Kirtsaeng v. John Wiley & Sons Inc.: Why Gamers Should Care

How First Sale Is Threatened

Is this the future face of organized crime?

As the case reached appellate courts, Kirtsaeng was prohibited from using First Sale in his defense, and was ordered to pay hundreds of thousands in damages to John Wiley & Sons. A Second Circuit panel considering this outcome and the prohibition against using First Sale as a defense ruled, in essence, that the First Sale doctrine only applies to objects actually manufactured in the United States. Objects manufactured elsewhere – even those manufactured on behalf of US-based companies – are not subject to the law. This is the question the Supreme Court is now considering.

What’s the big deal? It’s just about controlling resales of books, right? The big deal is that the First Sale doctrine is the legal basis on which entire retail industries rest. You can rent video games on Game Fly, buy used games at your local shop and sell your games on eBay because of it. But it isn’t just money that’s at stake. Public libraries depend on First Sale too; without it, they would have no legal standing to lend books for free. And yes, that means you, too, rely on First Sale to be able to lend your books to friends and family without fear of legal reprisal.

The problem is that in the modern globalized economy, there is very little sold in the US that isn’t manufactured outside of it, regardless of the company selling it. The shoes you’re wearing were almost certainly made overseas. So too the majority of Blu-ray discs on your movie shelf. The television you watch those blu-rays on was definitely made abroad. Not to mention your iPod, the printer connected to your computer, the coffee machine that fueled your ability to be angry on the Internet, and possibly even the glasses on your face. Even every single smartphone you’ve ever used was made overseas. This overly broad interpretation of the law would effectively nullify First Sale, even if it were upheld on strictly-domestic grounds.

This is doubly troublesome if you’re a gamer. Sony’s Playstation 3 console is manufactured in China. Xbox 360s are made in Brazil. Lest we forget, Microsoft and Sony are both very, very keen to severely restrict what the consumer may do with the equipment after purchase. Microsoft famously engaged in very serious judicial shenanigans back in 2010, in an attempt to ruin the life of one Matthew Crippen for his Xbox 360 console modding business. That case was thrown out, and no verdict was issued, meaning that the legality of the practice is still very much in doubt. With a ruling in favor of John Wiley & Sons, it would no longer be necessary to first establish whether or not modders are allowed to mod a console; instead, console developers would be able to litigate them into an early grave by simple assertion of foreign manufacture. It’s authority as vast and nebulous as that enjoyed by the recording industry in its quest to stamp down mp3 sharers without.

And just in case PC gamers start feeling smug, your Intel chip might have been fabricated in the United States, but remember the hard drive shortage earlier this year? That was caused by flooding in Thailand, where most hard drives are made. How would such a ruling affect your ability to gift or sell an older PC? Would certain (extremely pricey) components need to be removed or deactivated before sale? If SCOTUS rules for John Wiley & Sons, then yes, if the manufacturer demands it.

So What Next?

The court will likely rule in one of three ways. It’s possible they’ll find for the plaintiff after all; should this happen, we must expect a dramatic increase in business lobbying to bring about a change to the law, SOPA style, which would curtail First Sale. The court could also rule narrowly, maintaining the right of retailers to set regional prices but otherwise upholding the broad principle of First Sale. This would in essence kill cottage businesses, but wouldn’t necessarily kill, say, GameStop. The worst case scenario is that the Court will uphold the lower court’s decision in full, a decision that would forever upend the way Americans interact with sellers. (It would also become a self-reinforcing justification for further removal of production and manufacturing from American soil. Just in case you weren’t worried enough.)

The Court’s recent record on matters affecting consumers is spotty at best (for a perfect example of the problem, see Kelo v. New London‘s absurd redefining of Eminent Domain.) Their worst decisions haven’t fallen upon straight party lines, so it’s not entirely possible to predict how this court will rule. There’s also the fact that Supreme Court decisions are final. Unlike the very successful fight to derail SOPA, there’s not much that can be done by average citizens, save preparing for the aftermath of SCOTUS deliberations.

Even so, it’s important to keep a close eye on this. Whatever the outcome, gamers interested in the protection of consumer rights need to be ready to act quickly. Game Front will be following the case, and when a decision is issued – expected in June, 2013, so have fun! – we will revisit this topic with an eye on what to do next. In the meantime, for more information, see this extremely helpful article published by University of Minnesota.

NOTE: Edited for clarity; content was not otherwise altered.

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10 Comments on Kirtsaeng v. John Wiley & Sons Inc.: Why Gamers Should Care

Axetwin

On November 6, 2012 at 12:03 am

Its one thing to sell something youre no longer using. Its something completely different to form a “business” around buying and selling someone elses work without giving them a cut. I know ALOT of people have this misguided idea that the simple act of “buy low sell high” is what Capitolism is all about. Well its not.

However, youre right Ross, this does affect us as gamers. However not in the way you think. This not comparable to gamer selling a game they no longer play. What this guy is doing is more relatable to a company based around Gold/Item Selling. So instead of hoping this guy wins, we should be hoping this guy loses. If he does, then that sets the precedent that ‘you cannot build a business around someone elses copyrighted work’.

Axetwin 2 (we're twins)

On November 6, 2012 at 3:18 am

Axetwin – believe me, media companies will not stop until ALL pre-owned sales are banned, even person-to-person sales. They’d criminalise eBay if they could. If they want to stop their profits from going down, they should lower the price to something gamers would want to buy brand new. It may sound counter-productive but it really isn’t, it’s the more pragmatic approach that guarantees more direct sales in the long run. £40 for a game brand new is too high, especially when you often have to make a bunch of microtransactions on top of that in order to get the full experience, AND the cost of developing games is quite a lot lower than it was even five years ago (adjusted for inflation). £60 to download it on PSN is an absolute joke, for this you have no consumer rights whatsoever because it’s digital – you can’t even share it among other users on your own damn console. And EA have flat-out said that they want all games to be distributed only via download, using FIFA (i.e. the annually-reskinned football game that’s rendered totally obsolete within 12-18 months) as their prime example. You can be sure Ubisoft and Activision want the same thing. But rather than leading to an increase in sales, this would do the exact opposite – it would simply alienate gamers and lead them to never look at the games in the first place. They’re not going to buy them at those prices just because there’s no alternative, aside from maybe the most hardcore fans or those for whom money is just no issue. The majority will either ignore them completely or wait until they’re reduced to a more realistic price. You can expect piracy to go up tenfold as well if this goes through.

So sorry Axetwin, I often agree with your comments but on this one you’re dead wrong. Wiley and Sons winning this case would be a slippery slope that would have widespread negative and destructive repercussions on every media industry in America, and indeed the world.

Ebalosus

On November 6, 2012 at 4:25 am

” There’s also the fact that Supreme Court decisions are final”

Not true, because according to the Constitution, juries are the ultimate arbiters of the law. How? Jury nullification.

If enough Juries nullify a law, the supreme court and/or the government can’t do sh*t about it, because (and I’m quoting directly here):

“In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.” – VII Amendment to the US Constitution.

I.e. Since most copyright cases exceed $20, they’ll have to go to a jury trial…which then the jury can then nullify…which means that the law is unenforcable in practice.

(And yes, I recognise the irony of a New Zealander lecturing americans about the constitution and it’s application)

Roy Batty

On November 6, 2012 at 4:43 am

I had no idea Grizzly Adams was a gamer.

I have no problems paying $60 for a game as long as it has a great deal of replay value it is cheaper and more entertaining that a movie using an hourly cost formula.

I do have problems with being told what I can do with what I own. I also have problems with business using the courts for a business end (i.e. when companies use the Sherman Anti-trust act to sue Microsoft) claiming it is for the “consumer” (Bovine Scatology).

Perhaps John Wiley & Sons inc. should practice a little free market capitalism and offer the cheaper books here in the states. They could undercut Kirtsaeng’s prices on shipping costs alone which would run him out of the business. (or do what EA does…just buy the guy)

Ron Whitaker

On November 6, 2012 at 5:48 am

@Ebalosus: The irony is thick, yes. However, in practice, the Seventh Amendment isn’t quite so final. A judge may still set aside a jury’s ruling, although in the majority of cases, that means there will have to be a new jury trial. Surprisingly, Wikipedia actually explains it fairly well. http://en.wikipedia.org/wiki/Seventh_Amendment_to_the_United_States_Constitution

Ross Lincoln

On November 6, 2012 at 7:32 am

Ebalosus, with respect, while you’re correct, the section you’re referring to is also irrelevant, and you might be mistaken on what SCOTUS actually does.

A jury trial discusses guilt (or culpability) and innocence. SCOTUS determines constitutionality of the law. The issue here is the constitutionality of the lower court’s decision or whether that decision is in accordance with the law generally, in this case whether or not the law does in fact say that objects made outside the US aren’t covered by the first sale doctrine. The previous court’s ruling hinges on that question, so what they’re doing is determining whether or not that ruling had legal merit.

If I understand you, then what you’re saying is that after this case, we might conceivably see a bunch of jury trials rule against the court’s ruling. However, what’s at stake here is that fact that Kirtsaeng was prohibited from even mentioning the First Sale doctrine in the lower court; the second circuit panel’s ruling on that is what is being challenged here. If the court upholds that ruling, then similar cases would also be prohibited from bringing up that defense and juries would never even consider it.

David

On November 6, 2012 at 8:09 am

While I agree with most of the article, I would point out that SC decisions, while “final” in a juridical sense, are not actually “final” in a constitutional sense. Congress has often made laws that–in effect–overrule the SC: see, e.g., certain provisions of the so-called Civil Rights Act of 1991, or the Restoration of Religious Freedom Act. The authority to do this is implied by Article II, Section 2: feel free to look it up.

And–BTW–if you’re going to snark on the 2nd Amendment, you should try to show some awareness that the term “well-regulated” carried a different meaning to the Framers: it didn’t carry the modern meaning of “subject to rules”, but meant “orderly” or “squared away” or such similar sentiments. In other words, to the extent there is any connection between the militia part and the keeping arms part (and it isn’t clear that there is, see any number of other amendments where related but independent rights are discussed in a group, e.g. the five separate and distinct rights enumerated in the 1st Amendment), it is to say that to have a properly functioning militia, we need to guarantee that the citizenry has unfettered access to weaponry.

Ross Lincoln

On November 6, 2012 at 8:18 am

David, you’re right, and I did make that point in the end, though perhaps a bit too ambiguously. That’s part of ‘what to do next’. I regret that for length I cut a more lengthy elaboration of that point. You must concede that for all intents and purposes it is FINAL, meaning there is no appeal. (And kirtsaeng would lose no matter if the law were changed.)

As for your second point, history is not, in fact, unanimous on what the framers actually meant; centuries of precedent and the law, not to mention the arguments we’ve been having since like 1800, say otherwise. Here’s just one run down: http://www.law.cornell.edu/wex/second_amendment. Also, ‘well regulated’ meant the same thing in the 1700s that it means now, at least in the strict ‘meaning of words’ sense. They obviously intended to allow congress some leeway to pass laws related to guns.

BTW, I’m a gun owner. And I’ll still snark on the second amendment all I like. It’s horribly constructed and invites disagreement!

Ross Lincoln

On November 6, 2012 at 8:22 am

It’s also worth noting that there were some VERY strong disagreements between federalists and anti federalists about the nature of the law, the role of government, etc, and the language in the constitution is often open to interpretation specifically to satisfy everyone. They created a living document, not a bible. Let’s not forget also that it was crafted by people opposed to having a national army, most notably Thomas Jefferson.

Ebalosus

On November 7, 2012 at 3:05 am

Ron & Ross

I’ll…have to temporarily concede to your arguments, because i’ll have to ask the guy whom mentored me on the Constitution and how laws in your country operate about this case (which I’ve been meaning to do).