Omega S.A., v. Costco Wholesale Corporation
United States Courts of Appeals for the Ninth Circuit
September 03, 2008;
Nos. 07-55368 07-56206 D.C. No. CV-04-05443-TJH

When “First Sale” doctrine inapplicable as defense in infringement case

There is a recent infringement case that revisited the “first sale doctrine” of 17 U.S.C. Section 109(a) as a defense only where the disputed copies of a copyrighted work were either made or previously sold in the United States with the authority of the copyright owner.

The undisputed facts of the case were as follows.

Omega S.A. is the manufacturer of Omega watches in Switzerland which are sold globally through a network of authorized distributors and retailers. Found on the underside of these watches is a U.S. copyrighted “Omega Globe Design.”

Costco Wholesale Corporation, the defendant in this case, obtained watches bearing the copyrighted design from the “gray market” in the following manner:

• Omega sold the watches to authorized distributors overseas


• Unidentified third parties eventually purchased the watches and sold them to ENE Limited, a New York company


• ENE Limited in turn sold them to Costco

Although the initial foreign sale of the watches was authorized by Omega, its importation and sale made by Costco in the United States were not.

Thus, Omega filed a case against Costco alleging that the latter’s acquisition and sale of the watches constitute infringement under 17 U.S.C. Sections 106(3) and 602(2) and subsequently moved for a summary judgment. Costco argued that under the first sale doctrine, Omega’s initial foreign sale of the watches precludes claims of infringing distribution and importation in connection with the subsequent unauthorized sales. Costco also moved for a summary judgment by way of a counter-motion.

The district court ruled in favor of Costco. Omega appeals, hence, this case.

This time, the US Court of Appeals agreed with Omega’s contention that the Copyright Act provides no defense to the infringement claims because although the Omega Globe Design was copyrighted in the US, the watches bearing the design were manufactured and first sold overseas.

The Court, in deciding the issue of first sale doctrine, upheld the general rule that the law can provide a defense against infringement claims only insofar as the same involve domestically made copies of a US copyrighted works. Said the Court, “the statute would not apply because Omega made copies of the Omega Globe Design in Switzerland and Costco sold the copies without Omega’s authority in the United States.”

In sum, the Court held that Costco, as a defendant in a copyright infringement action, may claim “first sale doctrine” as a defense only where disputed copies of a copyrighted work were either made or previously sold in the United States with authority of the copyright owner. The doctrine was unavailable as defense to Omega’s claims for infringing distribution and importation where there was no genuine dispute that Omega made watches in foreign country and Costco sold them in the US without authority from the former after they were acquired in gray market.

For the foregoing reason, the US Court of Appeals reversed and remanded the case to the district court.