The Saga of Omega v. Costco Wholesale Corp.

Omega makes its watches in Switzerland and distributes them globally through a network of authorized distributors and retailers. The Omega Globe Design was three millimeters in size and was inscribed on the backside of certain of Omega's watches. Costco obtained the watches outside the United States where Omega had originally sold them to authorized distributors. Costco then sells these gray market watches in the United States at a significant discount.

Omega sued Costco in 2004 for copyright infringement for the unauthorized importation of watches bearing the U.S. copyrighted Omega Globe Design. At the district court, Costco moved for summary judgment that it was entitled to invoke the first sale defense. Costco argued that Omega's authorized sale of the watches bearing the copyrighted Globe Design exhausted Omega's ability to use its U.S. copyright to control future sales, even though those initial sales were outside the United States. Costco also alleged copyright misuse. Omega moved to strike Costco's affirmative defense of copyright misuse. Judge Terry J. Hatter, of the Central District of California, granted Costco's motion for summary judgment “without explanation,” and did not decide the copyright misuse issue on the grounds that Omega's motion to strike the defense was mooted. Omega appealed to the Ninth Circuit.