High court reviews Costco sale of Swiss watches

The Supreme Court is weighing whether Costco and other discount sellers can offer cut-rate goods from foreign manufacturers without violating U.S. copyright laws.

The justices heard argument Monday in a dispute between Costco and the Swiss watch maker Omega over a line of watches that Costco sold for a third less than they cost elsewhere.

The case has important implications for discount sellers like Costco and Target as well as eBay, Amazon and other companies that form an estimated $58 billion annual market for goods that are purchased abroad, then imported and resold without the permission of the manufacturer. The U.S.-based sellers, and consumers, benefit from the common practice of manufacturers to price items more cheaply abroad than in the United States.

The software, book, music and movie industries say a broad ruling for Costco also could threaten their ability to retain control over copyrighted works. By contrast, public and university libraries worry that a decision in favor of Omega could force them to withdraw foreign-made books from circulation.

Omega sued Costco for copyright infringement after the wholesale membership club offered Omega's Seamaster watch for $1,299. The suggested retail price was $1,995.

Costco purchased the watches from a company in New York. Omega initially sold at least some of the watches to an authorized distributor in Paraguay.

The high court already has ruled that copyright protections do not apply when the goods are made in the U.S., sold abroad and reimported. This case concerns only foreign-made items.

A decision is expected by spring.

The case is Costco Wholesale Corp. v. Omega, S.A., 08-1423.