Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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A Disastrous Development In The ‘First-Sale' Copyright Doctrine

The Supreme Court on Monday said Costco could be liable for copyright infringement for selling foreign-made watches without the manufacturer's authorization.

True - the Court split 4 to 4 and offered no reasoning for the vote, which technically means that no legal precedent by the high court is created. But on a practical level, it leaves in place the lower court's opinion which said that copyright law prevents Costco from re-selling foreign-made watches that it lawfully purchased.

There is also reason to believe that Justice Kagan might have also sided against Costco had she joined the debate since she once wrote a brief urging the Supreme Court to refuse Costco's appeal.

It will be quite amusing to see the reaction from people who support the current IP-regime but also claim to champion 'free market' principles. Their level of cognitive dissonance seems boundless. There can be no free markets without the freedom to re-sell goods which you have lawfully obtained. I should think that would be obvious, but apparently not to those who like to ape economic talking points without grasping the actual concepts that underlay them.

Nobody is accusing Costco of manufacturing false goods, placing Omega labels on non-Omega watches or making any form of 'copies' whatsoever. They are saying that once Omega sells its goods to party X, it should continue to have the legal right to prevent X from selling such goods to Y if it doesn't approve. To condone such power under the guise of 'free markets' is a perversion - pure and simple. But once you start equating real property with "intellectual property", perversion is sure to follow.

And now you have case where the first-sale doctrine (allowing you to re-sell previously bought goods without the manufacturer's permission) applies to domestic goods, but not overseas goods. More on the first-sale doctrine here:


Meanwhile, you can read up on the details of the case at the links below:



A link to the 9th Circuit's original ruling which provides much of the nitty-gritty legal details and background can be found here:


Audio of the Supreme Court arguments on this case can be found here:


[update] PDF Text transcript here: http://www.supremecourt.gov/oral_arguments/argument_transcripts/08-1423.pdf

UPDATE: More reactions and background from across the web here -




A good analysis of the issues at stake before the decision was handed down here - http://blogs.forbes.com/danielfisher/2010/11/05/costco-v-omega-is-about-much-more-than-cheap-watches/

The IP Policy blog tries to make the case for copyright misuse in this case here - http://188ip.wordpress.com/2010/11/24/costco-v-omega-and-copyright-misuse/


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