Omega S.A. v. Costco Wholesale Corp.

Omega S.A. v. Costco Wholesale Corp.
Court	United States Court of Appeals for the Ninth Circuit
Full case name	Omega S.A. v. Costco Wholesale Corporation
Date decided	September 3, 2008
Citation(s)	541 F.3d 982
Judge(s) sitting	Barry G. Silverman, Johnnie B. Rawlinson, Milan D. Smith, Jr.
Case history
Prior action(s)	Appeal from C.D. Cal. (2007 WL 7029735)
Subsequent action(s)	Affirmed by an equally divided Court (Docket No. 08-1423)
Case opinions
Smith

Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), was a case decided by the Ninth Circuit Court of Appeals that held that in copyright law, the first-sale doctrine does not act as a defense to claims of infringing distribution and importation for unauthorized sale of authentic, imported watches that bore a design registered in the Copyright Office.^[1]

Factual background

The plaintiff, Omega SA, is a luxury watchmaker based in Switzerland that distributes its watches through authorized retailers. The Omega watches feature a copyrighted globe design on the back of the watch. The defendant Costco obtained the watches through the grey market: Omega would sell the watches to authorized distributors, third parties would buy the watches and sell them to the New York company ENE Limited, and ENE would sell the watches to Costco. Omega did not authorize the importation or resale in the United States, and Omega sued for copyright infringement under 17 U.S.C. §§ 106(3) and 602(a). Costco asserted that the first sale doctrine precluded any infringement claims against them. The trial court ruled in favor of Costco.^[2]

Ninth Circuit decision

The Ninth Circuit reversed the trial court. The court cited Ninth Circuit precedents that interpreted the first sale doctrine as applying only to goods made in the United States.^[3] The court found its interpretation to be consistent with the Supreme Court case Quality King v. L'anza, which held that the first sale doctrine was a defense to an infringement claim based on unauthorized importation of copyrighted materials made within the United States.^[4] The court noted that the first sale doctrine only covered the resale of copies obtained lawfully, and declined to apply the Copyright Act extraterritorially and ascribe lawfulness to copies made outside of the United States. Because the Omega watches at issue were made outside of the United States, the court held that the first sale doctrine could not act as a defense and that Costco was liable for infringing Omega's importation rights.^[5]

Supreme Court case

Certiorari to the Supreme Court of the United States was granted on 19 April 2010.^[6] Justice Kagan took no part in the consideration or decision of the case. The remaining Justices split 4–4, which means the Court affirms the Ninth Circuit's decision.^[7]

Impact

The decision has been characterized as a loss for consumers in the sense that manufacturers will better be able to control the prices of their goods when the grey market cannot serve as competition. Also, the distinction drawn in the case between goods manufactured inside the United States and goods manufactured outside could be a possible motivation for companies to locate their manufacturing outside of the United States, where the first sale doctrine would not stand as an obstacle to suing grey market importers.^[8]

As a 4–4 decision, however, Omega only operates as mandatory authority in the Ninth Circuit and does not set a nationwide precedent.^[9]

References

1. ^ Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982, 990 (9th Cir. 2008)
2. ^ Omega, 541 F.3d at 984
3. ^ Omega, 541 F.3d at 986
4. ^ Omega, 541 F.3d at 987
5. ^ Omega, 541 F.3d at 990
6. ^ Supreme Court Docket File, No. 08-1423
7. ^ Costco Wholesale Corp. v. Omega S.A., 562 U.S. ___ (2010)
8. ^ Field, Abigail. Supreme Court Rules Against Consumers in Costco vs. Omega. Daily Finance, 13 December 2010.
9. ^ Recusals and the "problem" of an equally divided Supreme Court. Journal of Appellate Practice and Process. 22 March 2005.

External links

• Slip Opinion from the Supreme Court of the United States
• Full text of the Ninth Circuit opinion from Findlaw