First Sale Doctrine: Omega vs. Costco

May 4, 2010


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We have received contact from several Summer Associates who are interested in being notified whenever there is any new information, before the decision, on pending US Supreme Court cases.

Of particular interest to a few intellectual property summer associates has been Omega vs. Costco, a case the Supreme Court just agreed to hear regarding whether the ‘first sale doctrine’ applies to copyrighted material produced and sold outside of the US, and then later imported for sale to the United States.

Costco vs. Omega would seem to have wide reaching implications.  Critics of the 9th Circuit approach maintain that the interpretation of the lower court would allow businesses to control the importation of their goods even after the first sale simply by manufacturing them overseas instead of within the United States.

The dispute in question arose after the bargain chain Costco purchased Omega watches for resale from an overseas supplier.  Three provisions of the Copyright act are implicated. Section 106(3) gives the Copyright holder the authority to distribute copies exclusively.  Section 602(a) gives the Copyright holder the sole authority to import copies that were produced outside of the United States and 109(a) contains the first sale doctrine.

The doctrine of first sale essentially means that once a copyright holder has sold a “lawfully made” copy, they no longer have any control over what the purchaser does with the copy.  You may be wondering why the watches enjoy copyright protection in the first place.  The answer is Omega added a copyrighted globe designe to their watches presumably in the hopes that they might be able to take advantage of the copyright importation protection in 602(a).

Under 9th Circuit precedent in the past, the first sale protection of 109(a) applied only to goods lawfully manufactured in the United States.  In the decision presently being appealed, the 9th Circuit had to determine whether the Supreme Courts decision in Quality King necessitated overruling the 9th Circuits previous precedent.  Quality King held that goods manufactured in the United States, that were then exported and re-imported, did not enjoy the import exclusivity protection of 602(a), due to the doctrine of first sale.

The 9th Circuit distinguished Quality King, and held that since the Omega watches were not manufactured in the United States, they were not “Lawfully Made” under the laws of the United States.  Therefore, the doctrine of First Sale did not apply.  Consequently the court held that Omega enjoyed the exclusive ability to import the watches even after they had already been sold.  The Supreme Court granted Certiorari on April 19th 2010.

There is a great deal of information available for this case already on Westlaw.  First, you can look at the 9th Circuit decision found at 541 F.3d 982.  Secondly, you can find the Petition for Certiorari and any briefs written in support or in opposition with the query:

Westlaw Database: SCT-PETITION

Query: TI(OMEGA & COSTCO)

You might also wish to set up a Westclip alert with the same query in the  SCT-BRIEF database.  Here, you will get an email when any briefs (amicus or party) are filed.  You can also set up the same Westclip in SCT-TRANSCRIPTS to be notified when the transcript of the oral argument is added to Westlaw.  Finally, you can set up a Westclip with the same search in SCT to be emailed when the case comes online.