First Sale Doctrine: Omega vs. Costco

The  Omega vs. Costco case was one in which luxury watchmaker Omega filed a copyright lawsuit against retail giant Costco over so-called “gray market goods.

Omega would sell the watches to authorized distributors, from there third parties would buy the watches and sell them to a New York company that would then sell the same watches to Costco. Omega claimed it didn’t authorize the watches for sale in the United States and sued for copyright infringement under 17 U.S.C. §§ 106(3) and 602(a).

However, Costco maintained that the first-sale doctrine precluded any infringement claims against them.

At first, the Ninth Circuit ruled that the first-sale doctrine, which would relenquish Omega’s copyright control once it sold the watches, didn’t apply to goods that were purchased overseas.

However, a district judge later ruled in Costco’s favor saying the first-sale doctrine didn’t apply and Omega was misusing the copyright law to hike prices in the United States.

The Seamaster watch was routinely sold for $1,599 at authorized US retailers, but Costco, which had purchased them at a discount, was selling them for less than $1,300. Costco was awarded nearly $400,000 in attorneys’ fees.

Author: Steve McKinnon

Steve is an information technology expert specializing in the area of digital rights management.