Tag Archives: First Sale

The way forward, after Costco [Updated]

NB: This post has been updated to reflect the availability of the Drug Emporium exception wherever the Costco rule might be applied. The original version stated mistakenly that the exception was only available in the 9th Circuit.

Today the Library Copyright Alliance released The Impact of the Supreme Court’s Decision in Costco v. Omega on Libraries. Prepared by Jonathan Band, the concise, informative paper examines the much-discussed (at least among library and copyright nerds!) Costco v. Omega non-decision, which left in place a controversial 9th Circuit ruling that could have significant consequences for library lending practices.

The first sale doctrine (codified at §109 of the Copyright Act) lets purchasers of lawful copies of copyrighted works re-sell, donate, lend or otherwise dispose of their copy. If not for first sale, or some other balancing exception, copyright holders could ban purchasers from all of these practices, essentially controlling how you use cultural products that you own.

We’ve posted the factual background of Costco here. For now, suffice it to say that the core issue is whether the wording of Section 109 makes it possible for a rightsholder to evade the first sale doctrine by manufacturing its copies abroad (whether they be books or, as in this case, watches with copyrighted images embossed on them). The 9th Circuit said the law does allow this evasion, and the Supreme Court handed down a non-binding split decision that leaves that ruling intact for the 9th while the other Circuits free to decide the issue for themselves.

In his analysis, Band explains that libraries are still on sound footing in lending foreign-made copies in their collections. He gives a range of alternative justifications for lending that should cover the vast majority of situations that institutions face on a regular basis:

  • Under the “Drug Emporium Exception,” first sale still applies if a foreign-made copy was sold domestically by an authorized party.

  • The §602(a)(3)(C) provision for importation by scholarly, educational, and religious orgs should make it possible to lend materials lawfully imported for the purpose of lending.

  • Implied license and fair use are powerful and flexible doctrines that should capture many library uses.

As well as a handy chart to show which doctrines are useful in which circumstances:

We hope members of the library community find this paper useful as they decide how to react to this complex legal development.


A Rough End-of-Year for Library Lending (and for Users’ Rights)

Why Libraries Filed a Brief in a Case About Watches

Photo CC-BY Vince42

LCA Amicus Brief [PDF]

Today the Library Copyright Alliance (whose members are ARL, the American Library Association, and the Association of College and Research Libraries) filed a brief before the Supreme Court in the case of Costco v. Omega. On its face the case is about whether copyright forbids a warehouse retailer from buying wholesale luxury watches abroad. If you dig deeper, though, the case could strike at the heart of what libraries do.

It is worth asking why copyright law is even involved in a dispute between a retailer and a wholesaler where there is no allegation of counterfeit or copying. Copyright enters the picture because Omega attaches a copyrighted logo to its watches, and one of the exclusive rights in § 106 of the Copyright Act is the right of distribution or sale (§ 106(3)). This right doesn’t ordinarily come into play very often because of the “first sale doctrine,” which allows lawful purchasers to turn around and lend or re-sell copyrighted goods in most situations. Nevertheless, when Costco purchased Omega watches abroad and resold the watches in the US, Omega sued, claiming that Costco had made an illegal distribution of the watches by reselling them. Costco argues that the sale is permitted under the first-sale doctrine, but Omega claims that the first-sale doctrine does not apply to works produced abroad. The Court of Appeals for the Ninth Circuit agreed, relying on a statement by Justice Ginsburg in a concurring opinion in the Quality King case that the phrase “works lawfully made under this title” in § 109(a) of the Copyright Act means lawfully made in the US. In other words, the Ninth Circuit held that the first-sale doctrine does not apply to works manufactured abroad.

And that is why this case is important for libraries. In its amicus brief, LCA notes that “[b]y restricting the application of Section 109(a) to copies manufactured in the United States, the Ninth Circuit’s decision threatens the ability of libraries to continue to lend materials in their collections.” There are millions of volumes in library collections that were manufactured abroad. A more precise estimate than “millions” can probably never be known, though, because there is no reliable way of knowing where books in library collections were actually manufactured. So, if the Supreme Court agreed with the Ninth Circuit, and libraries determined that they could not find an alternative to the traditional first sale doctrine rationale for circulating foreign-manufactured works, they would face an impossible task in determining which of their books could not circulate under the new rule.

In the LCA brief, prepared by Jonathan Band, we argue that there are several alternative interpretations of the phrase “lawfully made under this title” that would avoid threatening the core function of libraries. The brief also argues extensively that libraries have a special status under copyright law, and to alter that status would alter the fundamental contours of copyright in ways that implicate constitutional protections, including the First Amendment.

The brief is highly readable and features a lot of great information about the history of libraries and their importance in the copyright policy regime. Check it out.