On Monday the U.S. Supreme Court affirmed a lower court decision on “the pricing of products made outside the United States.” This has implications for textbook pricing because it effectively prevents the new introduction of low-priced academic books.
Omega, a Swiss luxury watchmaker, noticed that Costco had started selling one of its trademark timepieces in its California stores for less than Omega was charging. Omega sued Costco for copyright violation, noting that Costco had bought the watches from a New York company, which had bought them from “gray market” merchants overseas, which had bought the watches from Omega’s overseas distributors. Since Omega itself did not authorize the sale of its watches in the United States, the watchmaker’s lawyers argued that Costco had violated its copyright.
Costco countered that Omega’s copyright authority does not reach that far: once Omega sells a watch, the wholesaler argued, it has no say over where the watch can be resold, or for what price.
That’s because internationally sold goods usually work like this: the manufacturer produces two types of the same product. One is expensive and lavish, intended to be sold in the developed world. The other version is cheap and basic, intended for sales in Third World countries.
Textbooks work like this too. The real barrier that many students have to accessing inexpensive textbooks is that publishers will only sell them the expensive, lavish version. Publishers totally make the cheap version, which is really all the students need, but the cheap version is only available in the developing world.
The case essentially came down to this: if the producer makes something intended for foreign sales, can American companies buy the product abroad and sell it cheaply back in America?
A victory for Costco would have meant yes, and might have allowed Americans to buy textbooks for less money. That would greatly cut into publishers’ profits, which is why the Association of American Publishers submitted an amicus brief in the case, arguing that,
Prohibiting the importation of copies acquired abroad… protects core aspects of the exclusive distribution right, ensuring that U.S. copyright owners have, as Congress intended, the right to determine when and where to distribute their works, at what price, and with what content.
The Supreme Court appeared to agree, affirming the opinion of the Ninth Circuit, which ruled in favor of Omega and prevented such foreign sales.
This is a victory for publishers. It looks like it’s a loss for students.