Costco Wholesale Corp. v. Omega, S. A.

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Costco Wholesale Corp. v. Omega, S. A.
Seal of the United States Supreme Court.svg
Argued November 8, 2010
Decided December 13, 2010
Full case nameCostco Wholesale Corporation v. Omega, S. A.
Citations562 U.S. 40 ( more )
131 S. Ct. 565; 178 L. Ed. 2d 470; 96 U.S.P.Q.2d 2025
Decision[The judgment is affirmed by an equally divided Court. Opinion]
Case history
Prior541 F.3d 982 (9th Cir. 2008); cert. granted, 559 U.S. 1066(2010).
Court membership
Chief Justice
John Roberts
Associate Justices
Antonin Scalia  · Anthony Kennedy
Clarence Thomas  · Ruth Bader Ginsburg
Stephen Breyer  · Samuel Alito
Sonia Sotomayor  · Elena Kagan
Case opinion
Per curiam
Kagan took no part in the consideration or decision of the case.
Laws applied
Copyright Act of 1976
Omega S. A. v. Costco Wholesale Corp.
Seal of the United States Court of Appeals, 9th Circuit.svg
Court United States Court of Appeals for the Ninth Circuit
Full case nameOmega S. A. v. Costco Wholesale Corporation
DecidedSeptember 3, 2008
Citation(s)541 F.3d 982
Case history
Prior action(s)Appeal from C.D. Cal. (2007 WL 7029735)
Subsequent action(s)Affirmed by an equally divided Supreme Court, No. 08-1423, 562 U.S. 40 (2010).
Court membership
Judge(s) sitting Barry G. Silverman, Johnnie B. Rawlinson, Milan D. Smith, Jr.
Case opinions
MajoritySmith, joined by Rawlinson, Silverman

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] It is contrasted with Kirtsaeng v. John Wiley & Sons, Inc. [2]

Contents

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 gray market: Omega would sell the watches to authorized distributors, third parties would buy the watches and sell them to the New York state 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. [3]

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. [4] 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. [5] 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. [1]

Supreme Court case

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

Subsequent history

On remand to the district court, both Costco and Omega moved for summary judgment on the issue of copyright misuse. [8] Judge Terry Hatter found for Costco, holding that Omega's application of a copyrighted work to an uncopyrighted watch for the purpose of controlling importation of the uncopyrighted good constituted copyright misuse. [8] [9]

On January 20, 2015, the Ninth Circuit Court of Appeals upheld the district court judgment, including awarding attorney's fees to Costco. [10]

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. [11]

As a 4–4 decision, however, Omega only operates as mandatory authority in the Ninth Circuit and does not set a nationwide precedent. [12]

In December 2011, petitions for certiorari in two cases from the Second Circuit with a similar issue were filed in the Supreme Court, providing the Court with another opportunity to revisit the still-unresolved issue in Omega: Kirtsaeng v. John Wiley & Sons, Inc. [13] and Liu v. Pearson Education [14] In 2013, the U.S. Supreme Court reversed lower court rulings and ruled that Kirtsaeng's sale of lawfully-made copies purchased overseas was protected by the first-sale doctrine. [2] Liu and another Pearson case were subsequently remanded to the lower courts to rehear, in light of Kirtsaeng. [15]

Related Research Articles

The first-sale doctrine is an American legal concept that limits the rights of an intellectual property owner to control resale of products embodying its intellectual property. The doctrine enables the distribution chain of copyrighted products, library lending, giving, video rentals and secondary markets for copyrighted works. In trademark law, this same doctrine enables reselling of trademarked products after the trademark holder puts the products on the market. In the case of patented products, the doctrine allows resale of patented products without any control from the patent holder. The first sale doctrine does not apply to patented processes, which are instead governed by the patent exhaustion doctrine.

Copyright misuse is an equitable defence to copyright infringement in the United States based upon the doctrine of unclean hands. The misuse doctrine provides that the copyright holder engaged in abusive or improper conduct in exploiting or enforcing the copyright will be precluded from enforcing his rights against the infringer. Copyright misuse is often comparable to and draws from the older and more established doctrine of patent misuse, which bars a patentee from obtaining relief for infringement when he extends his patent rights beyond the limited monopoly conferred by the law.

A scène à faire is a scene in a book or film which is almost obligatory for a book or film in that genre. In the U.S. it also refers to a principle in copyright law in which certain elements of a creative work are held to be not protected when they are mandated by or customary to the genre.

<i>In re Aimster Copyright Litigation</i>

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<i>Vernor v. Autodesk, Inc.</i> United States district court case

Vernor v. Autodesk, Inc. was a case in the United States District Court for the Western District of Washington regarding the applicability of the first-sale doctrine to software sold under the terms of so-called "shrinkwrap licensing." The court held that when the transfer of software to the purchaser materially resembled a sale it was, in fact, a "sale with restrictions on use" giving rise to a right to resell the copy under the first-sale doctrine. As such, Autodesk could not pursue an action for copyright infringement against Vernor, who sought to resell used versions of its software on eBay. The decision was appealed to the United States Court of Appeals for the Ninth Circuit, which issued a decision on September 10, 2010, reversing the first-sale doctrine ruling and remanding for further proceedings on the misuse of copyright claim. The Ninth Circuit's decision asserted that its ruling was compelled by Ninth Circuit precedent, but observed that the policy considerations involved in the case might affect motion pictures and libraries as well as sales of used software.

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<i>Veeck v. Southern Building Code Congress Intl</i>

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References

  1. 1 2 Omega S. A. v. Costco Wholesale Corp., 541F.3d982 , 990(9th Cir.2008).
  2. 1 2 Kirtsaeng v. John Wiley & Sons, Inc. , 568 U.S. 519 (2013).
  3. Omega, 541 F.3d at 984.
  4. Omega, 541 F.3d at 986.
  5. Omega, 541 F.3d at 987.
  6. Supreme Court Docket File, No. 08-1423
  7. Costco Wholesale Corp. v. Omega S. A. , 562 U.S. 40 (2010).
  8. 1 2 Siegal, Matthew; Shah, Binni N. (February 2012). "The Saga of Omega v. Costco Wholesalers Corp." (PDF). IP Strategist. pp. 2–3. Retrieved April 12, 2012.
  9. Omega S. A. v. Costco Wholesale Corp., no. 04-05443, (E.D. Cal. Nov. 9. 2011), order. ("Here, Omega concedes that a purpose of the copyrighted Omega Globe Design was to control the importation and sale of its watches containing the design, as the watches could not be copyrighted. Accordingly, Omega misused its copyright of the Omega Globe Design by leveraging its limited monopoly in being able to control the importation of that design to control the importation of its Seamaster watches.") Retrieved April 12, 2012.
  10. Omega S. A. v. Costco Wholesale Corp., 776F.3d692 (9th Cir.2015).
  11. Field, Abigail. Supreme Court Rules Against Consumers in Costco vs. Omega. Daily Finance, 13 December 2010.
  12. Black, Ryan; Epstein, Lee (Spring 2005). "Recusal and the "Problem" of an Equally Divided Supreme Court". Journal of Appellate Practice and Process. 7 (1): 75–99, 81. Archived from the original on March 13, 2012. Retrieved April 12, 2012.
  13. Kirtsaeng v. John Wiley & Sons, Inc., no. 11-697, petition for certiorari (docket). December 5, 2011. Retrieved April 12, 2012.
  14. Liu v. Pearson Education, Inc., et al., no. 11-708, petition for certiorari (docket). December 8, 2011. Retrieved April 12, 2012.
  15. "Order List: 568 U.S." (PDF). U.S. Supreme Court. March 25, 2013. p. 1. Retrieved 2015-10-20.

Further reading

Ninth Circuit Court of Appeals (2008)
Supreme Court (2010)