The First Sale Doctrine After Costco: Brilliantly Reconciling Decades of Legislative Revision; The Forgotten Curse of the Manufacturing Clause; or Just Plain Bad Statutory Drafting?

Authored by Patrick J. Coyne

Straus’ first sale doctrine has survived numerous attacks seeking to limit its scope. The most recent is the Ninth Circuit’s decision in Omega, S.A. v Costco Wholesale Corp. In a prior assault on the first sale doctrine, in Quality King v. L’Anza, the U.S. Supreme Court held that a product bearing a copyrighted work that was made by the copyright owner in the United States, exported, and re-imported into the United States, nonetheless, was subject to the first sale doctrine. Justice Stevens’ wide-ranging opinion resolved this issue but drew criticism that it was too wide-ranging.

This article by Finnegan partner Patrick J. Coyne, presents the case for two alternative results:

1. The first sale defense applies in Costco for the same reasons that required its application in Quality King. As Justice Stevens wrote in Quality King, “once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution”; or
2. The first sale defense does not limit infringement liability for unauthorized importation under 17 U.S.C. § 602(a) because the act of importation involves neither a sale nor disposition of a copy that would trigger the first sale doctrine. The difference in Quality King was that the work was distributed “to the public” inside the United States,
   exhausting the copyright owner’s rights before importation. No such U.S. sale or disposition of the copies took place prior to importation in Costco.

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