On December 13, 2010 the U.S. Supreme Court affirmed 4-4 a Ninth Circuit decision restricting the 1st sale doctrine to copyrighted works manufactured in the U.S. or sold with the copyright holder’s permission.
Omega, a Swiss luxury watch maker discovered Costco was selling its OMEGA 007 James Bond Seamaster watches in California. The watch has a U.S. copyrighted laser-engraving. Two copyright provisions were at odds in this case:
- Importation Prohibited: Importation of a copyrighted work without authority of the copyright holder is prohibited under § 602(a)(1) of the Copyright Act; and
- First Sale Defense: The owner of a lawfully obtained copy is authorized to sell or otherwise dispose of the possession of the copy under § 109.
The issue of §§ 602 and 109 has been previous litigation in the 1998 Supreme Court case of Quality King Distribs. v. L’Anza Research Int’l, 523 U.S. 135 (1998). There, the product was made in the U.S., sent overseas and then returned back to the U.S. In Quality King, the First Sale Defense applied because the first sale was inside the U.S. (i.e., the goods took a “round trip”).
However, in the Omega case, the goods were made in Switzerland, distributed to various middle east countries before then came into Costco’s possession.
Therefore, the first sale was not inside the U.S. (i.e., no “round trip”) occurred. Thus, Omega was able to stop the sale of the watches by Costco.
As a side note, this case was affirmed from the 9th Circuit on a 4-4 split because now-Justice Elena Kagan (then U.S. Solicitor General) recommended the U.S. Supreme Court not hear the case (which they did anyway).
