A Small Victory; Media Lobbyists No Doubt Beginning Work to Erode It Away
Publishers, in our modern, internationalized world, have established market segmentation: pricing their product separately in every country or region based on the maximum profit they believe they can derive from each market. Sometimes this is enforced by software and hardware restrictions; for example, you buy a DVD in America, that DVD will not work in a DVD player sold in Japan, Europe, Africa, or China, due to region encoding. Even without that restriction, language/subtitle segmentation allows for discrimination. As a result, a DVD/Blu-Ray set which sells for $20 in the U.S. (like Skyfall, for instance), sells for ¥3,045 ($32) in Japan (and it used to be $38 before the yen took a recent dive).
This might not affect you like it does me; living in Japan, I have a hard time getting media priced like it is in America. Market segmentation also makes my TV viewing options suck; if a TV show gets here at all, it is usually 2-3 years late. Hulu Japan at least allows me to watch whenever I want, but has the same terrible selection and late acquisition of titles.
However, there has been an issue in contention for a while regarding first-sale doctrine. This is the legal principle that once you buy a material item, it is yours to do with as you please. You buy an orange, for example, it belongs to you; you can slice it, peel it, juice it, resell it, or throw it out the window—and the seller of the orange has no say in what you do. This applies to physical copies of copyrighted work as well, allowing you to sell that book you bought to a used bookstore, or to someone on eBay.
Publishers have been trying to eradicate this in order to bolster their sales. The fact that electronic media can be licensed had given them the idea that anything can be licensed. Sony has put labels on their CDs which they try to make enforceable as a contract: break the seal and you accept the terms. Physical packages of software come with license agreements which forbid resale. Even when they have no legal force on their side, publishers attempt to claim various rights, like when they claim it’s illegal for you to put a CD into your computer and import the songs into iTunes. (At least I am pretty sure that’s legal; the music industry has been going full-blast in attempts, often successful, to have laws rewritten to their profit.) If the law does not go their way, they pour money into massive (and usually successful) lobbying efforts to change it, or else manipulate the laws to serve them.
This came to the forefront when Costco realized that watchmaker Omega watches were much cheaper on the gray market. Costco bought up the lower-priced versions, and sold them at a discount in the U.S. Realizing that first-sale laws did not support them, Omega tried a trick: they printed a copyrighted image on the back of the watches and tried to use copyright laws to restrict sales that defeat market segmentation; they also argued that the watches were not made in the U.S., and therefore, first-sale doctrine did not apply. They won in the Ninth Circuit; they would have lost in the Supreme Court, but Kagan, who would have ruled against them, recused herself and the court was split.
While a lower court slapped Omega down for illicitly using copyright law to defeat first-sale doctrine, the circuit court ruled that first sale doctrine only applies to goods manufactured in the U.S. In other words, if you manufacture something outside the U.S., you can get around first-sale and put restrictions on material goods as you wish.
This just got reversed in another case, Kirtsaeng v. John Wiley & Sons, Inc. In this case, a Thai student in New York paid his way through college by importing textbooks sold cheaply in Thailand and selling them in the U.S. He was sued by a publisher, and just now won in a 6-3 Supreme Court Decision. In the decision, the justices ruled that first-sale does not apply only to goods made in the U.S., and that:
…nongeographical interpretation would make it difficult for publishers to divide foreign and domestic markets, but there is no principle of copyright law that suggests that publishers are entitled to such rights.
This has good and bad implications. The bad implications include the possibility that publishers will hike up prices for books sold in countries where poor students will not be able to afford them:
[T]he likely outcome of this decision is that Wiley and all other publishers will now raise prices in countries that now get cheaper prices. These tend to be developing countries, so essentially poorer students abroad will be suffering the consequences. Some will no longer be able to afford the books at all, even though the marginal cost of one more book to a publisher who has already made the investment for the American market is essentially zero. As a result, it would not be surprising if we see students in these countries substituting with piracy.
I do not agree. The publishers will simply do a little more work to differentiate the texts so international versions will not be usable in U.S. schools, or they will find another trick to allow them to price as they please.
And let’s not forget, the bulk of market segmentation is not to give badly needed resources to needy students; most segmentation is about raw greed, the ability to charge whatever the market will bear to greater precision, ergo I have to pay almost twice as much for music and movies here in Japan.
In the end, we have an immediately significant win in an otherwise losing battle to maintain consumer rights and prevent corporations from using extreme means to shake every last penny from your pockets as they use lobbying efforts and legal manipulation to hold you upside down. Alas, those efforts will probably soon make decisions like this one moot.