Supreme Court Hears Copyright Dispute

WASHINGTON — American producers of films, recordings and books--as well as manufacturers of shampoo--soon may lose the right to control the marketing of those goods in this country if they also sell them abroad.

The producers are battling discounters who buy U.S. copyrighted goods that are sold for less overseas and then import them for resale in the United States. Until now, these American producers have been protected by federal court rulings in California, which have held that U.S. copyright holders have the exclusive right to sell their products here.

But the issue came before the Supreme Court on Monday, and the justices appeared to side strongly with the discounters.

Lawyers for the discounters rely on the “first sale doctrine” of copyright law. “Once a particular copy has been sold [legally anywhere in the world], the copyright owner’s rights cease,” attorney Allen R. Snyder told the high court.

This has not been the prevailing view of the law in the entertainment industry.

The Hollywood studios have maintained they can test-market a film abroad without fear that copies will be bought and resold in the United States. Meanwhile, compact discs and videotapes are often sold for less in foreign markets than in the United States.

Although the outcome of the copyright battle has great importance for movie producers, the recording industry and software makers, it came before the high court, oddly enough, in a dispute over shampoo.

L’anza Research International, a Northern California company, produces hair products that it sells in the United States only to beauty salons. However, it also sells the products for much less in Europe and in Third World nations. Each bottle has a copyrighted label.

Quality King Distributors, a Los Angeles-based discounter, buys such products from overseas importers for resale in the United States. When L’anza officials found their products for sale in pharmacies in the San Francisco area, they filed a copyright infringement suit against the discounter.

They won before a federal judge and the U.S. 9th Circuit Court of Appeals in San Francisco, which upheld the manufacturer’s copyright power.

However, the Supreme Court agreed to hear the discounter’s appeal in Quality King vs. L’anza International, 96-1470, and the justices strongly hinted in their questions and comments on Monday that they are likely to reverse the 9th Circuit.

“Frankly, I think the other side has the better argument,” Justice Sandra Day O’Connor told a lawyer for the hair care company.

Agreeing, Justices Antonin Scalia and Stephen G. Breyer wondered why U.S. consumers should be forced to pay more than foreigners for the same name-brand products.

The legal battle between the discounters and the producers has drawn the interest of a wide swath of American business.

Filing briefs in support of the discounter were Costco Cos., the Wal-Mart Stores Inc., Target Stores and the National Assn. of Chain Drug Stores.

The shampoo maker had the support, among others, of the National Assn. of Manufacturers, the Recording Industry of America, the Motion Picture Assn. of America, the Assn. of American Publishers, the Business Software Assn. and the Clinton administration.

Preeta D. Bansal, a New York lawyer who filed the friend-of-the-court brief on behalf of the entertainment industry, said a ruling in favor of the discounters could disrupt the marketing of films and records abroad.

“It is not just a matter of price but of how, when and where they market overseas,” she said.

The justices will meet later this week to vote on the case. A decision will be handed down by late June.