Ninth Circuit Rules in Favor of Costco in Omega Copyright Dispute


Under the first sale-doctrine of copyright law, a purchaser of a lawfully created copyrighted work normally can later sell the work without the permission of the copyright holder, free from a claim of copyright infringement. For some time there has been a split as to whether the first sale doctrine applies to copyrighted works that are manufactured and first sold abroad, and then imported into the United States. The 2013 Supreme Court decision in Kirtsaeng v. John Wiley & Sons, Inc. resolved this conflict between the first sale doctrine, set forth at 17 U.S.C. § 109(a), and the provision giving copyright holders the right to block imports of copies made overseas, set forth at 17 U.S.C § 602(a)(1). In Kirtsaeng the Court rejected the argument that the phrase "lawfully made under this title" in Section 109(a) meant only copies produced within the United States and subject to U.S. copyright law. In a 6-4 decision, the Supreme Court held that a copyright holder's ability to control importation and distribution of its copyrighted works expires at the first sale no matter where the works are manufactured or first sold.

As previously reported by Fish, Omega, a maker of Swiss luxury watches, sued Costco for copyright infringement over Costco's importation and sale of Omega watches that were manufactured overseas for sale overseas. On September 3, 2008 the Ninth Circuit overturned the District Court's grant of summary judgment in favor of Costco under the first sale doctrine, finding that the doctrine does not act as a defense to claims of infringing importation because it applies only to goods made in the United States. However, on November 9, 2011 the District Court, on remand, again granted summary judgment for Costco, this time finding that Omega has misused its copyright. Omega appealed on December 9, 2011, and while the appeal was pending Kirtsaeng was decided.

With the Kirtsaeng decision establishing that the first sale doctrine applies to copyrighted works made abroad and first sold abroad, the Ninth Circuit had no choice but to change its tune. On January 20, 2015 the Ninth Circuit ruled that Costco's importation of Omega's watches was not copyright infringement. See Omega S.A. v. Costco Wholesale Corporation. Judge Dorothy W. Nelson stated, "[i]t is clear, then, that Omega has no infringement cause of action against Costco, application of the first sale doctrine disposes of Omega’s claim, resolves this case in Costco’s favor, and conclusively reaffirms that copyright holders cannot use their rights to fix resale prices in the downstream market."