Supreme Court To Consider First Sale of Imports - Animaether passes along a legal tale that "doesn't involve the kind of cutting-edge issues that copyright lawyers usually grapple with in the digital age [and] sounds like the kind of lawsuit that should have been resolved 200 years ago," yet still "is very much a product of the Internet-driven global economy." "Can copyright owners assert rights over imported goods that have already been sold once? That is the issue before the Supreme Court in Costco Wholesale Corp v. Omega, S.A. (backstory here). What's at stake is the ability of resellers to offer legitimate, non-pirated versions of copyrighted goods, manufactured in foreign nations, to US consumers at prices that undercut those charged by the copyright holders."
Read more of this story at Slashdot.
[Slashdot. News for Nerds. Stuff that Matters]
I'm an armchair lawyer. I admit it. Specifically, I'm an armchair intellectual property lawyer. I am in no way licensed to practice law in any jurisdiction. Nothing herein should be construed as legal advice of any sort by the reader. That said, I have a very strong interest in intellectual property law. Also, after reading the case history, I'm biased in favor of Costco.
This case is gonna be interesting. At odds are 17 USC 602 (a)(1) and 17 USC 109 (a)(1). One one hand, 602 basically says that importation of a protected work without the authority of the owner of the rights to that work constitutes civil infringement. On the other hand, 109 clearly provides the owner of a copy "lawfully made under this title" the rights to dispose of such copy in any way he or she sees fit, notwithstanding (I love that word, it's a really big word tossed around in legal phrases all the time that means "despite") any license restriction to the contrary. Essentially, even if you are the owner of "109" copies of a work, you can't legally import them under 602 unless you are authorized by the rights owner to do so.
I'm not going to go into the case in great detail, that's been done in the links in the Slashdot story, but basically, Omega watches, made in Switzerland are sold to US distributors at a significantly higher price than they are sold to non-US distributors. Omega not only has a trademark on their corporate logo, but also has a registered copyright on it, valid in the United States. They have made copies of their logo, by placing them on the back of their watches, thus claiming the watches, or at least the logos, as "copies" under 17 USC. The court doesn't appear to take up whether that's a valid assertion specifically (although its questionable whether the logo is indeed copyrightable material), but we assume that the litigation of the case provides prima facie (hey another cool legal term; it comes from Latin, and basically means that the evidence stands proven for itself) evidence that the work really is copyrightable.
Costco has managed to find a distributer of Omega watches outside the US willing to sell them the watches at a significantly cheaper price than could otherwise be attained by purchasing from a US wholesaler. Omega, not wanting to lose a lucrative method of revenue generation, is claiming under 602 that the watches imported via 3rd party distributors are infringing copies. The Supreme Court ruled on a similar (but not quite identical) issue Quality King Distributors, Inc. v. L’Anza Research Int’l, Inc., 523 U.S. 135 (1998)
Quality King hinged upon the fact that L'Anza's products were originally manufactured in the United States, and consequently were made "lawfully under this title", invoking section 109 first sale protections, holding that 109 supercedes 602(a). While not explicitly saying it in Quality King, the court implied that copies outside of the United States may not necessarily be made "lawfully under this title" despite perhaps having been lawfully made elsewhere. In fact, Justice Ginsburg, in her concurring opinion said as much, without that being included in the court's opinion. Omega will almost certainly note this as they make their case.
This issue is really going to hinge on that fact, whether or not the watches were made lawfully under US copyright code. While I certainly am not claiming to know every possible scenario that could play out here, I see a few possibilities that could happen with this case.
First, the court could simply say that because the copies were made outside the United States, they weren't made "lawfully under this title", and that consequently, 602(a)(i) does indeed apply here. This would seem to have significant consequences, particularly because CD, DVD, and Blu-Ray media are typically manufactured overseas and imported into the US. We won't discuss the ramifications of this here, just because we can't enumerate them all.
On the other hand, regardless of what their reasoning for obtaining the copyright in the first place is, or whether the copyright is valid (it has been brought up on Slashdot, we won't comment on the validity of it here, but rather will assume that it is valid), Omega is arguing this case under the premise of their United States registered copyright. This of course raises the question. If they have a US based copyright on the image imprinted on the back of their watches, are not the copies created lawfully under Title 17? Both the United States and Switzerland are signatories to, and have implemented the Berne Convention, codified in the United States throughout various sections of the US copyright code.
There is no doubt that watches made extraterritorially by the copyright holder were made lawfully, and it is on this point that a Costco argument could hinge. For a Costco win, they need to prove that not only were the watches made lawfully, but that they were made lawfully under the US copyright code. First of all, Omega is asserting its US Copyright in this case. Were they asserting, say a Swiss copyright, it would be hard for them to hold that the US courts have jurisdiction over the case, however if they could justify it via the Berne Convention, the court would still have to answer the question of whether there is a copyright owner "under this title". If the court had to answer that question, we actually believe that this case would be even more complex, and would in fact, have ramifications on the applicability of 109, and whether the watches were made under this title.
Were the court to find that a Swiss copyright was sufficient to qualify as a copyright owner for the sake of section 602, the identical "under this title" language would imply that such copies were lawfully made under 109, and thus first sale doctrine applies, superceding 602, and invoking Quality King as the deciding factor as to whether the importation would be considered infringement (clearly it wouldn't). If on the other hand, the Swiss copyright wasn't sufficient to qualify as a 602 copyright owner, Omega would lack standing to sue for infringement, at least in the United States, and in principle, vacating the appellate decision.
However, the fact remains that Omega is using its United States copyright registration to enforce this market separation for its goods. One can easily argue that since the US copyright registration is being invoked as an enforcement tool that the watches were in fact made lawfully under 17 USC. In our opinion, that's the way it should be treated, too, lest we open up our courts to a selection of jurisdictions for different aspects of the case, favorable to one party over the other.
This is a very interesting case for the Court to take up, considering there isn't a collection of conflicting opinions throughout the various circuits. With a unanimous court ruling in Quality King, we can only assume that the court expects to further clarify Quality King and the applicability of 602(a)(1). Costco must feel that they are on really strong ground here. Perhaps Omega should have simply terminated the contracts of the overseas distributors who were selling to Costco; they would have saved a lot of money in legal bills regardless of how this case turns out. What will be interesting is if Costco loses, what ends up happening? How will damages be awarded? In the case where the copies themselves are infringing, such as with books or CD's fines are assessed, and the infringing copies are forfeited (as they should be). However, in this case, the watches themselves are legitimate, authorized "copies", made by the manufacturer. Its very hard to justify confiscating something that truly is legitimate. Perhaps if they lose, Costco should re-export them to Switzerland and undercut Omega there, if only to recoup some of the infringement judgment. :)
Blog comments