NOTE TO READERS:  The final update of this post was completed at 12:13 p.m.

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Dividing 4-4, the Supreme Court on Monday upheld a lower court’s denial of a discount retailer’s right to buy overseas a consumer item that is protected by copyright — in this case, a Swiss watch — and then bring it back into the U.S. for re-sale without the copyright owner’s consent.  Such an even split among the Justices has the effect of upholding the lower court decision at issue, without setting a nationwide precedent.  The division came about since Justice Elena Kagan was recused from the case – Costco Wholesale Corp. v. Omega S.A. (08-1423).  The case involved the so-called “first-sale doctrine” in copyright law.  In new orders issued Monday, the Court granted no further cases.

In a second decision finally resolving a case, the Supreme Court ruled summarily that federal courts have no authority to hear a lawsuit claiming that the U.S. House of Representatives must be increased beyond its present 435 seats, in order to bring about more equality among the states in their representation. The Court wiped out a ruling by a federal District Court in Mississippi, and ordered it to dismiss the lawsuit “for lack of jurisdiction.”  The decision came in the case of Clemons, et al., v. U.S. Department of Commerce (10-291).

The Court asked the federal government for its views on two new cases — one involving the rights of states to negotiate with Indian tribes over the operation of gambling casinos, and one involving the legal test on whether an invention has been described clearly enough to make it eligible for a patent.  There is no timetable for the Solicitor General’s office to respond to the invitation in the cases of Schwarzenegger v. Rincon Band of Indians (10-330) and Applera Corp., et al., v. Enzo Biochem, et al. (10-426).  The Court is not expected to take further action on the cases until it has received the government’s legal advice on whether they should be reviewed.

Justice Antonin Scalia, in a very strongly worded dissent from the Court’s refusal to hear the state of Alabama’s appeal in a death penalty case, accused federal judges of “lawless speculation” instead of following Congress’s mandate in federal habeas law to show great respect for state court decisions.  Joined by Justices Samuel A. Alito, Jr., and Clarence Thomas, Scalia wrote: “With distressing frequency, especially in capital cases such as this, federal judges refuse to be governed by Congress’s command that state criminal judgments must not be revised by federal courts unless they are ‘contrary to, or involve an unreasonable application of, clearly established federal law, as determined by the Supreme Court of the United States.’ ”

Scalia added: “We invite continued lawlessness when we permit a patently improper interference with state justice such as that which occurred in this case to stand.”  The dissent was filed in Allen v. Lawhorn (10-24).  The Eleventh Circuit Court had overturned a death sentence because of the ineffectiveness of the defense attorney in opting not to make a closing argument in the sentencing phase of the trial.  The Court’s denial order and the dissenting opinion can be found here.

The Court’s 4-4 split in the Costco case was the first indication that the Court’s work this Term may be substantially affected by the large volume of cases in which Justice Kagan is not taking part.  She is recused from about half of the cases the Court has heard so far in the Term; her absence will make a difference only when the eight other Justices split evenly and are not able to work it out so that a majority can be put together.

The Costco case was potentially a very significant one for American consumers, since the Ninth Circuit Court ruling that was summarily upheld by the 4-4 vote could have an effect on access to so-called “gray market goods” — a market that has expanded dramatically over the past two decades, and now involves tens of billions of dollars a year in trade.  In its appeal to the Supreme Court, the discount retailer argued that the Ninth Circuit decision will allow owners of copyrighted creations to make them overseas, and thus gain added legal weapons to use against those who buy the goods overseas and seek to import them into the U.S. for re-sale.

At issue is the so-called “first sale doctrine.”  Federal law provides that, if a copy of a protected work is made or purchased legally, that copy can be sold without the consent of the owner of the copyright.  Once the owner of a protected work has sold a copy of it to someone else, that other person may sell it without permission of the owner of the copyright.

Under other provisions of copyright law, importing a copy of a protected work amounts to an infringement of the copyright if the copy was made abroad and brought back into the U.S. without permission. The first-sale doctrine is an exception to that provision.  The Ninth Circuit, however, ruled that the doctrine applies only to copies made legally and sold inside the U.S.  It said that recognizing the defense for goods made abroad would extend copyright law beyond U.S. borders inappropriately.

The case involved a company, Omega S.A., that makes watches in Switzerland and sells them around the world through authorized distributors and retailers.  Costco, a membership warehouse club that sells brand-name merchandise to members at prices lower than its competitors, had bought Omega’s Seamaster watch abroad and re-sold it in the U.S.  Costco’s price was $1,299, about a third less than Omega’s suggested retail price of $1,999.

The Court’s summary ruling Monday ending a challenge to the size of the House of Representatives wiped off the judicial record books a lower court ruling that had upheld wide discretion for Congress to decide for itself how many seats there should be in the lower chamber, and how they were to be passed out among the 50 states.  The lawsuit against the present size, filed by nine citizens who live in the nation’s five states that claim to be the most under-represented in the House, sought an increase that would have produced a House of at least 932 seats, and perhaps as many as 1,761.

The case, from a constitutional perspective, was based on the claim that the Court’s one-person, one-vote doctrine — imposed to assure fairly near to equality in representation between districts within a single state, should also apply to representation in the House between the several states. The formula now used for allotting the existing 435 seats, the challengers argued, results in a greater disparity between the most over-represented and the most under-represented than is necessary, since all that would be necessary to ease the situation would be to increase the size.

When the case was before a three-judge District Court, the Justice Department at first argued that the challengers did not have standing to bring the lawsuit, but later dropped that claim and relied on an argument that the size of the House was an issue left to the political branches, not the courts, to decide.  The three-judge District Court in Mississippi rejected the “political question” argument, but went on to dismiss the case, finding that the disparity in representation did not violate the Constitution, and that the present size of 435 was well within Congress’s discretion about the issue.

When the case reached the Supreme Court, the Justice Department urged the Justices either to uphold the lower court ruling without briefing and argument, or to dismiss the case for “lack of a substantial federal question.”  If the Court had done either of those things, it would have left on the books the District Court ruling upholding the present size.  The Supreme Court, however, vacated that ruling, citing a lack of jurisdiction; the order did not say whether the challengers lacked standing or whether the issue was one for the political branches; it could have been either rationale.

In referring the Indian gambling casino case to the Solicitor General’s office for comment, the Justices are seeking advice on a case that the state of California argued could have a major impact on the entire Indian gaming industry, with casinos operating now in 28 states.  Under federal law, states and tribes are required to negotiate with each other over the terms of Indian gaming within those states.  The states, however, are barred from imposing any tax or fee on a tribe for its gambling operations.

The state of California, in negotiating with the Rincon Band over the number of slot machines it could operate at its Harrah’s Rincon Hotel and Casino in San Diego, sought a cut of the casino’s proceeds in return for accepting more slots.  The tribes contended that this amount to bargaining in “bad faith,” since it was an attempt to impose a tax or fee on the tribe.   The Ninth Circuit agreed, leading the state to appeal to the Supreme Court, contending that such revenue-sharing arrangements are common in state-tribe compacts in a number of states, all with the approval of the U.S. Interior Department.

The other case on which the Court invited the government’s views involves the issue of what an inventor must claim on a patent application in order to make it sufficiently definite to put the public on notice about what would be protected from copying if the patent were issued.  Prior Supreme Court rulings have held that a patent description must be “definite.”   But the Court has not ruled on what the concept involves since its ruling in 1942, in the case of United Carbon v. Binney & Smith.

The new case involves a dispute over a method of identifying the genetic code sequences in DNA.   The patents at issue were owned by Enzo Biochem Inc., and Yale University, and the invention involved grew out of the pioneering discoveries of Dr. David Ward and others at Yale.  The patent owners sued Applera Corp. for infringement, but Applera countered that the patents were invalid, because the claims made were too indefinite.  The Circuit Court for the Federal Circuit sided with the patent owners, applying what Applera argued in an appeal is a loose and flexible concept of “definiteness.”

In both the casino and the patent cases, the advice the Justice Department is being asked to give is on the issue of whether the Courts are worthy of Supreme Court review.   It is unclear, at this point, whether the Department’s responses will come in time for the Court to act on the cases during the current Term.

Last Friday, the Court had granted review of three of the cases the Justices considered at their private Conference earlier that day.  No other cases were granted in Monday’s list.

Among the denials Monday was a potentially significant appeal by Shell Oil Co., urging the Justices to more firmly establish a rule — only hinted at in prior rulings — that punitive damages can seldom exceed the amount of compensatory damage awards, when the contemporary verdict was already quite high.   The specific issue raised in the case was how to define compensatory damages, in making the calculation of what multiple, if any, of that amount could be justified in a punitive award.

In a case involving a dispute over oil and gas leaseholders’ rights to share in the profits from exploration in Oklahoma, Shell’s appeal argued that the compensatory award was only $750,708, and the punitive award of $53.6 million was 70 times the actual compensatory amount.  The compensatory award had been ballooned to $13.2 million, Shell noted, because the court included $12.4 million in pre-judgment interest as a part of that award.   Oklahoma has a 12 percent rate for pre-judgment interest, and that was designed as a penalty for failure to share in the profits of oil and gas exploration, so should not be treated as part of the compensatory award for purposes of comparing it with the punitive verdict, Shell argued.

The Court, as is its usual practice, gave no explanation of why it turned aside Shell’s challenge.    The case was Shell Oil Co. v. Hebble, et al. (10-349).

Posted in Costco v. Omega, Allen v. Lawhorn, Brown v. Rincon Band of Luiseno Mission Indians, Applera Corp. v. Enzo Biochem, Featured, Merits Cases

Recommended Citation: Lyle Denniston, Copyright defense restricted (Final update 12:13 p.m.), SCOTUSblog (Dec. 13, 2010, 10:22 AM), http://www.scotusblog.com/2010/12/copyright-defense-restricted/