U.S. Supreme Court

Costco Copyright Case Pending Before Supreme Court Has Internet Impact

At first glance, the copyright battle between Costco Wholesale Corp. and Swiss watchmaker Omega doesn’t involve any digital-age issues.

The U.S. Supreme Court granted cert in the case last week. At issue is whether copyright owners can assert rights over imported goods that are manufactured abroad and sold through overseas distributors, the Seattle Times reports.

Costco buys Omega watches this way because they are cheaper than those sold directly by the manufacturer. Omega claims Costco’s sales violate its copyright.

The dispute “sounds like the kind of lawsuit that should have been resolved 200 years ago,” Corporate Counsel reports. “But this lawsuit—and many others that hinge on its outcome—is very much a product of the Internet-driven global economy.”

The outcome of the case will affect Internet retailers such as Amazon.com and eBay that sell goods online, according to the Corporate Counsel story. Both have filed amicus briefs supporting the cert grant in the Costco case.

The amicus brief (PDF posted by SCOTUSblog) filed by eBay says the outcome of the case will affect its customers, who buy and sell goods made here and abroad. A decision giving greater downstream copyright protection to goods manufactured abroad than those made here “undermines the efficiency of the Internet as a global marketplace,” the brief says.

The case turns on the Copyright Act’s “first sale” doctrine, which holds that copyright holders can’t stop the resales of their products. A 1998 Supreme Court decision held that the doctrine applies to imported goods, so that copyright holders cannot prevent their resale. But ruling in the Costco case, the 9th U.S. Circuit Court of Appeals said the 1998 decision applies only to goods made in the United States, not to goods made overseas.

The 9th Circuit decision, Costco argues in its amicus brief (PDF posted by SCOTUSblog), “gutted the venerable ‘first-sale doctrine.’ ”

The case is Costco Wholesale Corp v. Omega.

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