The DVR … and Tivo … YouTube … and independent films … are legal and popular, in part, because of a 1984 Supreme Court decision that established the precedent of “first sale”.
The legal terrain at that time included the argument that videotape itself should be made illegal because it might be used to make illegal copies.
That sounds silly, and it was shot down.
On the other hand, there is a practical point: if there was no videotape, it would be a lot easier to enforce and defend copyright. So you should be able to see the interest, if not the merit, in that side of the argument.
The precedent established, first sale, holds that if you purchase a legal, original copy, of copyrighted material … that it is yours to do whatever you want with. You can’t sell it for profit, but you can make as many copies as you like — whether or not they are later used illegally.
Flash forward, and the Supreme Court ruled this month that the principle of “first sale” applies to books as well. The case involved a Thai student in America, and the publisher Wiley.
Wiley practiced third degree price discrimination:* it sold the same book at different prices in different markets. In particular, it sold textbooks more cheaply in Thailand. No surprise there: lower incomes in Thailand are likely to make demand more elastic, and thus optimal markup lower.
But, the student saw an arbitrage opportunity: buy the books new in Thailand, ship them to America, and then resell them as mint condition used books. He made $900K doing this. Wiley sued and won. The student appealed, and the Supreme Court sided with the student.
How will this change the managerial economics landscape? Well, price discrimination will still be the first move on the part of managers. But, it may end up being less common in practice.
One thing to note is that this decision applies only to copyrighted goods, not to patented goods. So, pharmaceutical reimportation is still illegal.
* Some authors call this direct segment price discrimination.