Will Justice System Crackdown on Garage Sales, eBay, and Craig’s List?

In The Total Money Makeover, one of the first things the author Dave Ramsey advises the reader to do in order to get out of debt is to “save $1000 fast.” You do this by having a garage sale and selling a bunch of stuff that you like but don’t need, because getting out of debt is far more important than holding on to your entertainment center. You could sell the bigger stuff on websites like eBay or Craigslist that act as hubs for buyers and sellers.

But an upcoming Supreme Court decision might make it illegal to resell foreign-made products without consent of the manufacturer. This goes for anything from cars, electronics and furniture to books and musical instruments. While this would effectively drive eBay and Craigslist out of the reselling business, it would also create yet another incentive to build a business overseas.

Since the overseas business would always have copyright ownership of the product, it would always be the one to give permission to resell and would more than likely want a cut of the proceeds each time its product is resold. So they would continue to bring in money on their products even after they were initially sold. As eBay noted, this court decision would “afford copyright owners the ability to control the downstream sales of goods for which they have already been paid.”

It might also create a secondary “black market” where people would just buy and sell in person with cash so that their transactions are not traceable and therefore not subject to potential royalty fees. This scenario sounds so benign, and in reality it is, but it would be criminal activity if the Supreme Court rules in favor of the appellate court.

This started when a Thailand native came to the U.S. to go to school at Cornell University in Ithaca, New York. He realized that the textbooks were cheaper in his home country than in the U.S. As any capitalist would do, he got his Thai relatives to ship him loads of books so that he could resell them here in the States. He made quite a fortune selling these books on eBay, raking in about $1.2 million.

The publisher, John Wiley & Sons, sued the student for copyright infringement. The student responded with the first-sale doctrine, which has been upheld by the Supreme Court for over a hundred years. It states that the resale of products does not need the permission of the original copyright holder of those products. Jennifer Waters of MarketWatch.com expounds:

Under the doctrine, which the Supreme Court has recognized since 1908, you can resell your stuff without worry because the copyright holder only had control over the first sale. Put simply, though Apple Inc. has the copyright on the iPhone and Mark Owen has it on the book “No Easy Day,” you can still sell your copies to whomever you please whenever you want without retribution.

But a U.S. Court of Appeals ruled in favor of a lower court’s decision that the first-sale doctrine does not apply to products made overseas, but only to those made in the U.S. The Supreme Court will be hearing oral arguments on this case on October 29th.

They might rule in favor of further restrictions on our ability to resell items either as a way to make money after we’ve lost a job, or as a way to get out of debt. Isn’t this just what we need now in our failing economy?