costco wins in supreme court

[htc8p]

http://consumerist.com/2015/01/21/fe...ga-watch-case/

[1William]

Interesting.

[wantonebad]

"Cheap-ish" watches not cheap...

[SMD]

Bad news for Rolex in the US. Good news for watch buyers.

[Kobayashi]

Thanks. I've been following this case.

[Passionata]

Originally Posted by SMD

Bad news for Rolex in the US. Good news for watch buyers.

Not really , AFAIK Rolex is protected from paralel import by the TM law ,
quote
Tariffs Act § 526
§ 526 prohibits absolutely importation of products
‘that bears a trademark owned by a citizen of the
US... and is registered in the US Patents and
Trademarks Office.’
Such a ban on importation does
not require a likelihood of confusion of the customers.
Where there is a parent-subsidiary relation between
foreign manufacturer and US distributor, the Tariff
Act cannot be used to stop imported gray goods.
13
However if the trademark is owned and registered in
the US by an exclusive distributor who is independent
of the foreign manufacturer and who has separate
goodwill in the product, the distributor is entitled
under §526 to prevent importation even of genuine
merchandise obtained from the same foreign manufacturer.
unquote
http://nopr.niscair.res.in/bitstream...29%2014-27.pdf

[subtona]

Interesting read until the "cheap watch" comment at the end

[locutus49]

Maybe I misunderstand the article, but it sounds like Omega makes two tiers of watches: one for first world countries, the other, less expensive versions for 3rd world countries.

And the ruling says that Costco can buy the 2nd tier (presumably less expensive components) Omega watches and sell them in the US, undermining Omega's two tier strategy.

Correct me If I got this wrong.

[wantonebad]

Originally Posted by locutus49

Maybe I misunderstand the article, but it sounds like Omega makes two tiers of watches: one for first world countries, the other, less expensive versions for 3rd world countries.

And the ruling says that Costco can buy the 2nd tier (presumably less expensive components) Omega watches and sell them in the US, undermining Omega's two tier strategy.

Correct me If I got this wrong.

That's kind of how I took it as well but I had assumed it meant Quartz vs. Mechanical, now I'm not sure. I don't think there are two tiers of mechanical watches?

[Cuts33]

Originally Posted by locutus49

Maybe I misunderstand the article, but it sounds like Omega makes two tiers of watches: one for first world countries, the other, less expensive versions for 3rd world countries.

And the ruling says that Costco can buy the 2nd tier (presumably less expensive components) Omega watches and sell them in the US, undermining Omega's two tier strategy.

Correct me If I got this wrong.

The watches that Omega was manufacturing and continues to manufacture are the same.

This is quite frankly one of the dumbest lawsuits I have ever seen and Costco rightfully so not only won, but got several hundred grand in attorney's fees awarded.

For such a conglomerate, Omega/Swatch had some real geniuses behind this and Costco selling Omega watches for the discount they were offering back in 2003 was entirely Omega's own doing.

For anyone who did not follow, Omega manufactured the watches and sold them to distributors. They have distributors in every country and those distributors then sell to the authorized dealers who then sell to the public.

The problem Omega created for itself was that it was charging its distributors different prices based on where they were located. For example, the market in Paraguay at the time was not interested in buying a $2,000.00 USD watch. But the market in the US would buy a $2,000.00 USD watch.

Therefore, the distributors in Paraguay got a better price than the distributors in the US and the eventual MSRP in Paraguay was less than the MSRP in the US.

So what did Costco and this other third party ENE Limited do? They went straight to the Latin American distributor and bought up their inventory at what in US dollars was a ridiculous discount over what a US distributor would charge.

The Court's holding, which I agree with, is that it is Omega's fault for not having a tighter leash on its distributors and its distribution channel as a whole.

This would never happen with Rolex who has their supply channel by the balls.

Omega created the very situation they were facing and they have nobody to blame but themselves.

Also, given the high number of watches and significant discounts you can still find to this day from gray market dealers on Omega watches, its pretty clear to me that they still have not learned their lesson and still have not figured out how to rein in their distributors. You can even find many Omega watches being sold on the forums from trusted dealers that have AD stamps from Switzerland and other parts of Europe.

Until this gets sorted out by Omega/Swatch and they can solve this issue, the days of everyone expecting a 20-25% discount on Omega watches are not going to end.

[SMD]

I understand this was a copyright case instead of a trademark case, but the concept of the first sale doctrine is the same in both contexts, and it is not a big leap to apply the same logic to trademark law. The way the trademark laws are being used under the Tariffs Act is simply to reduce competition. Of course it will have to be litigated, but I would not be surprised to see a Costco purchase grey Rolexes and take the same positions.

Originally Posted by Passionata

Not really , AFAIK Rolex is protected from paralel import by the TM law ,
quote
Tariffs Act § 526
§ 526 prohibits absolutely importation of products
‘that bears a trademark owned by a citizen of the
US... and is registered in the US Patents and
Trademarks Office.’
Such a ban on importation does
not require a likelihood of confusion of the customers.
Where there is a parent-subsidiary relation between
foreign manufacturer and US distributor, the Tariff
Act cannot be used to stop imported gray goods.
13
However if the trademark is owned and registered in
the US by an exclusive distributor who is independent
of the foreign manufacturer and who has separate
goodwill in the product, the distributor is entitled
under §526 to prevent importation even of genuine
merchandise obtained from the same foreign manufacturer.
unquote
http://nopr.niscair.res.in/bitstream...29%2014-27.pdf

[Passionata]

Originally Posted by SMD

I understand this was a copyright case instead of a trademark case, but the concept of the first sale doctrine is the same in both contexts, and it is not a big leap to apply the same logic to trademark law. The way the trademark laws are being used under the Tariffs Act is simply to reduce competition. Of course it will have to be litigated, but I would not be surprised to see a Costco purchase grey Rolexes and take the same positions.

I guess those Rolex watches will be confiscated by US customs as soon C. will try to customs clear them .

[IWantOne]

Originally Posted by SMD

I understand this was a copyright case instead of a trademark case, but the concept of the first sale doctrine is the same in both contexts, and it is not a big leap to apply the same logic to trademark law. The way the trademark laws are being used under the Tariffs Act is simply to reduce competition. Of course it will have to be litigated, but I would not be surprised to see a Costco purchase grey Rolexes and take the same positions.

I believe Costco already sell Rolexes in the US and in the UK.

I think this court case is similar to the supermarkets (Tesco's I think) who bought not direct from Levi's and sold their Jeans below MSRP.

[subtona]

just one of the global market pitfalls or windfalls depending on your perspective.

[T. Ferguson]

Originally Posted by subtona

Interesting read until the "cheap watch" comment at the end

I took that to mean cheap relative to the price at most other retailers - not as in it's a cheap product in the general sense.

Originally Posted by IWantOne

I believe Costco already sell Rolexes in the US and in the UK...

They do on occasion. But I'm guessing the ones sold in the U.S. were purchased from a U.S. AD and were therefore imported legally.

[FTX I]

Originally Posted by Cuts33

The watches that Omega was manufacturing and continues to manufacture are the same.

This is quite frankly one of the dumbest lawsuits I have ever seen and Costco rightfully so not only won, but got several hundred grand in attorney's fees awarded.

For such a conglomerate, Omega/Swatch had some real geniuses behind this and Costco selling Omega watches for the discount they were offering back in 2003 was entirely Omega's own doing.

For anyone who did not follow, Omega manufactured the watches and sold them to distributors. They have distributors in every country and those distributors then sell to the authorized dealers who then sell to the public.

The problem Omega created for itself was that it was charging its distributors different prices based on where they were located. For example, the market in Paraguay at the time was not interested in buying a $2,000.00 USD watch. But the market in the US would buy a $2,000.00 USD watch.

Therefore, the distributors in Paraguay got a better price than the distributors in the US and the eventual MSRP in Paraguay was less than the MSRP in the US.

So what did Costco and this other third party ENE Limited do? They went straight to the Latin American distributor and bought up their inventory at what in US dollars was a ridiculous discount over what a US distributor would charge.

The Court's holding, which I agree with, is that it is Omega's fault for not having a tighter leash on its distributors and its distribution channel as a whole.

This would never happen with Rolex who has their supply channel by the balls.

Omega created the very situation they were facing and they have nobody to blame but themselves.

Also, given the high number of watches and significant discounts you can still find to this day from gray market dealers on Omega watches, its pretty clear to me that they still have not learned their lesson and still have not figured out how to rein in their distributors. You can even find many Omega watches being sold on the forums from trusted dealers that have AD stamps from Switzerland and other parts of Europe.

Until this gets sorted out by Omega/Swatch and they can solve this issue, the days of everyone expecting a 20-25% discount on Omega watches are not going to end.

Nice. Thanks for sharing.

[htc8p]

The US court give more importance on consumers rather than omega control and profits. which is rightly so.

but in other countries it is harder to sell gray market openly like costco did

[Wesley Crusher]

Good for Costco. You can't fault them for what they did. If Omega doesn't want things like this to happen, they would have a tighter control over their distribution network.

Actually, that is what they are doing now... pulling out of ADs and focusing on boutiques.