We all know the thirft shop. You go. You buy The Great Gatsby. It is used. It is cheap. It is a great read. And potentially illegal contraband? That could be so. Under the Second Circuit’s ruling in John Wiley & Sons, Inc. v. Kirtsaeng, you may not resell copyrighted materials that are manufactured overseas in the U.S. The Supreme Court heard oral arguments in the case on Monday. Until Congress amends the Copyrigt Act to limit the first sale doctrine to copyrighted materials manufactured in this U.S., the Supreme Court should overrule the Second Circuit.
Under the first sale doctrine, you are permitted to buy a book and then resell it. The copyright owner no longer has a right to restrain your use of the book once you have paid for it. However, there is a provision in the Copyright Act which prohibits you from importing copyrighted works into the U.S. without first obtaining the copyright owner’s permission. The question is whether that provision of the Act applies to copyrighted works that are used.
In Wiley, the Second Circuit was asked to resolve the apparent conflict between these provisions of the Copyright Act. The defendant had family members buy academic books overseas and then send the books to him in the U.S. When here, he sold the books for a profit. The books were manufactured overseas, and were protected by U.S. copyright law. The plaintiff, a publisher of some of the books that defendant was importing, sued him for copyright infringement, claiming he was violating their right to decide what copyrighted goods to import, or not. His defense was that he was protected by the first sale doctrine because all of the books he was importing were used. The lower court refused to instruct the jury about the potential applicability of the defense, and the man was found liable for copyright infringment.
Using some mental gymnastics, the Second Circuit held in Wiley that the first sale doctrine did not apply to the books in question because they were manufactured overseas, whereas there would have been a defense had the books been manufactured domestically. The Second Circuit came to this decision after reading a concurrence by Justice Ginsberg in Quality King, a previous Supreme Court decision in which the court held that the first sale doctrine applies to copyrighted products produced in the United States and resold here after being re-imported. Even though the majority opinion in Quality King didn’t peg its first sale doctrine holding to the fact that the product in question was domestically produced, Justice Ginsberg suggested a different outcome could result if a product were produced overseas and then imported.
It seems if Congress wanted to expand a copyright holder’s rights beyond the first sale depending on whether the product in question was produced oversears, it could easily do so by amending the Copyright Act. Until then, it seems the best way to keep cool local thrift shops (and others) from getting sued and put out of business by major book publishers (or others) for selling used books (or other copyrighted items) manufactured overseas is for the Supreme Court to reverse the Second Circuit.
Doth not a rose by any other name smell as sweet? Of course it does. The same is true of an isolated gene. It may have different uses and molecular characteristics once separated from the human genome. However, the genetic code within the gene remains the same. Because such code is found in nature, the isolated gene should not be patentable subject matter. And yet the United States Court of Appeals for the Federal Circuit recently ruled in The Assoc. for Molecular Pathology, et. al. v. Myriad Genetics, Inc. (“Myriad”) that such a gene is patentable. In so holding, the Court went too far.
Myriad filed a patent over BRCA, which is an isolated gene from the human genome. Think of the BRCA as a link from a chain link fence. The company then used BRCA for various purposes, including the treatment for breast cancer. Indeed, the company filed a patent for such uses and applications. This patent was not the subject of the dispute.
Instead, the dispute centers on whether Myriad has the right to a government sanctioned monopoly over BRCA. A majority of the Federal Circuit held that it did. The majority’s reasoning: while the genetic code that underlies the BRCA is the same as the genetic code found in the human genome, the molecular nature of the BRCA changes once isolated from its chain. This is akin to saying that a link from a chain link fence can be heated and bent into forms that would not be possible if the link were still in the chain link fence.
However, the fact remains that the link still is made of the metal from which it came, just as the BRCA has the same generic code. Of course, Myriad should be — and was — rewarded with a patent for new and non-obvious applications or uses of the BRCA for the treatment of breast cancer. And the Court rightly upheld Myriad’s patent over a genetically modified gene that the company constructed in the laboratory and which did not naturally occur in nature.
In the end, allowing Myriad to monopolize the BRCA gene with a patent precludes others from experimenting with the gene in order to find new commercial and non-commercial applications that benefit society. In so doing, the Federal Circuit has placed too much undeserved power over a naturally occurring item in the hands of one company.
Recently, the United States Court of Appeals for the Second Circuit held in Barclays Capital v. Theflyonthewall.com (“Flyonthewall“) that while federal copyright law preempted the “hot news” doctrine in that particular case, Defendant Theflyonthewall could be held liable for infringing the copyright to Barclay’s and other Plaintiff banks buy/sell recommendations, notwithstanding First Amendment concerns. The Second Circuit should have gone father by abolishing the doctrine as preempted by the Copyright Act.
The “hot news” originated in International News Service v. Associated Press, a U.S. Supreme Court case decided in 1918. International News involved alleged free riding by International News Service (“INS”) on the Associated Press (“AP”). INS would obtain news from AP, sometimes illegally from a reporter like one on the left, on the East Coast. INS would then distribute the news on the West Coast. The Court held that such news was protected even in the absence of copying or a contractual obligation by INS to AP.
Similarly, in Flyonethewall, the Plaintiff banks had released by/sell recommendations concerning stock. Think of these recommendations as a wine rating you would see on Wine Spectator. Theflyonthewall not only divulges the banks recommendations before they got to their intended audience, but also copied some of the content verbatim on its site. As a result, Theflyonthewall was rightly found liable for copyright infringement. But the Second Circuit reversed the “hot news” claim as preempted in this particular case by the Copyright Act. Notably, the Court did not repudiate the doctrine all together as preempted completely by the Copyright Act. It should have.
The problem with the “hot news” doctrine is that there are no rational bounds on where it can be stopped. In the case where one newspaper copies text from another, you have a copyright violation. Where a reporter has a confidentiality contract with a newspaper but divulges news to another competitor, there may be a tortious interference claim. Or if one newspaper uses illegal means to get information from another, as in International News, an unfair competition claim exists. But “hot news” theory can be expanded to all sorts of ideas and information that are not otherwise obtained illegally or protected by copyright, patent, or contract. It in essence is relies then on a “sweat of the brow” theory. Without such bounds, the “hot news” doctrine expands intellectual property rights beyond the bounds Congress intended, revealing itself to be, in the end, full of hot air.