Omega S.A. v. Costco Wholesale Corporation
776 F.3d 692
| 9th Cir. | 2015Background
- Omega, a Swiss luxury watchmaker, engraved a small copyrighted "Globe Design" on the undersides of some Seamaster watches and registered the design in 2003.
- Costco purchased 117 genuine Omega Seamaster watches on the gray market (via intermediaries) and sold 43 in the U.S.; Omega never authorized Costco as a U.S. retailer.
- Omega sued Costco (2004) for copyright infringement based on unauthorized importation and distribution (17 U.S.C. §§106, 602).
- Earlier appeals produced a Ninth Circuit decision rejecting extraterritorial application of the first-sale doctrine (541 F.3d 982) and an equally divided Supreme Court affirmance.
- On remand the district court granted summary judgment for Costco on the equitable defense of copyright misuse and awarded attorney’s fees; the Ninth Circuit panel affirmed, relying on Kirtsaeng and upholding the fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Costco’s sale of foreign-made, lawfully made copies infringed Omega’s distribution/importation rights (first-sale doctrine) | Omega: importing/selling the watches into U.S. without Omega’s authorization violated its §602 distribution/importation rights | Costco: Kirtsaeng applies — first sale doctrine exhausts distribution/importation rights even for copies made abroad | Kirtsaeng applies; first-sale doctrine bars Omega’s infringement claim; no infringement |
| Whether Omega misused its copyright by engraving the Globe to control gray-market imports (copyright misuse) | Omega: valid copyright in Globe allows enforcement against unauthorized distribution | Costco: Omega used copyright to extend monopoly to uncopyrightable watches and suppress intrabrand competition | District court’s misuse finding stands; leveraging Globe to control watch market constituted copyright misuse |
| Whether attorney’s fees should be awarded to Costco | Omega: (implicitly) fees unwarranted | Costco: equitable factors support fees because Omega’s suit furthered anticompetitive purpose and was objectively unreasonable | Fee award not an abuse of discretion; fees affirmed |
| Whether the watches (or their undersides) are proper subjects of copyright protection | Omega: Globe design registration is valid and enforceable as a copyrighted work | Costco: watches are useful articles; Globe’s use to police distribution shows impermissible leveraging | Court resolved case on first-sale and misuse; copyright validity of Globe not disputed, but misuse prevents enforcement |
Key Cases Cited
- Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008) (prior Ninth Circuit decision in this litigation)
- Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (U.S. 2013) (held first-sale doctrine applies to copies lawfully made abroad)
- Practice Mgmt. Info. Corp. v. Am. Med. Ass'n, 121 F.3d 516 (9th Cir. 1997) (adopted copyright misuse as an equitable defense)
- Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) (copyright misuse forbids using copyright to secure monopoly beyond grant)
- Apple Inc. v. Psystar Corp., 658 F.3d 1150 (9th Cir. 2011) (discussion of misuse and equitable relief in copyright context)
- Mazer v. Stein, 347 U.S. 201 (U.S. 1954) (copyrightability of artistic elements incorporated in useful articles)