The United States Supreme Court recently said it would consider whether Costco Wholesale Corp.’s resale of Omega SA watches, legally purchased by Costco in foreign countries, constitutes copyright infringement. Omega filed suit after Costco imported Omega watches into the United States and sold 43 of them in California in 2004. The Court’s decision will hinge on whether copyright law’s “first-sale doctrine” applies to sales outside of the United States.

Under the first-sale doctrine, a copyright holder’s rights extend only to the first sale of a copyrighted good. In other words, when you purchase a DVD at your local retailer, the “first-sale” has taken place and you are free to resell the DVD (mind you, the physical DVD you purchased, not a copy of it) without risking a suit for copyright infringement. The question is whether buying a legal copy of the same DVD in a foreign country constitutes the first-sale and therefore, whether the copyright holder’s rights are still intact or whether the buyer is free to resell the DVD in the United States.

Before the Ninth Circuit, Omega argued that § 602 of the Copyright Act, which makes importing a copyrighted work an actionable offense, compelled a holding that a foreign sale of a copyrighted good does not constitute a first-sale. The Ninth Circuit agreed with Omega, reversing a decision from the U.S. District Court for the Central District of California.

In its petition for certiorari, Costco argued that excluding sales of foreign purchased goods from the first-sale rule would be “nonsensical,” prohibiting, for instance, libraries from lending foreign books and car rental companies from renting foreign cars. eBay and several other companies filed briefs in support of Costco’s petition, while the U.S. Department of Justice opposed Costco’s petition, claiming the law in the area is well-settled.

Needless to say, the ultimate decision of the Supreme Court could have far-reaching effects on United States retailers. The case is Costco Wholesale Corp. v. Omega SA, case no. 08-1423. The Ninth Circuit’s opinion is located at 541 F.3d 982.