Thu, May 23, 2013 20:57:49 PM
Bangkok Post
Thu, May 23, 2013 20:57:49 PM
Bangkok Post
A Thai graduate student’s money-making idea that began a decade ago has led to a commercial showdown this week in the US Supreme Court.
The case of Supap Kirtsaeng, which will be heard on Monday, has major ramifications for publishers, retailers, entertainment companies, manufacturers and consumers, say legal observers.
The case stems from a lower court decision in which Mr Supap was ordered to pay John Wiley & Sons Inc $600,000 for importing the publisher's copyrighted textbooks from Thailand and selling them in the United States for a profit.
At stake is the future of the so-called grey market, the annual trade in tens of billions of dollars worth goods outside their official distribution channels.
The case pits business against business. Retailers that offer grey-market products, led by eBay and Costco Wholesale Corp, are joining libraries and second-hand stores in backing Mr Supap, who currently teaches at Silpakorn University in Bangkok.
The motion picture, music, software and publishing industries are supporting Wiley, arguing that the practice illegally undercuts their US sales.
"This is fundamental to the creative industries," said Charles Sims, a Washington lawyer who filed a brief on behalf of the Association of American Publishers.
Grey market products are genuine goods that retailers acquire through unauthorised channels to exploit the lower prices manufacturers sometimes charge overseas.
Imports of those products to the US cost makers as much as $63 billion in sales a year, according to a 2009 Deloitte analysis conducted for Bloomberg News.
The case raises a copyright question very similar to the one that deadlocked the Supreme Court 4-4 in a 2010 clash between Costco and the Swiss watch giant Swatch Group over discounted Omega watches.
Justice Elena Kagan didn’t take part in that case and now stands to cast the deciding vote. That’s potentially bad news for the grey market because Kagan, a former top Supreme Court lawyer in the Obama administration, had filed a brief supporting Omega in the Costco case.
The dispute turns on a legal doctrine that says a copyright holder can profit only from the original sale of a product. In 1998, the Supreme Court unanimously said that so-called first- sale doctrine applies to US-made products that are sold overseas.
The ruling meant that purchasers could bring those goods back into the US to sell or distribute even if the copyright holder objected.
Mr Supap came to the United States to study mathematics in 1997 at Cornell University and later pursued a doctorate at the University of Southern California.
While at USC, he arranged for his family members to buy textbooks from stores in Thailand and ship them to the US, where he sold them on eBay as "BlueChristine99".
Mr Supap returned to Thailand in 2010 after working at USC.
Court records show he earned about $1.2 million in revenue, but there is disagreement about how much profit he made.
Specifically he sold dozens of copies of eight textbooks printed in Asia by a subsidiary of John Wiley & Sons. His lawyers claim his gross revenue from the Wiley sales was just $37,000.
The New Jersey publisher has a thriving overseas business. Its foreign editions typically carry a disclaimer: "This book is authorised 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."
A Manhattan federal jury found Mr Supap liable for copyright infringement and awarded the company $600,000. A judge later ordered him to turn over personal property, including his computer and golf clubs -- something Wiley says occurred only because he had transferred at least $170,000 out of the country.
Mr Supap's supporters say the original jury award and the reasoning of the 2nd US Circuit Court of Appeals, which upheld it, undermine one of the basic underpinnings of US property law.
"If you buy a legitimate, authentic good, then you own it, plain and simple," said Hillary Brill, eBay’s global policy counsel. "You have a right to resell it, lend it, give it away or donate it."
Mr Supap declined to comment for this story but he has been quoted earlier as having said the outcome of the case could have "astounding consequences" if he loses.
His supporters have argued that if he loses the case, manufacturers would have financial incentive to shut down US plants and produce everything overseas, since they could get a monetary cut and distribution control over every resale.
Mr Supap's lawyers say that amounts to "double-dipping", with copyright holders getting paid twice for the same item's sale.
As well, they say, American consumers would lose access to affordable and differentiated goods, and charitable donations would also be stifled.
Wiley and its allies say lower courts have uniformly ruled in favor of copyright owners on the issue, without any of the repercussions forecast by Mr Supap and his supporters.
"There is no threat to the museums of the United States or to the libraries of the United States," said Mr Sims.
When Congress enacted the Copyright Act in 1976, lawmakers intended that publishers, moviemakers and other copyright owners would be able to control where their products would be sold and at what price, he said.
