Territorial Entrepreneur Wins

We remember speaking as part of a team on Supply Chain opportunities at the UK BA conference back in Dublin in 1998. We knew the statement that would provoke a response was going to be when the final speaker of our team, Mike Shatzkin, would suggest that UK retailers should buy their books from the likes of Ingram in the US. The outrage from some on the day was expected and somewhat overshadowed all else and although the case was somewhat different to the Kirtsaeng v. Wiley recent case, the issue of territorial restrictions and pricing wasn’t.

Last week, the US Supreme Court’s ruled in the Kirtsaeng v. Wiley case and the landmark ruling, by a 6-3 margin, held that the doctrine of first sale, which allows for legally acquired copyrighted works to be resold by their new owners, applies to works made overseas and that previously were restricted by territorial rights.

The case centres on Kirtsaeng, a Thai-born US student who had been successfully sued by Wiley in a lower US court for importing and reselling foreign editions of Wiley textbooks made for exclusive sale abroad. Kirtsaeng had seen the pricing difference between content available in Asia and the content in the US and had bought the Asia content and sold it in the US. No different to global commodity market operations, but the publishers claimed that the copyright was specific to the territory and could not be resold in another territory. Although they won the case in the lower court they lost it in the Supreme Court.

Now many predict that the only option for publishers is to set uniform pricing across territories and end the practice of different prices in different regions.  This could result is unlikely to lead to lower US prices and is expected to result in consumers and students abroad seeing dramatic price increases or losing access to their US educational content. However this decision impacts not just education publishers but all publishers and also cuts across all media.

If we step back from the barricades that sprung up after the ruling, what we see is a change that some would say is inevitable. The practices that ‘protected’ interests in the old analogue world are being rigorous tested in the digital online global world of today. It isn’t just about foreign editions or territorial rights, it’s about consumer rights be they intuitions, businesses, or consumers and today the law will always err towards them. We have friction between, publishers and libraries over digital, publishers and institutions over fair use, publishers and consumers over territorial restrictions, pricing and the emerging issue of digital resale. These in many ways are no different to the battles between global corporates and the people over tax avoidance. The common thread is that the law is now demanding transparency and consistency and what was often built into a convenient extension of copyright is now falling shy of the rigorous legal test.

Many throw their arms in the air and say that these tectonic shifts will be the death of publishing as we know it and probably they are right. But is that a bad or good thing? Does it mean the industry is dead, or are they merely signalling that it is time to move on to new models, new processes and new relationships?

Consider the potential implications if publishers were to withdraw from markets such as Asia because the old model no longer worked and they deemed the market unprofitable? Do we believe that the gap would be filled by local efforts or by the pirates? Sometimes we have to accept that change is here and adjust and not merely pick up our ball and go off in a sulk.

The case, in some ways is no different to a bookstore finding that they can’t buy titles cheaper than a leading reseller or supermarket is actually selling them for. Should they be stopped from buying these copies and reselling them?