In a 4-4 split decision, the United States Supreme Court has upheld a Ninth Circuit Court ruling that states that the first-sale doctrine does not apply to goods purchased overseas.
The Supreme Court ruling was related to a Costco case in which the company stood accused of copyright infringement after the store was identified as selling foreign-purchased Omega watches without the Swiss watchmaker's permission.
Specifically, Costco was selling Omega-branded products purchased from lower-cost European retailers rather than purchasing the same watches from US sellers. The company was able to sell a $2,000 watch for about $1,300 to Costco members after purchasing the watches from cheaper foreign sources.
A 4-4 decision was reached in the Costco Wholesale Corp. v. Omega S.A. case after Justice Elena Kagan recused herself from the case, legal experts noted.
Omega was angered by Costco's actions and filed a copyright infringement suit against the company. The Ninth Circuit courts ruled in Omega's favor, stating that the first-sale doctrine can only be used for products purchased in the US.
In its simplest form, the first-sale doctrine states that if a music CD or movie is purchased legally, it can be re-sold again and the copyright holder doesn't need to approve (or be informed). The next owner can also re-sell the material without alerting the copyright holder, which opens the door for used goods markets, such as CDs, video games, DVDs, and books.
The entertainment industry has been unsure how to deal with re-sold products, and video game resales also have come under fire as of late.
Due to the split Supreme Court ruling, the lower court's decision will be upheld, with no nationwide precedent set because in legal terms it is now as if the high court did not even rule on the case. Legal experts say that a similar case will now have to make it's way to the Supreme Court for a nationwide precedent to be set (assuming there is no split decision on the next ruling).
The first-sale doctrine has a sweeping effect on products ranging from consumer goods to music CDs and other products that currently involve a legal gray area.
