Costco Wholesale Corp. v. Omega, S.A. (Supreme Court 2009)
The Supreme Court has asked the Solicitor General to file a brief expressing the Obama Administration’s view on this pending international copyright exhaustion case. The law of exhaustion in copyright and patents run roughly parallel, and the outcome of this case will likely alter US patent law as well.
Under the first sale doctrine (aka exhaustion), once a copyright (or patent) owner has made an authorized sale of a protected product, the owner no longer has rights in that particular copy. This allows the authorized purchaser to re-sell the particular product.
Omega sells its watches for a higher price in the US than it does elsewhere. The discount retailler Costco purchased genuine Omega watches from overseas (through an importer) and began to sell them in its US stores. The question on appeal is whether Omega’s authorized foreign sale exhausted its US copyright.
Under the Copyright Act’s first-sale doctrine, 17 U.S.C. § 109(a), the owner of any particular copy “lawfully made under this title” may resell that good without the authority of the copyright holder. In Quality King Distribs., Inc. v. L’Anza Research Int’l, Inc., 523 U.S. 135, 138 (1998), this Court posed the question presented as “whether the ‘first sale’ doctrine endorsed in § 109(a) is applicable to imported copies.” In the decision below, the Ninth Circuit held that Quality King (which answered that question af-firmatively) is limited to its facts, which involved goods manufactured in the United States, sold abroad, and then re-imported. The question pre-sented here is:
Whether the Ninth Circuit correctly held that the first-sale doctrine does not apply to imported goods manufactured abroad.
In Fuji Photo Film Co. v. ITC, 474 F.3d 1281 (Fed. Cir. 2007), the Federal Circuit held that US patent rights are only exhausted “through a first sale in the United States.” In that case, the Court recognized that “a different rule applies in copyright cases.” However, at least one district court has held that the Supreme Court’s 2008 Quanta decision is inconsistent with this Federal Circuit precedent. See LG Electronics, Inc. v. Hitachi, 2009 WL 667232 (N.D.Cal. 2009)
If it takes the case, the Supreme Court is likely to link the parallel patent and copyright doctrines.
One of my former students (Shourin Sen) has been following the case on his copyright focused site: Exclusive Rights.