TRUTH IS [MUCH] STRANGER THAN FICTION Once Upon A Time In Shaolin The Wu Tang Clan Pharma Bro and The First Sale Doctrine

THE PLAYERS – THE WU TANG CLAN

THE PLAYERS –WU TANG CLAN (FOUNDING MEMBERS)

THE PLAYERS – “PHARMA BRO” A/K/A MARTIN SHKRELI

THE PLAYERS – “ONCE UPON A TIME IN SHAOLIN”

Timeline 2008 to 2013 – Wu Tang Clan records the double sided 26 track “Once Upon A Time In Shaolin” album January to March 2015 – the album goes up for private auction and Pharma Bro buys it for $2 million August 2015 – Pharma Bro raises the price of Daraprim from $13.50 to $750 a tablet (5,000 percent) December 2015 – Pharma Bro arrested for securities fraud and posts a bond to avoid prison during the pendency of the litigation September 2016 – Pharma Bro lists the album for sale on eBay, but no sale completed September 2017 – Pharma Bro’s bail revoked, and he’s sent to jail for offering $5,000 for anyone who can bring him a sample of Hillary Clinton’s hair August 2017 – Conviction for securities fraud and conspiracy March 5, 2018 – Pharma Bro ordered to forfeit $7 million in assets including the album and a Picasso March 9, 2018 – Pharma Bro sentenced to 7 years in federal prison

The Contract Terms Pharma Bro gets the one and only copy of the album on CD (no master or other copy retained by the Wu Tang Clan), a decorative case and booklet about the album He can listen to the album and play it for others (unclear whether the public performance right is included) Complete prohibition on any commercialization of the album for 88 years (which includes a prohibition on making and selling additional copies or even selling his own copy during the 88 year period, although he can give it away) After 88 years, he has complete rights to commercialize the work and otherwise do anything he wants with it

The Contract Terms – An Additional Clause? The buying party also agrees that, at any time during the stipulated 88 year period, the seller may legally plan and attempt to execute one (1) heist or caper to steal back Once Upon A Time In Shaolin, which, if successful, would return all ownership rights to the seller. Said heist or caper can only be undertaken by currently active members of the Wu-Tang Clan and/or actor Bill Murray, with no legal repercussions.

The Contract Terms – An Additional Clause?

The Contract Terms – An Additional Clause?

Criminal Forfeiture

The FOIA Request

What Was Actually Conveyed? Ghostface Killah criticizes Pharma Bro for the Daraprim price increase Pharma Bro threatens to delete all of Ghostface’s lyrics from the one and only copy of the album And then explains that he’s using the album CD as a coaster for his drinks

The First Sale Doctrine Codified at 17 U.S.C. 109 Thus, the first sale doctrine provides that where a copyright owner parts with title to a particular copy of his copyrighted work, he divests himself of his exclusive right to vend that particular copy. While the proprietor's other copyright rights (reprinting, copying, etc.) remain unimpaired, the exclusive right to vend the transferred copy rests with the vendee, who is not restricted by statute from further transfers of that copy, even though in breach of an agreement restricting its sale. United States v. Wise, 550 F.2d 1180, 1187 (9th Cir. 1977)

The First Sale Doctrine – Policy The policy - expand access to creative works by ensuring the availability of a second hand market for copies of those works It balances the incentive for authors to create works, on the one hand, against the needs of the public to have access to those works, on the other This is a right of the public generally

The First Sale Doctrine – Application To This Dispute Most likely no impact on the commercialization clause as it applies to 88 year prohibition on making and selling additional copies of the album (CD, Spotify, Amazon, etc.); how is this any different than selling a sculpture without conveying the right to make reproductions? The first sale doctrine should apply to the prohibition on selling the one copy Pharma Bro bought and bar a copyright infringement claim for the sale of the copy But should it also bar/preempt a breach of contract claim?

The First Sale Doctrine – Application To This Dispute Let’s go back to U.S. v. Wise: Thus, the first sale doctrine provides that where a copyright owner parts with title to a particular copy of his copyrighted work, he divests himself of his exclusive right to vend that particular copy. While the proprietor's other copyright rights (reprinting, copying, etc.) remain unimpaired, the exclusive right to vend the transferred copy rests with the vendee, who is not restricted by statute from further transfers of that copy, even though in breach of an agreement restricting its sale. Vendee "may be liable for the breach but he is not guilty of infringement" United States v. Wise, 550 F.2d 1180, 1187 (9th Cir. 1977)

The First Sale Doctrine – Application To This Dispute The first sale thus extinguishes the copyright holder's ability to control the course of copies placed in the stream of commerce….. The copyright holder is limited to a suit against the original buyer for breach of the contract containing the restrictions. Am. Int'l Pictures v. Foreman, 576 F.2d 661, 664 (5th Cir. 1978)

The First Sale Doctrine – Application To This Dispute Copyright Act preemption? Probably not. As a matter of state contract law, however, courts can refuse to enforce agreements that violate public policy Should they use this authority to refuse to enforce contractual restrictions that conflict with the first sale doctrine? Without that, the buyer can avoid a copyright infringement claim, but who would sell/rent their copy if they could still be found liable for breach of contract under state law?