In a typical case, if authentic goods are sold by an authorized seller, the copyright holder’s rights are extinguished and the goods may be sold and resold through unauthorized sellers. This is known as the “first sale doctrine.” In many grey market transactions, goods are manufactured outside the U.S., sold outside the U.S. in authorized sales, and then brought into the U.S. and sold by unauthorized distributors. In the Ninth Circuit, the first sale doctrine does not apply as a defense to such unauthorized U.S. sales, where a U.S. copyright protects a design on the goods. Thus, the U.S. copyright holder has an action against the unauthorized seller for copyright infringement. In this case, Costco bought Swiss-made watches outside the United States from an authorized seller, and resold them in the United States. The watchmaker asserted U.S. copyright infringement against Costco, an unauthorized seller, for a copyrighted design on the back of the watch. Omega S.A. v. Costco Wholesale Corp., 2008 U.S. App. LEXIS 18800(9th Cir. Cal. Sept. 3, 2008). Make sure that any grey market goods bought for resale are either made in the U.S. or are purchased in the U.S. from an authorized seller.
First Sale Doctrine is not a Defense to Copyright Infringement for Grey Market Goods Made and Sold Outside the United States
