Selling products on the web can be amazingly easy. One popular strategy is to sell books and movies on Amazon.com. Given products often incorporate copyrighted elements; it is important to understand when such sales are allowed and when they constitute copyright infringement.
Selling on Amazon
Amazon.com is certainly one of the biggest retailers in the world. While the company started out primarily as a bookstore, it has spread its wings to the point that you can now even buy groceries.
What many consumers do not realize is third parties supply most of the products Amazon lists on its site. Amazon will even handle the storing and shipping of products through the much discussed Fulfillment By Amazon program. More than a few entrepreneurs have made a very nice living using “FBA”.
But is reselling products on Amazon legal? After all, aren’t people sued right and left online for copyright infringement when they trade movies and songs online? Yes, copyright issues do exist, but the first sale doctrine can be used to bypass infringement claims when the item being sold is a product.
First Sale Doctrine
The first sale doctrine is the single most important legal concept applicable to the reseller market. Without this doctrine, reseller markets ranging from large platforms such as eBay and Amazon to as small as weekend garage sales would not exist.
The first sale doctrine holds that once a person pays for a copyrighted item, they can do with that item as they see fit. This right includes selling, giving away, renting or even throwing the product in the trash.
Practically speaking, this means you can purchase books and movies from a variety of sources and then resell them on Amazon without fearing being named in a copyright infringement lawsuit. The original copyright holder cannot object to the sale.
Let’s look at a quick example of how this doctrine plays out. Stephen King writes a new novel. Bob buys the book at a bookstore and reads it. His wife eventually donates the book along with a number of other items to a local charity. You purchase the book at the charity for 50 cents because you know it is on sale for $10 on Amazon. You can list and sell the novel on Amazon without running into any problems because Bob conducted the “first sale” when he purchased the book from a bookstore. Copyright claims cannot be made against any subsequent ownership transfers.
As with most legal doctrines, there are limitations to the protections provided by the first sale doctrine. One major limitation is the doctrine only applies to the actual product being purchased, not copyrights contained within it.
Consider a coffee table book containing photographs of exotic locations. The individual who buys the book can turn around and resell it on Amazon.com, eBay or at a garage sale without worrying about being accosted by copyright lawyers.
Is the same true if you take apart the book? Does purchasing the product give you the right to remove or copy parts of the book and resell them separately? Can the owner remove the photos and sell them separately? Can the owner replicate the photos, blow them up and create a calendar book for sale?
The answer to these questions is clearly no. The first sale doctrine only applies to the complete fixed work as issued by the original copyright owner, to wit, the full book and not its individual pages or sections.
The second area of limitations involves haphazard rules that have popped up over the years through a variety of court decisions. Software and musical recordings? You can sell them, but not rent them. Fine art? You can sell and rent it, but not destroy it.
And what about international retail arbitrage? This strategy can be very profitable.
International Retail Arbitrage
What is international retail arbitrage? Companies sell the same product for markedly different prices in different parts of the world. Savvy sellers will hunt for products that are easy to sell in their market and then research other areas of the world where they can buy the products at huge discounts. The difference between the purchase and sales price can be massive, which equates to healthy profits. One case shows just how profitable.
In the 2009 case of John Wiley & Sons Inc. v. Kirtsaeng, the dispute involved textbooks produced by Wiley & Sons that Kirtsaeng was selling on eBay. Kirtsaeng had a brilliant business plan involving international retail arbitrage. He would have family members and friends purchase textbooks in Thailand where the books were very cheap. The books were then shipped to him in the U.S., where Kirtsaeng would sell them online at much higher prices that still undercut the prices of Wiley & Sons.
A cool $1.2 million a year or so.
Welcome to the very profitable field of international arbitrage.
As you can imagine, Wiley & Sons was none too happy about this situation. The company took the position that the first sale doctrine did not apply to products sold or made outside the United States. Since the textbooks in question were sold in Thailand, Wiley & Sons argued Kirtsaeng could not use the doctrine as a defense to a copyright infringement claim. Kirtsaeng argued the location of the manufacturing or sale of the product was a non-factor and the first sale doctrine should apply throughout the world.
Supreme Court Decides
The Supreme Court agreed with Kirtsaeng in a 6-3 decision. The majority decision noted the first sale doctrine applies without regard to the location of production or sale. Practically speaking, this means the doctrine protects sellers of movies and books on Amazon.com as long as the item is purchased initially from the copyright holder.
Considering a quick trip to Thailand to buy a small warehouse load of textbooks? Don’t. After the Supreme Court decision, Wiley & Sons immediately raised the prices on its overseas offerings sufficiently to make the purchasing and importing of the textbooks to the U.S. to expensive to turn a profit here. Of course, there are products in other niches that are perfect for international retail arbitrage.
Let’s return to our original question. Is it legal to resell movies, books and other products on Amazon.com? The answer is yes thanks to the first sale doctrine.
Richard A. Chapo, Esq.