Corp. v. Omega, S.A.,
131 S. Ct. 565 (U.S. 2010) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law]
concerned U.S. sales of a U.S. copyrighted work that was manufactured and first
sold abroad. The case ended in a 4-4 tie, avoiding how broadly the Court would
construe the first sale doctrine. However, in light of the Court's unanimous
decision in Quality King Distribs. v.
L'Anza Research Int'l, 523 U.S. 135 (U.S. 1998) [enhanced version / unenhanced version], the Costco non-decision may foreshadow
a shift in the Court toward a broader understanding, impacting not only
copyright law, but, potentially, patent law. In this Commentary, Eric Bensen discusses
the first sale doctrine and examines both Costco and Quality King. He writes:
The Grey Market
and IP Exhaustion Doctrines
The backdrop for the Costco
decision, of course, is the "grey market." In some cases, it is
cheaper to acquire a manufacturer's product abroad than it is to acquire it in
the United States because the manufacturer follows a pricing strategy that
calls for higher prices in the United States than in foreign markets for the
same product. It is sometimes so much cheaper that it is potentially profitable
to acquire the product in quantity abroad and re-sell it in the United States
at a lower price than that at which "parallel" articles authorized
for sale in the United States are sold. This is essentially what CWC [Costco
Wholesale] did with Omega watches. Such re-selling is known as the
"gray" market; "gray" because in the typical case, it is
neither authorized by the manufacturer nor expressly prohibited by law. Because
the gray market goods sell at a discount relative the parallel products
authorized for sale in the United States, manufacturers will go to great
lengths to prevent gray market sales.
The gray market is possible
from an intellectual property perspective because each of copyright law, patent
law and trademark law to some extent allows the purchaser of an item to use or
re-sell an item without incurring liability for infringement.
Copyright. As noted
above, the Copyright Act expressly provides that the owner of a copy can sell
or otherwise dispose of the copy without infringing the copyright, although
ownership of a copy does not entitle the owner to exercise the author's other
exclusive rights provided the Copyright Act, such as the right to make
additional copies. At the very least, copyrighted work manufactured in the
United States and sold abroad can be imported to the United States and re-sold
without infringing the copyright (whether a foreign-made copy is subject to the
first doctrine, of course, is the issue in Costco).
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Omega S.A.: What Does a 4-4 Tie Say About the Future of the First Sale
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