In 2010, the Supreme Court granted certiorari for a case between Omega and Costco concerning whether or not Costco, a discount retailer, in selling luxury Omega watches with an “Omega Globe” logo engraving without authorization from the Swiss watchmaker was infringing the importation right under the Copyright Act. The district court granted summary judgment in favor of Costco based on the first sale doctrine exception but the Ninth Circuit reversed based on the rationale that the first sale doctrine only applied to copies “lawfully made under this title” and since the Omega watches were made in Switzerland, it exception did not apply. The Supreme Court reached a 4-4 tie with Justice Kagan recusing herself, meaning that the Ninth Circuit decision was affirmed but only within the Ninth Circuit.
On remand, the district court once again granted summary judgment in favor of Costco but under a different theory, copyright misuse. The court found that Omega misused its copyright in the logo by trying to expand a limited monopoly of non-copyrightable watches. Omega appealed to the Ninth Circuit and in today’s decision, the court applied a recent 2013 Supreme Court case, Kirtsaeng v. Wiley, which held that the phrase “lawfully made under this title” applied to products made abroad that were brought into the United States. Under Kirtsaeng, the Ninth Circuit reapplied the first sale doctrine as a valid defense and reaffirmed that “copyright owners cannot used their rights to fix resale prices in the downstream market.”
However, in a strong concurring opinion, Judge Kim McLane Wardlaw agreed with the outcome but argued that the Ninth Circuit should have affirmed the copyright misuse finding because “Omega impermissibly used the defensive shield of copyright as an offensive sword.” Judge Wardlaw’s opinion fairly warns against using copyright as a means to fight otherwise legal gray market goods.