Court’s Tie Vote Sustains Ruling Against Costco
By REUTERS
WASHINGTON (Reuters) — The Supreme Court said Monday that it deadlocked by a 4-4 vote and would not decide a copyright infringement case involving the discount warehouse chain, Costco Wholesale, over the resale of imported Swiss-made watches made by a Swatch Group unit.
In a case between the top warehouse club and the world’s largest watch maker, the deadlock means that the justices automatically affirmed a federal appeals court ruling that Swatch’s Omega unit retained the rights to watches it made and sold abroad that later were imported into this country.
The Supreme Court’s action was not a ruling on the merits of the dispute and it does not set a precedent, but it does have the result of resolving the case in Omega’s favor.
It had been one of the court’s more important business cases, with implications for the multibillion-dollar so-called “gray market,” in which brand name goods protected by trademark or copyright are imported via third parties into the United States.
Retailers from Costco to Amazon.com have faced legal problems over the resale of goods that brand holders say infringes their copyright.
Several business groups, retailers and companies, like the online auctioneer eBay, had supported Costco before the Supreme Court. The Obama administration backed Omega.
Costco obtained Omega’s Seamaster watches through a series of transactions. It sold each of them to consumers in California for $1,299, a third less than the suggested retail price.
Omega first sold the watches to authorized distributors overseas. Unidentified third parties bought them and sold them to a New York company, which in turn sold them to Costco.
Although Omega approved the initial foreign sale, it did not authorize the importation of the watches into the United States or the sales by Costco.
After Costco’s sale of 43 watches in 2004, Omega sued and claimed Costco’s actions amounted to copyright infringement.
A federal judge ruled for Costco, but the appeals court sided with Omega.
The Supreme Court deadlocked because Justice Elena Kagan did not participate in the case, presumably because she had been involved with it previously as solicitor general. She has recused herself from several cases, but this was the first one so far that ended with a tie vote.
In a case between the top warehouse club and the world’s largest watch maker, the deadlock means that the justices automatically affirmed a federal appeals court ruling that Swatch’s Omega unit retained the rights to watches it made and sold abroad that later were imported into this country.
The Supreme Court’s action was not a ruling on the merits of the dispute and it does not set a precedent, but it does have the result of resolving the case in Omega’s favor.
It had been one of the court’s more important business cases, with implications for the multibillion-dollar so-called “gray market,” in which brand name goods protected by trademark or copyright are imported via third parties into the United States.
Retailers from Costco to Amazon.com have faced legal problems over the resale of goods that brand holders say infringes their copyright.
Several business groups, retailers and companies, like the online auctioneer eBay, had supported Costco before the Supreme Court. The Obama administration backed Omega.
Costco obtained Omega’s Seamaster watches through a series of transactions. It sold each of them to consumers in California for $1,299, a third less than the suggested retail price.
Omega first sold the watches to authorized distributors overseas. Unidentified third parties bought them and sold them to a New York company, which in turn sold them to Costco.
Although Omega approved the initial foreign sale, it did not authorize the importation of the watches into the United States or the sales by Costco.
After Costco’s sale of 43 watches in 2004, Omega sued and claimed Costco’s actions amounted to copyright infringement.
A federal judge ruled for Costco, but the appeals court sided with Omega.
The Supreme Court deadlocked because Justice Elena Kagan did not participate in the case, presumably because she had been involved with it previously as solicitor general. She has recused herself from several cases, but this was the first one so far that ended with a tie vote.
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