No Copyright First Sale Defense for Watches Made Overseas

In Omega S.A. v. Costco Wholesale Corp. (September 3, 2008), the Ninth Circuit held that the copyright "first sale doctrine" in 17 U.S.C. § 109(a) did not provide a defense to an infringement action where

Costco obtained watches bearing the copyrighted design from the “gray market” in
the following manner: Omega first sold the watches to authorized distributors overseas. Unidentified third parties eventually purchased the watches and sold them to ENE Limited, a New York company, which in turn sold them to Costco. Costco then sold the watches to consumers in California. Although Omega authorized the initial foreign sale of the watches, it did not authorize their importation into the United States or the sales made by Costco.

. . . In summary, our general rule that § 109(a) refers “only to copies legally made . . . in the United States,” id., is not clearly irreconcilable with Quality King, and, therefore, remains binding precedent. Under this rule, the first sale doctrine is unavailable as a defense to the claims under §§ 106(3) and 602(a) because there is no genuine dispute that Omega manufactured the watches bearing the Omega Globe Design in Switzerland. Id.; Fed. R. Civ. P. 56(c); see also Swatch S.A. v. New City, Inc., 454 F. Supp. 2d 1245, 1253-54 (S.D. Fla. 2006) (concluding that Quality King is consistent with the interpretation that “lawfully made under this title” means “legally made . . . in the United States”); 2 Goldstein on Copyright § 7.6.1, at 143-44 (concluding that Quality King “indicates an intention not to disturb lower court holdings that the first sale defense is unavailable to importers who acquire ownership of gray market goods made abroad”).