Court Opinion

ID: 3052861
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:44:31.783475+00
Date Added: 2024-06-11T11:49:28.450318
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

OMEGA S.A.,                               Nos. 07-55368
               Plaintiff-Appellant,             07-56206
                v.                          D.C. No.
COSTCO   WHOLESALE CORPORATION,           CV-04-05443-TJH
              Defendant-Appellee.
                                            OPINION

         Appeal from the United States District Court
            for the Central District of California
          Terry J. Hatter, District Judge, Presiding

                    Argued and Submitted
             July 15, 2008—Pasadena, California

                  Filed September 3, 2008

  Before: Barry G. Silverman, Johnnie B. Rawlinson, and
           Milan D. Smith, Jr., Circuit Judges.

            Opinion by Judge Milan D. Smith, Jr.

                            12107
12110               OMEGA v. COSTCO

                      COUNSEL

David S. Richman and Kenneth E. Johnson, Theodora
Oringher Miller & Richman, P.C., Los Angeles, California;
                      OMEGA v. COSTCO                   12111
Barry R. Levy, Horvitz & Levy LLP, Encino, California, for
the plaintiff-appellant.

Aaron J. Moss and Norman H. Levine, Greenberg Glusker
Fields Claman & Machtinger LLP, Los Angeles, California,
for the defendant-appellee.

W. Stephen Cannon and Seth D. Greenstein, Constantine
Cannon LLP, Washington, D.C., for the amici curiae.

                         OPINION

MILAN D. SMITH, JR., Circuit Judge:

   In this opinion, we address whether the Supreme Court’s
decision in Quality King Distributors, Inc. v. L’anza Research
International, Inc., 523 U.S. 135 (1998), requires us to over-
rule our precedents that allow a defendant in a copyright
infringement action to claim the “first sale doctrine” of 17
U.S.C. § 109(a) as a defense only where the disputed copies
of a copyrighted work were either made or previously sold in
the United States with the authority of the copyright owner.
Plaintiff-Appellant Omega, S.A. (Omega) filed claims for
infringing distribution and importation under 17 U.S.C.
§§ 106(3) and 602(a) in response to Defendant-Appellee
Costco Wholesale Corporation’s (Costco) unauthorized sale
of authentic, imported Omega watches bearing a design regis-
tered at the U.S. Copyright Office. The district court granted
summary judgment to Costco on the basis of the first sale
doctrine, and awarded attorney’s fees. We have jurisdiction
pursuant to 28 U.S.C. § 1291, and we reverse.

   This circuit has construed 17 U.S.C. § 109(a) to provide no
defense to an infringement action under §§ 106(3) and 602(a)
that involves (1) foreign-made, nonpiratical copies of a U.S.-
copyrighted work, (2) unless those same copies have already
12112                      OMEGA v. COSTCO
been sold in the United States with the copyright owner’s
authority. We hold that the first portion of this construction is
not “clearly irreconcilable” with Quality King, and that it
remains the law of this circuit. See Miller v. Gammie, 335
F.3d 889, 900 (9th Cir. 2003) (en banc). Because there is no
genuine dispute that Omega made the copies of the Omega
Globe Design in Switzerland, and that Costco sold them in the
United States without Omega’s authority, the first sale doc-
trine is unavailable as a defense to Omega’s claims.

 I.   FACTUAL AND PROCEDURAL BACKGROUND

   The facts are not disputed. Omega manufactures watches in
Switzerland and sells them globally through a network of
authorized distributors and retailers. Engraved on the under-
side of the watches is a U.S.-copyrighted “Omega Globe
Design.”

   Costco obtained watches bearing the copyrighted design
from the “gray market”1 in the following manner: Omega first
sold the watches to authorized distributors overseas. Unidenti-
fied third parties eventually purchased the watches and sold
them to ENE Limited, a New York company, which in turn
sold them to Costco. Costco then sold the watches to consum-
ers in California. Although Omega authorized the initial for-
eign sale of the watches, it did not authorize their importation
into the United States or the sales made by Costco.

  Omega filed a lawsuit alleging that Costco’s acquisition
and sale of the watches constitute copyright infringement
  1
    “ ‘Gray-market’ goods, or ‘parallel imports,’ are genuine products pos-
sessing a brand name protected by a trademark or copyright. They are typ-
ically manufactured abroad, and purchased and imported into the United
States by third parties, thereby bypassing the authorized U.S. distribution
channels.” Parfums Givenchy, Inc. v. Drug Emporium, Inc., 38 F.3d 477,
481 n.6 (9th Cir. 1994). Retailers are able to sell these products at a dis-
count because the gray market arbitrages international discrepancies in
manufacturers’ pricing systems.
                       OMEGA v. COSTCO                   12113
under 17 U.S.C. §§ 106(3) and 602(a), and subsequently
moved for summary judgment. Costco filed a cross-motion on
the basis of 17 U.S.C. § 109(a), arguing that, under the first
sale doctrine, Omega’s initial foreign sale of the watches pre-
cludes claims of infringing distribution and importation in
connection with the subsequent, unauthorized sales. The dis-
trict court ruled without explanation in favor of Costco on
both motions. The court also awarded $373,003.80 in attor-
ney’s fees to Costco under 17 U.S.C. § 505. This appeal fol-
lowed.

              II.   STANDARD OF REVIEW

   We review de novo a district court’s grant of summary
judgment under Federal Rule of Civil Procedure 56. Buono v.
Norton, 371 F.3d 543, 545 (9th Cir. 2004). Rule 56(c) pro-
vides that summary judgment is warranted when the “plead-
ings, the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any mate-
rial fact and that the movant is entitled to judgment as a mat-
ter of law.” We review a district court’s award of attorney’s
fees under 17 U.S.C. § 505 for an abuse of discretion. Colum-
bia Pictures Television, Inc. v. Krypton Broad. of Birming-
ham, Inc., 259 F.3d 1186, 1197 (9th Cir. 2001).

                    III.   DISCUSSION

   [1] The viability of Omega’s infringement claims hinges on
the relationship among three sections of the Copyright Act of
1976: 17 U.S.C. §§ 106(3), 109(a), and 602(a). In relevant
part, § 602(a) reads:

    Importation into the United States, without the
    authority of the owner of copyright under this title,
    of copies . . . of a work that have been acquired out-
    side the United States is an infringement of the
12114                      OMEGA v. COSTCO
      exclusive right to distribute copies . . . under section
      106, actionable under section 501.2

Section 106(3) states:

      Subject to sections 107 through 122, the owner of
      copyright under this title has the exclusive rights . . .
      to distribute copies . . . of the copyrighted work to
      the public by sale or other transfer of ownership, or
      by rental, lease, or lending.

Finally, § 109(a) provides:

      Notwithstanding the provisions of section 106(3),
      the owner of a particular copy . . . lawfully made
      under this title, or any person authorized by such
      owner, is entitled, without the authority of the copy-
      right owner, to sell or otherwise dispose of the pos-
      session of that copy . . . .

This last section codifies the so-called “first sale doctrine,”
which holds that “[o]nce [a] copyright owner consents to the
sale of particular copies of his work, he may not thereafter
exercise the distribution right with respect to those copies.” 2-
8 Melville B. Nimmer & David Nimmer, Nimmer on Copy-
right § 8.12(B)(1), at 8-156 (1978 ed.).

   [2] The text of the Copyright Act establishes by syllogism
that the first sale doctrine of § 109(a) limits § 602(a): First,
given that § 106(3) is “subject to sections 107 through 122”
and § 109 falls within the designated portion of the Code,
§ 109(a) limits the exclusive distribution right in § 106(3).
Second, infringing importation under § 602(a) is merely a
  2
   Section 501(a) provides: “Anyone who violates any of the exclusive
rights of the copyright owner as provided by sections 106 through 122, . . .
or who imports copies . . . into the United States in violation of section
602, is an infringer of the copyright . . . .”
                            OMEGA v. COSTCO                          12115
subcategory of “infringement of the exclusive right to distrib-
ute copies . . . under section 106,” so conduct that does not
violate § 106(3) cannot constitute infringement under
§ 602(a). Finally, because conduct covered by § 109(a) does
not violate § 106(3), and because absent a violation of
§ 106(3) there cannot be infringement under § 602(a), conduct
covered by § 109(a) does not violate § 602(a). In short,
infringement does not occur under § 106(3) or § 602(a) where
“the owner of a particular copy . . . lawfully made under this
title” imports and sells that copy without the authority of the
copyright owner. 17 U.S.C. § 109(a);3 see Quality King Dis-
tribs., Inc. v. L’anza Res. Int’l, Inc., 523 U.S. 135, 144-45
(1998) (adopting this interpretation).

   [3] Omega concedes that § 109(a) generally limits
§§ 106(3) and 602(a), but contends that § 109(a) does not
apply in this case. Specifically, Omega argues that § 109(a)
provides no defense to the infringement claims because,
although the Omega Globe Design was copyrighted in the
United States, the watches bearing the design were manufac-
tured and first sold overseas. Omega claims that the copies of
the design were not “lawfully made under [Title 17]” in these
circumstances. 17 U.S.C. § 109(a). Costco responds that
although Omega’s position is correct under BMG Music v.
Perez, 952 F.2d 318 (9th Cir. 1991), Parfums Givenchy, Inc.
v. Drug Emporium, Inc., 38 F.3d 477 (9th Cir. 1994), and
Denbicare U.S.A. Inc. v. Toys “R” Us, Inc., 84 F.3d 1143 (9th
Cir. 1996), the Supreme Court effectively overruled those
cases in Quality King, 523 U.S. 135. For the reasons set forth
below, we hold that Quality King did not invalidate our gen-
eral rule that § 109(a) can provide a defense against §§ 106(3)
and 602(a) claims only insofar as the claims involve domesti-
cally made copies of U.S.-copyrighted works. Because we
  3
   Other parts of § 109 qualify the first sale doctrine of § 109(a), see gen-
erally 17 U.S.C. § 109, but the parties do not argue that any of those limit-
ing provisions apply.
12116                  OMEGA v. COSTCO
also conclude that the exception to that rule does not apply,
§ 109(a) provides no defense in this case.

  A.    Current Rule in the Circuit

   [4] Omega’s position was clearly correct under pre-Quality
King Ninth Circuit precedent. This court has twice held on
indistinguishable facts that § 109(a) provides no defense
against a claim under § 602(a). In BMG Music, the defendant
purchased copies of the plaintiffs’ U.S.-copyrighted, foreign-
manufactured sound recordings, imported them into the
United States without the plaintiffs’ authorization, and then
sold them to the public. 952 F.2d at 319. Following CBS v.
Scorpio Music Distributors, 569 F. Supp. 47, 49 (E.D. Pa.
1983), aff’d without opinion, 738 F.2d 424 (3d Cir. 1984), we
held that § 109(a) provided no defense against a claim under
§ 602(a) in the circumstances because the phrase “lawfully
made under this title” in § 109(a) “grants first sale protection
only to copies legally made and sold in the United States,”
and the copies at issue were made and first sold abroad. 952
F.2d at 319. The rationale for this interpretation was twofold:
First, a contrary interpretation would impermissibly extend
the Copyright Act extraterritorially. Id. (citing Scorpio, 569 F.
Supp. at 49). Second, the application of § 109(a) after foreign
sales would “ ‘render § 602 virtually meaningless’ ” as a tool
against the unauthorized importation of nonpiratical copies
because importation is almost always preceded by at least one
lawful foreign sale that will have exhausted the distribution
right on which § 602(a) is premised. Id. at 319-20 (quoting
Scorpio, 569 F. Supp. at 49).

   [5] Drug Emporium, 38 F.3d 477, followed BMG Music by
holding on similar material facts that § 109(a) provided no
defense. However, we criticized the prior interpretation of
§ 109(a)’s key phrase—“lawfully made under this title.” By
permitting the first sale defense only against claims involving
copies that are “legally made and sold in the United States,”
BMG Music appeared to give greater copyright protection to
                          OMEGA v. COSTCO                         12117
foreign-made copies than to their domestically made counter-
parts. See 38 F.3d at 482 n.8. We found that “such a result
would be untenable, and that nothing in the legislative history
or text of § 602 supports such an interpretation.” Id.; see also
2 Paul Goldstein, Goldstein on Copyright § 7.6.1, at 142 (3d
ed. 2007) (criticizing the approach in BMG Music and Scor-
pio). We therefore created an exception to BMG Music, con-
cluding that § 109(a) can apply to copies not made in the
United States so long as an authorized first sale occurs here.
Drug Emporium, 38 F.3d at 481.

   Denbicare, which involved copies made in Hong Kong and
voluntarily sold by the U.S. copyright owner within the
United States, applied the exception created by Drug Empo-
rium. Denbicare, 84 F.3d at 1145-46. The copyright owner
sued under §§ 106(3) and 602(a) after the defendant pur-
chased the copies and resold them without permission, but we
rejected the claims: The defendant was not liable for infring-
ing importation under § 602(a) because the disputed copies
were imported by third parties prior to the defendant’s pur-
chase and resale. Id. at 1149. The defendant also was not lia-
ble under § 106(3) because, in light of § 109(a) and Drug
Emporium, the copyright owner’s voluntary sale of the copies
within the United States exhausted the exclusive right of dis-
tribution. Id. at 1149-50.

   [6] Under these cases, Costco would not be entitled to sum-
mary judgment on the basis of § 109(a). The statute would not
apply because Omega made copies of the Omega Globe
Design in Switzerland and Costco sold the copies without
Omega’s authority in the United States. The district court’s
unexplained grant of summary judgment on the basis of
§ 109(a) was at odds with BMG Music, Drug Emporium, and
Denbicare.4
  4
    Denbicare’s rejection of a § 602(a) claim due to the defendant’s lack
of involvement in importation suggests that Omega’s claim under § 602(a)
is similarly unmeritorious because, like the defendant in Denbicare,
12118                     OMEGA v. COSTCO
  B.    The Impact of Quality King

   We next address the degree to which the Supreme Court’s
decision in Quality King invalidates this circuit’s construction
of § 109(a). This panel may overrule BMG Music, Drug
Emporium, and Denbicare if Quality King “undercut[s] the
theory or reasoning underlying the prior circuit precedent in
such a way that the cases are clearly irreconcilable.” Miller,
335 F.3d at 900.

                                  1.

   [7] It is clear that Quality King did not directly overrule
BMG Music, Drug Emporium, and Denbicare. Quality King
involved “round trip” importation: a product with a U.S.-
copyrighted label was manufactured inside the United States,
exported to an authorized foreign distributor, sold to unidenti-
fied third parties overseas, shipped back into the United States
without the copyright owner’s permission, and then sold in
California by unauthorized retailers. 523 U.S. at 138-39. The
Court held that § 109(a) can provide a defense to an action
under § 602(a) in this context. Id. at 144-52. However,
because the facts involved only domestically manufactured
copies, the Court did not address the effect of § 109(a) on
claims involving unauthorized importation of copies made
abroad. See id. at 154 (Ginsburg, J., concurring) (“[W]e do
not today resolve cases in which the allegedly infringing
imports were manufactured abroad.”). Moreover, the Court
never discussed the scope of § 109(a) or defined what “law-
fully made under this title” means.

Costco did not import the disputed copies. See 84 F.3d at 1149. However,
Costco waived this argument by not raising it in its opening brief. See
Greenwood v. FAA, 28 F.3d 971, 977 (9th Cir. 1994) (“We review only
issues which are argued specifically and distinctly in a party’s opening
brief.”). In any event, we must still decide whether § 109(a) provides a
defense against Omega’s claim under § 106(3).
                          OMEGA v. COSTCO                         12119
                                   2.

   [8] We next consider whether the reasoning5 of Quality
King is clearly irreconcilable with our general rule that
§ 109(a) is limited to copies “legally made . . . in the United
States.” BMG Music, 952 F.2d at 319; see also Denbicare, 84
F.3d at 1150. The basis for that rule was our concern that
applying § 109(a) to foreign-made copies would violate the
presumption against the extraterritorial application of U.S.
law. BMG Music, 952 F.2d at 319 (citing Scorpio, 569 F.
Supp. at 49); cf. Subafilms, Ltd. v. MGM-Pathe Commc’ns
Co., 24 F.3d 1088, 1093-98 (9th Cir. 1994) (en banc)
(describing the “undisputed axiom” that United States copy-
right law has no extraterritorial application). Quality King dis-
missed a similar concern that the triggering of § 109(a) by
foreign sales would require an invalid extraterritorial applica-
tion of the Copyright Act, explaining that merely recognizing
the occurrence of such sales “does not require the extraterrito-
rial application of the Act any more than § 602(a)’s ‘acquired
abroad’ language does.” 523 U.S. at 145 n.14. Costco con-
tends that this explanation is irreconcilable with our interpre-
tation of § 109(a) in BMG Music.

   [9] We reject Costco’s contention and hold that the
Supreme Court’s brief discussion on extraterritoriality is not
“clearly irreconcilable” with our general limitation of § 109(a)
to copies that are lawfully made in the United States. Miller,
335 F.3d at 900. The common understanding of the presump-
tion against extraterritoriality is that a U.S. statute “appl[ies]
only to conduct occurring within, or having effect within, the
territory of the United States, unless the contrary is clearly
indicated by the statute.” Restatement (Second) of Foreign
Relations Law of the United States § 38 (1965); see also
  5
   “[L]ower courts [are] bound not only by the holdings of higher courts’
decisions but also by their ‘mode of analysis.’ ” Miller, 335 F.3d at 900
(quoting Antonin Scalia, The Rule of Law as a Law of Rules, 56 U. Chi.
L. Rev. 1175, 1177 (1989)).
12120                   OMEGA v. COSTCO
EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991).
Recognizing the importance of avoiding international con-
flicts of law in the area of intellectual property, however, we
have applied a more robust version of this presumption to the
Copyright Act, holding that the Act presumptively does not
apply to conduct that occurs abroad even when that conduct
produces harmful effects within the United States. See Suba-
films, Ltd., 24 F.3d at 1096-98; see also William S. Dodge,
Understanding the Presumption Against Extraterritoriality,
16 Berkeley J. Int’l L. 85, 101 (1998) (characterizing this cir-
cuit’s approach under the Copyright Act as consistent with
American Banana Co. v. United Fruit Co., 213 U.S. 347, 356
(1909), overruled on other grounds, Continental Ore Co. v.
Union Carbide & Carbon Corp., 370 U.S. 690, 704-05
(1962), which described the presumption as a “general and
almost universal rule . . . that the character of an act as lawful
or unlawful must be determined wholly by the law of the
country where the act is done”).

   [10] Given this understanding of the presumption, the
application of § 109(a) to foreign-made copies would imper-
missibly apply the Copyright Act extraterritorially in a way
that the application of the statute after foreign sales does not.
 Under the latter application, the statute merely acknowledges
the occurrence of a foreign event as a relevant fact. The for-
mer application would go much further. To characterize the
making of copies overseas as “lawful[ ] . . . under [Title 17]”
would be to ascribe legality under the Copyright Act to con-
duct that occurs entirely outside the United States, notwith-
standing the absence of a clear expression of congressional
intent in favor of extraterritoriality. See 17 U.S.C. § 109(a);
see also Subafilms, Ltd., 24 F.3d at 1096 (“There is no clear
expression of congressional intent in either the 1976 Act or
other relevant enactments to alter the preexisting extraterrito-
riality doctrine.”). Specifically, it would mean that a copyright
owner’s foreign manufacturing constitutes lawful reproduc-
tion under 17 U.S.C. § 106(1) even though that statute does
not clearly provide for extraterritorial application. This is pre-
                       OMEGA v. COSTCO                   12121
cisely what we proscribed in Subafilms, see 24 F.3d at 1098,
and Quality King provides no basis for rejecting our approach.

   [11] Other significant parts of Quality King’s analysis are
also consistent with BMG Music’s limitation of § 109(a) to
domestically made copies. The Court found that copies of a
work copyrighted under Title 17 are not necessarily “lawfully
made under [Title 17]” even when made by the owner of the
copyright: The category of copies covered by § 602(a), it was
explained, encompasses “copies that were ‘lawfully made’ not
under the United States Copyright Act, but instead, under the
law of some other country.” 523 U.S. at 147. Because
§ 602(a) extends to such copies, but on its terms permits an
infringement action only by the “owner of copyright under
[Title 17],” copies of a work can be lawfully made “under the
law of some other country,” rather than “under [Title 17],”
even when the copies are protected by a U.S. copyright. In
short, copies covered by the phrase “lawfully made under
[Title 17]” in § 109(a) are not simply those which are lawfully
made by the owner of a U.S. copyright. Something more is
required. To us, that “something” is the making of the copies
within the United States, where the Copyright Act applies. See
2-8 Nimmer on Copyright § 8.12(B)(6)(c), at 8-178.4(6)-(7).

   We also read one of the Court’s illustrations to be consis-
tent with this understanding. The Court stated that given

    a publisher of [a] U.S. edition [of a work] and a pub-
    lisher of [a] British edition of the same work, each
    such publisher could make lawful copies. If the
    author of the work gave the exclusive United States
    distribution rights—enforceable under the Act—to
    the publisher of the United States edition and the
    exclusive British distribution rights to the publisher
    of the British edition, however, presumably only
    those made by the publisher of the United States edi-
    tion would be ‘lawfully made under this title’ within
    the meaning of § 109(a). The first sale doctrine
12122                       OMEGA v. COSTCO
      would not provide the publisher of the British edition
      who decided to sell in the American market with a
      defense to an action under § 602(a).

523 U.S. at 148 (emphasis added and footnote omitted).
Assuming the British edition was made outside the United
States,6 this illustration suggests that “lawfully made under
this title” refers exclusively to copies of U.S.-copyrighted
works that are made domestically. Were it otherwise, the cop-
ies made by the British publisher would also fall within the
scope of § 109(a). See 2-8 Nimmer on Copyright
§ 8.12(B)(6)(c), at 8-178.4(7).

   Finally, in the decision’s only direct language on the issue,
Justice Ginsburg’s concurrence cited a copyright treatise for
the proposition that “lawfully made under this title” means
“lawfully made in the United States.” 523 U.S. at 154 (citing
W. Patry, Copyright Law and Practice 166-70 (1997 Supp.)).
The majority opinion did not dispute this interpretation, which
aligns closely with the one adopted by our circuit. See BMG
Music, 952 F.2d at 319.

   [12] Costco contends that BMG Music’s limitation of
§ 109(a) to domestically made copies is inconsistent with the
plain language of the statute and its legislative history. This
criticism has been made before, including by this court. See,
e.g., Parfums Givenchy, Inc. v. C & C Beauty Sales, Inc., 832
F. Supp. 1378, 1386-87 (C.D. Cal. 1993), aff’d sub nom. Drug
Emporium, 38 F.3d at 482 n.8. Perhaps most compelling is the
objection that BMG Music would provide substantially greater
copyright protection to foreign-made copies of U.S.-
copyrighted works. A U.S. copyright owner, for example,
  6
    The illustration offers no specific justification for making this assump-
tion over any other regarding the site of manufacture, but Quality King
cannot be “clearly irreconcilable” with our precedent even if the decision
merely permits assumptions that are consistent with that precedent. Miller,
335 F.3d at 900.
                       OMEGA v. COSTCO                    12123
would be unable to exercise distribution rights after one law-
ful, domestic sale of a watch lawfully made in South Dakota,
but, without the limits imposed by § 109(a), the same owner
could seemingly exercise distribution rights after even the
tenth sale in the United States of a watch lawfully made in
Switzerland. The difference would likely encourage U.S.
copyright owners to outsource the manufacturing of copies of
their work overseas. Drug Emporium and Denbicare, how-
ever, resolved this problem by clarifying that parties can raise
§ 109(a) as a defense in cases involving foreign-made copies
so long as a lawful domestic sale has occurred. See Drug
Emporium, 38 F.3d at 481; Denbicare, 84 F.3d at 1150. Inso-
far as Costco contends that § 109(a) should apply to foreign-
made copies even in the absence of a lawful domestic sale, the
surviving rule from BMG Music requires otherwise. See 952
F.2d at 319.

   In summary, our general rule that § 109(a) refers “only to
copies legally made . . . in the United States,” id., is not
clearly irreconcilable with Quality King, and, therefore,
remains binding precedent. Under this rule, the first sale doc-
trine is unavailable as a defense to the claims under §§ 106(3)
and 602(a) because there is no genuine dispute that Omega
manufactured the watches bearing the Omega Globe Design
in Switzerland. Id.; Fed. R. Civ. P. 56(c); see also Swatch S.A.
v. New City, Inc., 454 F. Supp. 2d 1245, 1253-54 (S.D. Fla.
2006) (concluding that Quality King is consistent with the
interpretation that “lawfully made under this title” means “le-
gally made . . . in the United States”); 2 Goldstein on Copy-
right § 7.6.1, at 143-44 (concluding that Quality King
“indicates an intention not to disturb lower court holdings that
the first sale defense is unavailable to importers who acquire
ownership of gray market goods made abroad”).

                               3.

  We need not decide whether Drug Emporium’s and Denbi-
care’s exception to the rule in BMG Music also survives
12124                  OMEGA v. COSTCO
Quality King. There is no genuine dispute that the copies of
the Omega Globe Design were sold in the United States with-
out Omega’s authority. The exception, therefore, does not
apply in this case. See Denbicare, 84 F.3d at 1145-46
(“[Section] 109 applies to copies made abroad only if the cop-
ies have been sold in the United States by the copyright owner
or with its authority.”). Because the exception does not apply,
the question of its continuing viability cannot affect our con-
clusion that § 109(a) provides no defense to Omega’s claims.

  C.    Attorney’s fees under 17 U.S.C. § 505

   [13] The final issue is whether the district court abused its
discretion in awarding attorney’s fees to Costco. The Copy-
right Act provides for an “award [of] a reasonable attorney’s
fee to the prevailing party as part of the costs.” 17 U.S.C.
§ 505. In deciding whether to award fees under this statute, a
district court should consider “the degree of success obtained;
frivolousness; motivation; objective unreasonableness (both
in the factual and legal arguments in the case); and the need
in particular circumstances to advance considerations of com-
pensation and deterrence.” Columbia Pictures Television,
Inc., 259 F.3d at 1197.

   [14] The district court’s award of $373,003.80 in attorney’s
fees to Costco was an abuse of discretion because neither
party has prevailed in this litigation to this point.

  REVERSED AND REMANDED.