What is the First Sale Doctrine?
The doctrine of first sale, in essence, limits the power of distribution of copyright owners. It is based on the rationale that once a copyright owner has relinquished ownership of a specific copy of his work, subsequent possessors of the copy should not be forced to go through the hassle of negotiating with the owner each time they contemplate a sale or other transfer of the copy.
When an author, for example, sells a particular copy of her/his book, the property that is transferred is not her copyright in the book, but rather the property rights in that specific physical copy of the book.
Here, it is pertinent to note that, while the buyer is not permitted to reproduce the book, she/he is permitted to resell it, as selling is an important component of his ownership right. The doctrine of first sale states that a person has the right to sell his copy of a copyrighted work to anyone without being bound by any terms imposed by the copyright owner.
What is the Principle of Exhaustion?
Justice Ravindra Bhat of the Delhi High Court penned his opinion on the same stating that the doctrine of exhaustion of copyright permits the free exchange of materials on which copies of protected works have been fixed and put into circulation with the approval of the right holder.
Essentially, the “exhaustion” principle resolves the conflict that arises when a work’s right to ownership conflicts with the author’s right to control the dissemination of copies of the work.
When it comes to the priority of ownership and the right to trade in material carriers, exhaustion is decisive, provided that a copy has been legally introduced into the market.
What is the Economic Benefit of the First sale Doctrine?
Once it is not necessary to obtain authorization from a copyright owner in order to sell a product in the secondary market, the consumer base grows as a result. Opportunity costs here are lower in the secondary market, they will be more receptive of further sales in the secondary market.
Additionally, the risk associated with investing in intellectual property is lessened and the unrestricted flow of commodities in the market is ensured to continue.
An original work that is protected by copyright could not have been sold more than once if the Doctrine of First Sale had not been in place.
The secondary channels continue to function as effective carriers of information of cultural significance even after the copyright owner has stopped all production and distribution of the material.
On the other side of the coin, we also see that there is a revenue loss for young authors who are not yet established in the industry and who wish to make a living from their craft. However, given that a secondary market is based almost entirely on the popularity of the levels of sales in the primary market, the effects of this may be considered negligible. Copies of books by less well known authors and on lesser known topics, as we may have all observed, are less likely to show up in a second hand bookstore than their more popular counterparts.
Important Case Laws on the Doctrine
Kirtsaeng v. John Wiley & Sons is a transformative case on the First Sale Doctrine. While this case is from the United States, it has had repercussions across many countries, and is relied as a definitive authority to this day even in Indian Cases.
The case involved a Thai student who had come to the United States to study and entered into a business relationship with his family back home in Thailand. In exchange for a low price, they would ship him the books that they had acquired in Thailand, and he would resale them in the U.S. market, where the prices were higher. The student grew his firm to the point where he was able to earn $100,000 in profit.
Publishers in the United States filed a lawsuit against the student, claiming that the idea of first sale did not apply to “grey market commodities,” which are lawfully manufactured goods that were imported into (but not manufactured in) the United States.
Although the Supreme Court disagreed, it found in favour of the student, holding that so long as the copies were legally made under the instruction of the copyright owners, it was not necessary for the books to be manufactured in the United States.
Here, even though the student did not own the copyright to the book, he was free to do anything he wanted with his own copy of it under the first sale doctrine.
The Effects of the Kirtsaeng Case
Kirtsaeng is anticipated to have significant ramifications for the international market for copyrighted works and items in the coming years. The judgement allows permission to US corporations to acquire items from other countries, import them, and resale them at a reduced price in the “grey market.” In addition to traditional protected items like as books and records, the judgement will have an impact on decorative and ornamental objects as well.
It is anticipated to be beneficial to wholesalers and e-commerce enterprises that can afford to expand their operations into the worldwide market.
Publishers can raise their selling prices in foreign markets in an attempt to generate more income, however this may result in a decrease in readership and an increase in copyright infringement in the nations impacted. Additionally, the judgement may compel US trade representatives to abandon their opposition to “international tiredness” that they have adopted in international trade discussions.
Someone sends an image from one location to another through a network, such as the internet, while retaining ownership of the original work and providing a fresh copy of that same work to the recipient of the transmission.
The transmission herein, results in the creation of a new copy of the work and because the reproduction right is not covered by the first sale exception, the transmission of a copyrighted copy of a work is not excused by the first sale exception.
The law is explicit in that the first sale exception applies only in cases when the owner of a copy transfers physical ownership of that copy to a third party for the first time.
Author: Ayush Agrawal, Legal Intern at PA Legal.
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