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Industry news: The implications of the ruling that you can resell foreign text books in the US (hint: you care)

March 23, 2013

Supreme Court upholds first-sale doctrine

The Supreme Court ruled 6-to-3 that an immigrant from Thailand could buy textbooks published abroad at lower prices and sell them to US consumers on eBay. In the US, prices for text books are higher, and the Thai, Supap Kirtsaeng, was able to pay for his education by having relatives buy the books abroad and sell them in the US. The Court overturned a lower court rulingthat found for an Asian subsidiary of the publisher, John Wiley & Sons, and awarded $600,000 in damages. The case upholds the first-sale doctrine that allows you to resell what you bought without the permission of the copyright holder. It’s most often thought of in terms of used books, but has implications far beyond, including materials with intellectual property protections in used appliances and other hardware, which include copyright protections for components sold to the eventual manufacturers.

In other words, if the Court had found for Wiley, you might have to get permission from companies you’ve never heard of to sell your stove at a garage sale because that company holds a copyright on a part you didn’t know exists.

What this means to you: This means a lot. On its face, it seems only fair that the United States should enjoy the same pricing advantages as other locations. A text book that sells for $40 in Thailand shouldn’t sell for $110 in the United States just because the publisher can get more for it here. In a Harvard Business Review article, this practice–which sounds horrible on its face–is explained in a less menacing way. According to the author, it’s the same practice as selling a protein bar at the airport for $3, when it only costs $2 at the grocery store. In that case, you’re paying for convenience, and the fact that it probably costs more to sell the bar at the airport than it does at your local Publix. In the same way, the article puts forth the proposition that publishers can sell books for lower prices abroad than in the United States.

This case could also have implications in other industries, such as the pharmaceutical industry, and expand the market for foreign drugs sold in the United States.

But first-sale doctrine is also being tested when it comes to e-books. Amazon and a few others are trying to craft a solution that allows owners to resell used e-books on line. A strict interpretation of first-sale doctrine would seem to hold that anyone should be able to resell any e-book they want on line for any price, and keep all the money that comes from its sale.

The efforts being made to create a resale market for e-books, at least to date, are trying to make sure that the publisher and maybe the author gets a cut of that sale. (An author’s cut would depend on their contract with the publisher.) However, if the doctrine of first sale is placed on the resale of e-books, the requirement to give the publisher a cut may go away. If you have the right to resell whatever you buy with no strings attached, why should anyone else, such as the publisher, make money?

And if you’re a reader, why not wait a week or two and buy a $5-$15 ebook for $2-$5 from a used ebook reseller? For readers, this is a great deal. For publishers and authors, not so much, because it reduces the number of units sold and drives prices down. And in a resale environment where only the book purchaser makes money from the resale of an e-book, publishers and authors could stand to lose a lot of money.

To be fair, the Supreme Court ruling deals specifically with domestic resale of items purchased abroad, which would not be the case for most resales of e-books. And other intellectual property laws probably force the resale approach where the publisher gets a cut of ebook resales. If they didn’t, Amazon and the rest probably wouldn’t be working so hard to include such a provision.

But as technology shifts and the world becomes smaller, more of these cases will come up, and they could have significant impact on revenue made by publishers and authors–which could be you.

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