Intellectual Property Law

Gray Market Piracy? Come on!

I nearly fell out of my chair when I read CRM News: Strategy: Is Your Supply Chain Going Gray? Frustrated that the Supreme Court has made is so that “Copyright lawyers won’t save you” because the Copyright Act makes it clear that copyrights do not extend to control over re-distribution of lawfully made copies owned by others, the authors suggest other creative ways to limit folks from exercising the entitlement to re-distribute those copies.

This is nothing new. Copyright owners (including the owners of the ?works? embodied in the copyrighted labels on common non-copyrighted goods) like to discriminate in pricing by creating artificial markets so that discounts in one market won’t be resold at a lower price in over-priced markets. The thinking goes, “Why let U.S. consumers get the benefit of prices that are affordable to people in developing countries when we know we can get more out of the U.S. consumer’s pocket?”

The “first sale doctrine,” now codified as Section 109 of the Copyright Act, makes clear that the copyright owner’s right of distribution is subject to the copy owner’s right to sell it to anyone, anywhere, at any price. And that’s great policy. Entrepreneurs who see too big a gap between the prices charged U.S. consumers and the prices charged consumers elsewhere for identical copies can buy the cheaper product and sell it at a profit, while still giving the U.S. consumer a better bargain.

But that’s not why I nearly fell out of my chair. I was used to these anti-competitive price discriminators ranting about perfectly lawful gray market goods. What this story does is label these perfectly legal importers as pirates. That’s right. Despite quoting the Supreme Court in Quality King Distributors v. L’anza Research International, 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,” a ruling that suggests that the evildoers are those who try to circumvent the law by preventing gray market imports, they go on to call the importers “pirates”:

“Part of the reason gray market piracy exists is the complexity of the operating environment. Global supply chains often have complex pricing, distribution, control and cross-functional coordination challenges. If not managed well, these open the door to a number of opportunities that pirates can leverage.”

Copyright owners have enough trouble with real pirates. Infringement is a huge problem. It should not be made light of by suggesting that any law-abiding merchant who uses skill and opportunity to bring U.S. consumers a cheaper, non-infringing copy, is a “pirate” just because the copyright owner does not like the law.

Gray market imports of lawfully made copies of copyrighted movies, software, video games, music, books, and product labels may not be authorized by the copyright owner, but they are certainly authorized by law.

Full post as published by CopyOwner on January 06, 2008 (boomark / email).