No. 13
July 2010
International Association for the Protection of Intellectual Property
AIPPI General Secretariat |Toedistrasse 16 | CH-8027 Zurich
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Does Your Family Heirloom Infringe?
Patrick J. Coyne, Finnegan LLP

You buy a genuine Omega watch at Costco. You treasure it and you don't even notice the little design on the back:
Does Your Family Heirloom Infringe
Yet, when you give this family heirloom to your son, or lend it to a friend for the evening, are you a copyright infringer?

Last year, in Omega, S.A. v Costco Wholesale Corp ., (9th Cir. 07-55368), the U.S. Court of Appeals for the Ninth Circuit held that Omega can continue to control the distribution of its watches even after they are sold. It can prohibit their importation and subsequent sale in the United States. Generally, once a manufacturer sells a product bearing a copyrighted image, the “first sale doctrine,” 15 U.S.C. § 109(a), protects the purchaser: “Notwithstanding the provisions of section 106(3) (the exclusive right to distribute a copyrighted work by sale, transfer, rental, lease, or lending), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authorization of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” 17 U.S.C. §109 (emphasis added). The Ninth Circuit, however, held that “lawfully made under this title” means made or sold by the copyright owner in the United States. Since the watches were made and sold by Omega overseas, the first sale doctrine is not a defense.

The Supreme Court considered the first sale defense in Quality King Distributors, Inc. v L'Anza Research Int'l, Inc., 523 U.S. 135 (1998) and held that it applies to imported copies (17 U.S.C. §602(a)). The copies in Quality King, however, were “round-trip” imports, made here, exported, and re-imported. The Supreme Court left open the issue whether “one-way” imports, made overseas, would be subject to the first sale defense. The first sale doctrine is based on the Supreme Court's decision in Bobbs-Merrill v Straus, 210 U.S. 339 (1908). Congress codified the first sale doctrine in the 1909 Copyright Act. The 1909 and 1947 Copyright Acts would have protected a purchaser under the first sale doctrine. When Congress changed the wording of the first sale doctrine in the 1976 Act, adding the phrase “lawfully made under this title,” was it requiring that the work be physically made in the United States or simply that it is a lawful (not a pirated) copy, regardless where it is made?

The Ninth Circuit's decision that it required the work to be made here is suspect for three reasons. First, for 93 years Congress maintained a “manufacturing” requirement that certain types of works be made in the United States. Congress was asked but declined to extend this requirement to all works subject to the first sale defense.

The Ninth Circuit declined to apply the first sale doctrine in Omega, reasoning that it would give U.S. copyright law “extraterritorial effect” by relying on events that occurred overseas. Yet, the manufacturing clause itself targets events occurring overseas-manufacturing. Thus, the Ninth Circuit's reasoning appears highly suspect.

Second, the first sale doctrine was expressly endorsed by Congress. There is no legislative history that would support that Congress was trying to limit the first sale doctrine, in any way. Instead, the legislative history shows that Congress unequivocally supported the first sale doctrine.

Section 109(a) does not depend on where the work is made. The copies made by Omega are not unlawful, either under either U.S. law or foreign countries'. Nor does giving effect to Section 109(a) require giving US law extraterritorial effect. Rather, it simply acknowledges that the legitimate copies are not unlawful under the Copyright Act, or otherwise.

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