In law, are gray market imports equivalent to pirated works? [Read this journal article on the implications for American libraries of imported pirated works from China.] Gray market imports are lawfully produced with the permission of the copyright holder, sold to a customer in a foreign country and then imported into another, often the country of origin, at far lower prices than new product on the shelves. Pirates, however, are copies produced without the copyright owner's permission and sold for next to nothing. In both cases -- resale into the gray market and sale of pirate copies -- the copyright holder does not benefit from repeated sales. Only in the gray market sale does the copyright holder benefit at all -- from the first sale. So, which is lawful? Pirated works generally constitute copyright infringement. What about gray market imports?
A young technology entrepreneur (read EBay seller) comes into the office with a software CD, asking if he can legally resell it. The copyright holder gave permission for the publication of the software and the client purchased it lawfully. Quite likely he can. I mean, common sense, he can sell a lawfully published, copyrighted book that he purchased, right?
Vernor v. AutoCAD, has just issued in support of that affirmative answer. Attorney John Mitchell writes:
A seller of lawfully made copies of AutoCAD software, fed up with use of bogus copyright claims to suppress his competition authorized by the Copyright Act, sought a declaratory judgment that his sales are just fine. AutoCAD sought to have his claim dismissed, and lost. In Vernor v. AutoCAD, Judge Richard Jones, of the U.S. District Court for the Western District of Washington, did the sensible thing, ruling that even if Vernor breached some duty imposed by license, such breach would, at best, violate a contractual agreement, and could not be the basis for a claim of infringement where Congress authorized the very activity complained of.
Why? Because of the "first sale doctrine." Generally speaking, once one has purchased a lawful copy of a copyrighted work, one may resell it, barring, as noted by Judge Jones above, some breach unrelated to copyright infringement.
"Once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution,”In other words, gray market " Quality King Distributors v. L’anza Research International
Those merchants whose sales are undercut by gray market imports would attempt to argue piracy without success. (See this post.) Ten years ago, Delco had a significant problem with Korean distributors rerouting auto batteries into the Chinese market at profit margins higher than could be gotten in Korea and yet at prices lower than Delco's China distributors charged for the same product. Hmm, fire Jackson in the Global Pricing Department...
The undercurrent of the gray trade moves wherever expensive or difficult to source product is in high demand: pirated DVDs from China into the US, iPhones gray marketed into China from the US. Gray market imports from China back into the U.S. are cause for concern, certainly by American equipment manufacturers, who claim, for example, non-compliance with U.S. environmental and safety regulations. Of course, American medical equipment manufacturers had no qualms selling used devices to China, untill their import was banned in the 90s. Need for equipment, insufficient capital, etc. Yes, the money was bubbling up at that time.
On the subject of bubbly, one is led to understand that a delightful gray market exists in Champagne. ...as long as the bubbly itself isn't grey...
