Certiorari granted in Costco v. Omega
Normally, when you die, your heirs can receive your books, magazines, iPods, laptops, CDs, DVDs, photographs, sketches, automobiles, home appliances, power tools, Omega watches, shampoo bottles, paper, canvas, and any other articles in which a copyrighted work as been lawfully reproduced. Several courts, however, led by an aberration in the Ninth Circuit precedent and a misinterpretation of Supreme Court dicta have concluded that none of those things can pass to your heirs unless they were “made in the U.S.A.”
As a result of this misguided “law gone wild,” two courts have held that it is OK for textbook publishers to price-gouge U.S. students by preventing price competition from copies of the same books that they make outside of the U.S., courts have held that software publishers can extend their control over redistribution of legal copies of their computer programs (and, by implication, control whether you can even sell your laptop or let a friend borrow your car or power tool) if the computer program was reproduced onto the disc, laptop, car or power tool while it was physically outside of the United States. And, in California, the Ninth Circuit said it was just fine and dandy for Omega to sue Costco for copyright infringement for selling Omega watches – perfectly legal Omega watches that Omega made and sold – just because they had a little copyrighted logo on them and were made outside of the United States.
Section 202 of the Copyright Act makes clear that the rights in the “copyright” and the rights in the “copy” of a copyrighted work are two entirely different things. Section 106 makes clear that the right to sell copies is limited (made “subject to”) section 109 of the Copyright Act, and Section 109(a) states that if you own a “lawfully made” copy of a copyrighted work, you can sell it, lend it, give it away or throw it in the trash without the consent of the copyright holder. So, why did the Supreme Court even need to bother? Because this 150-year-old right was being re-interpreted by nefarious copyright owners to circumvent the restrictions copyright law placed on their rights.
The old common law did not care where the copies were made. The old statutory law (since 1909) was not contingent on where the copies were made. But, in 1976, to clarify that the right (called the first sale doctrine) to re-distribute copies that the copyright owner no longer owned did not apply to copies that were stolen or belonged to someone else (the old law simply gave the right to redistribute to anyone in possession), Congress limited the principle to copies “lawfully made under this title,” and “this title” referred to the Copyright Act.
Common sense suggests that “lawfully made under this title” simply means “non-infringing” under U.S. law, but leave it to creative lawyering to argue that since the U.S. Copyright Act does not apply abroad, nothing made abroad can ever be “lawfully made under this title.”
On its face, that position is rather silly, since the Copyright Act itself grants the copyright owner the exclusive right to reproduce the work into copies – or to authorize others to do so – and does not restrict that right to making copies in the U.S. Indeed, I can’t imagine any copyright owner arguing that their copyright does not give it the exclusive right to authorize someone to make a copy outside of the United States, because that would mean that anyone – anyone at all – who is in the United States could authorize anyone – anyone at all – to make copies outside of the United States, without infringing the copyright. That would, in effect, allow any U.S.-based enterprise to set up a global piracy operation, facilitating the reproduction of major motion pictures all over the world before they have opened in U.S. theaters, so long as the copies were being made abroad.
A lot of people have lost their businesses, paid settlements, or gone bankrupt because of copyright owner abuses based on this misguided theory. Having granted certiorari, the Supreme Court has the opportunity to restore U.S. law to its 150-year-old history that says, quite simply, that if the copy is not infringing, the copyright owner’s right to control distribution ends when it no longer owns the copy. They can’t have their cake and eat it too.
Costco Wholesale Corp. v. Omega S.A., No. 08-1423.