Earlier this year, a US court ruled that Costco could legally sell 117 Omega Seamaster watches that it had obtained on the ‘grey market’.
Grey market trading occurs when authentic branded product is bought and sold outside of the manufacturer’s authorised trading channels. In this case, Costco acquired Omega watches from third-party businesses.
While legal, such distribution is usually not sanctioned by the original manufacturer, and in bypassing Omega’s official channels, Costco was able to sell the product for US$600 (AU$843) less than the recommended retail price.
Omega initiated legal action against Costco in 2004, claiming the retailer was infringing on its copyrighted globe design, which it had started engraving on the back of its watches after receiving complaints from authorised Omega distributors about Costco.
The case continued for years, with court rulings being appealed and judgements reversed, until the matter finally appeared to come to a head in January this year.
At that time, a three-judge panel reaffirmed an earlier US district court’s determination that Omega had misused its copyright by engraving the globe design with the intent to eliminate Costco as its competition. Omega was subsequently ordered to pay Costco around US$400,000 (AU$562,065) in legal fees.
A report by legal news service Law360 indicated that the US Supreme Court later made another ruling in Costco’s favour that reinstated a 2007 court decision.
The 2007 determination stated that the first sale doctrine – which stipulates that a copyright owner cannot claim infringement for distribution of copies of copyrighted work after consenting to the initial sale – was a “complete defence to Omega’s claims”, but this judgement was later reversed in 2008 on the basis that it did not apply to overseas manufactured goods that had been imported into the US.
However, following the 2008 decision, the Supreme Court was said to have made a ruling on a separate, unrelated case declaring the first sale doctrine must, in fact, apply to legally purchased, foreign-made goods.
In August this year, Omega reportedly appealed to the Supreme Court to review its case, arguing that the order that required it to pay US$400,000 in fees had been based on grounds that had since been invalidated.
According to Law360, however, it appears Omega recently dropped its petition to the Supreme Court voluntarily, ending the decade-long court dispute with Costco.
Costco vs Tiffany & Co
In related news, multiple media sources suggest Costco was recently denied a request to fast-track an appeal for a separate, unrelated legal battle with Tiffany & Co.
As previously reported by Jeweller, Tiffany & Co initially filed suit against Costco in February 2013, claiming the retailer was falsely selling Tiffany-branded diamond engagement rings. Tiffany & Co was granted summary judgement in September this year when a US district court rejected Costco’s argument that ‘Tiffany setting’ was a generic industry term.
It was said that not long after the court’s decision, Costco filed a motion to speed up the appeal, stating that the negative publicity resulting from the case was causing the business “ongoing, irreparable harm … [and] causing Costco to suffer every day”.
The appeals court reportedly dismissed Costco’s request last week on the basis that it was too early for the case to be appealed. However, the retailer will be able to re-file an appeal after the jury trial has concluded.
Reports indicated the trial was scheduled for January next year.
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