Retailing's gray market and the death of an America diplomatic giant

Attention Costco shoppers: Those discounted luxury items might soon cost more. A 4-4 ruling Monday from the U.S. Supreme Court didn't set a national precedent, but it means that Costco will most likely keep fighting in court with Swiss watchmaker Omega over how Costco bought and imported fancy watches, then sold them for $700 less than retail. A tie vote means the appeals court ruling in a case stands. The 9th U.S. Circuit Court of Appeals had ruled that Costco couldn't get Omega's suit dismissed. New Justice Elena Kagan stayed out of the case because she was U.S. solicitor general when the Obama administration filed a brief siding with Omega. The issue was whether Omega could use U.S. copyright law to prevent Costco from reselling high-end watches acquired through the gray market. Discount stores increasingly are using "gray market" distribution chains to buy luxury goods -- not knock-offs -- abroad then selling the imported goods. But companies that haven't been able to control the gray market by invoking trademark laws have tried to use copyright instead. Omega cleverly engraved a tiny special design on the backs of the watches, copyrighted the logo in the U.S., then sued Costco for selling copyrighted products without permission. Costco said copyright law gave Omega control over only the first sale of the watches, not over every other sale down the line. The 9th Circuit disagreed. The Supreme Court had to grapple with a dizzying array of issues, such as how far U.S. copyright law reaches, whether giving foreign companies broad rights down the distribution chain harms U.S. consumers and whether the law provides more price controls for foreign-made goods than those made in the U.S. The billions of dollars at stake attracted a business who's who in friend-of-the-court briefs. Costco backers included Grapevine-based GameStop, Amazon.com, Target, Sam's, the American Library Association, eBay, Google and Intel. Omega's included Fujifilm Corp., the American Bar Association and the motion picture and recording industries. The price wars will no doubt continue. RIP, Richard Holbrooke The e-mail exchanges this week among editorial writers who met in April with U.S. special envoy Richard Holbrooke at a State Department briefing served as a shorthand summation of the personality of the career diplomat, who died Tuesday during surgery to repair a torn aorta. Bursting with energy. Knowledgeable, open and enthusiastic about his work and his experiences. Incredibly candid. Leaving others disarmed by his frankness and his unassuming manner. Not everyone agreed with those descriptions. Holbrooke, 69, could be arrogant and challenging to work with, alienating aides and allies as well as enemies. And, as one member of the National Conference of Editorial Writers said, he was not shy about letting us know that he could use the media to his advantage. Holbrooke was also a patron of journalism. His off-the-record sessions, designed to help opinion writers understand the nuances and difficulties in working toward peace in Afghanistan and Pakistan, proved that. His untimely death was a loss to U.S. diplomacy and to a better understanding of the delicate and often dicey game of diplomacy.