WASHINGTON, April 19 (UPI) -- The U.S. Supreme Court said Monday it would hear argument in a case involving Costco and its "gray market" acquisition and sale of Swiss-made Omega watches.
The justices accepted the case in a one-line order without comment, but likely will hear argument next fall.
A federal appeals court in San Francisco said the facts in the Los Angeles case were simple: Omega makes the watches in Switzerland and sells them all over the world through a network of authorized distributors and retailers. Engraved on the underside of the watches is a U.S.-copyrighted "Omega Globe Design."
But the Costco Wholesale Corp. obtained the watches with the copyrighted design from the "gray market," the appeals court said in an opinion ruling against Costco.
Omega sold its watches to authorized distributors overseas; unidentified third parties bought the watches and resold them to a New Your company, ENE Lmt., which in turn sold them to Costco. The wholesaler then sold them to California consumers.
Omega did not authorize the import of the watches into the United States or their sale by Costco, the appeals court said.
Omega filed suit, but Costco argued that under the "first sale doctrine," Omega's initial foreign sale of the watches precludes claims of infringing distribution and importation in connection with the subsequent, unauthorized sales.
A federal judge ruled "without explanation" in favor of Costco.
But the appeals court ruled: "Because there is no genuine dispute that Omega made the copies of the Omega Globe Design in Switzerland, and that Costco sold them in the United States without Omega's authority, the first sale doctrine is unavailable as a defense to Omega's claims."
