Copyright Distribution and Importation Rights

The Ninth Circuit Court of Appeals recently took up the question of whether the purchaser of a copyrighted work can import the item into the United States and sell the good without obtaining permission from the copyright owner.

Omega S.A. v. Costco Wholesale Corp. involved two huge commercial companies: Costco, a discount warehouse, and Omega, a global manufacturer of luxury watches. Costco purchased 117 Omega Seamaster watches in a rather unusual way. First, Omega sold the watches to an authorized foreign distributor who then sold the watches to ENE Limited, a New York company. Costco purchased the watches from ENE Limited and ultimately sold the watches to Costco California members. Omega authorized the initial sale to the foreign distributor but did not approve the watches’ importation into the United States and their subsequent sale to Costco members.

Omega sued Costco for copyright infringement because Costco imported the copyrighted work without Omega’s permission. The Ninth Circuit found that Omega could not bring an infringement claim against Costco. In reaching its decision, the Ninth Circuit looked to a recent Supreme Court case, Kirtsaeng v. John Wiley & Sons, Inc.

In Kirtsaeng, a textbook publisher filed a copyright infringement action against a student from Thailand attending school in America. The textbook publisher manufactured and sold two versions of the same book: an American version printed and sold in the United States and a foreign version manufactured and sold abroad. The student asked his family and friends in Thailand to buy copies of the English version of foreign textbooks, where they were sold for low prices, and mail them to him in the United States. Then, the student would sell them, reimburse his family, and keep the profit. The Supreme Court held that copyright distribution and importation rights expire after the first sale, regardless of where the item was manufactured or first sold.

As such, the Ninth Circuit concluded that Omega’s right to control importation and distribution of its copyright expired after the authorized first sale, and Costco’s subsequent sale of the watches did not constitute copyright infringement.

Omega and Kirtsaeng conclusively reaffirmed that copyright holders cannot use their rights to fix resale prices in subsequent markets. While a copyright holder may find it more difficult to charge different prices for the same item in different geographic markets, no basic principle of copyright law exists that suggests that a copyright owner is entitled to this right. Thus, the copyright owner should ensure their buyers are trustworthy and will not resell the item for distribution in a market the copyright owner does not wish to enter.

If you have any concern regarding Omega’s impact on your copyrighted work, e-mail or call one of the Intellectual Property attorneys at Conway, Olejniczak & Jerry.

Written By:
Attorney Tori L. Kluess