[A2k] Two pieces in the Financial Times on Kirtsaeng

Thirukumaran Balasubramaniam thiru at keionline.org
Thu Mar 21 02:09:06 PDT 2013


March 20, 2013 7:02 pm
Publishers challenge book resale ruling
By April Dembosky in San Francisco

US publishers are poised to take their battle to stop books bought abroad being resold in the US to Congress, after the Supreme Court ruled against them in a case that will have broad implications for global commerce.

In the case of Kirtsaeng v Wiley, the court ruled in favour of Supap Kirtsaeng, a California student who asked his family in Thailand to buy textbooks for him at low international prices so he could resell them at a profit on eBay.

Shares in educational publishing companies fell slightly in the wake of the decision, as analysts warned that the grey market for textbooks could affect up to 50 per cent of a publisher’s educational business.

Tom Allen, president and chief executive of the Association of American Publishers, said his group was prepared to defend publishers’ rights in any legislative action pursued by lawmakers in Congress.

“[The] copyright decision by the US Supreme Court ignores broader issues critical to America’s ability to compete in the global marketplace,” he said in a statement.

John Wiley & Sons, the New York-based publishing house that owned several of the titles Mr Kirtsaeng resold, argued in court that the online sales violated international copyright laws and undercut publishers’ ability to set lower prices for books sold in foreign markets.

But the court decided that the “first sale doctrine” of US copyright law applies to goods manufactured abroad, allowing the owners of those goods to resell them in the US without permission of the copyright owner.

Stephen Smith, chief executive of Wiley, said he was disappointed by the ruling, adding: “It is a loss for the US economy, and students and authors in the US and around the world.”

Retail and ecommerce companies that resell or facilitate the sale of international goods in the US were pleased with the court’s decision, but acknowledged the debate was likely to continue.

Andrew Shore, executive director of the Owners’ Rights Initiative, a coalition of libraries and online companies including eBay and Etsy, said the decision recognised how international commerce was changing in a computer age.

“You have a court that now understands that global commerce isn’t just about big companies putting goods in megaton containers and sending them across the ocean,” he said. “It’s a guy sitting in his pyjamas selling his book collection to someone in Japan.”



Publishers mull tech tactics after legal defeat over imports
March 21, 2013 12:42 amby April Dembosky

Publishers may take a cue from the software industry as they regroup from a decisive loss in the US Supreme Court over copyright rules.

After failing to persuade the justices to protect their foreign-made titles from resale in the US in the Kirtsaeng v Wiley case, publishers must instead rethink their international business practices.

While traditional publishers of books, music, and film have generally viewed the computer industry as a foe in various policy battles, it could find a saviour in borrowing its concept of software licensing agreements and applying them to physical goods.

Brad Newberg, a partner in the intellectual property group of law firm Reed Smith, believes publishers will move toward attaching licensing agreements to books, CDs and DVDs, similar to those that come with computer software over the internet and on CD-ROMs.

“They might put a license on their copyrighted work that says you’re not actually getting a copy of this copyrighted work, you’re just purchasing a license to use the work in this way or that,” he said.

That fact that courts have validated these types of licenses in the software industry gives lawyers that represent traditional media hope that they would be upheld on physical products, too.

The challenge is in implementation. Technology is developing that could allow content-owners to insert a screen into a DVD that requires people to click on their remote to accept an end-user agreement before they can watch the film, or apply a chip to a CD cover that can perform a similar function before people can listen, Mr Newberg said.

The cost of such measures, however, combined with the behaviour change required of merchants and consumers, present significant hurdles to this plan. Indeed, it is difficult to picture a vibrant market in Mumbai where people buying books must first sign agreements.

But Mr Newberg said Tuesday’s Supreme Court decision could accelerate the industry’s efforts.

The case involved Supap Kirtsaeng, an enterprising graduate student, who bought textbooks in Thailand, via family members, then resold them at higher prices to American students in the US over eBay. John Wiley & Sons, a New York publishing house that owned several of the titles, argued that this undercut its ability to set lower prices in foreign markets.

The justices surprised legal experts from both camps when it sided with Mr Kirtsaeng, saying the US “first sale” doctrine that allows consumers to resell goods they legitimately bought and own has no geographic limits and applies to goods manufactured outside the US.

While Wiley and other publishers are likely to take their arguments to lawmakers in Congress, in the meantime, they will have to mitigate the impact of the decision through new business practices.

Besides the possible licensing tactic, Giasone Salati, an analyst with Espírito Santo Investment Bank, outlined several steps publishers could take, including creating different versions of textbooks for international markets that omit a critical chapter, or change the language, making it more difficult for American students to use foreign editions as substitutes.

Or, they could more tightly integrate their products with online services that require a log in, building on a growing trend in the publishing industry to supplement physical textbooks with digital components.

Mr Salati also argued that publishers might raise the prices of international books to be more in line with US prices, creating a disincentive for future Supap Kirtsaengs to take advantage of price differentials.

But Mr Newberg said this was unlikely. Prices in foreign markets are controlled by demand, and publishers would have already raised prices if the market would have tolerated it. Also, certain emerging markets are still rooted in a culture of print reading and represent areas of steady, if not growing, business for publishers that they do not want to harm.


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)

thiru at keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997

More information about the A2k mailing list