, correct? Excuse me. 2009.” Kirtsaeng answered “yes.” Wiley's counsel proceeded to ask Kirtsaeng a series of questions about his “net worth” in an attempt to impeach his previous statements. Specifically, he attempted to enter into evidence a record of Kirtsaeng's PayPal revenues, showing $1.2 million in revenues, in contrast to Kirtsaeng's previous testimony that he had earned only $900,000 in revenues. Joint App'x at 295–97.

At a second sidebar conference, during which the jury was excused from the courtroom, the District Court excluded the record of the PayPal evidence as “confusing and unfairly prejudicial.” Id. at 298.

When the jury reentered the courtroom, Wiley's counsel continued to ask Kirtsaeng about his revenues from eBay sales. Although Kirtsaeng's counsel immediately objected to the line of questioning on the basis that it had already been “asked and answered”—an objection the District Court initially sustained—the Court subsequently allowed the questioning, explaining that it was uncertain whether the same questions had in fact been asked of the witness earlier in the examination.

At the end of the trial, the District Court charged the jury to determine whether Kirtsaeng had infringed the copyrights of each of eight works and whether any such infringements had been willful. The District Court explained that, under the statutory damages scheme found at 17 U.S.C. § 504(c), see note 10, ante, if the jury found that Kirtsaeng had infringed Wiley's copyright, it could award no less than $750 and no more than $30,000 in damages for each infringed work.

The District Court identified two exceptions to this rule. First, the District Court instructed the jury that, if it found that Wiley had proved...