Introduction

The doctrine of First sale is, in essence, a limit on copyright owners’ right of distribution. It is based on the logic that “once a copyright owner has parted with title to a particular copy embodying his work, successive possessors of the copy should not be put into trouble of having to negotiate with the owner each time they contemplate a further sale or other transfer”.

The first sale doctrine is the legal concept that allows markets in copyright protected goods to function in a relatively normal manner. If a copyright owner sells you a copyright protected work, the first sale doctrine grants you the right to distribute that specific copy that you purchased. However, each of these rights contains an important limitation – once a physical item is sold, the intellectual property holder loses the right to control distribution or resale of the physical item. This is known as the first sale doctrine in the United States and the “exhaustion of rights” doctrine internationally because once the item is sold, the IP holder has no more rights over the item. The first sale doctrine is a defense to claims of intellectual property infringement.

First Sale Doctrine Definition:

The first sale concept is based on the same principles in patent, copyright, and trademark law, but each area of intellectual property has its own definition. According to the first sale doctrine, which is defined in the Copyright Act under 17 USC 109, the owner of a specific product that includes a copyright is free to sell or otherwise part with possession. The Patent Act does not specifically state this notion in terms of patent law. Instead, the idea can be found in the 1873 Supreme Court case Adams v. Burke. Similar legal precedent for this right in trademark law may be seen in cases like NEC Electronics v. CAL Circuit ABCO, which ruled that once a trademark owner sells his goods, the purchaser is permitted to resell the goods. Owners of copyrights may restrict the original dissemination of their works, but once the item is sold, they lose this ability to do so. In other words, once a physical thing is sold, their rights are “exhausted.”  Without a contract with the buyer, the copyright holder has no control over the original purchaser’s decisions to resell the object for a profit, give it away for free, or destroy it.

Defences Under The First Sale Doctrine:

According to the US Copyright law, a defendant must show the following in order to claim the defences under the “First sale doctrine”: The product was lawfully created with the copyright holder’s consent or authorization; ownership was initially transferred with the copyright holder’s consent or authorization; the defendant is the rightful owner of the copy in question; and use by the defendant It is significant to highlight that the First sale concept does not defend the selling of copies of protected works or the resale of stolen goods. It is prohibited to buy a book, make exact copies of its text, and then provide those copies to other people to sell or otherwise distribute, even if they are not turning a profit. When a buyer of copyrighted material sells the physical copy of what they bought, their rights are completely terminated.

Effect Of Precedents On The First Sale Doctrine:

QUALITY KING DISTRIBUTORS, INC. v. L’ANZA RESEARCH INTERNATIONAL, INC.

Factual Background:

Respondent L’anza, a California-based producer, only sells its hair care products in this country to distributors who have agreed to resale them to authorised stores only in specific geographic regions. L’anza uses intensive advertising and specialised retailer training to enhance its domestic sales. It does not, however, engage in equivalent advertising or marketing in overseas markets, and its foreign pricing are far lower than its local prices. It appears that after several tonnes of L’anza products with copyrighted labels were sold to a distributor in Malta by L’anza’s United Kingdom distributor, that distributor then sold the products to the petitioner, who then brought them back into the country without L’anza’s consent and resold them at a discount to unlicensed retailers.  

L’anza filed a lawsuit, claiming that the petitioner’s conduct infringed on its exclusive rights to reproduce and distribute the copyrighted content in the United States under the Copyright Act of 1976 (Act), 17 U.S.C. 106501 and 602. The District Court granted L’anza summary judgement after rejecting the petitioner’s 109(a) “first sale” defence.

Arguments Advanced:

The Judgment under its Para (d) and (e) lays emphasis on the arguments advanced by both the parties and purported to reveal the court’s observation on this issue. 

L’anza’s claim that a breach of the latter kind is different from one of the former and hence not subject to [§]109 is also rejected. The strength of this argument is undermined by other legislative factors, such as the fact that [§]602(a) expressly specifies that the prohibited importation constitutes a violation “under [§]106,” designating [§]602 offences as a subset of [§]106 violations.¹

The Solicitor General’s claim that “importation” refers to an act that is not covered by [§]109(a) is rejected by the Court as unpersuasive. The right to ship the copy to a different individual in a different nation is included in an ordinary interpretation of that language. More significantly, the Solicitor General’s constrained interpretation conflicts with [§]109(a). The entire premise of the first sale doctrine is that once a copyright owner sells an item protected by a copyright, he exhausts all of his legal options for regulating its distribution. There is no reason to believe that Congress intended for the doctrine’s application to be restricted by [§]109(a).²

The statutory text makes it very apparent that the right provided by Section 602(a) is subject to Section 109. (a). Notably, Section 602(a) does not expressly forbid the i:mproper importation of copyrighted items, but rather states that, excepting three circumstances, doing so “violates the exclusive right to distribute under Section 106.”  While doing so, the Court rejected the contentions made by the parties.

Decision:

The Ninth Circuit upheld the decision, reasoning that if 109(a) offered a defence, 602(a), which grants copyright owners the power to forbid the unauthorised importation of copies, would be “meaningless. This right was also covered in the Kirtsaeng v. John Wiley & Sons, Inc. with regard to copyright law. The identical textbooks were brought there by a foreign student who intended to resell them for a profit domestically. The Supreme Court’s ruling confirmed that sales of legally produced and acquired publications are not geographically restricted, even if they were intended for export. As a result, regardless of where a protected item was purchased, the first sale concept allows for its resale.

Conclusion:

Digital content like computer software, music, or books is likewise subject to the first sale concept. A pdf file cannot be purchased and printed or distributed physically to others. Additionally, they cannot install software on their computers and then sell the installation CDs, nor can they post the digital file online for others to access. The customer must first erase all digital copies of the item they currently own in order to legally resale such products.

As a result, copies of copyrighted electronic works are sold with specific electronic licences that specify how many devices the work may be installed on, how many users may access it, how long the licence is valid for, as well as other usage or distribution restrictions. Contractual arrangements between the copyright holder and the buyer govern this kind of licencing.