Copyright

by Mike Masnick


Filed Under:
copyright, first sale, supreme court

Companies:
costco, omega



Supreme Court Ruling: You May Not Be Able To Legally Sell A Product First Made Outside The US

from the this-is-bad dept

Earlier this year, we covered a rather important copyright case in the Supreme Court, between watchmaker Omega and retailing giant Costco. The crux of the issue was that Costco bought a bunch of Omega watches that were not meant for sale in the US, imported them, and started selling them in the US for less than Omega was selling other watches here. Your basic principles of "you bought it, you can resell it" seemed to apply, but Omega had a nasty copyright trick up it's sleeve. It had put a little 0.5 cm "globe" design on the underside of the watches -- where no one would see it, and then claimed copyright on the design. Thus, they claimed that Costco's attempt to resell the watches was copyright infringement. Of course, US copyright law has a right of first sale (the same "you bought it, you can resell it" concept), but Omega's lawyers craftily sought out a loophole in US copyright law.

The Copyright Act's section that deals with first sale rights (section 109(a) for those playing along with the home game) notes that it only applies to copies "lawfully made under this title." Omega's lawyers argued that the design on the watches does not count because the watchers were made outside of the US, and thus not covered by US copyright law and thus the design was not lawfully made under US copyright law.

The Ninth Circuit appeals court -- which certainly has a history of wacky rulings -- agreed with Omega's interpretation of the law and the case was appealed to the Supreme Court. The court deadlocked on the issue today, coming to a 4-4 tie (with Justice Kagan not taking part, since she had filed an amicus brief in the case as Solicitor General), meaning that the 9th Circuit ruling stands and copyrighted products first made outside the US may no longer have a right of first sale.

In other words, be careful if you buy a book that was first published outside the US. Technically, you may no longer have a legal right to sell it -- or even to lend it to to others, which is why librarians were reasonably worried about this decision.

If there's any sort of silver lining to all of this, the fact that the Justices deadlocked, rather than coming to a full decision means that it's not a precedential ruling and a different case could allow them to decide differently later on. Though, if you were wondering, when Kagan filed the amicus brief as Solicitor General... she sided with Omega, and said the Supreme Court should not take the case, since the 9th Circuit's ruling was just fine.

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  1. icon
    dandover (profile), 18 Dec 2010 @ 4:30pm

    Re: Re: Re: Re: Re: Re: Re: Damn

    That's the f-ed up part.
    I think we all recognize that there is something wrong with this case. Unfortunately, given the questions the court had to answer, they ruled in the most sensible way they could.

    I would say the f-ed up part is that copyright law is being applied to these watches. Personally, if I had been arguing Costco's case, I would not have tried to go the first sale route. Instead they should have argued that, by putting the copyrighted "design" on the backs of the watches, Omega had given an implied license to import the copyrighted design, because Omega attached it to an object whose primary purpose is in no way at all connected to any artistic value that the design might have. The real value of the "copy" of the copyrighted work is as a watch (which is something that normally doesn't qualify for copyright protection) not as a work of art or anything like that. Personally, I think that is what is wrong with this case. Unfortunately, this is not the approach Costco took. Since they didn't raise this issue, the court could not address it.

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