M+E Daily

In its upcoming term this fall, the U.S. Supreme Court will hear a case that could bring changes to the entertainment industry’s longstanding “first sale” precedents — even though neither party has much of a stake in the entertainment sector.

Petitioning the high court over a suit from Swiss watchmaker Omega, wholesale membership warehouse Costco says it should be able to resell Omega-brand watches that it purchased from a third party, since the watches’ first sale was to an authorized distributor. The problem, according to Omega, is that the first sale was abroad.

The watchmaker claims that Costco’s unauthorized importation and resale of the watches in California stores — for hundreds of dollars less than they ordinarily would sell for Stateside — effectively infringes on a U.S.-copyrighted logo that’s engraved on each timepiece.

Businesses from Blockbuster to Netflix are predicated on the “first sale” doctrine. But it’s unlikely that the facts of the Omega case would arise in the DVD arena. Consumer DVD pricing may vary around the world, but region-coding and differing video standards between countries effectively prevent U.S. consumers from being able to play discs that were first sold in foreign markets.

Universally-playable media such as audio CDs are potentially another story. However, ruling in favor of Omega in its 2008 appeal, the Ninth U.S. Circuit Court of Appeals held (.pdf) that resellers of foreign-made goods could claim protection under the Copyright Act’s first-sale provision only if an authorized first sale took place domestically. The court’s rule built upon a 1991 decision that disallowed first-sale protections to an importer of U.S.-copyrighted, foreign-manufactured sound recordings (BMG Music v. Perez).

Still, Costco’s appeal to the Supreme Court recently garnered friend-of-the-court support from the American Library Association, which along with other library groups contends that the Ninth Circuit’s rule “threatens the ability of libraries to continue to lend materials in their collections.” More on these implications at The Wall Street Journal — which also meditates on how U.S. copyright law has increasingly seen successful exploitation by consumer-goods brands and other corporations, even as it falls short for distributors of creative works in the digital age.

A retailer trade association whose members include Costco as well as Walmart, Target, Best Buy, and Apple has also submitted a friend-of-the-court brief to the Supreme Court. More on retailers’ angle at Lexology.