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Originally published March 19, 2013 at 2:47 PM | Page modified March 19, 2013 at 9:29 PM

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Supreme Court textbook copyright ruling bodes well for Costco

The Supreme Court ruled that textbooks and other goods made and sold abroad can be resold online and in discount stores without violating U.S. copyright law. The outcome was a huge relief to eBay, Costco and other businesses that trade in products made outside the U.S.

Associated Press

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WASHINGTON (AP) — The Supreme Court ruled Tuesday that textbooks and other goods made and sold abroad can be resold online and in discount stores without violating U.S. copyright law. The outcome was a huge relief to eBay, Costco Wholesale and other businesses that trade in products made outside the U.S.

In a 6-3 opinion, the court threw out a copyright infringement award to publisher John Wiley & Sons against Thai graduate student Supap Kirtsaeng, who used eBay to resell copies of the publisher’s copyrighted books that his relatives first bought abroad at cut-rate prices.

“We are very happy with the outcome,” said Joel Benoliel, Costco’s chief legal officer. The company filed an amicus brief supporting the student.

In 2010, the court was deadlocked 4-4 in a similar case in which Swiss watch maker Omega sued Costco for selling its watches in the United States without permission.

Such “gray market” products are sold in the United States even though they are authorized by their manufacturers to be sold only in other countries.

Justice Elena Kagan did not vote in the Omega case because she had worked on it in the Justice Department, but she voted in Costco’s favor in the current textbook ruling.

Benoliel called the new decision a victory for consumers, “who will get the benefit of competitive pricing in those cases where the manufacturers or retailers in the U.S. artificially inflate pricing on imported goods to U.S. consumers over what the citizens of other countries pay for the exact same product.”

The holder of the copyright is still protected until the goods are sold, after which the new owner can resell the product without permission of the copyright holder, he said.

“We hold that the ‘first sale’ doctrine applies to copies of a copyrighted work lawfully made abroad,” Justice Stephen Breyer said in his opinion.

Had the court come out the other way, it would have crimped the sale of many goods sold online and in discount stores, and it would have complicated the tasks of museums and libraries that contain works produced outside the United States, Breyer said. Retailers told the court that more than $2.3 trillion worth of foreign goods were imported in 2011, and that many of these goods were bought after they were first sold abroad, he said.

Aaron Moss, a Los Angeles-based lawyer who is representing Costco in a related case, said the court “correctly rejected the idea that this has anything to do with geography.”

In a dissent for herself and Justices Anthony Kennedy and Antonin Scalia, Justice Ruth Bader Ginsburg said the court was ignoring Congress’ aim of protecting “copyright owners against the unauthorized importation of low-priced, foreign-made copies of their copyrighted works.”

The movie and music businesses, software makers and other manufacturers worry that the decision allows unauthorized sales to undercut their businesses.

“The ruling for Kirtsaeng will send a tremor through the publishing industries, harming both U.S. businesses and consumers around the world. Today’s decision will create a strong disincentive for publishers to market different versions and sell copies at different prices in different regions. The practical result may very well be that consumers and students abroad will see dramatic price increases or entirely lose their access to valuable U.S. resources created specifically for them,” said Keith Kupferschmid, general counsel for the Software & Information Industry Association.

Justice Kagan, joined by Justice Samuel Alito, said in a separate opinion that Congress is free to change the law if it thinks holders of copyrights need more protection. Chief Justice John Roberts and Justices Sonia Sotomayor and Clarence Thomas also were part of the court’s majority.

Kirtsaeng sold $900,000 worth of books published abroad by Wiley and others and made about $100,000 in profit. The international editions of the textbooks were essentially the same as the more costly American editions. A jury in New York awarded Wiley $600,000 after deciding Kirtsaeng sold copies of eight Wiley textbooks without permission.

The high court wrestled with what protection the holder of a copyright has after a product made outside the United States is sold for the first time. In this case, the issue was whether U.S. copyright protection applies to items that are made abroad, purchased abroad and then resold in the U.S. without the permission of the manufacturer.

The court earlier rejected copyright claims over U.S.-made items that were sold abroad and then brought back to the United States for resale.

Seattle Times business reporter Melissa Allison contributed to this report.

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