Grey Market: Protecting Your Work From Unauthorized Parties Who Sell It For Less?

by Stephen M Stern on Jan. 05, 2016

Intellectual Property Intellectual Property  Trademark Intellectual Property  Copyright 

Summary: Grey Market: Protecting Your Work From Unauthorized Parties Who Sell It For Less?

In a recent U.S. Supreme Court decision, the majority of justices decided that a person who buy/obtains one’s book from outside the U.S. and sells it in the U.S. at a lower rate is NOT in violation of the U.S. Copyright Act. Known as the First Sale Doctrine, the law had previously only protected unauthorized reseller’s of books acquired in the U.S. The initial purpose of protecting against books imported from other countries was to prevent the diminished value of the book. This stems from many publishers selling the same or similar book to other countries at a greatly discounted price based on the affordability factor of its residences. For example, a law book that may cost $150 at the university bookstore, may cost $50 in Bangkok. An entrepreneur then acquires all the books they can afford and resells then in the U.S. to students at half the price, eliminating royalties and profits for the publisher and author.

Specifically at issue is the tension between Section 109 of the Copyright Act (First Sale Doctrine) that allows owners of a piece of copyrighted material to sell the the material in their possession without permission from the person who owns the copyright, versus Section 602 of the Copyright Act which bans the importation of copyrighted goods with the copyright holder’s authorization.

This decision not only impacts books, but potentially all copyright material. That means authors, musicians, songwriters, artists and many others who create copyrighted material now face the loss of revenues and profits via importation of their work. One possible solution is to include one’s trademark on the copyrighted material. A trademark includes any word, name symbol or device …used by a person….to identify and distinguish their goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods (15 U.S.C. 1127). Trademark Law has a Trademark First Sale rule that provides that once a a particular good is first sold, the trademark owner loses control   over the subsequent exchange of that good. However, there is an exception if the good is materially altered and may dilute the value of the trademark. Moreover, some manufactures purposefully modify or customize their products to better fit the cultural tastes of those consumers while also using their trademark to build brand recognition. If those goods,  such as the modified law book, were to then be exported to another country for resale, the consumer familiar with the brand (trademark) may be confused by the differences, which may also dilute the value. For these reasons, Trademark owners have been successful in preventing the exportation of their goods from country to country.

As a result, adding the trademark to books and other copyright material may allow the copyright holder protection under trademark infringement instead of the now depleted copyright infringement argument following the U.S. Supreme Court Decision in Kirtsaeng v. John Wiley & Sons, Inc. 133 S.Ct. 1351, 1371 (2013).

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