U.S. Supreme Court Ruling in Kirtsaeng Endorses Arbitrage

Today’s United States Supreme Court Opinion in Kirtsaeng v. John Wiley & Sons, Inc. endorses arbitrage and the free market over the rights of copyright-owners to lawful, downstream sales of copyright-protected works most anywhere in the world. In a 6-3 Opinion written by Justice Kagan, the Supreme Court authorized the importation of works protected under the United States Copyright Act that are lawfully manufactured outside of the U.S. and lawfully acquired abroad. This is a victory for consumers.

In a dissent joined by Justice Kennedy and, in part, by Justices Scalia, Justice Ginsberg criticized the majority’s decision as a bold departure from the intent of the Congress.  Congress, as stated by Justice Ginsberg, granted copyright owners strong rights to control the overseas manufacture and distribution of their works.

I see two potential effects of the Court’s Kirtsaeng Opinion:

First, publishers of copyright protected works are likely to shift manufacture of works from the United States and other countries with high manufacturing costs to countries where manufacturing costs are much lower. Kirtsaeng stands for the proposition that a copyright-protected work has one price – the lowest price that the copyright owner agrees to sell the work wherever in the world, plus shipping.

Second, based purely on my own purchases, I actually “purchase” fewer copyright-protected works today than I did several years ago. Why? Because most movies, songs, and books I enjoy today are acquired through licenses with Apple’s iTunes or Amazon. I am not the owner of the song or film, rather, I have paid a fee for a limited license. The movement of distribution channels from hard-copy purchases to software licenses should mitigate the negative consequences, to an extent, of the Kirtsaeng decision.