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Supreme Court Upholds Ninth Circuit Ruling Limiting First-Sale Copyright Doctrine

By Stephanie Robinson

Omega sued Costco for copyright infringement, alleging Costco purchased heavily discounted watches from unauthorized resellers in Europe. Costco defended against the copyright claims by invoking the First Sale Doctrine, which allows a reseller to sell a copyrighted work without the original copyright holder?s permission. Omega lost in the trial court, but won a reversal before the Ninth Circuit Court of Appeals, which ruled the First Sale Doctrine did not apply to copies of a work produced overseas. In a rare, evenly split 4-4 decision, from which Justice Elena Kagan recused herself, the U.S. Supreme Court affirmed the Ninth Circuit?s ruling. The decision has the same effect as if the Supreme Court never agreed to hear the appeal from the Ninth Circuit?s decision, and it means that some resellers like Costco may be liable for copyright infringement for selling imported, copyrighted content without authorization from the copyright owner. (Interestingly, Omega began stamping a small copyrighted design on the back of its watches in 2003 for the specific purpose of allowing it to bring copyright suits in U.S. courts.) This case represented an opportunity for the Supreme Court to interpret the range of the First Sale Doctrine, and it could have impacted copyright infringement lawsuits significantly if it had become binding. However, because the ruling was made by a split decision, it does not necessarily affect cases outside the Ninth Circuit. It also remains to be seen if subsequent lawsuits ? especially those not presenting a conflict-of-interest problem for any of the justices ? will reach the Supreme Court and result in an authoritative ruling on the First Sale Doctrine. In the meantime, resellers of copyrighted content should work closely with counsel to explore the extent to which the Ninth Circuit?s ruling may apply to their activities.

Full post as published by Business and Technology Law on December 27, 2010 (boomark / email).