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Anticipating the Limits of the Misuse Doctrine

Recall the Omega S.A. v. Costco case, which led to the 9th Circuit holding the first sale doctrine inapplicable for goods purchased overseas and later imported into the United States. Well, this case is still ticking, and a recent District Court ruling looks to be ripe for a whole new round of appellate review. After the first sale issue was appealed all the way up the Supreme Court, which affirmed the 9th Circuit without issuing an opinion, the District Court for the Eastern District of California got another crack at it.

While the first sale justification for summary judgment was overruled, additional summary judgment arguments were left undecided at the District Court level. In the November 14 opinion of the District Court, Costco’s arguments won out. In granting summary judgment, the court held that Omega had misused their copyright.

See the full opinion.

At first blush it appears that Judge Hatter is right on the money with his misuse assessment. I mean, when he discusses the 3-millimeter diameter Omega symbol hidden on the back of the watch and that Omega conceded it placed the symbol there to “control the importation and sale of watches containing the design, as the watches could not be copyrighted,” one can’t really help but feel he correctly diagnosed misuse. That type of behavior simply doesn’t jibe with the purpose of copyright law. Because misuse is an equitable defense based on public policy concerns about the scope of intellectual property rights, what most interests me is the potential to further shape the limits of the misuse doctrine on appeal.

Judge Hatter admits that the limits of the doctrine “are still being defined.” What limits we do have are almost wholly defined by the Circuit Courts and the Federal Circuit. The Supreme Court’s last meaningful misuse case was nearly 70 years ago, so keep an eye out for Omega v. Costco to make another trip up through the 9th Circuit on the way to the Supreme Court.

For additional reading, check out:

Morton Salt Co. v. G.S. Suppinger, Co., 314 U.S. 488 (1942) (last major Supreme Court misuse case).

Princo Corp. v. Int’l Trade Comm’n, 616 F.3d 1318 (Fed. Cir. 2010) (latest patent misuse case).