Gray market goods represent about a $40 billion dollar industry for information technology products alone. When combined with other types of products, the total industry dollar figure attributable to the gray market could go significantly up. The gray market includes only genuine products that flow out of the owner’s intended geographical region of distribution. The purpose is to apply different price schemes based on the local geographical consumer’s ability to pay. The copyright owner is trying to squeeze as much profit out of the copyrighted product as possible throughout the various geographical regions. You can sell products for more money in one country than in another. For example, products can be sold more expensively in the United States than in other developing or third world countries.
In Costco v. Omega, the issue before the 9th Circuit court was whether importing genuine Omega watches into the United States if they were first made and sold outside of the United States constituted copyright infringement. The court held that such one-way importation of products through the gray market violates the copyrights of the owner.
In this follow-up case, Kirsteang v. Wiley, the United States Supreme Court dealt with the same issue. A Thai student studying in the United States imported about 600 genuine textbooks from Thailand which can be purchased for less in Thailand than in the United States. He imported them and sold them to his classmates for a profit. Wiley the publisher sued the Thai student for copyright infringement. Wiley obtained a judgment against the Thai student in the lower court. The United States Supreme Court granted review based on different views on this issue throughout the other Circuit Courts. After a review of the relevant language, its context, and the common-law history of the first sale doctrine, the United States Supreme Court held that the relevant language of the copyright statute “lawfully made under this title” favors a non-geographical interpretation.
One of the many scenarios that would cause a problem with current business structures is with libraries. They have been importing foreign books into U.S. libraries. The Supreme Court didn’t want to prohibit libraries from continuing to do so.
In Kirsteang, the United States Supreme Court held that any genuine product made and sold outside of the United States can be legally imported into the United States. Simply put, the gray market for copyrighted products no longer exists. However, if you are contemplating the importation of copyright products, you must still avoid infringement of any patent, trademark, and trade secret that might be embodied in that product you are importing. You may still run into gray market issues in these other areas of intellectual property.
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