The US Supreme Court just ruled that publishers have no right to differential pricing

If you’ve been paying attention to copyright and the myriad ways it gets abused by publishing interests, you’ve probably heard of the Kirtsaeng case.  For those just tuning in, here’s quick recap:

John Wiley & Sons is a publishing company, involved in one of the most despicable fields within the publishing industry: the publication of academic textbooks.  Anyone who’s ever been to college and had to pay the exorbitant rates they charge every semester, just because they can, will need no explanation as to why these guys are scum.

The interesting thing is, while they charge whatever they can, “whatever they can” means different things in different contexts.  Some parts of the world are wealthier than others, and in some countries there’s just less blood available to be squeezed from that particular stone, and so they have to set the prices lower so as not to be unaffordable.

Anyone with a basic knowledge of economics, when presented with these facts, should recognize that an opportunity for arbitrage exists here: buying goods in a low-priced market and reselling them at a profit, where the prices are high.  And that’s exactly what this Thai guy called Supap Kirtsaeng did.

He would purchase textbooks in poor nations at a low cost, then resell them to American students at a decent markup which still managed to significantly undercut Wiley’s prices.  It’s a win-win situation. Students get a more affordable education, Kirtsaeng gets some money in his pocket, and the parasites lose out on some opportunities for ill-gotten gain.  Everyone’s happy.

…except, of course, the parasites.  Wiley said “hey, we’re losing money on this!” and sued.

Kirtsaeng’s defense was that, under the First Sale Doctrine in US copyright law, once he’s legally purchased something, he has the right to do whatever he wants to with it, including resell it, and the publisher has no right to interfere.  (Publishing interests hate the First Sale Doctrine.  In digital media, they’ve managed to do a good job circumventing it by getting the DMCA passed, so that they can just stick DRM on something and then even if you have rights to something you purchased, you can’t legally exercise them.  But Kirtsaeng was dealing with books.)

Wiley responded with the somewhat ridiculous claim that, because the books were printed and purchased overseas, they were not covered by the First Sale Doctrine, which is a provision of US law and therefore does not apply to foreign purchases.  (And yet somehow they wanted US copyright law to apply to these purchases in every sense in which it benefited them! Otherwise, they would have had no case in the first place.)

Well, to make a long story short, different courts ruled different ways, and it kept getting appealed, until the Supreme Court agreed to hear the case.  The justices asked some pretty pointed questions about how the exclusion of First Sale rights from copyrighted items created overseas might apply to other areas of life.  Would it be illegal to sell your car, for example, if it runs copyrighted computer code that was written outside of the USA?

Well, they finally reached a verdict earlier today, in which they upheld Kirtsaeng’s First Sale rights and officially ruled that the First Sale Doctrine is not bound by geography.  But the part that really caught my attention was the way their ruling explicitly went back and touched on the basic underlying issue: arbitrage.

Wiley and the dissent claim that a nongeographical interpretation will make it difficult, perhaps impossible, for publishers (and other copyright holders) to divide foreign and domestic markets. We concede that is so. A publisher may find it more difficult to charge different prices for the same book in different geographic markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights.

[….] the Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book, say to increase or to maximize gain. Neither, to our knowledge, did any Founder make any such suggestion.We have found no precedent suggesting a legal preference for interpretations of copyright statutes that would provide for market divisions.

To the contrary, Congress enacted a copyright law that (through the “first sale” doctrine) limits copyright holders’ ability to divide domestic markets. And that limitation is consistent with antitrust laws that ordinarily forbid market divisions.

In other words, the Supreme Court just officially proclaimed, as part of a larger ruling, that publishers have no inherent right to charge different prices for the same product in different markets.

If anyone wonders why I’ve spent so many words writing up a brief recap of a copyright decision on what’s supposed to be a Delphi blog, look at that last paragraph.  Things are about to get very interesting for Delphi customers overseas…


  1. A. Bouchez says:

    For us in Europe, such information does ring a bell…

    I wonder if Delphi sell policy may change according to this statement.

    Does it mean that in United States, there is “just less blood available to be squeezed from that particular stone” than in Europe?
    I certainly doubt that.

    Nice info!

  2. Paul says:

    An interesting one… It still doesn’t say that they don’t have the right to try and divide markets. That is they can charge the differential pricing if they want to, but they must accept that a middle man may come in, buy in the cheap location and resell back to the high price location. So yes, that does lead to the publisher maybe leaning towards leveling prices, but as you said in the digital world, they impose other barriers such as DRM.

    Still its a step in the right direction.

  3. Jan Doggen says:

    To add to what Paul says: the publisher doesn’t have the right to price differentially, but it’s not forbidden. All this verdict does is saying they can’t sue the middleman (and that is what this whole case is about). So this opens the possibility for a middleman to step in. Next question: is it legal for the publisher to refuse to sell to the middleman?

  4. Alexandre says:

    But, as a Brazilian Delphi customer, how could this be enforced here, once this is a US supreme court rule? If EMB just refuses to sell me Delphi here for the same price they do in US, what could be done??

  5. Dave says:

    Ok, I’ve never had to be concerned about this in the past. So where is Delphi cheapest/most expensive?

  6. David Heffernan says:

    There’s nothing new here at all. If an entity wants to charge one price in one region and another price in another region, that’s up to it. There’s nothing illegal with that and I’d be astounded if there ever will be. The market can simply resolve this by way of 3rd parties buying in the cheaper region and then re-selling in the other region in order to undercut the original seller.

    • A. Bouchez says:

      But AFAIK no one in Europe is allowed to sell American Delphi licenses, for instance.

      What if, for instance, some company in Europe buy Delphi licenses at American price, then sell it in Europe?

      It would break the “official” European Delphi market.

      • Arioch says:

        The problem is tha tbooks are books. They are things. And they are things not covered by DRM.

        To shift this to software – these “news” are yesteryear snow.,_Inc.

        But Delphi is not sold by boxes nor is it freed from DRM.
        So neither of those rulings do apply directly to EMBA policies.

        Personally i believe that DMCA, if it was enforced, should be formulated like that:
        * Yes, the owner does not have the right to make the artwork’s copies or to transfer the artwork by means of overcoming DRM.
        * However that means that the publisher, or other body responsible for both copyright and DRM rights (and they must be owned by same body), restricted owner’s rights and have a responsibility to compensate it, in other words for any case when owner wants to exercise his legal rights to make the copy or do transfer, if DRM interferes, then the publisher is obliged to make that action on behalf of the owner request, caring both his and owner’s expenses in their entirety, and do so in the shortest possible timeframe. Failure to do so frees this artwork from any DRM/DMCA implications and also makes publisher obliged to compensate all the expenses that owner invested to free the artwork of DRM.

  7. C Johnson says:

    Actually, that language seems to have an even wider impact. It seems to imply that there is no fundamental right to create arbitrary market divisions at all. Those include things like “We can’t sell that to your country because the manufacturer won’t let us” (Which is not to imply that the government can’t impose export limitations, they do and they can).

    Personally, I am hoping that consumers will eventually wise up, rebel against DRM and spend their dollars more wisely with competitors that do NOT include DRM. It’s about time some of these companies showed their customers some proper respect for all those hard earned dollars going their way.

  8. Keld R. Hansen says:

    It’s already so in Europe. A seller in the EU may not refuse to sell to any EU citizen based on their geographical location. So if I find an item cheaper in Poland than in Denmark, I can buy it in Poland at the cheap price and the seller is forbidden to refuse to sell it to me based on my geographical location.

    I have already used this option to buy Delphi 2010 at a cheaper price that I could in Denmark. It took some convincing and forwarding of the relevant documents from the EU legislation, but I got it at the cheaper price.

  9. Jim McKeeth says:

    The difference is Delphi is licensed, and not purchased, so first sale doesn’t necessariliy apply. From what I’ve heard from Embarcadero is that your Delphi license is only valid if you purchased it from a licensed reseller.

    • Thaddy says:

      Here’s where you go wrong: under European community law a license is a purchase: you own the license and therefore the underlying product. Embarcadero should know that because I told them in person. See a.o. the Foss patents blog.

      • Thaddy says:

        Which means in the European union it is per5fectly legal to resell a license and the person or company who initally sold the license is obliged to fullfil any rights – including updates – following from that license even if it is resold. No joke, but a fact.

  10. François says:

    An excellent piece and very enjoyable to read!

    As for software, it might be more complicated as users typically only buy a license to use the software. They don’t own it and there can be a lot of strings attached.
    (Whoever came with this “brilliant” idea paved the way for all kind of abuse).

    Someone who buys a book owns it; it’s just the content that’s protected against unauthorized reproduction (or any copyright violation).

  11. Mark Garnett says:

    This would be pretty good for us here in Australia as well. I can fly to the US, purchase a copy of Autodesk 3DS Max and fly back cheaper than I can buy it here, and it’s a downloadable product!!

    • Arioch says:

      if 3DS Max is sold as boxes – then for sure you have the right, at least for last 5 years.,_Inc.

      the problem is if you can exercise those rights (DRM, activation servers, etc)

  12. Warren P says:

    Is anybody here old enough to remember the old Borland license terms. (Like a book?)

    Sigh, nostalgia.


  13. Yogi Yang says:

    Here is what I understand from this article.

    EMB sells License to use Delphi but one can easily sell the License that one purchases as and when one sees fit.

    So ultimately this does mean that I can purchase from online from an American Store (like egghead or bestbuy) and then sell the same as second hand sale to someone in Europe without any legal issues.

    If EMB tries to restrict second hand sale then it would be their responsibility to buy back the product license at the price the owen want to sell it!

  14. Bear says:

    Hi thank you for the post. I am a China Delphi User. I bought a Delphi XE2 last year oversea on Internet, registered successfully.
    Then several month I use it again , I found it is locked. I can not use it any more. I need me register again, sure failed.

    Even now I can not use XE2, i can only use Delphi 2009.

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