Omega S.A. v. Costco Wholesale Corp.

The first sale doctrine bars a copyright infringement claim because copyright distribution and importation rights expire after an authorized sale within a foreign jurisdiction.

Omega S.A. (“Omega”) is a Swiss manufacturer of luxury watches, one of which is a high-end model, the Seamaster, that carries an engraving of the Omega Globe Design (“Omega Globe”). Omega acquired a copyright to the Omega Globe. In 2003, discussion took place between Costco Wholesale Corp. ("Costco") and Omega regarding Costco being a watch distributor, but an agreement never took place and Costco did not gain permission to become an authorized dealer. In 2004, Costco bought a number of Seamaster watches with the copyrighted Omega globe on the “gray market” and resold those watches to its members in California. Omega alleges that Costco infringed on their copyright because while it authorized the sale of its goods to foreign distributors, it did not consent to Costco’s purchase from those distributors for the purpose of reselling in the United States. The district court ruled in favor of Costco based on the first sale doctrine. The Ninth Circuit initially reversed, and after an appeal to the Supreme Court and a remand, the district court again granted summary judgment in favor of Costco and awarded Costco attorney’s fees. On appeal, the panel held that pursuant to Kirtsaeng v. John Wiley & Sons, Inc., copyright and importation rights lapse notwithstanding the place where such item was manufactured or sold. The panel determined that because Omega conceded the sale of its products within a foreign jurisdiction, its ability to control distribution expired. Lastly, the panel held that the imposition of attorney fees furthers the Copyright Act’s purpose because such control is not condoned nor protected. AFFIRMED.