{ "id": "R41422", "type": "CRS Report", "typeId": "REPORTS", "number": "R41422", "active": false, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 375506, "date": "2011-01-06", "retrieved": "2016-04-07T01:14:39.618526", "title": "Applicability of the Copyright Law\u2019s First Sale Doctrine to Imported Goods Manufactured Abroad: Costco Wholesale Corp. v. Omega S.A.", "summary": "Section 106(3) of the Copyright Act grants a copyright holder the exclusive right to distribute copies of a copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending. In addition, \u00a7 602(a) of the Copyright Act generally prohibits the importation into the United States, without the authority of the copyright holder, of copies of a work that have been acquired outside the United States; such importation is considered an infringement of the exclusive right to distribute copies of the work under \u00a7 106. However, the Copyright Act\u2019s \u201cfirst-sale\u201d doctrine, codified at \u00a7 109(a), provides a limitation to the copyright holder\u2019s distribution rights\u2014it entitles the owner of a particular copy of a copyrighted work that has been \u201clawfully made under\u201d title 17 of the U.S. Code (where the Copyright Act is codified) to sell or otherwise dispose of the possession of that copy, without the prior permission of the copyright holder. In other words, once a copyright holder agrees to sell particular copies of his work to others (constituting the \u201cfirst sale\u201d of such copies), the copyright holder may not thereafter further control subsequent transfers of ownership of those copies.\nAt issue in Costco Wholesale Corp. v. Omega S.A. was the scope of the first sale doctrine with respect to so-called \u201cgray-market\u201d goods\u2014products that have been manufactured and purchased abroad and thereafter imported into the United States for resale at often discounted prices to U.S. customers. The case involved the sale by Costco of authentic Omega watches made in Switzerland. Costco had purchased these watches (which bear a copyrighted design on their underside) from third parties that had purchased the watches from authorized Omega distributors located abroad. While Omega had permitted the initial foreign sale of its watches, it had not authorized their importation into the United States or Costco\u2019s domestic sale of the watches. Omega sued Costco for infringing its distribution and importation rights under \u00a7\u00a7 106(3) and 602(a) of the Copyright Act; Costco defended itself by arguing that the first sale doctrine, \u00a7 109(a), precluded Omega\u2019s infringement claims. In September 2008, the U.S. Court of Appeals for the Ninth Circuit reversed the district court\u2019s grant of summary judgment to Costco, holding that the first sale doctrine does not apply to imported goods that had been manufactured and first sold abroad. The appellate court reached this determination by asserting that copies of copyrighted works made and sold outside the United States are not considered \u201clawfully made\u201d within the meaning of \u00a7 109(a); thus, these copies are not subject to the first sale doctrine, and Costco is precluded from raising such defense to Omega\u2019s infringement claims. In reaction to this decision, some observers expressed concern that the Ninth Circuit\u2019s interpretation of the first sale doctrine creates incentives for outsourcing, as manufacturers would desire to move production abroad of goods containing copyrighted aspects (thus avoiding the first sale doctrine\u2019s effect and providing the manufacturer with greater control over distribution of the goods). \nOn December 13, 2010, in a one sentence per curiam decision, the U.S. Supreme Court affirmed the Ninth Circuit\u2019s judgment due to a 4-4 tie vote among the participating justices (Justice Elena Kagan had recused herself because of her involvement in the case as U.S. Solicitor General prior to becoming a member of the Court). The Court\u2019s action in Costco Wholesale Corp. upholds the Ninth Circuit\u2019s ruling but does not establish controlling precedent for other federal circuits on the question of whether the copyright law\u2019s first sale doctrine applies to goods manufactured abroad and then imported into the United States. Therefore, those federal circuits are free to issue opinions that agree or conflict with the Ninth Circuit\u2019s judgment on this matter, and the Supreme Court could revisit the legal question in a future case. Also, Congress could consider legislation to clarify the relationship between the Copyright Act\u2019s \u00a7 109(a) first sale provision and the \u00a7 602(a)(2) importation right.", "type": "CRS Report", "typeId": "REPORTS", "active": false, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R41422", "sha1": "3d5c8cc28da3cb387885f866e602d914687efcb1", "filename": "files/20110106_R41422_3d5c8cc28da3cb387885f866e602d914687efcb1.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R41422", "sha1": "1c81dd27f027b3fdb72df2a95bd8bd585cdf9638", "filename": "files/20110106_R41422_1c81dd27f027b3fdb72df2a95bd8bd585cdf9638.pdf", "images": null } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc813440/", "id": "R41422_2010Sep21", "date": "2010-09-21", "retrieved": "2016-03-19T13:57:26", "title": "Applicability of the Copyright Law\u2019s First Sale Doctrine to Imported Goods Manufactured Abroad: Costco Wholesale Corp. v. Omega S.A.", "summary": null, "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20100921_R41422_9d5c1b4bd861e8f0e3a9ac372637aa6dfff65c70.pdf" }, { "format": "HTML", "filename": "files/20100921_R41422_9d5c1b4bd861e8f0e3a9ac372637aa6dfff65c70.html" } ], "topics": [] } ], "topics": [] }