No. 08-1423

IN THE

Supreme Court of the United States

_______________________________ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

COSTCO WHOLESALE CORPORATION,

Petitioner

v.

OMEGA, S.A.,

Respondent

BRIEF OF AMICUS CURIAEINTELLECTUAL PROPERTY OWNERS

ASSOCIATION IN SUPPORTOF RESPONDENT

GEORGE L. GRAFF

Counsel of Record112 Holly PlaceBriarcliff Manor, NY 10510(914) 762-3706georgegraff@paulhastings.com

VICTORIA A. CUNDIFF

REBECCA K. MYERS

LAURA K. ISENBERG

PAUL, HASTINGS, JANOFSKY

& WALKER, LLP75 East 55 StreetNew York, NY 10022(212) 318-6000

DOUGLAS K. NORMAN, PresidentKEVIN RHODES, ChairAMICUS BRIEF COMMITTEE

INTELLECTUAL PROPERTY

OWNERS ASSOCIATION

1501 M Street, NWSuite 1150Washington, DC 20005(202) 507-4500

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Cited AuthoritiesPage

TABLE OF CONTENTS

TABLE OF CITED AUTHORITIES . . . . . . . . . ii

INTEREST OF AMICUS CURIAE . . . . . . . . . . 1

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

A. In General, A Copyright Owner Has TheRight To Bar Unauthorized ImportationOf Works Acquired Outside The UnitedStates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1. The language of section 602(a) of theCopyright Act and its legislativehistory demonstrate that it wasintended to apply to all works “thathave been acquired outside theUnited States” . . . . . . . . . . . . . . . . . . . 5

2. This Court’s Decision in QualityKing does not require a differentresult . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

3. The practices and economics of thecopyright-based industries requirethat the copyrights in differentcountries be treated separately andthat rights granted in one country donot apply in another. . . . . . . . . . . . . . . 15

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Cited AuthoritiesPage

Contents

B. While Holding the First Sale DoctrineInapplicable, This Court ShouldExpressly Reserve Judgment on theQuestion of Whether It Is Appropriate toUse Copyright Law To Prevent theImportation of “Gray Market” Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

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Cited AuthoritiesPage

TABLE OF CITED AUTHORITIES

CASES

Omega S.A. v. Costco Wholesale Corp.,541 F.3d 982 (9th Cir. 2008) . . . . . . . . . . . . . . . . 3

Quality King Distribs., Inc. v. L’AnzaResearch Int’l, Inc.,523 U.S. 135 (1998) . . . . . . . . . . . . . . . . . . . . . passim

CONSTITUTIONAL AND STATUTORYPROVISIONS

17 U.S.C. §§109(a) & 602(a) . . . . . . . . . . . . . . . . passim

U.S. Constitution, Art. 1, §8 . . . . . . . . . . . . . . . . . . 2

OTHER AUTHORITIES

2003 Guide on Surveying the EconomicContribution of the Copyright-BasedIndustries, World Intellecutal PropertyOrganization, November 3-10, 2003, availableat http://www.wipo.int/copyright/en/publications/pdf/copyright_pub_893.pdf . . . . . 15

Brief for the Petitioner, July 10, 2010 . . . . . . . . . 4, 7

Copyright Law Revision: Report of the Registerof Copyrights on the General Revision of theU.S. Copyright Law, 87th Cong., 1st Sess.,125-126 (H.R. Judiciary Comm. Print 1961) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

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Cited AuthoritiesPage

Defendant Costco Wholesale Corporation’sMemorandum of Points and Authorities inOpposition to Omega’s Motion for SummaryJudgment, 21-25. . . . . . . . . . . . . . . . . . . . . . . . . . 22

P. Goldstein, Copyright §16.0, 16:1-16:2 (2d ed.1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Joint statement by both houses of Congress: H.R.REP. NO. 1476, 94th Cong., 2d Sess. 169(1976), reprinted in 1976 U.S. CODE CONG.& AD. NEWS 5659, 5785 and S. REP. NO. 473,94th Cong., 1st Sess. 151 (1975) . . . . . . . . . . . . 8

John O’Neil, Getting Textbooks Cheaper fromIndia, N. Y. Times, Mar. 29, 2006, availableat http://www.nytimes.com/2006/03/29/education/29textbooks.html . . . . . . . . . . . . . . . . 18

W. Patry, Copyright Law and Practice, 166-170(1997 Supp.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Stephen Siwek, Copyright Industries in theU.S. Economy: The 2003-2007 Report ,International Intellectual Property Alliance(2009), available at http://www.iipa.com/pdf/IIPASiwekReport2003-07.pdf. . . . . . . . . . . . . . 15

U.S. Government Accountability Office, CollegeTextbooks: Enhanced Offerings Appear toDrive Recent Price Increases, GAO-05-806,pp. 21-22 (2005), available at http://www.gao.gov/new.items/d05806.pdf. . . . . . . . . . 16

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INTEREST OF AMICUS CURIAE

Amicus curiae Intellectual Property OwnersAssociation (IPO) is a trade association representingcompanies and individuals in all industries and fields oftechnology who own or are interested in U.S. intellectualproperty rights.1 IPO’s membership includes more than200 companies and more than 11,000 individuals whoare involved in the association either through theircompanies or as inventors, authors, executives, lawfirms, or attorney members. Founded in 1972, IPOrepresents the interests of all owners of intellectualproperty. IPO members receive about thirty percent ofthe patents issued by the Patent and Trademark Officeto U.S. nationals. IPO regularly represents theinterests of its members before Congress and the PTOand has filed amicus curiae briefs in this Court andother courts on significant issues of intellectual propertylaw. The members of IPO’s Board of Directors, whichapproved the filing of this brief, are listed in theAppendix.2

1 No counsel for a party authored this brief in whole or inpart, and no such counsel or party made a monetary contributionintended to fund the preparation or submission of this brief.No person other than the amicus curiae, or its counsel made amonetary contribution to its preparation or submission. Bothparties in this case consented to the filing of amicus briefs insupport of either party or neither party by letters submitted tothis Court on May 5 and 10, 2010.

2 IPO procedures require approval of positions in briefsby a three-fourth majority of directors present and voting.

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INTRODUCTION

The Copyright Act is designed to fulfill Congress’constitutional mission of “securing for limited Times toAuthors . . . the exclusive Right to their . . . Writings”(U.S. Constitution, Art. 1, §8). This “exclusive Right”includes, most significantly, the right to prevent, and tothereby exercise control over, the distribution of copiesof their works by, among other things, preventing theimportation of more than a personally carried singlecopy of works that are “acquired outside the UnitedStates.” 17 U.S.C. §602(a).

The established law with respect to unpatenteduseful articles, such as the watches involved in this case,is quite different – it is generally accepted thatunpatented goods that have been acquired lawfullyanywhere in the world can be freely imported and soldin this country and that the maker of such goods cannotprevent such importation and sale so long as the goodsare “genuine” and their sale will not deceive or confusethe consumers who purchase them.

In this case, the goods are watches bearing a tinycopyrighted design (the “Globe Design”) engraved ontheir backs. Since the watches themselves, as useful,unpatented articles, would be ineligible for copyrightprotection, Respondent would not have a lawful basisfor preventing their importation were it not for theGlobe Design, which may have no other function or value.Because the issue was not decided below for this Court’sreview here, however, IPO notes that the issue ofwhether a copyright owner may use its exclusive rightsin a design solely as a means of preventing the

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importation and sale of the goods on which it appearsmust await a future case for resolution.

In its decision below, the Ninth Circuit Court ofAppeals did not consider or pass upon the question ofwhether, and under what circumstances, a copyrightowner may use an embedded copyrighted work toprevent the importation of genuine useful articles, butconfined its decision solely to one of Petitioner’saffirmative defenses: the contention that the “first saledoctrine,” as embodied in section 109(a) of the CopyrightAct, deprives U.S. copyright owners of their right toprevent importation of copies of works made or soldanywhere in the world. See Omega S.A. v. CostcoWholesale Corp., 541 F.3d 982, 990 (9th Cir. 2008). Onthat issue, IPO believes that the language and legislativehistory of the Copyright Act compel the conclusion thatCongress intended to grant the U.S. copyright ownerthe right to prevent unauthorized importation of anycopies of a work that were created and acquired underthe copyright law of another country.

ARGUMENT

Point A

In General, A Copyright Owner Has The Right To BarUnauthorized Importation Of Works AcquiredOutside The United States

IPO believes that it is important to distinguishbetween the rules generally applicable to copies of worksthat are the proper subject of copyright protection, suchas books, musical compositions, sound recordings,

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motion pictures, graphical works and computerprograms, and useful articles that are not subject tocopyright or other intellectual property protection, suchas the watches involved in this case. With respect to theformer, the author, or his or her assignee, is granted anexpress statutory right to control the importation andinitial sale of copies of the work in the United States.With respect to the latter, there is a well-establishedpolicy permitting the importation and distribution ofgenuine products that were lawfully acquired anywherein the world.

In challenging the Ninth Circuit’s decision,Costco says little about the implications of the decisionwith respect to copyrighted works, but focuses on thepurported adverse effects that the Ninth Circuitdecision would have on the importation and use ofmanufactured goods that are not the intendedbeneficiaries of the exclusive rights granted by theCopyright Act — an issue which the Ninth Circuit hasyet to address. See Brief for the Petitioner (hereinafter“Petitioner’s Opening Brief ”) at 46-52.3

Petitioner’s parade of horribles misses the issue forthe Court. IPO believes that the Ninth Circuit’s holdingwas correct as a matter of statutory construction. Theplain language of the Copyright Act and its legislative

3 The only exception is Petitioner’s assertion that denyingthe “first sale” defense to libraries that lend foreign books wouldexpose those libraries to liability for copyright infringement.Petitioner ’s Opening Brief at p. 51. However, Congressspecifically addressed that issue in section 602(a)(3) of the Act,which expressly permits libraries to acquire and lend out up tofive copies of works acquired outside of the United States.

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history compel the conclusion that section 602(a) of theAct was intended to grant the U.S. copyright owner theright to prevent the importation of copies of works thatwere “acquired outside of the United States.” Thisconclusion is reinforced by the specific limited exceptionscontained in section 602(a); and the broad limitationimposed by 109(a) on application of the first saledoctrine to copies “lawfully made under this title” – i.e.,in the United States. That result comports with theletter and legislative intent of the Copyright Act and isconsistent with this Court’s holding in Quality KingDistiribs., Inc. v. L’Anza Research Int’l, Inc., 523 U.S.135 (1998). Moreover, it will preserve and protect therights of the authors, artists and industries that rely oncopyright law to safeguard their investment in thecreation, marketing and distribution of copyrightedworks.

1. The language of section 602(a) of theCopyright Act and its legislative historydemonstrate that it was intended to apply toall works “that have been acquired outsidethe United States”

The limited issue presented at this stage of the casedeals solely with the effect, if any, of the “first saledoctrine,” as codified in section 109(a) of the CopyrightAct, on the right granted to the copyright owner insection 602(a) of the Act to prevent the unauthorizedimportation of works acquired outside the UnitedStates. The two provisions are entirely consistent andindependent of each other. Section 109(a) addressesworks made “under this title”; that is, in the UnitedStates. It says nothing about importation. Section 602

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only applies to work “acquired outside the UnitedStates.” It says nothing about works acquired in theUnited States. In Quality King, this Court held thatthe first sale doctrine codified in Section 109(a) appliesto works made “under this title” in the United States,exported, then acquired abroad and imported. Neitherthe plain language of Section 109(a), nor the decision inQuality King, makes it applicable to works “not madeunder this title”; that is, works made outside the UnitedStates.

While Section 109(a) grants to the owner of “aparticular copy lawfully made under this title” the rightto “sell or otherwise dispose of possession of that copy .. . ,” section 602(a) provides that it is an act ofinfringement for anyone to import copies acquiredabroad:

(1) Importation. Importation into the UnitedStates, without the authority of the owner ofcopyright under this title, of copies orphonorecords of a work that have beenacquired outside the United States is aninfringement of the exclusive right todistribute copies or phonorecords undersection 106, actionable under section 501.

(emphasis added.)

Section 602(a) goes on to provide for three express,limited exceptions to the right it grants: copies importedby governmental bodies for their own use (17 U.S.C.§602(a)(3)(A)); a single copy imported for the private useof the importer and “forming part of such person’s

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personal baggage” (17 U.S.C. §602(a)(3)(B)); and nomore than a single copy imported by an organization“operated for scholarly, educational or religiouspurposes” for its archival purposes, or a combined totalof no more than five copies imported by such anorganization for its “library lending and archivalpurposes.” (17 U.S.C. §602(a)(3)(C)). Those exceptionsare limited even further by section 602(b), which grantsthe customs service the power to seize any copies ofworks that “would have constituted an infringement ofcopyright if this title had been applicable.”

The argument espoused by Costco in this case, wereit to be adopted, would create an implied exception tosection 602(a) that is far broader than the narrowexceptions expressly allowed by Congress, permittingthe owner of copies of any work that meets therequirement of 602(b) – that is that their making wouldnot have been an infringement if they were made in theUnited States – to import an unlimited number of copiesfor any purpose without the permission of the U.S.copyright owner. See discussion in Petitioner’s OpeningBrief at 15-41. Indeed, it is so broad that the rightsgranted by 602(a), and its carefully drawn exceptions,would effectively be limited only to “piratical works” and,perhaps, some rare occasions where the importer of thecopies is neither the owner of the copies nor its agent.

No such broad exception can reasonably be inferredfrom the language of the statute or its legislative history.To the contrary, in discussing the structure of section602, the legislative history shows that Congress intendedsubsection 602(a) to apply to all works acquired abroad,and that it was only subsection 602(b) that was to be

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limited to works that would not have been lawfully madehad they been made in the United States:

Section 602 details with two separatesituations: importation of “piratical” articles(that is, copies or phonorecords made withoutany authorization of the copyright owner), andunauthorized importation of copies orphonorecords that were lawfully made. Thegeneral approach of section 602 is to makeunauthorized importation an act ofinfringement in both cases, but to permit theBureau of Customs to prohibit importationonly of “piratical” articles.

Joint statement by both houses of Congress: H.R.REP. NO. 1476, 94th Cong., 2d Sess. 169 (1976),reprinted in 1976 U.S. CODE CONG. & AD. NEWS5659, 5785 and S. REP. NO. 473, 94th Cong., 1st Sess.151 (1975), hereinafter “Joint Report” (emphasis added).Indeed, after re-stating the “general rule [of section602(a)] that unauthorized importation is aninfringement merely if the copies or phonorecords ‘havebeen acquired abroad,’” (emphasis added) and thenenumerating the three exemptions to that rule, theJoint Report concludes:

If none of the three exemptions applies, anyunauthorized importer of copies ofphonorecords acquired abroad could be suedfor damages and enjoined from making anyuse of them, even before any publicdistribution in this country has taken place.

Id. (emphasis added).

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Certainly nothing in the language of section 109(a),which defines the first sale doctrine for purposes of theCopyright Act, purports to create such a broad exceptionto section 602(a). The relevant portion of that sectionreads as follows:

Notwithstanding the provisions of Section106(3), the owner of a particular copy orphonorecord lawfully made under this title,or any person authorized by such owner, isentitled, without the authority of thecopyright owner, to sell or otherwise disposeof the possession of that copy or phonorecord.

17 U.S.C. §109(a) (emphasis added). In contrast tosection 602(b), which authorizes seizure at the borderof works that “would have constituted an infringementof copyright if this title had been applicable,” section109(a) says nothing about copies made under the lawsof other countries. Nor does it purport to limit the entirepublic distribution right granted to the copyright ownerunder section 106(3) of the Act, but only a very specificsubset of that right, granting the owner of a copy onlythe very specific right to “sell or otherwise dispose ofpossession” of the particular copy it owns. In sum,sections 109(a) and 602(a) are very different, both interms of the copies to which they apply and the exclusiverights that they affect, and there is no overlap in theirapplication which would support a conclusion thatsection 109(a) was intended to create a massiveexception to the right of U.S. copyright owners undersection 602(a) to treat the importation of all worksacquired outside of the United States (subject to thelimited express exceptions it contains) as an infringingact.

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2. This Court’s Decision in Quality King doesnot require a different result

This Court’s decision in Quality King Distribs., Inc.v. L’Anza Research Int’l, Inc., 523 U.S. 135 (1998) isentirely consistent with the conclusion of the NinthCircuit in this case and, if anything, supports theconclusion that application of the first sale doctrine islimited in its application to copies made in this country.In Quality King, plaintiff, L’Anza manufactured haircare products in California bearing a copyrighted labeland sold them to distributers around the world. QualityKing acquired some of the products that L’Anza hadexported to foreign markets4 and reimported them intothe United States for domestic sale in this country at asignificantly reduced price.

Although the Court held that section 602(a) did notprevent the re-importation of the copies involved in thatcase, the opinion makes it quite clear that this Courtwould have reached a different result had the copiesinvolved not been made in the United States.Specifically, in response to the argument advanced byL’Anza that applying the first sale doctrine would rendersection 602(a) superfluous, Justice Stevens’ opinion for

4 It was unclear from the record in Quality King whetherlegal title to the goods formally passed to the foreigndistributors in the United States, but it was clear that the goodsand the labels were made and shipped directly from L’Anza’sfacilities in California. Thus, the copies were unquestionably“lawfully made under this title” as required by section 109(a)and, at least in the first instance, were not “acquired outsidethe United States,” a predicate for infringement under section602(a).

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the Court points to three instances where the sectionwould still apply:

First, even if § 602(a) did apply only topiratical copies, it at least would provide thecopyright holder with a private remedyagainst the importer, whereas theenforcement of § 602(b) is vested in theCustoms Service. Second, because theprotection afforded by § 109(a) is availableonly to the “owner” of a lawfully made copy(or someone authorized by the owner), thefirst sale doctrine would not provide a defenseto a § 602(a) action against any non-ownersuch as a bailee, a licensee, a consignee, orone whose possession of the copy wasunlawful. [footnote omitted]Third, § 602(a)applies to a category of copies that are neitherpiratical nor “lawfully made under this title.”That category encompasses copies that were“lawfully made” not under the United StatesCopyright Act, but instead, under the law ofsome other country.

523 U.S. at 146-7 (emphasis added). Similarly, in itsdiscussion of the potential adverse effect on thepublishing industry (a matter of particular concern toIPO), the opinion once again emphasizes that copiesmade in other countries would not qualify for applicationof the first sale doctrine:

Even in the absence of a market allocationagreement between, for example, a publisherof the U.S. edition and a publisher of the

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British edition of the same work, each suchpublisher could make lawful copies. If theauthor of the work gave the exclusive U.S.distribution rights — enforceable under theAct — to the publisher of the U.S. edition andthe exclusive British distribution rights to thepublisher of the British edition, [footnoteomitted] however, presumably only thosemade by the publisher of the U.S. editionwould be “lawfully made under this title”within the meaning of § 109(a). The first saledoctrine would not provide the publisher ofthe British edition who decided to sell in theAmerican market with a defense to an actionunder § 602(a) (or, for that matter, to anaction under § 106(3), if there was adistribution of the copies).

523 U.S. at 146-7 (emphasis added).

Finally, the opinion’s statement in response to theargument that application of the first sale doctrine tosection 602(a) would make the exceptions to section602(a) superfluous resolves any conceivable doubt onthe point:

The argument that the statutory exceptionsto § 602(a) are superfluous if the first saledoctrine is applicable rests on the assumptionthat the coverage of that section is co-extensive with the coverage of § 109(a). Butsince it is, in fact, broader because itencompasses copies that are not subject to thefirst sale doctrine — e.g., copies that are

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lawfully made under the law of anothercountry — the exceptions do protect thetraveler who may have made an isolatedpurchase of a copy of a work that could not beimported in bulk for purposes of resale.

523 U.S. at 148 (emphasis added).

In her concurring opinion in Quality King, JusticeGinsburg emphasized that the Court’s holding waslimited to the facts presented in that case, where thecopies were made in the United States and exported bythe copyright owner, and that it does not apply to copiesthat were neither made nor first sold in the UnitedStates:

This case involves a “round trip” journey,travel of the copies in question from theUnited States to places abroad, then backagain. I join the Court’s opinion recognizingthat we do not today resolve cases in whichthe allegedly infringing imports weremanufactured abroad.

Id . at 1135 (citing W. Patry, Copyright Law andPractice, 166-170 (1997 Supp.) (commenting thatprovisions of Title 17 do not apply extraterritoriallyunless expressly so stated, hence the words “lawfullymade under this title” in the “first sale” provision, 17U.S.C. §109(a), must mean “lawfully made in the UnitedStates”). See also P. Goldstein, Copyright §16.0, 16:1-16:2 (2d ed. 1998) (“Copyright protection is territorial.The rights granted by the United States Copyright Actextend no farther than the nation’s borders.”)

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To be sure, IPO recognizes that strictly limiting theapplication of the first sale doctrine to copies made inthe United States could arguably lead to unjustified andunintended consequences with respect to works thathave been lawfully imported with the consent of thecopyright owner, limiting their alienability in the handsof consumers and affecting other rights, such as thoseset forth in section 109(c),5 that apply only to copies“lawfully made under this title.” But these concerns caneasily be avoided by establishing a presumption that,when a United States copyright owner authorizes theimportation of a work made outside the United States,it is intended, in the absence of specific evidence to thecontrary, to vest the owner with the same rights as thestatute affords to owners of copies that were made inthis country.

In all events, none of those issues is now before thecourt. The issue in this case is simply whether, despitethe clear language of section 602(a), the first saledoctrine applies generally to permit the unauthorizedimportation of copies of works that were acquiredabroad and were not lawfully made pursuant to UnitedStates copyright law. And, it is clear that none of thelanguage of the statute, its legislative history nor thisCourt’s decision in Quality King supports such aconclusion.

5 Section 109(c) grants the owner of a copy “lawfullymade under this title” the right to “display that copy publicly,either directly or by the projection of no more than one imageat a time, to viewers present at the place where the copy islocated.”

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3. The practices and economics of the copyright-based industries require that the copyrightsin different countries be treated separatelyand that rights granted in one country do notapply in another.

Permitting the unauthorized importation of copiesof works first made and sold outside the United Stateswill have broad negative implications to the copyright-based industries that are such major contributors to thiscountry’s economic strength.6 While it is common forcopyright owners to authorize publication anddistribution of their works in many countriesthroughout the world, there is a strong economic needto maintain their ability to assure that their publicationin other countries will not result in flooding the UnitedStates market with the foreign versions of their works.

6 See, e.g . , July 20, 2009 economic report entitledCopyright Industries in the U.S. Economy: The 2003-2007Report , the twelfth study written by Stephen Siwek ofEconomists Inc. for the International Intellectual PropertyAlliance, a coalition of seven trade associations representingthe copyright-based industries. The report follows the statisticalmethodology outlined by WIPO in its 2003 Guide on Surveyingthe Economic Contribution of the Copyright-Based Industries,and concludes that the latest data shows that the core U.S.copyright industries accounted for an estimated $889.1 billionor 6.44% of the U.S. gross domestic product in (GDP) 2007. Thesecore industries were responsible for 22.74% of the real economicgrowth achieved by the U.S. economy in 2006-2007. In addition,the core copyright industries employed 5.6 million workers(4.05% of U.S. workers) in 2007. Finally, estimated 2007 foreignsales and exports of the core copyright industries increased toat least $126 billion, leading other major industry sectors.

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Recent developments in the textbook marketprovide a good example of the consequences that couldresult from eliminating the right to prevent importationof copies that are made abroad. In a July 2005 reportissued by the United States Government AccountabilityOffice on the price of college textbooks, the GAO stated:

Textbooks developed for certain academicdisciplines are more likely to have broaderinternational appeal than others, according topublishers. For example, the content in manymathematics, science and engineeringtextbooks is essentially global in itsapplicability … If international demand for atextbook exists, publishers may sell the sametextbook that is sold in the United States, aninternational edition produced with lessexpensive materials, or an adaptation of thetextbook that includes locally relevantexamples. In international markets where theprimary language spoken is not English,publishers may sell the rights to translate thetextbook into the local language.

U.S. Government Accountability Office, CollegeTextbooks: Enhanced Offerings Appear to Drive RecentPrice Increases, GAO-05-806, pp. 21-22 (2005), availableat http://www.gao.gov/new.items/d05806.pdf. Findingthat publishers consider many different factors inpricing the textbooks sold abroad, including the qualityof the reproduction and materials used, income level,cost of living, strength of currency, demand, etc., thereport observes:

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Publishers told us that they have to beparticularly concerned about pricing at a levelthat is affordable to students in developingcountries because of the threat of piracy inthese countries.

*****

In addition to income levels, differences ininstructional styles and systems of highereducation influence publishers’ pricingdecisions. For example, publishers told us thateven though average income levels are highin the United Kingdom, textbooks tend to sellfor lower prices than in the United Statesbecause the demand for textbooks is lower.Specifically, they said that instructors in theUnited Kingdom are more likely to recommendseveral textbooks for students to consider,rather than requiring a specific textbook.Additionally, publishers told us that there isless demand for electronic and printsupplements to support teaching and learningin non-U.S. markets. Publishers also told usthat because higher education funding tendsto be highly subsidized in the United Kingdomand European countries, students may not bewilling to pay out-of-pocket costs for textbooksat U.S. prices. According to publishers,textbook prices in Canada and Australia tendto be similar to those in the United Statesbecause the instructional styles are similar inthat instructors select specific textbooks fortheir classes. However, publishers noted that

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in these markets there is also greater demandfor U.S. textbooks that have been adapted tothe local culture or economy. In order forinternational pricing differences to persist,there must be barriers that limit massimportation of less expensive U.S. textbooksfrom other countries.

Id. at 22-23.

As these materials demonstrate, the practical effectof broadening the availability of a defense based on thefirst sale doctrine to an unauthorized importer wouldlikely be that copyright owners would only authorizesales of copies of their works in jurisdictions in whichthey could command a relatively high price and refuseto sell them anywhere else, lest they undercut themarket for their works elsewhere. The dissemination ofcopyrighted works internationally, and particularly atreduced prices in developing nations, would suffer. See,e.g., John O’Neil, Getting Textbooks Cheaper fromIndia, N. Y. Times, Mar. 29, 2006, available at http://w w w. n y t i m e s . c o m / 2 0 0 6 / 0 3 / 2 9 / e d u c a t i o n /29textbooks.html (discussing the concerns of the Indiangovernment that the widespread importation into theUnited States of textbooks sold at reduced prices inIndia will lead to a return to “the bad old days,” when toprevent infringement, American publishers sold onlyout-of-date textbooks to overseas markets).

The need to tailor their products and their pricingto maximize the distribution of their works throughoutthe world has led to the longstanding and establishedpractice of copyright-based industries treating separate

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nations as separate markets. This Court expresslyrecognized the widespread and prevalent nature of thatpractice in Quality King, when it referenced commentsmade by the Register of Copyrights in a 1961 report toCongress:

When arrangements are made for both a U.S.edition and a foreign edition of the same work,the publishers frequently agree to divide theinternational markets. The foreign publisheragrees not to sell his edition in the UnitedStates, and the U.S. publisher agrees not tosell his edition in certain foreign countries.

Quality King, 523 U.S. at 147 (citing Copyright LawRevision: Report of the Register of Copyrights on theGeneral Revision of the U.S. Copyright Law, 87th Cong.,1st Sess., 125-126 (H.R. Judiciary Comm. Print 1961).Remarking on these comments by the Register ofCopyright, the Quality King court further elaboratedthat, so long as the application of section 109(a) is limitedto copies made in the United States, these longstandingindustry practices would be preserved:

Even in the absence of a market allocationagreement between, for example, a publisherof the U.S. edition and a publisher of theBritish edition of the same work, each suchpublisher could make lawful copies. If theauthor of the work gave the exclusive UnitedStates distribution rights - enforceable underthe Act - to the publisher of the United Statesedition and the exclusive British distributionrights to the publisher of the British edition,

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. . . presumably only those made by thepublisher of the United States edition wouldbe “lawfully made under this title” within themeaning of § 109(a). The first sale doctrinewould not provide the publisher of the British[i.e., foreign] edition who decided to sell in theAmerican market with a defense to an actionunder § 602(a) (or, for that matter, to an actionunder § 106(3), if there was a distribution ofthe copies).

Id. at 148.

The commercial practices of the industries that relyon copyright to protect their products are structuredin recognition of the principle that the holding of acopyright, either by ownership or exclusive license, inone jurisdiction confers no rights in another. As JusticeStevens observed in Quality King, copyright ownersmay exclusively license or assign their rights to differentpublishers in different jurisdictions under differentterms. As a result, the holders of the rights in differentjurisdictions may be unrelated and even competitorswith each other in different markets. Thus, it would beextremely disruptive, and destructive of the value ofUnited States copyrights, if copies of works made inother countries could be freely imported and resold inthis country without the consent of the United Statescopyright owner.

Section 602(a) of the Copyright Act was enacted topreserve the established and economically beneficialpractice of treating the copyright in each country asdifferent and independent, so that its exercise in one

21

country confers no rights in another. It contains threelimited and express exceptions that are carefullydesigned to minimize any adverse impact of foreigndistribution of copies on the rights of the U.S. copyrightowner, allowing only a limited class of persons to importa limited number of copies for very limited purposes.The extension of the first sale doctrine to permit theimportation of commercial quantities of copies made andacquired in other countries would subvert thecongressional intent of section 602(a) of the CopyrightAct and the prevalent commercial practices of the corecopyright industries, which treat the copyright in eachcountry as separate and distinct, so that the exercise ofrights in one country has no adverse affect on the rightsin another.

Point B

While Holding the First Sale Doctrine Inapplicable,This Court Should Expressly Reserve Judgment onthe Question of Whether It Is Appropriate to UseCopyright Law To Prevent the Importation of “GrayMarket” Goods.

Many of the arguments asserted in favor ofextending the first sale doctrine to copies made in othercountries are premised on the assumption that the firstsale doctrine is the only avenue available to preventOmega from imposing unreasonable restrictions on theimportation and free alienation of its watches. However,in its memorandum in opposition to Omega’s motion forsummary judgment filed in the district court, Costcoraised several defenses in addition to the first saledoctrine, including claims that Omega engaged in

22

“copyright misuse.” Defendant Costco WholesaleCorporation’s Memorandum of Points and Authoritiesin Opposition to Omega’s Motion for SummaryJudgment at pp. 21-25. In particular, Costco argued thatthe application of section 602(a) to the watches involvedin this case constituted a form of “copyright misuse”and that, under these circumstances, the Globe Design,as an inextricable component of a “useful article,” is notcopyrightable. Id. In its decision, however, the NinthCircuit confined its conclusions solely to the availabilitythe “first sale” defense, and remanded the case forfurther proceedings. Accordingly, the other defensesraised by Costco are not now before this Court.

Although the Court cannot, in the presentprocedural context of this case, take a final position onthe applicability of Costco’s other defenses, it isimportant to recognize that neither the Ninth Circuitdecision, nor an affirmance of that decision by thisCourt, will foreclose those defenses. Acknowledging thepotential availability of a “copyright misuse” orcopyrightablility defense would make it clear that thisCourt has not foreclosed consideration of the issue ofwhether copyright protection is appropriate for thewatches at issue in this particular case withoutsubverting the language and legislative policy of theCopyright Act as a whole or the established practices ofthe core copyright industries who rely on the provisionsof section 602(a) of the Copyright Act to support andprotect the value of their United States copyrights.

23

CONCLUSION

For the foregoing reasons, IPO respectfully requeststhat the Court hold that the first sale doctrine isinapplicable to works made and acquired outside theUnited States. In doing so, however, the Court shouldexpressly note that it is not holding that section 602(a)of the Copyright Act necessarily applies to the watchesinvolved in this case, but that there may be otherdefenses that the courts below have not yet had anopportunity to consider.

Respectfully Submitted,

GEORGE L. GRAFF

Counsel of Record112 Holly PlaceBriarcliff Manor, NY 10510(914) 762-3706georgegraff@paulhastings.com

VICTORIA A. CUNDIFF

REBECCA K. MYERS

LAURA K. ISENBERG

PAUL, HASTINGS, JANOFSKY

& WALKER, LLP75 East 55 StreetNew York, NY 10022(212) 318-6000

DOUGLAS K. NORMAN, PresidentKEVIN RHODES, ChairAMICUS BRIEF COMMITTEE

INTELLECTUAL PROPERTY

OWNERS ASSOCIATION

1501 M Street, NWSuite 1150Washington, DC 20005(202) 507-4500

APPENDIX

Appendix

1a

APPENDIX1 — MEMBERS OF THE BOARD OFDIRECTORS INTELLECTUAL PROPERTY

OWNERS ASSOCIATION

T.J. AngiolettiOracle USA, Inc.

Angelo N. ChaclasPitney Bowes Inc.

William J. CoughlinFord Global Technologies LLC

Timothy J. CreanSAP AG

Robert DeBerardineSanofi-Aventis

Jeanne D. DoddDow Corning Corp.

Bart EppenauerMicrosoft Corp.

Scott M. FrankAT&T

Michael L. GlennDow Chemical Co.

Jack E. HakenKoninklijke Philips Elec. N.V.

Dennis R. Hoerner, Jr.Monsanto Co.

Carl B. HortonGeneral Electric Co.

Soonhee JangDanisco U.S. Inc.

Michael JaroMedtronic, Inc.

Jennifer K. JohnsonZymoGenetics, Inc.

Philip S. JohnsonJohnson & Johnson

George William JohnstonHoffman-La Roche Inc.

Lisa K. JorgensonSTMicroelectronics, Inc.

1. IPO procedures require approval of positions in briefsby a three-fourths majority of directors present and voting.

Appendix

2a

Dean KamenDEKA R&D Corp.

Charles M. KinzigGlaxoSmithKline

Dennis C. SkarvanCaterpillar Inc.

Russ SliferMicron Technology, Inc.

Wayne SobonAccenture Global Services GmbH

Daniel J. StaudtSiemens Corp.

Brian K. StierwaltConocoPhillips

Thierry SueurAir Liquide

James. J. TrussellBP America, Inc.

Danise Van Vuuren-NieldThe Coca-Cola Co.

Roy WaldronPfizer, Inc.

Bernard J. Graves, Jr.Eastman Chemical Co.

Krish GuptaEMC Corporation

David J. KorisShell International B.V.

Michelle LeeGoogle Inc.

Richard J. Lutton, Jr.Apple Inc.

Jonathan P. MeyerMotorola, Inc.

Steven W. MillerProcter & Gamble Co.

Jeffrey L. MyersAdobe Systems Inc.

Douglas K. NormanEli Lilly and Co.

Richard F. PhillipsExxon Mobil Corp.

Sean O’BrienUnited Technologies Corp.

Appendix

3a

Kevin H. Rhodes3M Innovative Properties Co.

Mark L. RodgersAir Products & Chemicals, Inc.

Manny SchecterIBM Corp.

Robert R. SchroederMars Incorporated

David M. SimonIntel Corp.

Michael WalkerDuPont

BJ WatrousHewlett-Packard Co.

Stuart L. WattAmgen, Inc.

Don WebberCovidien

Paul D. YasgerAbbott Laboratories