Importing Gray Market Goods – The Omega v. Costco Case

"Critical Implications of Costco v. Omega on the Gray Goods and the First Sale Doctrine" CLE Program is now available at lawline.com here

Lawline.com now has available a continuing legal education (CLE) course that I served as faculty on regarding a case that dealt with an importation of “gray market goods.” Specifically, it had to do with the Supreme Court’s December 2010 affirmance of the case heard in the 9th Circuit Court of Appeals entitled, Omega S.A. v. Costco Wholesale Corp., 541 F.3d 962 (9th Cir. 2008). (For more information on gray market goods, see my Dec. 20, 2010 post)

To give a little background, Omega, a popular high end watch company, is the owner of a “Globe” watch design that is registered with the US Copyright Office. It also has its trademark registered with the US Patent and Trademark Office.

Omega had a production of watches manufactured overseas that bore the Omega trademark and the copyprighted Globe design.

Costco thereafter purchased the foreign manufactured Omega watches bearing the copyright and trademark, and imported them into the United States for sale in its US stores at a price of $1,299, which was significantly less than Omega's US retail sales price of $1,995.

Costco did so however, without the authorization of Omega, which according to Omega, was in violation of the Copyright Act’s prohibition on unauthorized importations.

In its defense, Costco raised what is known under Copyright law (and not Customs law) as the “First Sale Doctrine.” This doctrine places a limitation on the exclusive rights of a copyright owner (19 USC §109a) which in this case is Omega.

Ultimately, the 9th Circuit Court of Appeals position was that using this defense was permissible only where the disputed copies of a copyrighted work were either made or previously sold in the US with the authority of the copyright owner. That is, Costco could not use it as a defense in this instance.

The Supreme Court agreed.

For an in-depth discussion on some possible implications of this decision on imports, check out our program on lawline.com by clicking here.

Questions/comments? Email me at clark.deanna@gmail.com or post below.