The Sixth Circuit Clarifies Exceptions to the First Sale Doctrine in Both Trademark and Copyright.

Case: Brilliance Audio, Inc. v. Haights Cross Communications, Inc., No. 05-1209 (6th Cir. 1/26/2007)

The One Sentence Summary:
The Sixth Circuit holds that in trademark law, the first sale doctrine does not apply where the alleged infringer provides insufficient notice of repackaging or where the alleged infringer sells goods materially different from those of the trademark holder; in copyright law, the record rental exception to the first sale doctrine applies only to musical works, not to audiobooks.

What They Were Fighting About:
Brilliance Audio, Inc. (“Brilliance”) sued Haights Cross Communications, Inc. (“Haights”) for trademark and copyright infringement. Brilliance produces and sells audiobooks through exclusive agreements with publishers and authors. Brilliance produces two versions of its audiobooks, a retail version and a library version, which differ in packaging and marketing. It has copyrights in these works and protectable rights in the federally-registered BRILLIANCE trademark. Haights is a direct competitor of Brilliance. Brilliance claims that Haights uses the Brilliance mark on the repackaged products, constituting trademark infringement. Brilliance also alleges that Haights is repackaging and relabeling Brilliance’s retail editions as library editions, which it then distributes for commercial advantage, constituting copyright infringement.

Sixth Circuit Holdings:

• In trademark law, the Sixth Circuit joins other circuits in holding that the “first sale doctrine,” a defense to claims of trademark infringement, has two exceptions.
• The first exception occurs where the notice that the item has been repackaged is inadequate. Here, Brilliance alleges that Haights is repackaging Brilliance’s retail editions as library editions, and that the notice of repackaging is inadequate because it misrepresents that Haights has a relationship with Brilliance and that Haights has obtained permission for its activities, possibly resulting in consumer confusion.
• The second exception occurs where an alleged infringer sells trademarked goods that are materially different than those sold by the trademark owner. Here, Brilliance alleges that the retail edition is different than the library edition, and that by packaging the retail edition as a library edition, Haights is altering the product in a manner likely to cause consumer confusion.
• In copyright law, the court found that the record rental exception to copyright’s first sale doctrine, codified at 17 U.S.C. § 109(b)(1)(A), applies only to sound recordings of musical works, and not to sound records of literary works, such as audiobooks. The court found the plain language of 109(b)(1)(A) ambiguous, and based its holding on a combination of the legislative history, the context in which the statute was passed, and the policy rationales behind trademark and copyright law.