Costco v. Omega Conclusion Was Not Very Satisfactory

Costco v. Omega turned out to be decidedly ho-hum. The Supreme Court accepted the Ninth Circuit decision in favor of Omega in the appeal of Costco v. Omega, by default (4-4 decision, with Associate Justice Kagan recusing herself)) allowing the first sale doctrine to be unavailable to Costco as a defense to Omega’s copyright infringement claims. All that we had thought would come from this decision didn’t materialize.

As we briefly discussed on November 16, Omega watches with the copyrighted design were made in Switzerland, subsequently sold to dealers in Latin America, and then sold to distributors who sold them to Costco for a lesser COGS, enabling COSTCO to sell them at a price lower than Omega’s direct U.S. dealers. Omega claimed that was a copyright violation. Costco claimed that it should be able to sell the less expensive watches at a lesser-than-direct-dealer price under the first-sale doctrine. The deciding fact in favor of Omega was that the watches were not manufactured in the U.S.