US Supreme Court Hears Costco Wholesale Corp. v. Omega

As earlier reported, a legal battle is being waged over the right of the luxury Swiss watchmaker Omega to stop discount retailers such as eBay, Amazon and Costco from importing and reselling their watches without gaining the express permission of Omega. eBay, Amazon and Google have filed briefs in support of Costco’s action whilst organisations representative of the publishing, software, music and motion picture industry have also filed briefs supporting Omega which is trying to protect it’s copyright. eBay, as outlined in their amicus brief to the Court are concerned with the detrimental effect on the ability of buyers and sellers of secondary-market goods to engage in commerce in the United States.

The case commenced when Omega initiated action against Costco for copyright infringement after the CostCo. offered Omega Seamaster watches for sale for a price of $1,299, substantially lower than the RRP of $1,995.

Although the Court has commenced hearing oral arguments, a decision in Costco Wholesale Corp. v. Omega, S.A., 08-1423 is not expected to be handed down until mid 2011.

Swiss watch companies have used discount outlets to liquidate excess inventory. There exist many authorized dealers who can’t afford to carry the minimum required by manufacturers, who often sell off excess inventories to small businesses offering warranties.

Whilst swiss watch manufacturers often claim on their websites that they do not sell products through the internet on the grey market, the reality is that many cannot survive without it and tolerate grey market sales. Omega, Hamilton, Movado, and Swiss Army, are all examples of brands that tolerate the grey market. Manufacturers, being in business, have to move their products and the companies manufacturer thousands of pieces a year which can only all be sold in a grey market.

Rolex, Patek Phillipe are some of the high-end manufacturers who refuse to discount their products and are extremely discerning about who they allow to become authorised dealers for their product.

The briefs in the case can be read here.

Related posts:

  1. FIRST SALE DOCTRINE & FOREIGN MADE GOODS – Costco Wholesale Corp. v. Omega S.A
  2. Canadian Supreme Court Issues First Ruling on Legality of Keyword Advertising
  3. Supreme Court Backs Freedom of Speech Online – Spiller v Joseph [2010] UKSC 53
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