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Re: Jacobsen v Katzer, 535 F.3d 1373 overruled by the US Ninth Circuit

From: Alexander Terekhov
Subject: Re: Jacobsen v Katzer, 535 F.3d 1373 overruled by the US Ninth CircuitCourtof Appeals
Date: Tue, 21 Dec 2010 18:30:02 +0100

Hyman Rosen wrote:
> exactly that, a copy made as permitted by this law. Omega vs.
> Costco resulted in first sale not applying to imported items


"During the Costco oral arguments, the Court seemed skeptical of both
sides’ positions on whether the “first sale” statute9 (Section 109)
implicitly included a territoriality requirement, repeatedly asking the
lawyers to point out where in the text or legislative history support
could be found for their respective arguments. The Justices appeared to
agree that reading Section 109 to include a territoriality requirement
would effectively incentivize foreign outsourcing or manufacturing
outside the United States, and Congress certainly would not have enacted
Section 109 with such an intent – “what earthly sense would it make to
prefer goods that are manufactured abroad over those manufactured in the
U.S.” (J. Ginsburg).

On December 13, 2010 the Court issued a per curiam order affirming the
Ninth Circuit’s ruling against Costco. This order was issued because the
court split 4 to 4 on the question and so by rule the lower court
opinion was affirmed by an equally divided court. This division resulted
after Justice Kagan had recused herself because she had participated as
Solicitor General in submitting a brief to the Court urging it to not
take the case because the decision of the Ninth Circuit was correct. In
effect, the Supreme Court’s action left the Ninth Circuit’s ruling
against Costco undisturbed (i.e., the exhaustion doctrine is subject to
a territoriality requirement), but it provided no clarification or
further precedent to guide lower courts and interested parties. Thus,
the conflicting views about the territorial scope of the exhaustion
doctrine remain unsettled (at least outside of the Ninth Circuit)."

"Supreme Court does not answer copyright exhaustion question in Costco

Haynes and Boone LLP Thomas Kelton, Jeff Becker, Purvi J. Patel, Lisa
Garono and David A. Bell USA 

December 17 2010 

Earlier this week, the US Supreme Court issued a split decision and
failed to resolve whether copyrighted materials legally made abroad can
be imported into the U.S. and sold without the express permission of the
copyright owner. See Costco Wholesale Corp. v. Omega S.A., 562 U.S. __
(2010). In other words, it is still up to the nation’s circuit courts to
decide whether the first sale doctrine extinguishes the rights of a
copyright holder when the goods are made outside of the U.S.    

The case came to the Court from the 9th Circuit, which ruled that
copyrighted materials made abroad cannot be imported into the U.S. and
sold without the express permission of the copyright owner. See Omega
S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008). After the
split decision at the Supreme Court, the 9th Circuit’s decision remains
good law within the 9th Circuit’s jurisdiction, but no nationwide
precedent is set. Other circuit courts have yet to weigh in on the
issue. The 9th Circuit’s decision and the Supreme Court’s decision are
referred to collectively herein as the “Costco cases.” 

The Costco cases have important ramifications, not only within the 9th
Circuit. “Grey market” importers may find themselves subject to
successful infringement suits, especially when selling goods within the
9th Circuit. From the other vantage point, the Costco cases provide an
important avenue for copyright holders, such as brand-name
manufacturers, to keep grey market goods out of the country.
Furthermore, because the 9th Circuit includes the entire west coast, the
Costco cases deal a blow to much of the nation’s grey market activity.
Copyright holders and grey market importers can expect the same question
to come before other circuit courts in the coming years.

Interestingly, the Costco cases treat foreign-manufactured goods
preferentially in comparison to domestically-manufactured goods. In
other words, a lawful first sale does not extinguish a copyright
holder’s rights when the goods are made abroad; however, the same is not
true for goods produced domestically. Thus, copyright holders gain a
slight advantage by manufacturing goods abroad.


The Supreme Court addressed a similar issue in 1998. See Quality King
Distributors Inc., v. L'anza Research International Inc., 523 U.S. 135
(1998). In the Quality King decision, the goods in issue were made in
the U.S., exported abroad by the copyright holder, and then re-imported
into the U.S. by the defendant without the copyright holder’s
permission. The Supreme Court held that the first sale doctrine
extinguished the rights of the copyright holder. In Quality King, the
Court specifically refused to consider a fact pattern including
foreign-manufactured goods.

In the present case, Omega made and sold its watches in Switzerland
legally. A third party acquired the watches and legally sold them to
Costco, who imported them into the U.S. without the permission of Omega.
Omega had no contractual relationship with Costco providing protection
against grey market importation and sales and, thus, had to rely on
copyright law. Specifically, the watches in question had a small design
on their backs, garnering copyright protection and serving as Omega’s
ticket into court. The first sale defense to copyright infringement
arises from statute and applies to “a particular copy…lawfully made
under this title,” where title refers to the U.S. copyright laws. 17
U.S.C. §109(a). The 9th Circuit underpinned much of its decision by
cautiously avoiding applying U.S. law to foreign activities. In other
words, the 9th Circuit says that “made under this title” means “made in
the U.S.” Similar laws providing for trademark and patent exhaustion
remain undisturbed."


(GNG is a derecursive recursive derecursion which pwns GNU since it can 
be infinitely looped as GNGNGNGNG...NGNGNG... and can be said backwards 
too, whereas GNU cannot.)

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