(Previously electronically published at lawyers.com)
The term parallel imports refers to goods containing copyrightable material
or bearing trademarks imported from outside of the United States. These
goods are usually imported because the particular version or style is either
However, the rights holder of either the copyrights or trademarks had, in some manner, authorized the initial reproduction and sale. The U.S. Supreme Court has recently decided a case involving parallel imports in the copyright context, although the imports involved would not normally be thought of as warranting copyright protection. The goods were hair care products that contained a label bearing copyrightable subject matter.
The Copyright Law provides the right to exclude others from using any one of a bundle of exclusive rights. The primary rights provided by Section 106 of the Copyright Act are the right to exclude others from (1) reproducing the copyrighted work, (2) preparing derivative works, (3) distributing copies of a work, (4) performing a work publicly and (5) publicly displaying a copyrighted work. The particular right under the Copyright Laws that is of interest in connection with parallel imports is the third right of exclusion: the distribution right.
The distribution right has limitations. Once a physical copy of a work
has been lawfully distributed under the copyright law, the right for further
distribution or the right to exclude further distribution is limited by
the First Sale Doctrine.
Following Section 106, and beginning with Section 107 are a number of
exceptions to the exclusive rights of the copyright proprietor. In the
1976 Copyright Act, the first sale doctrine became Section 109(a), which
"Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. . . ."Importation
Can a copyright holder prevent the importation of copies lawfully purchased abroad despite the first sale doctrine? Section 602 of the Copyright Act prohibits infringing importation of copies or phonorecords. The question is: what is the effect of importation of so called authorized works in relationship to the First Sale Doctrine, Section 109(a), in view of section 602.
In the past, the issue has been dealt with by several Federal Courts of Appeal. The Ninth Circuit Court of Appeals in BMG v. Perez held that the importation of phonorecords, which were lawfully purchased in Mexico, nevertheless violated U.S. Copyright Law when they were imported into the United States. The Ninth Circuit pointed out that since copyrights are territorial, U.S. Copyright Law is not applicable outside of the United States and thus, first sale had not occurred in Mexico. The Third Circuit Court of Appeals in Sebastian Int' l, Inc. v. Consumer Contacts (PTY) Ltd. had adopted a seemingly contrary position permitting the importation of hair care products having labels with copyrightable material.
In the case of Quality King Distributors, Inc. v. L'Anza Research International, Inc., the U.S. Supreme Court has recently given at least a partial answer to this question by reviewing a Ninth Circuit decision barring parallel imports. The case involved the importation of hair salon products that had labels containing copyrightable subject matter affixed to the packaging. Therefore, the subject of the importation was really the hair care products, and not the copyrightable subject matter. The labels appeared to be used as a way to assure the manufacturer that its products--destined for Malta at a considerably lower price point than sold in U.S. salons--would not find their way back to the United States.
In effect, the copyrightable subject matter on labels was used as a way to attempt to prevent parallel importation of the hair care products into the United States. The U.S. Supreme Court held that the importation clause of the Copyright Law could not prevent the importation of these goods in view of the first sale doctrine expressed in Section 109(a) of the Copyright Act.
The manufacturers had sought to control the manner of distribution of the goods because they were destined for high priced salon sales (as opposed to lower priced retail sales) in the United States. From the Manufacturers perspective, the trademark laws had not been effective because they tended to be fuzzy. Consumer protectionism, at times, tended to favor parallel imports where the public was not in any significant way being deceived. The goods, if they were genuine, might be permitted to be imported based upon the difficult-to-reconcile parallel imports trademark cases.
The Copyright Laws seemed to provide a clearer demarcation as to infringement. However, the Supreme Court has seemingly taken the position that the Copyright Laws may not be used in this manner to prevent parallel imports. It appears that the Supreme Court was probably trying to say that the distributor could not use Copyright Laws as a method of controlling markets and distribution channels by the expedient of a label containing copyrightable subject matter.
Particularly noted in the concurring opinion of the Supreme Court's
decision is the fact that the goods were originally manufactured
in the United States, then shipped out of the United States and then
re-imported. The significance is that the copyright distribution
right had already been exhausted by the act of distribution from the United
States. The decision might have different had the work originally
been completely manufactured or made outside of the United States.
The entertainment industry had been watching this case with interest.
Allegedly, the In conclusion, the result of the decision was not surprising.
Nothing in the opinion prevents the barring of piratical copies. This was
not the subject of the proceeding. The Ninth Circuit, which includes
the Southern California entertainment industry, took the position
that the importation clause prevails and that the goods could not
be imported. The Supreme Court took a strict view of the First Sale Doctrine.
This was easy to do since the goods had originated from the United
States, and the Court could readily reach the conclusion that the
rights were exhausted. As a result, other than to send a message to manufacturers
that they should not be too cavalier in using the trick of a label on a
product in connection with the copyright system, the decision was not so
startling. The copyright system may have other, more important tasks:
to protect rather than to squander its power over control of manufacturers'
international marketing schemes.
Paul D. Supnik Paul D. Supnik practices copyright, trademark
and entertainment law in Beverly Hills, California. He is a past chair
of the Intellectual Property and Entertainment Law Section of the
Los Angeles County Bar Association, a past chair of the editorial board
of the Los Angeles Lawyer Magazine and a Trustee of the Los Angeles Copyright
Society. He is the author of the chapter "Copyright" in California Continuing
Education of the Bar's book, Proof in Competitive Business Litigation.
PAUL D. SUPNIK