Rebalancing Copyright Exhaustion

In 2013, in Kirtsaeng v. John Wiley & Sons, the Supreme Court wrote another chapter in the ongoing story of copyright exhaustion. This decision is part of a series of recent decisions in high-profile cases and a vibrant discourse, domestically and internationally, regarding the scope of copyright exhaustion, and, more broadly, the ability of copyright owners to control the distribution of their work along the chain of commerce. Unfortunately, this discussion rarely explores the modern justifications for copyright exhaustion, which makes it notoriously incoherent and confusing. This Article suggests that copyright exhaustion serves an important social function of reducing information costs. Without it, buyers will need to inefficiently waste resources inquiring whether they will be able to resell copyrighted work. Because resale rights are typically socially desirable the law should usually provide those rights to buyers. Copyright exhaustion also has costs. The main costs are the reduction in the incentives to create and a regressive distributive effect that are the result of the limitation that copyright exhaustion places on certain price discrimination practices. The balance between these benefits and costs should dictate the scope of copyright exhaustion. This Article applies this balanced approach and explores the desired scope of copyright exhaustion. It concludes, inter alia, that it should not prevent copyright owners from exercising control over commercial importation of copyrighted goods or over distribution of digital work. However, contracting around copyright exhaustion should be restricted and copyright owners should not be allowed to circumvent it just by including “magic words” in their standard-form agreements