In order to appreciate the significance of such an important ruling and how it may affect you and/or your business, it is first best to understand what a copyright is and how it is important for you, your profession, and/or business.
What is a federal copyright?
A federal copyright is a form of protection provided by the laws of the United States to the authors of original works including, dramatic, musical, literary, artistic, and certain other intellectual works. Federal copyright protection starts from the time an original work is created in fixed form. Usually, only the author can rightfully claim federal copyright since it is considered their property. Generally, if there is more than one author, then such authors are the co-owners of the federal copyright in the work, unless there is an agreement stating otherwise.
What rights and benefits do I have as a copyright owner?
The owner of the federal copyright generally has the exclusive right to authorize others to reproduce the copyrighted work, prepare derivative works based on the copyrighted work, and distribute such copies by sale or transfer of ownership. Ultimately, federal copyright registration protects the owner from others taking credit for or profiting from such protected works.
There are many beneficial reasons why you should obtain protection through federal copyright registration. An important reason is to have the federal copyright in the public record since registration is necessary for works originating in the United States if you are planning to file an infringement suit. Registration lets the owner of the federal copyright record the registration with the United States Customs Service for protection against the importation of infringing copies. Having copyrighted material registered may also lead to accumulating royalties. Furthermore, once your material has been copyrighted, you can then place the federal copyright symbol “©” with it. This shows everyone that the material is copyrighted and that it is protected under law of the United States.
Kirtsaeng v. John Wiley & Sons
The recently decided U.S. Supreme Court case of Kirtsaeng v. John Wiley & Sons involves a former University of Southern California student from Thailand, Supap Kirtsaeng, who thought he could make money by purchasing textbooks inexpensively in Thailand and then selling them in the United States for a higher price through the internet. In this case, the student was sued by the publisher of those textbooks, John Wiley & Sons, for violating their copyright protection. For willfully violating its copyrights, $600,000 in the amount of damages was assessed by a New York jury. The judgment was recently reversed by the U.S. Supreme Court, which ruled in favor of the student.
The First Sale Doctrine
The key question in this appeal was whether the First Sale Doctrine, 17 U.S.C. § 109(a), applies to copies of copyrighted works produced outside of the United States but imported and resold in the United States. The First Sale Doctrine in copyright law permits the owner of a lawfully purchased copy of a copyrighted work to resell it without limitations imposed by the copyright owner. The doctrine dates to 1908, when the U.S. Supreme Court held that the owner of a copyright could not impose price controls on sales of copies of a copyrighted material beyond the initial sale. Therefore, if you are the copyright owner, you would only have control over the first sale of your copyrighted article.
The issue here concerned the interpretation of this doctrine. The student contended that the doctrine applies to a copyrighted work manufactured and legally obtained abroad and then sold in the United States, while the publisher asserted that this doctrine only pertains to copyrighted works manufactured in the United States.
In this case in particular, the publisher’s foreign edition textbooks were manufactured abroad and marked with a legend to designate that they are to be sold only in a particular country or geographic region. In the appeal, the First Sale Doctrine was ruled as also applicable to copies of a copyrighted work lawfully made abroad, where the copyright owner would then lose control over the resale of such material.
How does the U.S. Supreme Court decision impact me?
While the recent ruling does sustain the secondary goods market because it allows resellers to sell goods at cheap prices without worrying about copyright infringement, the decision ultimately affects the availability of foreign-made products within the United States, as well as internationally, and could prove to be a setback for American companies that sell copyrighted goods overseas. Copyright owners who have products and items manufactured abroad may now need to take extensive steps to obtain the necessary licensing rights for goods that they import and then distribute. The good news is, however, that by taking the necessary precautionary steps such as forming appropriate business entities and entering into proper licensing agreements, an individual or business entity may retain some kind of control over its copyrighted materials, mitigate potential liabilities, and protect its intellectual property in the United States and abroad.
Should I have an entity own the copyright?
It is important for an individual creator of intellectual property such as copyrighted material to form a business entity to manufacture, market, and sell goods as related to its intellectual property. It is desirable to have the intellectual property owned by the business entity so that the intellectual property can be protected from the liabilities associated with the business operations. For asset protection purposes, therefore, you may want a limited liability company, corporation, partnership or revocable or irrevocable trust to be the owner or creator of a copyrighted work. An experienced attorney would be able to guide you through this process.
What kind of agreements do I need to have drafted to properly protect my intellectual property rights?
It is important to protect your valuable intellectual property with a licensing agreement. That way, the intellectual property may be protected from the liabilities associated with the business operations of the business entity. A properly drafted agreement should designate who should determine the method of marketing, advertising, selling, distributing, and manufacturing in connection with the intellectual property. Additionally, any agreement drafted should designate who has the authority to fix the prices and terms of sale for consumers, dealers, distributors, wholesale or retail. In the case where you may need to transfer exclusive ownership of your intellectual property to someone, such as your children or a business entity, a Federal Copyright Transfer and Assignment Agreement should be carefully prepared.
Now that you understand that a federal copyright registration is one way to protect your intellectual property, it is easy to see that intellectual property is a vast area within the law and full of interesting junctures. Whether you are an individual entrepreneur with a cutting-edge idea or an internationally growing business, protecting your company’s investments and innovations is extremely important, as well as growing and maintaining your intellectual property portfolio. The global marketplace is changing at faster rate now than ever before. Consequently, hiring the right legal professional to draft appropriate agreements and to counsel you as to which business entity would best suit your needs to protect your ideas and innovations may be the key to getting an edge in an already highly competitive marketplace and to achieving and protecting your business success.
Disclaimer: This article is not intended to be legal advice. Legal advice depends on each and every person's particular circumstance. This article is for informational purposes only and must not be used for avoiding any penalties that may be imposed under the Internal Revenue Code. Arora Law Firm and Radhika Arora, Esq. specifically disclaim any responsibility for positions taken by readers in their individual cases or for any misunderstanding on the part of readers of this article or publication.
Copyright 2013 by Arora Law Firm. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without prior written consent of Arora Law Firm