Costco's right to hawk cheap, foreign-made goods in U.S. stores reached the ears of the United States Supreme Court on Monday. The case started originally when Swiss luxury watch company Omega sued Costco for buying its "Seamaster" watches from foreign distributors on the cheap, then selling them back home at a deep discount. At stake are more than watches, however, as the case looks to set precedent in an estimated $58 billion "gray market" that exists within the ambiguity of U.S. copyright law.
The gray market works when companies like Costco buy expensive goods in countries where they are much cheaper, then import them to American stores, where even at the discount price they're sold for, the company still makes a profit.
The practice, which, besides Costco, is common at companies like eBay,Target and Amazon, drives manufacturers up the wall. They contend that it costs them dearly when retail stores don't buy directly from them, but rather from foreign third parties that may have no relationship with the manufacturer.
There is some precedent that the justices are working with. The first is a similar, if backwards, ruling that says copyright holders cannot stop American made goods that are sent overseas from being re-imported and sold here.
There's also a 1909 law called the "first-sale doctrine" that says once a company sells even one item abroad that it can't sue when that product is then imported back into the U.S. and sold at a discount.
The case is being watched closely by book, software, music and movie companies that are concerned that if Costco wins, it could threaten their control over copyrighted works. Libraries, meanwhile, are worried that if Omega wins, they may have to pull foreign-made books from circulation.
The whole thing is all a bit perplexing. And so far, no one seems to be able to get a read on how the justices might rule.
But considering the the high court is of the oft-stated opinion that corporations are the same as individuals, it would seem that an individual's right to sell a $10 item in the U.S for $5 in Mexico without worrying that the guy in the U.S will just start buying it in Mexico and selling it back home for $7.50, seems to be questionable.