In what is perhaps a fitting end to the only copyright case before the Supreme Court during this term, the Court sitting without Justice Kagen issued its first split decision of the term – leaving the issue of “gray-market” goods in a gray area.
- ‘Gray-market’ goods, or ‘parallel imports,’ are genuine products possessing a brand name protected by a trademark or copyright. They are typically manufactured abroad, and purchased and imported into the United States by third parties, thereby bypassing the authorized U.S. distribution channels.” Parfums Givenchy, Inc. v. Drug Emporium, Inc., 38 F.3d 477
The case centered on Costco’s sale of imported watches manufactured in other countries. The watches manufacturer alleged that the unauthorized sale of the watches constituted a violation of their rights to control importation under 17 USC 602(a). Costco’s defense rested on the “first sale doctrine” The case centered on Costco’s sale of imported watches manufactured in other countries. The watches manufacturer alleged that the unauthorized sale of the watches constituted a violation of their rights to control importation under 17 USC 602(a). Costco’s defense rested on the “first sale doctrine” 17 USC 109(a)which holds that while a copyright holder may control the first sale of their copyright protected work, the subsequent sale of the item cannot be controlled. Omega, however, argued that the first sale doctrine only applies to the goods manufactured in the United States and that since the watches were made outside the country, their subsequent purchase by Costco from a company that did not have authorization to import them to the United States does not provide Costco with a defense of copyright infringement based on the first sale doctrine.
As the Court was split, the lower courts opinion holding that the first sale doctrine does not apply to foreign manufactured goods remains in place and is considered the controlling law for the Ninth Circuit.