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Supreme Court Affirms Ninth Circuit without Opinion in Costco Case

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The Supreme Court issued a per curiam decision in Costco Wholesale Corporation v. Omega S.A. on December 13, 2010. The case concerns Omega’s attempt to prevent Costco from buying authentic Omega watches from resellers abroad and importing them for sale in the U.S. Because the goods at issue are authentic, Omega cannot attack the practice on counterfeiting grounds. Instead, Omega relies on a small copyrighted emblem placed on the underside of every watch to attack Costco’s practice using the right to control distribution of a work that is conferred by the Copyright Act. Costco’s defense hinges on the first sale doctrine, which prevents copyright owners from controlling re-sales of their goods by purchasers. The equally divided court affirmed the 2008 decision of the Court of Appeals for the Ninth Circuit without any opinion. The court’s equal division was possible because Justice Elana Kagan recused herself as a result of her earlier involvement in the case as Solicitor General. The Court’s affirmation lets stand the Ninth Circuit’s decision that copyrighted goods manufactured abroad are not “lawfully made” under the Copyright Act and are therefore not subject to the first sale doctrine. This means copyright owners who manufacture goods abroad can control their importation into the U.S., even after their initial sale. The decision may have far-reaching implications, as it appears to provide more protection to goods manufactured abroad than to those made in the U.S. However, the even split of the court, the absence of an opinion, and the fact that this question remains unresolved with respect to other intellectual property may indicate that this issue has not been considered for the last time.

To read the (very short) Supreme Court slip opinion, click here.

To read the Ninth Circuit opinion, click here.

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