Ninth Circuit (Mostly) Skirts the Issue of Copyright Misuse in Most Recent Omega v. Costco Decision

quarterSometimes a cigar is just a cigar, as the saying goes. However, things are not always as they appear, and sometimes events unfold in ways you would not anticipate. Such is the case with the Ninth Circuit decision in the matter of Omega v. Costco. The case concerns Omega’s allegations that Costco was importing watches bearing the Omega symbol, thus infringing the copyright in that design. Despite the fact that the parties on appeal briefed only one hotly contested legal issue – copyright misuse – the Ninth Circuit’s majority opinion contains no holding regarding this issue. The concurrence, however, takes the ball and runs with it, providing potential ammunition for future litigations to argue that the doctrine of copyright misuse should apply in these circumstances.

The Winding Road to the Ninth Circuit’s Ultimate Decision

As we previously discussed here, in its 2013 opinion in Kirtsaeng v. John Wiley & Sons, the Supreme Court held that the copyright first sale doctrine attaches under U.S. law when authorized, copyrighted goods are manufactured and first sold abroad. This means that copyright owners cannot control downstream sales of goods sold abroad and imported by a third party into the United States. Because a first sale has taken place, third parties are free to import and resell the goods without consent of the copyright owner.

But long before the Kirtsaeng decision, the Ninth Circuit came to the opposite conclusion in 2008, in its first opinion in Omega v. Costco. Having determined that foreign sales do not invoke the first sale doctrine, the Ninth Circuit upheld Omega’s right to sue Costco for copyright infringement.

Costco, unable to rely on the first sale doctrine, turned to the doctrine of copyright misuse. At summary judgment, Costco claimed that Omega’s use of the copyrighted symbol on the watches as a means to control the sale of watches themselves constituted copyright misuse. The District Court agreed that Omega had misused its copyright and, without much discussion of the prevailing law, granted Costco’s motion for summary judgment. Omega once again turned to the Ninth Circuit, filing another appeal in 2011 on the issue of copyright misuse. The Ninth Circuit issued its second Omega v. Costco decision on January 20, 2015.

Copyright Misuse Not Relevant to Ninth Circuit’s Majority Decision

The Ninth Circuit’s majority opinion on Omega’s copyright misuse appeal, surprisingly, did not address the issue of copyright misuse. Instead, armed with the Supreme Court’s recent Kirtsaeng decision, the Ninth Circuit revisited its effectively overruled earlier opinion on the first sale doctrine. The majority held that Omega, having first sold its watches abroad, never had a copyright claim against Costco in the first place. On this basis alone, the Ninth Circuit upheld the lower court’s summary judgment ruling in favor of Costco, without reference or regard to copyright misuse.

Concurring Opinion Upholds Finding of Misuse

The majority’s opinion may have been disappointing to many copyright owners, who had been awaiting the Ninth Circuit decision with more than a little interest. If affixing a copyrighted symbol to a consumer good like a watch, for the purposes of controlling sales and reproductions of the watch, is viewed as copyright misuse, it could have broad implications for any industry that sells consumer items marked with copyrighted material.

But the concurring opinion did address this issue and found that Omega had misused its copyright. Circuit Judge Wardlaw stated quite clearly that copyright protects Omega’s symbol, not Omega’s watches, and that “Omega’s attempt to expand the scope of its statutory monopoly by misusing its copyright . . . upset this balance.”

This copyright misuse issue is sure to pop up again, doubtless with citation to Judge Wardlaw’s concurrence. However, the resolution of this issue will likely come in another case, because it appears as though Costco and Omega’s dispute has reached its conclusion.

Leave a Reply

Your email address will not be published. Required fields are marked *