Evan Schuman's StorefrontBacktalk

Attorney Mark D. Rasch is the former head of the U.S. Justice Department’s computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.

On Tuesday (March 19), the U.S. Supreme Court struck a blow against manufacturers, who wanted to use copyright law as a way of keeping merchants from purchasing cheaper products overseas and then reselling them within the United States. The court ruled that the “first sale” doctrine, long established in common law and in copyright law, permits merchants and others to lawfully purchase products intended for distribution outside the United States and then import those products into the United States for resale without violating copyright law.

Manufacturers have long been using copyright law, which is intended to protect certain types of expression, to prevent this practice. The Supreme Court said no.

(Related story: “U.S. Supreme Court Knocks Down Barrier To Cross-Border E-Tail”)

A few years ago, Costco (NASDAQ:COST) found a way to sell watches cheap. Rather than purchasing the watches in the United States, the chain went overseas and purchased lawfully made legitimate watches in foreign markets. Because of supply and demand, these watches could be purchased more cheaply overseas and then imported into the United States for later resale.

However, these weren’t just watches. A watch cannot be protected by copyright law. What the watch manufacturer had done was to engrave a copyrighted logo on the watch itself. So although the watch was not covered by copyright law, the logo was. The watch manufacturer then argued that the importation of the copyrighted work to the United States violated U.S. copyright law. The watch was simply going along for the ride.

This is similar to what a California shampoo manufacturer did to prevent its shampoo from being purchased abroad and imported back into the United States for resale. The shampoo bottles, boxes and artwork were all copyrighted. The shampoo manufacturer argued that by purchasing the shampoo abroad and importing it into United States, the importer was infringing on the shampoo maker’s copyright.

Now, it’s important to recognize that in each of these cases the items were lawfully purchased and that the manufacturer was actually paid for the product. These were not black-market products, knockoffs or illegitimate materials. They were shampoos from the shampoo manufacturer and watches from the watch manufacturer.

The same thing happened when John Wiley and Sons sold textbooks both in the United States and abroad. A Thai college student noticed that the same textbooks he was using in college in the United States were substantially cheaper in Thailand. He purchased dozens or hundreds of these textbooks in Thailand, imported them into the United States and resold them.

This earned him the wrath of the publisher and, ultimately, a lawsuit that found its way to the U.S. Supreme Court.