Thursday, March 21, 2013

Supreme Court Decision in Wiley Importation Case

The background:  a Thai national studying in the US imported from Thailand, and subsequently sold on eBay, 600 copies of a Wiley textbook that had been reproduced by Wiley Asia in a cheaper edition and priced for the local Asian market. Such International Student Editions (ISE's) are common in the Higher Ed market. 

The price he charged his customers was obviously a lot cheaper than the US edition available from US campus bookshops.

Wiley took him to court and won. They also won on appeal. Both judgements rested on section 602 of the US Copyright Act that quite explicitly prohibits unauthorised importation of lawfully made copies of works.

However the student, Mr Kirtsaeng, was not satisfied and applied to the Supreme Court for a hearing. 

His argument was that another, more fundamental, section of the Act (109) had priority and should have determined the outcome of the case. This section deals with the 'first sale doctrine', commonly known as the 'exhaustion' of rights when the work is sold. When the customer buys the book all ownership rights are transferred. The publisher relinquishes any further control over subsequent selling, lending or hiring activities (but not copying). Thus libraries, second hand bookshops, museums and other entities can legitimately trade in the property without seeking the publisher's permission. Kirtsaeng also contended such exhaustion was global, thus enabling international trading.

The Supreme Court's judgement, in its majority and dissenting opinions, is a fascinating exploration of all these conflicting issues. Of course it benefited Kirtsaeng to focus on exhaustion, and it benefited Wiley to focus on importation.

The majority decision privileged the notion of exhaustion, thus allowing free and open importation.

The minority view distinguished the two principles and opted to privilege the prohibition of importation thus sidestepping the exhaustion issue.

In the end the argument seems to have rested on differing interpretations of Congress's intentions when framing both sections.

Congress will no doubt now be lobbied by publishers and other parties to clarify its intentions into law by strengthening the importation prohibitions.

Australia has clear importation provisions - the infamous Parallel Importation Provisions (PIRs).

So as in Australia, the debate in the US should be about whether such prohibitions are worthwhile or not, i.e. whether they do more harm than good. It should never be about rights exhaustion.

It's always been my view that Australia's PIRs are harmful to the economy and consumers and should be repealed. They operate to protect over-pricing and under-servicing by uncompetitive publishers.

However it also seems pretty clear to me that the commercial imperatives in the US are fundamentally different, and justify restrictive importation provisions. Prices in the US, particularly for trade books, are low by international standards, so the importation restrictions are not working to prop up prices to uncompetitive levels. 

For educational materials the ability of publishers to price low in developing countries is an imperative that should not be undermined by unrestricted importation back to the the US. The world needs these materials to be available at differentiated prices to ensure affordability by local students. Publishers should be able to stop these low cost versions from being able to be re-imported. 


Anonymous said...


You are making a distinction without difference. The US college kids who have been ripped off for years by higher ed publishers feel just as disadvantaged as any Australian general book buyer.

It is ironic that, now as publishers are encountering mass resistance to their traditional print products and scramble to find a worthwhile digital business model, they might also have to cope with cheap imports of their own textbooks.

Who knows, maybe they will find that, at a fair price, the aversion to textbooks is not as profound or as permanent as they thought.

And the variable market pricing model of US higher ed publishers has less to do with helping poor foreign students than it has to do with setting realistic prices in open markets. Now they will have to do the same (maybe) back home.


Peter Donoughue said...

Well I take your point Greg, and as you know, would generally sympathise with it. But I also believe in radically lower pricing in Asian/African territories of the exact same, not inferior, product. Sure this is 'setting realistic prices in open markets', done for commercial reasons, but that doesn't mean at all that it isn't also critically important for global education and advancement.

Also, in my experience, US publishers would react in precisely the wrong way if importation back to the US was common and legal practice. They would either dramatically increase prices in low-price territories, thus cruelling sales and encouraging piracy, or they would produce far lower quality editions (content wise, not just production values) and without offering the supporting instructor material.

The thing they wouldn't do is lower prices in the US market.

Anyway, this is a pretty dated argument by now, as the rapid transition to digital materials takes over, with subscriptions being paid for by university administrations rather than students.