House "first sale" doctrine redefinition is what Congress originally "intended" -- L'Anza.

HOUSE "FIRST SALE" DOCTRINE REDEFINITION NEEDS PUBLIC AIRING, the American Free Trade Association said in response to Rep. Howard Coble's(R-N.C.) amendment to the House's Digital Millennium Copyright Act (HR 2281). AFTA is calling for a "deliberative process" to discuss the amendment, which the group said would "negate" the Supreme Court's ruling in L'Anza Research International v. Quality King Distributors regarding parallel market discount goods and would "grant manufacturers unprecedented copyright protection to bar all companies from buying goods overseas at a discount price for resale in the U.S." The amendment passed the House floor by voice vote Aug. 4, the same day HR 2281 passed by 420-4.

According to the Supreme Court's L'Anza ruling March 9, the first sale doctrine, or Section 109(a) of the Copyright Act, holds that after the first sale of a copyrighted product, the owner of the product is "entitled, without the authority of the copyright owner, to sell that item" ("The Rose Sheet" March 16, p. 4). L'Anza brought the case against Quality King after its hair care products were imported back in into the U.S. by a third party, and Quality King began distributing them at a discount.

The Coble amendment would have a significant economic impact on retailers and consumers, AFTA maintains. A reversal of the high court's decision on the first sale doctrine would result in "higher prices for discount retailers who [would] no longer be able to pass on savings to consumers," AFTA claims. The group is lobbying Congress to take an approach that will not "wipe out" the $1 bil. parallel goods industry.

With congressional members having to juggle major legislative issues as the session runs out, the bill's future remains unclear. A similar Senate bill that does not include the amendment (S 2037) was introduced by Sen. Orrin Hatch (R-Utah) May 6 and passed the Senate May 14. House and Senate Judiciary Committees are discussing whether to hold conference committee meetings on the two bills.

According to the Coble amendment, the first sale exception would only apply to goods distributed in the U.S. with the authority of the copyright owner. Therefore, companies purchasing a product in foreign markets would be restricted from selling the product in the U.S. without the authority of the copyright owner.

The bill strikes the first sentence of Section 109(a) and inserts: "Notwithstanding the provisions of Section 106(3), the owner of a particular lawfully made copy or phonorecord that has been distributed in the United States by the authority of the copyright owner, or any person authorized by the owner of that copy or phonorecord, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord."

L'Anza said it "always expected that Congress would take the step to clarify" the first sale doctrine after the Supreme Court decision. The amendment was "what Congress intended," based on the legislative history of the Copyright Act, the Azura, Calif.-based company said. L'Anza does not agree that a public discussion should be held regarding the amendment, noting there were plenty of public hearings that took place when the Copyright Act was being considered.

In response to the first sale amendment, Quality King said the firm finds "it incredulous that nine of our top justices in the country have put forward a landslide decision that the House is now looking to reverse." The distributor has joined the association in lobbying against the amendment and its inclusion in a final bill. AFTA has brought on a lobbyist to specifically address the issue. L'Anza is also communicating with Senate staff regarding the first sale clarification.