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19 U. Balt. Intell. Prop. L.J. 147 (2010-2011)
Omega S.A. v. Costco Wholesale Corp.: An Example of the Ninth Circuit Adding Confusion to First-Sale Doctrine in Order to Prevent Gray Market Imports

handle is hein.journals/ubip19 and id is 151 raw text is: OMEGA S.A. V COSTCO WHOLESALE CORP.: AN EXAMPLE OF THE NINTH CIRCUIT ADDING CONFUSION TO FIRST- SALE DOCTRINE IN ORDER TO PREVENT GRAY MARKET IMPORTS William Brice* I. INTRODUCTION In today's global market, companies are facing increased risks posed by geographic pricing, arbitrage,' and its effects on importations. In order to prevent the importation and sale of identical or near-identical gray market2 products, some manufacturers have turned to copyright law.3 This was the case with Omega S.A. in its dispute with Costco Wholesale Corp., which involved the sale of Omega watches at Costco's discount stores.4 Omega's action was brought against Costco over its gray market buying and selling practices and to prevent gray market arbitrage.5 Gray market goods reside in the murky area of law between legitimacy and illegality.6 There is no specific statutory regime that deals with these goods and litigants are forced into shoe-homing their complaints into existing provisions of the Tariff Act of 1930 or infringement on intellectual property; creating a substantial body of jurisprudence in support and clarification. The real question presented in this case is: once a consumer purchases a product, why should the initial seller have the right to block or dictate the price of a resale? * University of Baltimore School of Law; J.D. Candidate 2012. Arbitrage can be defined as the simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies. Arbitrage Definitions, Investopedia.com, available at www.investopedia.com/terms/a/arbitrage.asp (last visited Mar. 27 2011). 2 Courts have defined gray market goods in a variety of ways. See K Mart Corp. v. Cariter, Inc., 486 U.S. 281, 285 (1988); Weil Ceramics & Glass, Inc v. Dash, 878 F.2d 659, 662 n.1 (3d Cir. 1989); Helene Curtis, Inc. v. Nat'l Wholesale Liquidators, Inc., 980 F. Supp. 152, 154 (E.D.N.Y. 1995). For a simple explanation, see Lynda J. Oswald, Statutory and Judicial Approaches to Gray Market Goods: The Material Differences Standard 95 Ky. L.J. 107 (2006), explaining that gray markets also referred to as parallel imports are genuine goods that are sold through unauthorized channels in direct competition with authorized distributors. These are most commonly goods that are produced or sold abroad under the authority or licensees of a U.S. mark holder and under a mark that is used both abroad and in the United States. The goods are then imported into the United States without authorization from the U.S. mark holder and in violation of lawful arrangements made by the mark holder to prohibit such importation and sales. Id at 107-108 3 Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008). 4 Id. 5 Id. 6 David R. Sugden, Gray Markets: Prevention, Detection and Litigation, 4-5 (Oxford University Press 2009). Oswald, supra note 2 at I10. See Omega S.A., 541 F.3d 982.

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