By seeking input from the Solicitor General, the Supreme Court appears to be seriously considering granting review of a case raising the issue of whether the doctrine of copyright exhaustion applies to goods sold overseas by a United States. copyright holder and then imported to and sold in the U.S., Costco Wholesale Corp. v. Omega, S.A. Under the doctrine of first sale or exhaustion, once the copyright holder has sold an authorized copy of the protected work, the purchaser takes the copy free of the copyright holders rights and can transfer it without obligation to or subject to restrictions of the copyright holder. Omega sells its watches for a higher price in the U.S. than it does in other countries. Costco purchased Omega watches overseas and began selling them in its U.S. stores. The issue on appeal is whether the overseas sales exhausted the copyright. The Ninth Circuit Court of Appeals held that the doctrine did not apply.
In the related field of patent law, the Court of Appeals for the Federal Circuit has held that patent rights are only exhausted by a first sale in the U.S. Fuji Photo Film Co. v. ITC, 474 F.3d 1281 (Fed. Cir. 2007). However, the holding in Fuji Photo Film has been called into question by the Supreme Court’s 2008 Quanta opinion. The Supreme Court may well rely on patent cases and link the first sale doctrines of patent and copyright.
Hopefully the Supreme Court will take the case and hold that the first sale doctrine applies. The purpose of copyright law is to protect authors from freeloaders (e.g., unauthorized copying and counterfeits). There is no question that Omega is the source of the watches so they are not fakes, copies, or counterfeits. Therefore, Omega is asserting rights in excess of what the copyright statute recognizes.
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