Omega Beats Costco in Grey Market Case

A tie vote by the Supreme Court on Dec. 13 means that watch
brand Omega can prevent “grey market” versions of its watches from being sold
at retailer Costco.

The court evenly split
4-4 on the case of Costco Wholesale Corp.
v. Omega S.A
, in effect upholding a September 2008 U.S. Court of Appeals,
Ninth Circuit ruling
in favor of Omega. Justice Elana
Kagan sat out the case.

Because the court did not issue an opinion, this ruling will
not have the power of precedent, which means the grey market issue has not been
settled, commentators said.

The case began in 2004, when Omega sued Costco in federal
court in California over its sales of grey market watches. The term refers to a
practice in which retailers buy brands from unauthorized dealers located
overseas and resell them at lower prices in the United States.

The case differed from past fights in that Omega used
copyright infringement to fight its case. Since Omega watches sold by Costco
carry the watch company’s copyrighted icon, the company argued that selling
them without its authorization violates U.S. copyright law. 

But Costco argued that the case could impede the ability of
retailers to sell products without authorization, and court briefs supporting
Costco were filed by eBay,
which argued that the ruling “permit[s] copyright owners to control downstream

Costco did not respond to a request from JCK for comment. The Swatch Group, Omega’s parent, sent out a statement saying it “commend[s] the decision as it provides a legal
mechanism to help control the spread of grey market trading.”