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The United States Supreme Court’s verdict transforms the publishing industry – Do the Vietnamese enterprises benefit from such ruling?

The article with the title: “The United States Supreme Court’s verdict transforms the publishing industry – Do the Vietnamese enterprises benefit from such ruling?” written by Lawyer Tran Thanh Tung – Partner of Phuoc & Partners is published on Saigon Economic Times dated 5/12/2013.


A landmark lawsuit in the West

The United States Supreme Court has just issued a ruling that could usher in a complete transformation of the publishing industry with respect to book distribution in the U.S and which could have an extensive and profound influence on the world’s book distribution market, especially in the current information technology era. The ruling in question is from the case of Kirtsaeng vs. John Wiley and Sons whereby a publisher in the United States filed a petition against a Thai student because he asked his friends and family in Thailand to buy copies of foreign edition English language textbooks from Thai book shops and then resold it on eBay to students in the United States. Of course, the book price in Thailand is much cheaper than that in the U.S. and his business was thriving.

The profits from book sales amounted to hundreds of thousands of American Dollars and it is not hard to understand why the American publisher decided to shut his business down and sufficiently discourage others from such activities.

With legal proceedings spanning several months and through multiple court levels, early in 2013 the U.S. Supreme Court ruled in favour of the Thai student and stated that he had the right to buy books in Thailand and sell them in the U.S. without violating the American publisher’s copyright. Broadly speaking since the ruling, all publications lawfully made and circulated abroad will be eligible for importation into the U.S. to be legally sold. Issued by the highest judicial authority of the United States, this judgment will serve as a precedent and a “green light” for the parallel importation of copyright protected products. This ruling will have a significant impact on the publishing industry of the U.S., especially in the electronic commerce age, when online book purchases can be made with just a mouse click.

Exhaustion doctrine

The legal conception of parallel importation of copyright protected products is derived from the exhaustion doctrine (first-sale doctrine) in the U.S. common law system. This theory can be understood simply as that the copyright owner will lose copyright once his/her copyrighted product(s) are sold on the market because the owner gained commercial benefits from their sale. Specifically, if a person has legally purchased copyrighted books on the market, the copyright owner is no longer in further control of the sale, donation or disposition of books by the buyer. This doctrine essentially seeks to limit the copyright owner’s exclusive distribution rights over a copyrighted product that has been made and traded legally on the market. Of course, a buyer is then left with mere discretion over any book without its copyright or the right to transfer its copyright.

In this regard, Vietnam’s Intellectual Property Law (“IP Law”) requires that upon exploitation of the property rights (including the right to distribute, import the original or the copy thereof), organizations and individuals must obtain permission and pay royalties, remuneration and other material benefits to the authors. The “export, import, distribution of the copies of a piece of work without permission of the copyright owner” is considered an infringement of copyright under Clause 16, Article 28 of the IP Law. If the copyrighted work originals or their copyrighted copies have been sold to foreign markets, the question is asked whether, once importing them into Vietnam for resale, the buyer must obtain permission from the author. The legal documents guiding implementation of the IP Law state clearly that a limited import of only one copy of copyrighted product for private use can be made without obtaining permission or paying royalties or remuneration.[1] Thus, it seems that this rule does not allow the importation of copies for commercial purposes. If so, domestic publishers are perhaps still “assured” their exclusive distribution rights in failing to share the domestic market with the book importers, with the consumers losing the opportunity to have access to a cheap book market.

Indeed the import of copyrighted books and publications, in general, to profit from the price difference is not new and has taken place in multiple markets, particularly in the circulation of goods between developing and developed countries. There is furthermore a significant price discrepancy even among the markets of developing countries and which is quite the business opportunity for whoever can fully grasp the prevailing legal provisions.

Moreover, the decision of the Supreme Court of the United States, in this case, has expanded the copyright exhaustion doctrine, concurrently improving and strengthening it in an international context. Applying this theory will mean all publications lawfully made and circulated in an overseas market are eligible to be imported into the U.S. market for resale or disposition under different forms without having to obtain permission from the authors/copyright owners (namely publishers).

What path the publishing industry takes

This ruling arguably will open the floodgates for lawmakers in favour of the international exhaustion doctrine of copyrights, not just in America but also most other countries, to challenge the status quo; the publishing industry may soon find their share of local markets threatened by the parallel importation of copyrighted books; publishers will need to find a solution to maintain their market relevance, particularly in their “home fields”.

Following issuance of the decision of the U.S. Supreme Court, the first approach is for the publishing associations and enterprises to join together to convince U.S. lawmakers to bring orthodox written legislation affirming the national exhaustion doctrine of copyrights in U.S. Copyright Law. It will however not be easy for the U.S. publishing industry as the current U.S. Supreme Court case law is supportive of the international copyright exhaustion doctrine; balancing the public interest with the exclusive distribution of the copyright owner. To convince U.S. lawmakers to amend or supersede such case law, the U.S. publishing industry must prove how the American economy will be damaged when copyrighted products purchased in developing countries are imported into the United States without permission of the copyright owners and are traded openly and legally in the U.S. market at lower prices than the official price in the U.S., and that not only will the publishing industry but also other industries will be adversely affected. This being a not so simple task, the publishing industry should perhaps consider a different path before attempting to lobby U.S. lawmakers.

A more considered approach may have publishers narrow the gap between market prices to such an extent that any such economic advantage of parallel importation is stifled and consumers may turn back to directly purchasing copyrighted work in the U.S. market. Whatever path is taken the publishing industry will assume a huge cost to reassert its exclusive distribution right in the market; however the second option would seem to at least give consumers more choices.

Impact of the verdict on the book distribution market

Returning to the U.S. Supreme Court’s ruling that has transformed the book market landscape, whilst an obvious “headache” for publishers in the U.S., it creates opportunities for American retailers to profit from the price gap amongst international markets without spending a lot of effort investing, printing, buying copyrights etc. other than the capital used to buy publications abroad at the cheaper rate and shipping costs to the U.S.

In the aforementioned case for example, it is probably not too hard to guess who benefits from this judgement. Firstly, it is the Thai student that has taken full advantage of the United States common law to make profits. And secondly, consumers now have access to lower priced books that still ensure the printing quality as well as their quantitative content. More broadly, it is those who can make the most of the legal provisions of the international exhaustion doctrine to trade commodities yielding a price disparity between developing and developed countries or even among the markets of the developing countries. The said, the verdict may be considered as beneficial to some developing countries.

More notably, if copyrighted works are converted into electronic data and sold online, shipping costs will amount to zero and therefore the seller’s profits will be higher. On the other hand, this decision not only impacts upon the sale of books but also for other products in the fields of architecture, photography, musical arts etc. So for many copyright owners other than publishers, here is decision which may directly affect their consumer market for copyrighted products.

If individuals and/or enterprises become suitably wise to the legal provisions in international markets such as the U.S., the doctrines or rules are no longer the words on paper, except for the very chance to seek profits from this market.

What options for Vietnam?

As aforesaid, Vietnam’s current law really has not yet advocated the international exhaustion doctrine. This can be explained in many different ways, both from the theoretical perspective – these provisions have yet to create any issues for copyright protection as well as protection of the consumer’s interests – and in practical terms; first, the copyrighted product price in Vietnam is usually not higher than the products brought to the overseas markets for promotion. On the other hand, the copyright violation (using illegal copies) still runs rampant in many different fields. Thus, the import of any works or the copies thereof to reach out to the cheaper products on the market is probably not common in Vietnam.  However to a certain degree, when the sense of copyright protection is respected, the copyrighted product price in Vietnam is higher than other markets and there is a distinct possibility that a parallel importer will seek the Vietnamese market to distribute cheaper products. That will be the point in time the lawmakers need to weigh the public interest with the exclusive benefit of the copyright owners to choose a path for their national legislation. And it is what lawmakers need to project before issuing the law on amending the copyright protection.

1] Article 24.2 of Decree 100/2006/NĐ-CP September 21, 2006 detailing and guiding implementation of some articles of the Civil Code, the Intellectual Property Law on the copyright and related rights

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