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Goodbye Goodwill: Implications Of The First Sale Doctrine Decision

Remember that couch you bought in college that your spouse finally insisted had to be sold? You put it on Craigslist and sold it to a new generation of lowly college students. Unfortunately, it looks as if that may be a thing of the past. The government is working to pass new copyright laws that would prevent private citizens from being able to re-sell used items.

The Case

The U.S. Supreme Court is currently hearing a case that will help guide copyright policy in terms of selling used goods. For over a hundred years, our court and copyright system have operated under a “first sale doctrine,” meaning that items are subject to copyright the first time they are sold (by the company or manufacturer). When an item is resold, it is not subject to the same kind of limitations. The first sale doctrine primarily applies to goods made and manufactured in the United States, but little substantial law regarding the subject has ever been established in terms of foreign made goods. Because first sale doctrine has yet to be applied to goods produced abroad, it technically may not be legal for individuals to purchase and re-sell goods if they are manufactured abroad.

In this test case, a company produces one type of (expensive) textbook for buyers in the United States and a cheaper version for consumers overseas. Supap Kirtsaeng, a University of Southern California student, had relatives overseas ship him copies of the cheaper textbook, and he sold that version to fellow students. Over time, Kirtsaeng cheated the company out of a fair amount of profits by decreasing sales of the expensive textbook in the United States. If Kirtsaeng had been selling textbooks manufactured in the U.S., his actions would have been protected under the first sale doctrine. However, a second-circuit appellate court ruled in favor of the publisher, claiming that the “first sale” doctrine only applies to goods made in the U.S. One judge on the appellate court dissented, writing that as long as the good was legally manufactured, it is covered by the same provisions of copyright laws no matter where it is manufactured.

In order to sell any used item, you would have to look for a copyright logo or “Made in U.S.” stamp before selling the item. If the item was made overseas, you have to apply for a license to sell the item. This would greatly limit the ability of citizens to dispose of their property as they wish. This is the perfect example of a law interpreted too literally by our judicial system; no common sense was applied in the instance of the second appellate court’s ruling. The truth is that individuals are unlikely to stop selling used goods when they have no use for them: a ruling in favor of the publisher will create more criminals, not more compliance with complicated copyright laws.

Case Law Ramifications

If the Supreme Court rules in favor of the publishing company, there are three areas that will suffer major restrictions. First, individuals trying to sell used goods will be in danger of prosecution or fines. Second, second-hand stores will have to re-evaluate their entire business premise, as it is unlikely that they will be able to afford the rising business costs involved with filing paperwork to be able to sell items produced overseas. Third, there is a substantial risk that companies will move their manufacturing processes overseas in order to maximize profits. Not only will we lose our ability to sell used goods, we may be losing an entire sector of jobs.

When individuals sell used items (currently), the money that they receive is not always a net profit. It is usually simply an attempt to recoup the money that you originally spent on the item. If the Supreme Court were to rule that the first sale doctrine applies to goods manufactured abroad, there is a valid constitutional argument to be made that this violates the constitutional right of an individual to be owed governmental compensation if property is seized.

An entire industry will be plunged into chaos. The particulars will be left to Congress to legislate, meaning that it is unlikely that this issue will be clarified for years. With issues like the national debt, healthcare, and partisan infighting consuming Washington, copyright issues are unlikely to make it back on anybody’s priority list, meaning that any company that makes a business by selling used goods would likely have to shut down- at least until they went through each item, checking its manufacturing location. Stores like Goodwill, housing thousands of for sale items, would have to track the history of each item before they would actually be allowed to sell it, and that does not include the money they would lose while closed to complete that process.

Companies have, over the past few decades, begun moving manufacturing centers overseas in order to optimize cheap labor that is not subjected to strict labor oversight laws. If there was a legal process by which these companies could profit not only from the first sale of an item, but each reselling, it makes sense that these companies would send more manufacturing overseas. Every time and iPod or iPad is re-sold, Apple would receive profits in addition to the original, full price of the item. In addition to being unable to recoup as much money from a used item as you usually would, the price of goods would universally rise, as each portion of each good would be manufactured abroad, and the goods would be assembled abroad.

In short, this law has the potential to send our entire manufacturing sector into purely profit-frenzied chaos. This is an instance when the Supreme Court should consider not only the letter of the law, but the likely practical outcomes of such a ruling. With Justice Kagan still on the court, who has previously stated that the first sale doctrine should not apply to foreign made goods, however, there is a worrisome possibility that Craigslist will begin to suffer from the same scrutiny as the fake goods market.

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