What Quality King Distributors Does is Perfectly Legal!

• Industry: Health Care Equipment & Svcs
• Founded: 1961
• Country: United States
• CEO: Glenn Nussdorf
• CFO: Michael Katz
• Website: www.qkd.com
• Employees: 900 ^e
• Fiscal Year End: Oct 31, 2013
• Sales: $3.2 B ^e
• Headquarters: Ronkonkoma, NY

The first-sale doctrine plays an important role in U.S. copyright and trademark law by limiting certain rights of a copyright or trademark owner. The doctrine enables the distribution chain of copyrighted products, library lending, giving, video rentals and secondary markets for copyrighted works (for example, enabling individuals to sell their legally purchased books or CDs to others). In trademark law, this same doctrine enables reselling of trademarked products after the trademark holder put the products on the market. The doctrine is also referred to as the “right of first sale,” “first sale rule,” or “exhaustion rule.”

Copyright law grants a copyright owner an exclusive right “to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” 17 U.S.C. 106(3). This is called “distribution right” and differs from the copyright owner’s “reproduction right” which involves making copies of the copyrighted works. Rather than the right to copy, the distribution right involves the right to transfer physical copies or phonorecords (i.e., recorded music) of the copyrighted work. For example, the distribution right could be infringed when a retailer acquires and sells to public unlawfully made audio or video tapes. Although the retailer may not have copied the work in any way and may not have known that the tapes were made unlawfully, he nevertheless infringes the distribution right by the sale. The distribution right allows the copyright owner to seek redress from any member in the chain of distribution.

The first-sale doctrine creates a basic exception to the copyright holder’s distribution right. Once the work is lawfully sold or even transferred gratuitously, the copyright owner’s interest in the material object in which the copyrighted work is embodied is exhausted. The owner of the material object can then dispose of it as he sees fit. Thus, one who buys a copy of a book is entitled to resell it, rent it, give it away, or destroy it. However, the owner of the copy of the book will not be able to make new copies of the book because the first-sale doctrine does not limit copyright owner’s reproduction right. The rationale of the doctrine is to prevent the copyright owner from restraining the free alienability of goods. Without the doctrine, a possessor of a copy of a copyrighted work would have to negotiate with the copyright owner every time he wished to dispose of his copy. After the initial transfer of ownership of a legal copy of a copyrighted work, the first-sale doctrine exhausts copyright holder’s right to control how ownership of that copy can be disposed of. For this reason, this doctrine is also referred to as “exhaustion rule.”

The doctrine was first recognized by the Supreme Court of the United States in 1908 (see Bobbs-Merrill Co. v. Straus) and subsequently codified in the Copyright Act of 1976, 17 U.S.C. § 109. In the Bobbs-Merrill case, the publisher, Bobbs-Merrill, had inserted a notice in its books that any retail sale at a price under $1.00 would constitute an infringement of its copyright. The defendants, who owned Macy’s department store, disregarded the notice and sold the books at a lower price without Bobbs-Merrill’s consent. The Supreme Court held that the exclusive statutory right to “vend” applied only to the first sale of the copyrighted work.

Section 109(a) provides: “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.” The elements of the first sale doctrine can be summarized as follows: (1) the copy was lawfully made with the authorization of the copyright owner; (2) ownership of the copy was initially transferred under the copyright owner’s authority; (3) the defendant is a lawful owner of the copy in question; and (4) the defendant’s use implicates the distribution right only; not the reproduction or some other right given to the copyright owner.

Application to public display right

17 U.S.C. §109(c) creates a limited exception to a copyright owner’s public display right. Owner of a lawful copy of a copyrighted work can, without permission from the copyright owner, display that copy to viewers present at the place where the copy is located. For example, an owner of copy of a computer program (and only a computer program under §109(c)) cannot display the copy publicly on a website under this provision.^{[citation needed]}

An amicus brief in Kirtsaeng v. John Wiley & Sons, Inc. argued that Section 109 was a key provision for US art museums:

Most U.S. art museums have permanent collections that were acquired through purchases, gifts, and bequests, and on which they draw for exhibitions to the public. Museums also present special exhibitions, largely made up of works not in their collections, through loans from private collectors, galleries, and other institutions. For all these activities museums depend on the protections afforded by Section 109. Section 109(c) provides that the owner of a particular copy “lawfully made under this title” is entitled to display that copy publicly without the copyright owner’s permission. Section 109(a) similarly allows museums to buy, borrow, loan, and sell such “lawfully made” artworks.^[1]