Review of Intellectual Property Law Blog

Omega: A Preview for the Rest of the Oct. 2010?

By Michael Eisnach on Wednesday, January 5th, 2011
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On December 13, 2010, an equally divided court issued a per curiam decision affirming the Ninth Circuit’s decision in Omega v. Costco. The Ninth Circuit held that goods manufactured abroad are not covered by the first sale doctrine under 17 U.S.C. § 109. While the Court occasionally issues per curiam decisions, it does not often do so without opinion or because it cannot produce a majority opinion.

The question at issue in the case was whether foreign made goods could be “lawfully made under this title” in § 109 of the Copyright Act so as to trigger the application of the first sale doctrine.

To recap the facts of the case, Omega brought a copyright infringement suit against Costco when Costco sold a line of Omega watches for hundreds of dollars less than Omega’s U.S. retail price. Costco obtained the watches, which were manufactured in Switzerland, through a third party. The third party legally purchased the watches abroad and then imported them into the U.S. and subsequently sold them to Costco. Omega claimed it could control the importation of the watches under § 602 of the Copyright Act because of the quarter inch globe design on the back of the watch, which it had registered with the Copyright Office.

As a result of the Court being unable to produce a majority opinion, its decision affirmed that of the Ninth Circuit. The Ninth Circuit held that foreign made goods were not subject to the first sale doctrine under § 109 and that § 602 was the controlling provision of the Copyright Act for foreign made goods. This decision broadens the application of § 602 and may ultimately grant foreign manufacturers greater rights than domestic copyright owners. The impact of this result? Foreign manufacturers may be able to control their goods further down the stream of commerce than domestic producers can under § 109.

Copyright owners are unlikely to challenge the outcome of this case, which leaves re-sellers, like Costco, with few options. First, re-sellers could file declaratory judgment actions to be appealed to the Supreme Court, but it is unlikely that the Court will grant cert in a similar case for at least a few years. Alternatively, Congress could clarify how § 602 interacts with § 109 or could rewrite one or both sections. This alternative seems to make the most sense as the phrase “lawfully made under this title” is Congressional language. This option would also provide more immediate relief.

On a side note, the Supreme Court rarely issues per curiam decisions. Even more rare is a per curiam decision without an opinion if there is not a jurisdictional defect. In fact, in the last ten years, only 100 per curiam decisions have been issued. Of those decisions, only two were intellectual property cases. See Laboratory Corp. of Amer. Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124 (2006); Nike, Inc. v. Kasky, 539 U.S. 654 (2003). This is rather exceptional, as many recent intellectual property cases have had 7-2 or 9-0 decisions.

Outside of the intellectual property arena, Omega v. Costco was not considered a controversial case. The oral arguments before the Supreme Court, however, demonstrated that the Court was very divided. Justice Kagan was recused because of her involvement in the case as Solicitor General. In fact, because of her previous post, Justice Kagan has recused herself in more than half of the Court’s cases this term. As result, Chief Justice Roberts will need to bring his Court together if he expects the Court to function this term. Perhaps most troubling about the Omega decision is that the Court was unable to produce a majority opinion in a case that was not considered to be controversial. If the Court cannot produce an opinion here, will it be able produce a majority opinion in the most controversial cases of the term, such as the protests at military funerals case? If not, the Court may lose respect or credibility with the general public.

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