By Erin Geiger Smith 

The U.S. Supreme Court will hear arguments on Monday in one of the most important copyright cases in a decade, over whether works manufactured outside the United States can be resold here without the permission of the copyright owner.

The decision could have a huge impact on the $63 billion "gray market" for goods purchased abroad and sold for a higher price in the United States.

Both parties to the case believe a loss for their side will result in a doomsday scenario of sorts. One side says that a ruling in their favor is the only way to free American consumers from the potential of copyright holders to exert never ending control over their material. The other side insists that a decision for them is the only way U.S. companies will be able to successfully participate in the global marketplace. A down-the-line victory for one side or the other is likely to result in the loser lobbying Congress for an update to the Copyright Act.

At issue in the case, Kirtsaeng v. John Wiley & Sons, are provisions of the Copyright Act that appear contradictory. One section says that the importation into the United States, without the authority of the copyright owner, of works acquired abroad is an infringement of the copyright owner's exclusive right to distribute copies. However, another part of the act limits the copyright holder's distribution rights by saying that the owner of a copy "lawfully made under this title" can sell or otherwise get rid of it. That resell right is known as the "first-sale doctrine."

Supap Kirtsaeng, a Thai man who attended college and graduate school in the United States, had his family at home buy textbooks manufactured internationally and ship them to him. He then resold the books on eBay. John Wiley & Sons, a prominent textbook publisher, has the exclusive rights to distribute its textbooks in the United States, and some of the books Kirtsaeng sold were Wiley textbooks that were manufactured abroad. Wiley sued and was awarded several hundred thousand dollars in damages. The student, who maintained that he had the right to resell books he owned, appealed. In August 2011, the 2nd U.S.Circuit Court of Appeals sided with Wiley and held that the first-sale doctrine was inapplicable because the "lawfully made under this title" language referred only to copies manufactured in the United States.

In its decision, authored by Judge Jose Cabranes, the 2nd Circuit acknowledged the "particularly difficult question of statutory construction" and said that "if our decision leads to policy consequences ... which Congress now find unpalatable, Congress is of course able to correct our judgment."

Those "unpalatable" consequences have been highlighted, in amicus briefs and other public statements by companies like eBay and Costco, whose businesses rely on resales, as well as by libraries and museums who acquire works from around the world.(We wrote about the library group's amicus brief in July.)

Kirtsaeng's brief, submitted by a team including Joshua Rosenkranz of Orrick, Herrington & Sutcliffe, also walks through examples of what could happen if the court upholds the 2nd Circuit's decision. The resale or lease of cars imported into the United States, which almost always have copyrighted software, would violate copyright laws, and movie producers could begin manufacturing DVDs abroad and "enjoy a permanent veto over any further rental of the foreign-made DVD," the brief said.

Though "anyone who makes a product would love to control what happens to it downstream," the longstanding U.S. law is that if you bought it, you own it, no matter where that purchase was made, Rosenkranz said. That is a point he will put "front and center" to the court, he said.

While it sounds like an odd outcome that goods manufactured abroad could receive more far-reaching copyright protection than goods manufactured domestically, John Wiley's team, led by Theodore Olson of Gibson, Dunn & Crutcher, argued in its brief that those fears were much ado about nothing. Kirtsaeng's examples, it argued, focus on scenarios where the copyright owner authorized the original import. The court does not need to address what happens to the first-sale doctrine in the event of an "authorized" importation, the Wiley brief said, and can instead just focus on Kirtsaeng's unauthorized import and sale.

Evan Finkel, an intellectual property partner at Pillsbury Winthrop Shaw Pittman, said because of the facts of the case and the section's wording, it's unlikely the Supreme Court will enact such a specific exception in this case. Instead, should the court rule for Wiley, he said, they could note some exception for individual consumers reselling a book or two, or at least note that it is a question for another day.

Monday will be like the second time around for this copyright question. In 2010, the Supreme Court upheld a 9th Circuit decision involving Costco's sale of gray-market Omega brand watches. The circuit court had ruled that the first sale doctrine does not apply to works manufactured outside the United States. The Supreme Court's holding came with no opinion, however. It was a result of a 4-4 tie, with Justice Elena Kagan not participating. This time around, Kagan will be on the bench.

While both parties argue that history and statutory interpretation are on their side, they recognize to some extent that an increasingly shrinking world might not fit within the confines of the current law. Wiley's brief acknowledges that many of the scenarios, like one involving Netflix and DVD rentals, could not have been considered by Congress because they didn't exist when the first sale-related section was drafted nearly 40 years ago.

John Wiley declined to comment.

Follow us on Twitter @AlisonFrankel, @erin_gs, @ReutersLegal  | Like us on Facebook