The US Supreme Court is entering the legal battle that pits a superpower of the watch world (Omega) against a retail juggernaut (Costco). The Swiss watchmaker hopes to prevent bargain discount sellers like Costco, Target, eBay, Amazon, and others from importing and reselling their watches without the express permission of Omega.
The justices said this will week they will take on Costco's appeal of a lower court ruling in favor of Omega, which found sales of the watches were in violation of Omega's US copyright.
As the Associated Press reported this week:
The high court has previously ruled that copyright protections do not apply to goods made in the United States, sold abroad and then imported back into the country for resale. At issue in this case are items that are manufactured overseas, sold by their maker abroad and then brought back here for resale.
This means of purchase, importation and resale is sometimes called the secondary-goods or gray-goods market, and it is a big part of Costco's business.
And more from Reuters:
Costco obtained watches bearing the copyrighted design from the so-called "grey market" through a series of transactions.
Omega first sold the watches to authorized distributors overseas. Unidentified third parties bought the watches and sold them to a New York company, which in turn sold them to Costco, which sold them to consumers in California.
Although Omega approved the initial foreign sale, it did not authorize importing the watches into the United States or the sales by Costco.
The case will be heard in the fall of 2010.
We've previously argued that many Swiss watch companies tacitly encourage the grey market as a means to liquidate discontinued and excess inventory models quickly. Omega is a brand that has made a concerted effort to go upscale in recent years, so they've tried to regularize their distribution channels but with little success to date.
What do you think of Omega's position?