Uncertainty Prevails for U.S. Distributors and Retailers in Wake of Supreme Court’s Costco Decision

Full Court including Kagan is likely to revisit the issue
12.22.10
By Stephen C. Ellis and William L. Weigand
Can a U.S. retailer import copyrighted goods it purchased overseas at prices significantly below those in the U.S., and then sell them at retail prices significantly below those prevailing in the U.S. for the same product models? The answer is a clear “maybe.”

On Dec. 13, 2010, the U.S. Supreme Court issued its first major business decision of the current term, a one-sentence, 4-4 opinion affirming the decision of the 9th Circuit Court of Appeals in Costco Wholesale Corporation v. Omega, S.A. that a U.S. retailer could not import copyrighted goods because both their manufacture and their first purchase had occurred overseas.

The “first sale doctrine”

At issue—and still unresolved because of the Court’s 4-4 deadlock—was the question of whether the so-called “first sale doctrine” embodied in 17 U.S.C. §109(a) applies when the first purchase of foreign-manufactured copyrighted goods is overseas prior to their importation into the U.S. The first sale doctrine holds that once a copyrighted product has been sold to a first purchaser, the first and subsequent purchasers are entitled to sell or otherwise dispose of the product without the permission of the copyright holder.

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About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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