Gray-Market Goods and Copyright\u27s Gray Area

Copyright law generally gives authors no control over the aftermarket for their goods. Suppose I write a book, and I sell you a copy of it. You are free to resell the book, or lend it to a friend, or give it away. That’s because as long as your copy is “lawfully made under this title” (that is, made with my authorization under U.S. law), then copyright has nothing to say about its further distribution – who owns it, who sells it to whom, etc. This notion is known as the first sale doctrine. It is so named because at one time it was the copyright owner’s first sale of a particular copy that exhausted his or her right to control its further distribution. That name has stuck, even though the law has recognized for decades that it’s now the copyright owner’s making of the copy, not its sale, that exhausts his or her rights. That distinction made little difference until a curious 1998 case called Quality King v. L’anza Research. L’anza sold shampoo in bottles that featured a copyrighted design on the label. It made its labels and shampoo in the United States, but it exported some units abroad. In doing so, it engaged in price discrimination: In the United States, it sold its shampoo exclusively through pricey salons, but in foreign markets it was not so exclusive and its prices were considerably lower. [...