Corporate Strategies, First Sale Rules, and Copyright Misuse: Waiting for Answers From Kirstsaeng v. Wiley and Omega v. Costco (II)
In this Essay, I continue my previous analysis of the first sale rule (or principle of exhaustion) in intellectual property law in the context of international trade. In particular, I highlight the differences between the first sale rules in trademark and copyright law — in particular, international first sale in trademark law and national first sale (at least to date) in copyright law — and criticize the corporate trend to invoke copyright protection for incidental product features of otherwise functional and uncopyrightable products in order to restrict the importation of gray market (genuine) products into the United States. During the past decade, corporations have increasingly turned to copyright law to protect the designs used in their labels, logos, products packaging, and so forth. However, I elaborate in this Essay that this trend is frequently finalized at leveraging the copyright protection on these designs to encompass the entire products to which these designs are affixed, and in turn circumvent the rule of trademark law (international first sale) by blocking the importation of gray market products under the more business-friendly rule of national copyright first sale.
This Essay proceeds as follows. In Part II, I provide a brief overview of the differences between the first sale rules in trademark and copyright law. In Part III, I criticize the growing practice of corporations leveraging copyright protection for incidental features of otherwise uncopyrightable products in order to invoke the principle of national first sale in copyright law for products in their entirety to prevent the importation of gray market products. In particular, I argue that this practice amounts to copyright misuse, as it has been recently recognized by part of the judiciary, and I call upon the courts to consistently embrace this line of reasoning and curtail this misuse of copyright protection by corporations. In Part IV, I evaluate the possible outcomes of Kirtsaeng v. John Wiley & Sons, which is currently pending in the Supreme Court on the territorial extent of the copyright first sale rule, and Omega v. Costco Wholesale, which is currently pending before the Ninth Circuit on the issue of gray market products and copyright misuse. I specifically advocate that the Ninth Circuit finds that Omega misused copyright law when it claimed copyright protection for a small design engraved on the back of its watches to prevent the unauthorized importation of these watches into the United States. In this part, I also call upon Congress to consider a legislative amendment to the text of the Copyright Act to formally prohibit the leveraging of copyright protection for incidental product features in the context of international trade, following the examples of other common law jurisdictions. Still, I conclude, in the immediate future the responsibility remains with the courts — the Ninth Circuit in first instance — to prevent corporations from opportunistically exploiting overlapping copyrights and trademarks.