|QUALITY KING DISTRIBUTORS, INC. v. LANZARESEARCH INTL, INC. (96-1470)|
98 F.3d 1109, reversed.
[ Stevens ]
[ Ginsburg ]
The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
QUALITY KING DISTRIBUTORS, INC. v. LANZA
RESEARCH INTERNATIONAL, INC.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
Respondent Lanza, a California manufacturer, sells its hair care products in this country exclusively to distributors who have agreed to resell within limited geographic areas and only to authorized retailers. Lanza promotes its domestic sales with extensive advertising and special retailer training. In foreign markets, however, it does not engage in comparable advertising or promotion; its foreign prices are substantially lower than its domestic prices. It appears that after Lanzas United Kingdom distributor arranged for the sale of several tons of Lanza products, affixed with copyrighted labels, to a distributor in Malta, that distributor sold the goods to petitioner, which imported them back into this country without Lanzas permission and then resold them at discounted prices to unauthorized retailers. Lanza filed suit, alleging that petitioners actions violated Lanzas exclusive rights under the Copyright Act of 1976 (Act), 17 U.S.C. § 106 501, and 602, to reproduce and distribute the copyrighted material in the United States. The District Court rejected petitioners first sale defense under §109(a) and entered summary judgment for Lanza. Concluding that §602(a), which gives copyright owners the right to prohibit the unauthorized importation of copies, would be meaningless if §109(a) provided a defense, the Ninth Circuit affirmed.
Held: The first sale doctrine endorsed in §109(a) is applicable to imported copies. Pp. 318.
(a) In Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 349350, this Court held that the exclusive right to vend under the copyright statute then in force applied only to the first sale of a copyrighted work. Congress subsequently codified Bobbs-Merrills first sale doctrine in the Act. Section 106(3) gives the copyright holder the exclusive right to distribute copies by sale or other transfer of ownership, but §109(a) provides: Notwithstanding [§]106(3), the owner of a particular copy . . . lawfully made under this title, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy . Although the first sale doctrine prevents Lanza from treating unauthorized resales by its domestic distributors as an infringement of the exclusive right to distribute, Lanza claims that §602(a), properly construed, prohibits its foreign distributors from reselling its products to American vendors unable to buy from its domestic distributors. Pp. 37.
(b) The statutory language clearly demonstrates that the right granted by §602(a) is subject to §109(a). Significantly, §602(a) does not categorically prohibit the unauthorized importation of copyrighted materials, but provides that, with three exceptions, such [i]mportation is an infringement of the exclusive right to distribute under [§]106 . Section 106 in turn expressly states that all of the exclusive rights therein grantedincluding the distribution right granted by subsection (3)are limited by §§107 through 120. One of those limitations is provided by §109(a), which expressly permits the owner of a lawfully made copy to sell that copy [n]otwithstanding the provisions of [§]106(3). After the first sale of a copyrighted item lawfully made under this title, any subsequent purchaser, whether from a domestic or a foreign reseller, is obviously an owner of that item. Read literally, §109(a) unambiguously states that such an owner is entitled, without the authority of the copyright owner, to sell that item. Moreover, since §602(a) merely provides that unauthorized importation is an infringement of an exclusive right under [§]106, and since that limited right does not encompass resales by lawful owners, §602(a)s literal text is simply inapplicable to both domestic and foreign owners of Lanzas products who decide to import and resell them here. Pp. 79.
(c) The Court rejects Lanzas argument that §602(a), and particularly its exceptions, are superfluous if limited by the first sale doctrine. The short answer is that this argument does not adequately explain why the words under [§]106 appear in §602(a). Moreover, there are several flaws in Lanzas reasoning that, because §602(b) already prohibits the importation of unauthorized or piratical copies, §602(a) must cover nonpiratical (lawfully made) copies sold by the copyright owner. First, even if §602(a) applied only to piratical copies, it at least would provide a private remedy against the importer, whereas §602(b)s enforcement is vested in the Customs Service. Second, because §109(a)s protection is available only to the owner of a lawfully made copy, the first sale doctrine would not provide a defense to a §602(a) action against a non-owner such as a bailee. Third, §602(a) applies to a category of copies that are neither piratical nor lawfully made under this title: those that are lawfully made under another countrys law. Pp. 912.
(d) Also rejected is Lanzas argument that because §501(a) defines an infringer as one who violates [§]106 , or who imports in violation of [§]602, a violation of the latter type is distinct from one of the former, and thus not subject to §109(a). This arguments force is outweighed by other statutory considerations, including the fact that §602(a) unambiguously states that the prohibited importation is an infringement under [§]106, thereby identifying §602 violations as a species of §106 violations. More important is the fact that the §106 rights are subject to all of the provisions of [§§]107 through 120. If §602(a) functioned independently, none of those sections would limit its coverage. Pp. 1215.
(e) The Court finds unpersuasive the Solicitor Generals argument that importation describes an act that is not protected by §109(a)s authorization to a subsequent owner to sell or otherwise dispose of the possession of a copy. An ordinary interpretation of that language includes the right to ship the copy to another person in another country. More important, the Solicitor Generals cramped reading is at odds with §109(a)s necessarily broad reach. The whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution. There is no reason to assume that Congress intended §109(a) to limit the doctrines scope. Pp. 1516.
(f) The wisdom of protecting domestic copyright owners from the unauthorized importation of validly copyrighted copies of their works, and the fact that the Executive Branch has recently entered into at least five international trade agreements apparently intended to do just that, are irrelevant to a proper interpretation of the Act. Pp.
Stevens, J., delivered the opinion for a unanimous Court. Ginsburg, J., filed a concurring opinion.