Quality King Distributors, Inc. v. L'Anza Research International, Inc.

1998-03-09

Headline: Court unanimously holds the copyright first-sale rule applies to U.S.-made goods sold abroad and returned, limiting owners’ ability to block resale and curbing enforcement against gray-market imports.

Holding: The Court rules that the Copyright Act’s first-sale doctrine limits §602(a), allowing owners of lawfully made U.S. copies sold abroad to import and resell them in the United States.

Real World Impact:

Allows owners of lawfully made U.S. copies to import and resell them.
Limits manufacturers’ ability to block gray-market sales of labeled products.
Applies to U.S.-made goods that left and returned; does not decide foreign-made imports.

Topics: copyright law, first sale rule, gray-market imports, product resale

Summary

Background

A California hair-care maker sold products in the United States through authorized domestic distributors and also sold the same labeled goods abroad at lower prices. Some of those U.S.-made items were later imported back and sold by unauthorized retailers after a distributor in Malta resold shipments. The manufacturer sued the importer and retailers, claiming the importation and resale violated its exclusive copyright distribution rights under the Copyright Act.

Reasoning

The Court addressed whether the Act’s first-sale rule lets an owner of a lawfully made copy resell that copy even if it was imported. The majority read the statute literally: section 106’s distribution right is expressly limited by sections 107–120, and section 109(a) says an owner of a lawfully made copy may sell or otherwise dispose of it. Because section 602(a) treats unauthorized importation as an infringement “under section 106,” the Court concluded the first-sale limit applies and bars a §602(a) claim against owners who lawfully acquired U.S.-made copies and then imported them for resale. The Court rejected textual and policy arguments for a broader import ban and reversed the Ninth Circuit.

Real world impact

The decision makes it harder for manufacturers to use copyright law to stop resale of U.S.-made goods that were sold abroad and later returned for resale. The ruling applies to round-trip cases where the items were lawfully made under U.S. law and first sold abroad; the Court did not decide cases where the copies were manufactured abroad.

Dissents or concurrances

Justice Ginsburg concurred, noting this is a “round trip” case and emphasizing the Court does not decide imports of goods manufactured entirely abroad.