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Kirtsaeng v. John Wiley & Sons: No Good Deed Goes Unpunished

March 26, 2013
The Supreme Court handed Kirtsaeng a victory last week finding his importation and resale of copyrighted books exhausted the copyright under the First Sale Doctrine. In a vain attempt at corporate responsibility, the publishers in this case created two versions of textbooks; a no-frills “Asia edition” to sell at affordable prices to students in less affluent places like Thailand, and a higher quality more expensive version to relatively more affluent students in places like the United States.

On the other hand, Kirtsaeng was not a student who simply bought a textbook and brought it into the country. Kirtsaeng received crates of Asia-edition textbooks from Bangkok and proceeded to sell them in competition with the publisher at campuses in the United States, generating hundreds of thousands of dollars in revenue. The Supreme Court apparently thinks that is OK. It did not matter to the Supreme Court that these books designed for poor students in developing countries.

Unfortunately, few people in the pharmaceutical patent world are surprised by this decision. The World Health Organization actively states that parallel importation (buying in one market and selling in another) is allowed by international law and should be encouraged. However, the negative side effects of such “grey market” imports are apparent to anyone with a basic understanding of economics and include increased market prices in the least developed country, diversion and product shortages in the least developed country, and the loss of the innovator’s incentive to make innovative products available in least developed countries.

Pricing and other access models will always differ based on individual company/product factors, and depending on local market circumstances. Yet, IP owners will logically respond in one way to the Supreme Court’s decision whether it is a copyrighted medical textbook, a patented smartphone, or a new patented biologic. Sell all IP protected products at the exact same developed world price all around the world. Any other approach runs the risk of being punished by opportunistic arbitrageurs like Kirtsaeng.