Libraries Worried About Potential Supreme Court Ruling Concerning Legality Of Selling Imported Omega Watches

from the greymarket-libraries dept

Mon, Jul 12th 2010 2:53am — Mike Masnick

Earlier this year we discussed an important upcoming Supreme Court case between Omega (the watch company) and Costco over whether or not it can be considered copyright infringement to resell legally purchased watches that were bought overseas. The concept sounds crazy, right? What does reselling foreign watches have to do with copyright? Well, the details are a bit complicated, but basically lots of companies hate the concept of first sale rights (the ability to resell something you've legally bought) and have tried all sorts of tricks to try and block those rights. In this case, Omega inscribed a tiny globe on the back of its watches (where no one will ever see it) solely for the purpose of copyrighting that design and using it to try to stop resale. Of course, once again, the first sale doctrine does allow for resale, but here's where Omega got sneaky. It pointed out that the first sale doctrine technically only applies to copies that are "lawfully made under this title." Omega's argument is that because the copyrighted globe design was made outside of the US, the copy was not made under US law... and thus (voila!) there are no first sale rights on any copyrighted product made outside of the US.

Amazingly, the court agreed. Even more amazing? The Obama administration argues that the court decided correctly, in part because the recent ProIP Act (which gave us our friendly IP Czar) ever so slightly changed the rules on importing and exporting copyrighted goods... removing first sale rights from foreign goods.

The implications, if this is true, are immensely problematic. A coalition of libraries has now filed a detailed amicus brief in the case (pdf) noting what a massive problem it would be if the lower court ruling is upheld:

Over 200 million books in U.S. libraries have foreign publishers. Moreover, many books published by U.S. publishers were actually manufactured by printers in other countries. Although some books indicate on their copyright page where they were printed, many do not. Libraries, therefore, have no way of knowing whether these books comply with the Ninth Circuit's rule. Without the certainty of the protection of the first sale doctrine, librarians will have to confront the difficult policy decision of whether to continue to circulate these materials in their collections in the face of potential copyright infringement liability. For future acquisitions, libraries would be able to adjust to the Ninth Circuit's narrowing of Section 109(a) only by bearing the significant cost of obtaining a "lending license" whenever they acquired a copy that was not clearly manufactured in the United States.

How ridiculous is it that copyright law -- which was originally put in place "for the encouragement of learning," might now make it much more difficult to encourage learning through libraries.

Now, some will obviously state that this is a problem for Congress, not the courts, to fix. And, to some extent that is true. But the Supreme Court is also supposed to make sure that the laws that Congress has put in place are interpreted in line with the Constitution. In this case, copyright law is being so abused as to clearly have nothing to do with its intended purpose, and thus the court can and should note that this interpretation of copyright law is clearly outside the bounds of what Congress could have possibly meant.

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Filed Under: copyright, first sale, foreign works, libraries, supreme court
Companies: costco, omega

62 Comments

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BearGriz72 (profile), 12 Jul 2010 @ 2:59am

/headdesk
I knew that that ruling was Fu�ked Up, I just had no idea how bad...
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Anonymous Coward, 12 Jul 2010 @ 3:41am

There goes the rest of US domestic production
Why make/publish anything in the US, when you can completely control the second hand market by having it made overseas?

Maybe people will get riled up when other companies start taking advantage of this and people find that they can no longer resell their ipods/jewelry/etc.

Goodbye U.S. economy, it was nice knowing you.

(PS - I sure hope I'm misunderstanding the implications of this)
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PaulT (profile), 12 Jul 2010 @ 3:42am

This reminds me of several cases in the UK involving "copyright" claims to infringe on free trade. The ones that come to mind are Lik-Sang (an importer shut down by Sony for having the audacity to legally import the PSP before its official UK release), CD-WOW (for sourcing CDs from outside the EU and passing on savings to customers) and Tesco (for selling Levi jeans at a discount).

In every case, it's utterly ridiculous and ignores the legitimate customer concerns that they're getting ripped off severely in favour of a manufacturer's "right" to fleece them. Of course, Omega probably won't care about the unintended consequences of their ruling as there's money to be had.
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Red Monkey (profile), 12 Jul 2010 @ 3:46am

liability for discarding a watch
The first sale section of the copyright act, 109(a) says that if you own a copyrighted item "lawfully made under this title", then you don't need to ask the copyright owner's permission "to sell or otherwise dispose of possession" of that item.

So read literally, if you own one of those Omega watches in dispute, and if you construe 109(a) to NOT apply to those watches because, having been made abroad, they were not "lawfully made under this title", then if the watch breaks, you would need Omega's permission to discard it.
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Big Al, 12 Jul 2010 @ 3:53am

And this means...
That the second-hand market for imported cars (BMW, Audi, Mercedes, Jaguar, Porsche etc) just disappeared overnight???
I'm sure that the manuals are all copyright and they are included in the purchase...
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Anonymous Coward, 12 Jul 2010 @ 4:06am

Trademark
The UK cases stem from the Silhouette case and use trademark law to preserve the right of an importer to have exclusive rights of the import of products into a market. The intention of this is to stop grey imports (imports of real products sourced from markets where the product is sold at a lower price). The argument for this approach is that it preserves the right of the trademark holder to control the way that their product is offered for sale e.g. in nice expensive shops with a valid warranty etc.
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Anonymous Coward, 12 Jul 2010 @ 4:10am

Re: There goes the rest of US domestic production
Its still a bad ruling, but I did exaggerate the implications. It looks like once the copyright owner authorizes a single sale in the US, then the first-sale doctrine applies. This finding for the most part just applies to those practicing arbitrage.

But I wonder ... suppose the creator finds an 'unauthorized partner' (wink, wink, nudge nudge) to make the first sale in the US, and just happens to never bring suit against this initial importer. They could still be free to forbid any secondary sales. Right?

As an off-topic aside, it looks like Ms. Kagan authored (or at least signed) the Obama brief. Assuming she is confirmed, I'll be watching for her to recuse herself from this case.
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Anonymous Coward, 12 Jul 2010 @ 4:16am

Re:
like most people, you always get things wrong: there is no right to "fleece" anyone, the sheep come to get sheered willingly. are levis too expensive? go buy some other brand. its the reason many of us dont wear diesel jeans (they are freaking expensive for nothing), but i do no begrudge them the right to exclusively sell their products at whatever price they feel they can get.
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Anonymous Coward, 12 Jul 2010 @ 4:22am

"For future acquisitions, libraries would be able to adjust to the Ninth Circuit's narrowing of Section 109(a) only by bearing the significant cost of obtaining a "lending license" whenever they acquired a copy that was not clearly manufactured in the United States." - this is a pretty broad overstatement. they would only have to have even the slightest concern under this ruling if (a) the books are manufactured outside of the us, and (b) are not offered for sale inside the us. the point of manufacture is not important if the books are sold openly by the company in the us. it would however mean that libraries would have a harder time looking for books to bring back from overseas.

they are also overlooking the major point that the governemnts case did not extend to end users, only the resellers. it is not clear that anyone who purchased a watch as part of this program had any liablity at all, or that they even had to give up their products. can someone clarify this?

it would almost seem like the libraries are being used by a third party group as sort of legal front. i cannot imaging their lawyers coming to this conclusion.
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Anonymous Coward, 12 Jul 2010 @ 4:31am

as a side note, i have to say mike that you make me laugh. you can manage to schedule posts to release at 4am local time for you, but you cannot manage to make posts release on the weekend. you need to take one of those seminars that will remind you that the internet is a 7 day a week business. so instead of pouring out 10 posts friday afternoon, why not have at least a couple of time come in over the weekend?
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Anonymous Coward, 12 Jul 2010 @ 4:33am

Re:
You don't know librarians. They are dangerous when angered. Search for OOK if you don't believe me.
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Anonymous Coward, 12 Jul 2010 @ 4:39am

Re:
"the point of manufacture is not important if the books are sold openly by the company in the us."

Not so. Omega sold their watches openly in the US, however, the particular copies that Costco had were not purchased in the US, so they got into trouble.

This is a pain for libraries, because they now have to make sure that:
a) Each particular book on their shelves was purchased domestically. I'm not sure if (or how long) they keep that audit trail.
b) Their purchase (or some previous domestic purchase) was authorized by the publisher).
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PaulT (profile), 12 Jul 2010 @ 4:44am

Re: Re:
... but then they lose the moral right to complain when *actual* pirated/counterfeit goods are traded rather than the merely imported goods from which they still make a profit. They can't have it both ways.
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abc gum, 12 Jul 2010 @ 4:44am

Re:
Debating the person rather than the topic - again -

Opps, sorry, am I shouting?
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Made in China, 12 Jul 2010 @ 4:49am

Look at the bright side ... it would then be illegal to sell any of that cheap Chinese crap in the US. We do not need melamine in food, sulfur drywall or lead paint. /s
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PaulT (profile), 12 Jul 2010 @ 5:06am

Re: Trademark
I understand the argument, I just happen to think that it's a load of crap. If the product with extra warranties, etc. are worth more then people are willing to pay more. If they can get an identical, legitimate product cheaper then they will. If they don't care about the legitimacy, they'll go pirate/counterfeit. You can argue against the latter, but the only real difference between a UK version of a product and the US version, for example, is often only the price (at least 40% more expensive in the UK just on exchange rates alone).

Artificially raising prices and restricting free trade doesn't do anything to encourage a person to buy more of a product in a particular country. Hell, everyone I know who visits a different continent (especially US or Asia) on holiday usually gets a list from friends & family of the good they them to bring back with them.
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Anonymous Coward, 12 Jul 2010 @ 5:07am

Re:
"There must be more to the story!"

Thank you for admitting your failure, TAM, by resorting to your lamest of arguments.
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Red Monkey (profile), 12 Jul 2010 @ 5:12am

Re: Re:
Wouldn't the plaintiff have the burden of establishing that the library's books were NOT purchased domestically?
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Red Monkey (profile), 12 Jul 2010 @ 5:14am

Re:
I don't get it. Why not? None of that stuff relates to section 109 anyway.
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PaulT (profile), 12 Jul 2010 @ 5:16am

Re:
So, your complaint is that Mike takes a weekend off while you, being a moron with nothing else to fill your time, cannot bear to spend 2 days without your favourite troll target? Are you so desperate for material that the timing of posts on the blog that you voluntarily visit on a daily basis now an issue?

By the way, I can't help but notice that the timestamp on your comment is 4:31am and that unlike Mike's, your comment cannot be scheduled. I know my excuse for posting at this time of day (it's 14:12 in my time zone). What's yours?
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Anonymous Coward, 12 Jul 2010 @ 5:20am

Re: Re:
again, why do they have to confirm any of that? they purchase them in the us in good faith, and at worst, they lose the book (if someone complains). there is no requirement beyond good faith.

same question applies: were any of the purchasers of the omega watches require to return them or forfeit them? or was the case strictly at the level of manufacture to retailer?
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Anonymous Coward, 12 Jul 2010 @ 5:21am

Re: Re:
maybe you can ask tam if he posts. but since i am not tam, nor did i say any such thing, you just troll-failed. move along idiot, mike won't pay you this week if you keep that up.
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Anonymous Coward, 12 Jul 2010 @ 5:26am

Re: Re: Re:
why not? please explain this broad (and unsupported) statement.
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Anonymous Coward, 12 Jul 2010 @ 5:29am

Re: Re:
no, again, the point just slid right over your head. can you imagine taking business advice from someone who hasn't figured out the internet runs 7 days a week? i am not suggesting mike needs to work 7 days a week, but since his system is capable of launching articles while he sleeps, why would he not schedule at least some to appear on the weekends? do you think he gives the sponsors 2 free days every week?

as for the time it is current 12:29 pm zulu. thanks for asking.
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Technopolitical (profile), 12 Jul 2010 @ 5:31am

Now, some will obviously state that this is a problem for Congress, not the courts, to fix. And, to some extent that is true.
MIKE :"Now, some will obviously state that this is a problem for Congress, not the courts, to fix. And, to ==some extent that is true==."

ME : It is all true. The courts rule on what law says. If the law has "un-intended consequences" Congress has to fix the law. They will. Congress likes libraries.
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Book Burning, 12 Jul 2010 @ 5:31am

Re: Re: Re:
"and at worst, they lose the book (if someone complains)"

Alright!
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ShoutMaster, 12 Jul 2010 @ 5:33am

Re: Re: Re:
You are sooo lame - just sayin ...
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Made in China, 12 Jul 2010 @ 5:35am

Re: Re:
"I don't get it"

Try some coffee
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Jeremy7600 (profile), 12 Jul 2010 @ 6:06am

Re: Re: Re:
I can't imagine anyone ever taking you seriously.

What do you care? If you haven't figured out by now that you shouldn't look for new articles over the weekend, maybe you need new hobbies. Or just one.
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PaulT (profile), 12 Jul 2010 @ 6:14am

Re: Re: Re: Re:
Quite simply put: the company in question are creating demand for the product and then actively refusing to service that demand.

If we're talking about a pure real vs counterfeit system, the company has the high moral ground. Counterfeiters usually save costs by producing far lower quality goods which will probably circumvent health & safety among other laws, so they are perfectly justified in suing and outlawing the counterfeits. In this scenario, they are addressing their customers' needs and actively protecting them from inferior fake goods.

However, in the "grey market" system we're talking about, there's "approved" goods vs. real but "unapproved goods vs. counterfeits. The only real differences between the "approved" and "unapproved" goods is the amount they can charge in the local market - the goods themselves are often identical. if the customers in the more expensive market recognise they are being ripped off, they will demand lower prices. In a real free market system, we should have the choice between an import from country X instead of a native product where both sets of goods are genuine.

By going to court to stop imports rather than servicing their customers' demands, they lose the high moral ground when people decide to go for the cheaper option anyway. If, for example, I cannot afford a real pair of Levis but Levi Strauss refuses to allow an import of an identical pair at half the price (on which they still profit) then they lose the moral high ground when I source a cheaper pair anyway.
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Anonymous Coward, 12 Jul 2010 @ 6:50am

Re:
... but you cannot manage to make posts release on the weekend.

Who says he's trying to?
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Anonymous Coward, 12 Jul 2010 @ 6:53am

Re: Made in China
"it would then be illegal to sell any of that cheap Chinese crap in the US."

Why? How would a ruling regarding the scope of section 109 of the copyright act have any effect on importing food, drywall and paint from China? Those items aren't the subject matter of copyright to begin with.
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NullOp, 12 Jul 2010 @ 6:58am

HA!
Details my ass! All this is just more lets-belly-up-to-the-trough and get our share, oink!!!
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PaulT (profile), 12 Jul 2010 @ 7:11am

Re: Re: Re:
"i am not suggesting mike needs to work 7 days a week, but since his system is capable of launching articles while he sleeps, why would he not schedule at least some to appear on the weekends?"

Maybe Mike has significantly less traffic over the weekends. Perhaps he's experimented with this tactic in the past and decided that the small rise in traffic isn't worth the extra work. Maybe he doesn't have time to write numerous articles for the express purpose of being viewed several days after the fact - the blog is after all just one part of his business. Most other tech-focussed sites I read (The Register, for example) have significant drops in new posts over the weekend because there simply isn't that much new to report and they have numerous staff writing for them on a daily basis.

Whatever, I don't see why this should affect you in any way. Maybe you should take the weekend off as well. I mean, I'm here a lot but I only ever post here during downtime at work. I almost never come here on my days off. Why complain about 2 days without new posts to troll (though plenty of old threads with unanswered questions and unfinished discussions for you to dive into).

"do you think he gives the sponsors 2 free days every week?"

Surely, any sponsorship would be based on the total amount of traffic, not the days on which Mike posts?
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The Groove Tiger (profile), 12 Jul 2010 @ 7:18am

Re: Re:
Most people always get things wrong? I'm sure a majority of people get something right at least once.
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Anonymous Coward, 12 Jul 2010 @ 7:28am

Never buy an Omega Watch. In other words "WHO!".
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PaulT (profile), 12 Jul 2010 @ 7:35am

Re: Re: Re:
Refusal to log in and identify himself, makes moronic statements in lower case, accuses anyone who calls him out on it as being a paid shill... Yep, looks like TAM alright.

If you're really not TAM and you're tired of defending yourself? You know the remedy for this if you choose to use it.
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Anonymous Coward, 12 Jul 2010 @ 7:51am

Re: Re:
Not really, people donate books to libraries. Those books could be from foreign sources. I can easily see a situation where someone willed a private collection to a library that contained non-US books.
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Anonymous Coward, 12 Jul 2010 @ 7:53am

Re: Re: Re:
Damn boy! do you miss mike's posts so much, that you get your panties in a bunch when he does not post on the weekends?
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Killer_Tofu (profile), 12 Jul 2010 @ 8:01am

Re: Re: Made in China
Neither is a watch, but they are certainly stretching it to be. You could easily have it cover food, drywall, or paint just as easily as it covers a watch. All out of pure stupidity. This decision is incredibly dumb.
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Anonymous Coward, 12 Jul 2010 @ 8:03am

That's because we all know that republicans (those with the supreme court majority) are all free market capitalists, right?

Only when it helps big business.
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Anonymous Coward, 12 Jul 2010 @ 8:20am

Re: Re: Re: Re: Re:
wait, are you saying there is a lack of watches in the us? are there some artificial market issue that is create a lack of watches? or is it more than this company has an excellent product, and like many higher end providers, chooses not to flood the market with product in order to maintain their high end position?

basically, you are saying they are not allowed to make adjustments to their business model using supply and demand unless they do it on a totally worldwide basis?

"I cannot afford a real pair of Levis but Levi Strauss refuses to allow an import of an identical pair at half the price (on which they still profit) then they lose the moral high ground when I source a cheaper pair anyway." - since levis is not the only jeans company on the planet, you have no issues. either you are willing to pay the premium in market for the name, or you go to another (cheaper) company that maybe wont make you so cool. you have options, there is no legal reason to force companies to offer a cheaper product.
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Anonymous Coward, 12 Jul 2010 @ 8:21am

Re: Re: Re:
again, what is the issue? at worst, the book might be seized. the library would just be an innocent victim of someone elses scam.

now, if the library actively sought out books overseas to get lower prices...
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Anonymous Coward, 12 Jul 2010 @ 8:22am

Re: Re: Re: Re:
is the traffic lower on the weekend because it is lower, or is it lower because there are no posts? the traffic goes up directly based on posting.

as for ad rates, i would leave mike to explain it to you, but is suspect it is on 30 day contracts (except for google).
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Anonymous Coward, 12 Jul 2010 @ 8:24am

Re:
You know, I had a teacher that required a textbook not sold by our school. I had to buy it over the Internet, as did the other students, and inside the book somewhere around the cover page(?) it says something to the extent of this book is not sold in the U.S. and if you are in the U.S. and have this book you have it illegally. Great book, BTW and it wasn't expensive either, not nearly as expensive as most textbooks.

Turns out there is another U.S. specific edition of the book, I guess they wanted us to get that instead. A few students got the U.S. edition instead (the titles were identical but the ISBN was different and the cover images were different), most got the "illegal" edition that our teacher gave the ISBN number for. Before class everyone compared them worried that the got the wrong book. As far as I can tell the books were almost identical (page by page), my edition had a very few extra pages of extra detail here and there. The prices were different. My teacher said either edition was fine.

Free market capitalism?
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Anonymous Coward, 12 Jul 2010 @ 8:41am

Re: Now, some will obviously state that this is a problem for Congress, not the courts, to fix. And, to some extent that is true.
No, congress likes big business.
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Anonymous Coward, 12 Jul 2010 @ 8:41am

Re: Re: Now, some will obviously state that this is a problem for Congress, not the courts, to fix. And, to some extent that is true.
Oh, and they also like lobbyists and campaign contributions.
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ChronoFish (profile), 12 Jul 2010 @ 8:54am

Re: And this means...
Not to mention that most car parts are made overseas and only assembled in the US as a car. How difficult would it be to load car parts up with stickers?

-CF
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harbingerofdoom (profile), 12 Jul 2010 @ 9:20am

Re: Re: There goes the rest of US domestic production
i think its only exaggerating in the short term.

by means of these kinds of rulings and further erosion of fair use along with abuses of copyright and trademark law all in the name of short term monetary gains, the long term outcome is the US finding itself in a 3rd world nation status in the future.

obviously, i think changes would be made once everyone actually realizes thats where things are really headed, but without any sort of changes, thats exactly where its going to wind up so i dont think you really exaggerated the implications all that much.
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Anonymous Coward, 12 Jul 2010 @ 9:24am

Re: Re: Re: Re:
There is more at stake than just losing a book.

Book lending depends on the first sale doctrine (see the law at http://www.copyright.gov/title17/92chap1.html#109 ). It's not only the person that the library bought from that is in trouble. The library itself could be found liable for lending something that it didn't have rights to. And with our thermonuclear sized penalties for copyright violations, that's enough to shut any library down.
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Anonymous Coward, 12 Jul 2010 @ 9:45am

Re: Re: Re:
If the library purchased them in good faith they may end up with a smaller penalty than if they willfully infringed. However lending, without the first sale doctrine exception, is still a copyright violation. So the library could be found liable for every time it lends out a violating book.

The watch purchasers are a completely different issue. They aren't engaging in any copyright violations. However if they decide to put their watches on ebay (or lend their watch to a friend), they could theoretically get in trouble too.
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PaulT (profile), 12 Jul 2010 @ 9:53am

Re: Re: Re: Re: Re: Re:
You love being disingenuous, don't you?

The point is simple. Omega has people who want to buy their watches. The Omega watches officially supplied in the US are too expensive for some people. Omega watches imported from other countries are cheaper and so more people can buy them. Omega block this avenue.

It doesn't matter if they buy a competitor's watch, get a friend to buy one next time they fly to China or buy a counterfeit (or simply decide not to bother buying a watch at all). My simple point is that their own actions are causing their lost sales, and so they lose the right to complain when this happens. Is that too complicated for you?

"there is no legal reason to force companies to offer a cheaper product."

Except, if you think about this for 2 minutes, that's the exact OPPOSITE of what's happening in that scenario. Levi's have the option of allowing their product to be sold at a cheaper price. They are using the courts to STOP the cheaper Levis from being available and force a MORE expensive but identical product to be sold. Again, the exact opposite of what you're claiming.
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Anonymous Coward, 12 Jul 2010 @ 9:53am

Re: Re: Re: Re: Re: Re:
Levis are cool? When did that happen?
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PaulT (profile), 12 Jul 2010 @ 9:59am

Re: Re: Re: Re: Re:
You're the one making a positive claim, it's your job to back it up. I was simply offering some logical reasons why your comments were (as always) rather silly and made a lot of assumptions you don't know are true (such as a direct relationship between new posts and traffic).
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Anonymous Coward, 12 Jul 2010 @ 11:36am

Re:
Maybe Mike has a life.
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Anonymous Coward, 12 Jul 2010 @ 11:39am

Re: Re: Re:
Hum...I was wondering:

Is 12:00am midnight or noon?
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cjovalle (profile), 12 Jul 2010 @ 2:18pm

Re:
I'm not sure (b) there is correct. I believe if the copy itself is not for sale in the US, the library could be in trouble. It's not the purchasing that's an issue, it's the lending, since the reason libraries can lend books is Section 109.

Furthermore, I'm pretty sure that most large libraries have imported books in their collections- books in other languages, or certain collections that are made primarily of books from other countries (for example, research libraries or collections on a specific geographical area). If I recall correctly from some of ARL's earlier works when examining the Google Books issue, at least 20% of most research libraries' collections are in copyright and from other countries.

Also, just about every academic library will lend journals from other countries. They may have paid a licensing fee in some cases, but this will add additional complication- and cost- to these practices. I'll need to think about this some more and visit some specific places to get a better grip on how this might apply, but I've little doubt that Jonathan Band was off on his analysis. He has worked with ALA and ARL for some time, and his work is pretty darned good.
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Red Monkey (profile), 12 Jul 2010 @ 2:55pm

Re: Re: Re: Made in China
No , they had a design on the back of the watch. That's where the copyright hook came in I think. The watch itself isn't subject to copyright.
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Pooky, 12 Jul 2010 @ 3:51pm

Re: Re: Re: Re:
Hey now, libraries are proud of their collections. I imagine any book from overseas would be valuable and rare. Perhaps. We don't WANT books seized!
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Anonymous Coward, 12 Jul 2010 @ 4:20pm

Re: Re: Re:
Nice, you managed to squeeze two lies about yourself into one comment. Try for 3 next time, TAM.
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Killer_Tofu (profile), 13 Jul 2010 @ 6:06am

Re: Re: Re: Re: Made in China
Yes, and I am pointing out that using that dumb logic you could just as easily put a design on the piece of drywall, on the can the paint comes in or perhaps on the foods packaging. So yes, you could easily stretch this to cover anything. It is just a dumb ruling.
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Matthew Stinar (profile), 27 Jul 2010 @ 2:05am

Isn't the operative word COPY?
Maybe I missed it, but didn't notice anyone pointing out that Costco never copied anything! There can be no violation of copyright without copying, whether it be mechanical, digital, performance or other means.
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