Omega v. Costco: Copyright Misuse

In a surprising development, Omega v. Costco, a case that went to the Supreme Court last year, has ended in Costco’s favor on the ground that Omega engaged in copyright misuse. In its lawsuit,¬†Omega sought to prevent Costco from reselling Omega Seamaster watches that Costco had imported from abroad but that were not authorized by Omega for sale in the United States. The district court held that the first sale doctrine protected Costco. The U.S. Court of Appeals for the Ninth Circuit reversed that decision and the U.S. Supreme Court affirmed (by a divided court) the circuit court’s ruling. But that was not the end of the matter. For the watches themselves were not copyrightable. So in order to control importation (and gather evidence against Costco)¬†Omega engraved on the back of the Seamaster watches a tiny copyrighted design, known as the Omega Globe Design. The copyright infringement claim against Costco was based on the infringement of that design. On November 9, Judge Terry J. Hatter of the United States District Court for the Eastern District of California,held that Omega’s use of the copyright in the engraving to stop trade in the watches constituted copyright misuse. Judge Hatter explained: “Omega misused its copyright of the Omega Global Design by leveraging its limited monopoly in being able to control the importation of that design to control the importation of its Seamaster watches.” An appeal seems certain.

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