Supreme Court Issues Split Ruling In Fair Use Copyright Dispute

 WASHINGTON, D.C. -- (Mealey's) A divided U.S. Supreme Court on Dec. 13 allowed to stand a Ninth Circuit U.S. Court of Appeals ruling that the Copyright Act's first-sale doctrine does not apply to goods lawfully manufactured abroad and then sold domestically (Costco Wholesale Corp. v. Omega S.A., No. 08-1423, U.S. Sup.).

Justice Elena Kagan took no part in the case, leading to a 4-4 split.

"The judgment is affirmed by an equally divided court," the one-sentence per curiam ruling states.

Petitioner Costco Wholesale Corp. was sued by respondent and watchmaker Omega S.A. in the U.S. District Court for the Southern District of California after Costco began selling copyrighted "Seamaster" watches at its retail warehouse chain.  According to Omega, the sales represented copyright infringement under 17 U.S. Code Sections 106(3) and 602(a).  In response to the lawsuit, Costco asserted the affirmative defense of fair use.
 
In Quality King Distribs. Inc. v. L'Anza Research Int'l Inc. (523 U.S. 135, 138 [1988]), the Supreme Court touched upon fair use in a case involving goods manufactured domestically, sold abroad and then reimported. In that ruling, it decided that Section 109(a) provides an exception to Section 602(a)(1)'s general ban on the unauthorized importation of copyrighted works but that Section 602(a)(1) would retain significant effect because the fair use doctrine applies only to copies "lawfully made under this title" and not to copies made under foreign law.

The Ninth Circuit - which ultimately found in favor of Omega, reversing the District Court - concluded that Quality King is limited to its facts and that the first-sale doctrine does not apply to goods that are manufactured abroad and then imported to the United States.

The Supreme Court granted certiorari in April and heard oral arguments last month.

[Editor's Note:  Full coverage will be in the Jan. 7 issue of Mealey's Litigation Report: Intellectual Property.  In the meantime, the per curiam decision is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #16-110107-001Z.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]

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