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Parallel Imports and the First Sale Doctrine
By Timothy Toohey and Keith Gregory
Reprinted and/or posted with the permission of Daily Journal Corp. (2011).
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Under the “rst sale” or “exhaustion” doctrine in intellectual
property law, a lawful purchaser of a copyrighted, patented
or trademarked product may generally use or resell the
product without fear of being subject to an infringement
lawsuit. e owner of the intellectual property rights is said
to have “exhausted” her rights to the work with the rst sale
and generally cannot prevent further use or sale of the work.
When the rst sale of a work, like a book or DVD, occurs
in the U.S. the purchaser may generally resell the product
to whomever she wishes without fear that the owner of the
copyright will pursue her for infringement.
What if the rst sale of the work occurs overseas, which
is then imported into the U.S.? May a purchaser of
such a work raise the rst sale doctrine as a defense to an
infringement action? Recent decisions involving “gray
market goods” or “parallel imports” indicate that the defense
will not be available under those circumstances, particularly
for copyrighted and patented goods.
When the U.S. Supreme Court accepted certiorari in
2010 for Omega S.A. v. Costco Wholesale Corp., 541 F.3d
982 (9th Cir. 2008), many commentators anticipated that
the Court would decide the question left open by Quality
King Distributors Inc. v. L’Anza Research Int’l Inc., 523
U.S. 135 (1998), i.e., whether the “rst sale doctrine” in
Section 109(a) of the Copyright Act applies to “allegedly
infringing imports that were manufactured abroad.”
523 U.S. at 154. Such gray market goods are typically
imported into the U.S. without the permission of U.S.
rights holders, often because they are less expensive than
their domestically sold counterparts.
e Omega decision engendered considerable debate because
the court held that Costco could not avail itself of the “rst
sale” defense because it had purchased Omega watches with
a small copyrighted logo that had rst been sold abroad
and then imported into the U.S. If the Omega watches
purchased by Costco had rst been sold in the U.S., Costco
may have been able to avail itself of this defense. Relying on
its prior precedents, which it maintained were not overruled
by Quality King, the 9th U.S. Circuit Court of Appeals held
that Section 109(a) did not apply to goods manufactured
abroad. It found that the phrase “lawfully made under this
title” meant copies “legally made...in the United States” and
applied only to goods rst sold in the U.S. e court also
found that its interpretation was supported by the “more
robust version” of the presumption against extraterritorial
application of laws used for the Copyright Act.
e Omega case prompted a considerable number of
amicus briefs on both sides in the Supreme Court. Retailers
typically lined up behind Costco to support its attempt to
overturn the 9th Circuit, citing principles of free trade and
consumer choice. Manufacturers nd intellectual property
owners urged armance, citing intellectual property
rights and rights holders’ freedom to dierentiate sales
of products to domestic and overseas markets. e hope
for a denitive pronouncement by the Supreme Court
was frustrated by the armance, without opinion, of the
decision by an equally divided Court, Justice Elena Kagan
took no part in the case. Costco Wholesale Corp. v. Omega,
S.A., 131 S. Ct. 565 (2010).
Although F. Scott Fitzgerald said that there are no second
acts in American lives, retailers and manufacturers may get a
chance to dust o their amicus briefs if the recent decision of
the 2nd U.S. Circuit Court of Appeals in John Wiley & Sons
Inc. v. Kirtsaeng, 654 F.3d 210, (2nd Cir. 2011) is appealed
and the Supreme Court grants review. Like Omega, Wiley
presents the Court with an opportunity to determine
whether the importation and sale in U.S. of copyrighted
goods is subject to the Copyright Act’s rst sale doctrine.
In Wiley, Supap Kirstaeng, after availing himself of legal
advice from “Google Answers,” set out to support his
undergraduate education at Cornell University by having
friends and family ship Wiley textbooks to him from Asia,
which he then resold for prot in the U.S. His business
was evidently successful because his PayPal account showed
revenues of $1.2 million. After the district court determined
that the rst sale defense did not apply to Kirtsaeng’s
textbook sales, a jury found him liable for willful copyright
infringement and imposed damages of $75,000 for each
of eight infringed Wiley works. In a 2-1 decision, the 2nd
Circuit armed the holding of the district court. Although
