I have been practicing law long enough to not be surprised easily by anything handed down from the courts.  The Supreme Court of the United States (SCOTUS), however, has engaged in a real “hand-off” this week.  In an earlier post, I wrote about the Ninth Circuit decision in Costco  Wholesale Corp. v. Omega S.A. whereby the Ninth Circuit sided with Omega that the “first sale doctrine” does not apply to copies of works made outside the United States.   In essence, the Ninth Circuit held that “lawfully made under [the Copyright] Act” means “lawfully made in the United States”. Based upon my understanding of the legislative history underlying the Copyright Act and prior Supreme Court precedent, I joined with many of my learned colleagues in criticizing the Ninth Circuit’s rationale and opining that the SCOTUS would likely overturn this ruling.  Low and behold, the SCOTUS handed down a per curium decision whereby the court was forced to “punt” because the justices split 4-4 (Justice Kagan recused herself due to her having argued the case before the court as the United States Solicitor General).  As a result, the circuit court’s decision stands as binding precedent for the Ninth Circuit (California, Nevada, Arizona, Oregon, Washington, Idaho, Montana and Alaska), and operates as persuasive precedent for other jurisdictions to follow for guidance.

Due to the per curium decision (a decision in which the court rules collectively and anonymously without providing a reason), we really have no idea what the justices were thinking…although the split implies there is some serious disagreement between the justices on what constitutes “lawfully made under the Act”.   Huh? In the opinion of this author, the Ninth Circuit’s reasoning relies upon a reading of the Copyright Act that places too much emphasis on extraterritoriality versus global market reality – if “lawfully made under Act” means “lawfully made in the United States”, virtually all resale of goods in the United States that are manufactured abroad would rise to the level of copyright infringement. Making the defense available only where there is a “lawful domestic sale” in the U.S. of the foreign-manufactured goods does not resolve the issue – it arguably exacerbates it.   As I have previously posted,  “[i]n one fell swoop, this decision could effectively eliminate secondary markets for works that have been permissible under the law for over 100 years, and prompt even more outsourcing of manufacturing operations for the United States.”  Given the SCOTUS “non-decision”, U.S. companies are now provided yet another incentive to manufacture goods covered under copyright overseas so they can control the distribution channel into the U.S. in ways they otherwise would not be able.  As if the lagging American economy needed a legal basis for an even more sluggish recovery.

This is not the last we have heard on this issue…let’s just hope that by the time the SCOTUS looks at this issue again, we get more guidance.  The seconds are ticking…

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