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Discounters and Online Sellers Catch A Break; Supreme Court Rules In Their Favor

In a 6 to 3 decision with a potentially far-reaching impact, the Supreme Court ruled that textbooks and other goods made and sold in foreign countries may be purchased in the country of origin and re-sold online and in discount retail outlets in the U.S.

The court’s ruling covers a wide variety of goods, starting with copyrighted books, but also includes designer clothing, considered intellectual property, and therefore protected from infringement.

With this new judicial sanction, discounters and off-price retailers have recovered a large measure of the leverage they lost to manufacturers in the Costco v. Omega case of 2010.

In that case, the Supreme Court held that manufacturers and brands have the right to control distribution, pricing and resale in the U.S. of its imported foreign-made products.

The legal issue in question was the “first-sale doctrine,” of U.S. copyright law, in which a manufacturer’s rights to distribution are terminated after its first authorized sale. The “first-sale doctrine,” the high court ruled, allows any individual or business with a lawfully made product to sell it without approval of the copyright owner.

Major retailers such as Wal-Mart, Sam’s Club and Costco will reap the benefits of the court’s decision, say legal experts.  Consumers and small entrepreneurs who resell foreign-made products online, will also profit from the ruling.

“What we have now is no geographical distinction to the extent to which copyright protection is afforded to manufacturers, whether the goods are made in the U.S. or…overseas and imported legally into the U.S.,” said Joel Benoliel, chief legal officer of Costco.

“The big picture view [of the court’s decision] is this is a victory for consumers,” he said.