Equally Divided Supreme Court Affirms Ninth Circuit Ruling in Omega S.A. v. Costco Wholesale Corporation

On December 13, 2010, an equally divided Supreme Court decided Costco Wholesale Corp. v. Omega S.A., No. 08-1423, affirming without opinion a Ninth Circuit decision holding that the "first sale doctrine" is not a defense to the sale of copyrighted  works made outside the United States.  The case involved the bulk resale of watches bearing a copyrighted design.

Copyright law gives the copyright owner "exclusive rights to distribute copies of the copyrighted work to the public" by sale or otherwise, except that the owner of a "particular copy" lawfully made or previously authorized for sale can resell that copy without the authorization of the copyright owner.  This exception is known as the "first sale doctrine" – the copyright owner controls only the first lawful sale.  For almost 20 years, the Ninth Circuit has held that the "first sale doctrine" applies only to domestically made or authorized-for-sale copies of U.S.-copyrighted works.

In Quality King Distributors, Inc. v. L'anza Research International, Inc., 523 U.S. 135 (1998), the Supreme Court held that the "first sale doctrine" applied to a product with a U.S.-copyrighted label that was manufactured inside the United States, exported to an authorized foreign distributor, sold overseas to unidentified third parties, shipped back to the United States without the copyright owner's permission, and then sold in the United States by unauthorized retailers.  Justice Stevens wrote for a unanimous Court, holding that the "first sale doctrine" did protect such bulk resale of "round trip" goods originating in the United States.  (Statutory exceptions apart from the "first sale doctrine" protect travelers who make an isolated purchase of a copy of a work that could not be imported in bulk for purposes of resale.)  In a concurring opinion, Justice Ginsburg noted that "we do not today resolve cases in which the allegedly infringing imports were manufactured abroad." 

In Costco, the Ninth Circuit addressed the question left open by Quality King and retained its prior rule that the "first sale doctrine" does not protect bulk resellers of infringing imports that are manufactured outside the United States.  Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008).

The Supreme Court divided equally on the Costco question, thereby affirming the decision of the Ninth Circuit.

The Court issued its decision per curiam.  Justice Kagan took no part in the consideration or decision of the case.

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