International Copyright and the First Sale Doctrine: Costco Can't Import Genuine Watches From Switzerland

According to the Omega watch company's website,

"When Daniel Craig reprises his role as James Bond in Quantum of Solace, he will be wearing an OMEGA Seamaster Planet Ocean 600m Co-Axial Chronometer with a black dial [ ...]. Bond fans and OMEGA enthusiasts will know that 007 has been wearing Seamasters featuring blue dials since 1995 so the black watch face on the Seamaster Planet Ocean in Quantum of Solace marks a departure for James Bond. "

The first sale doctrine is codified at 17 U.S.C. Section 109 (a) says that if you own a copy of a copyrighted work "lawfully made under this title", you can sell or "otherwise dispose of" it. Section 109(b) says that even if you own copies of phonorecords or software, you can't rent them.

The language seemed pretty clear. So when Costco bought genuine Swiss Omega watches through someone who purchased them from an authorized dealer in Switzerland, Omega thought it perfectly legal to sell them in the U.S. The U.S. district court judge agreed, awarding Costco hefty legal fees when Omega claimed that such importation of authentic, genuine, non-piratical watches that it owned.

Copyright owners often set up territories throughout the world and appoint distributors for various territories. When a purchaser from a high-cost territory buys the copyrighted work in a low-cost territory, this is known as "gray market" goods. Retailers save money by buying from the lower-cost territory.

In Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), the Ninth Circuit reversed the district court and found that Omega could use Section 106(3) and 602(a) of the Copyright Act to claim copyright infringement for unauthorized distribution.

For the first sale doctrine to apply, there must be an authorized first sale in the United States. For a copy to be "lawfully made under this title [17 U.S.C.]" - it means made in the U.S.

The result is that even if you buy genuine copyrighted works from a foreign representative of a copyright owner, you infringe copyright if you import and sell them in the U.S. without the copyright owner's permission.

Will James Bond get busted for pawning his Swiss-purchased Omega in the U.S.?