Trademark Date

May 19, 2021

Right2020 (Ne) 10062

Case

Court

Intellectual Property High
Court, Third Division

number- A case in which the court determined that the acts in question that constitute parallel
import are not substantially illegal and do not constitute infringement of the
trademark right.
Case type: Injunction
Results: Appeal dismissed
References: Article 36 of the Trademark Act
Related rights, etc.: Trademark Registration No. 5696029
The judgment in prior instance: Tokyo District Court, 2018 (Wa) 35053 (rendered on
October 22, 2020)
Summary of the Judgment
1. Outline of the case(1) Appellant X1, a Canadian corporation, is a holder of the trademark right for the
trademark in question (the "Trademark") for which goods such as men's underwear aredesignated. It manufactures and sells men's underwear, etc. (the "Goods") via Company
L, its affiliated Canadian corporation.
Appellant X2 has obtained a non-registered exclusive license for the Trademark thatis effective in Japan and imports the Goods from Company L and sells them as Appellant
X1's distributor in Japan.
The Appellee imported from Company M the goods that Company L had sold toCompany M, which was Company L's distributor in Singapore. The Appellee sold thesegoods on the internet at lower prices than the selling prices offered by Appellant X 1,
and upon such sale, the Appellee affixed notes such as "Imperfect," "Damaged
package," and the like, to the goods. Marks that are identical to or similar to theTrademark were affixed to these goods.
Appellants X1 and X2 filed an action against the Appellee to seek an injunction andcompensation for damage on the grounds of infringement of the trademark right.
(2) The court of prior instance dismissed the Appellants' claims, holding that theAppellee's acts of importing and selling the goods are not substantially illegal in termsof constituting infringement of the trademark right.
Dissatisfied with this, the Appellants filed an appeal against the judgment in priorinstance.
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2. In this judgment, the court held that the judgment in prior instance is appropriate anddismissed the Appellants' claims, determining as follows on the basis of the threerequirements concerning the substantial illegality of parallel import which were
presented in the judgment of the First Petty Bench of the Supreme Court rendered on
February 27, 2003 (Minshu Vol. 57, No. 2, page 125; hereinafter the "2003 Supreme
Court Judgment").
(1) The 2003 Supreme Court Judgment was rendered for the case where the defendantof the case imported the goods from a person that obtained a license for a trademark
from the trademark right holder and manufactured and sold the goods with thetrademark affixed thereto. On the other hand, in the present case, the trademark rightholder (Appellant X1) itself manufactured the goods and sold them to its distributor,
Company M, and the Appellee

imported the goods from that distributor, Company M.

Thus, there is a critical difference between these cases in terms of whether the goods
were manufactured by the trademark right holder itself. This can raise a question as towhether the abovementioned requirements should be modified depending on the
difference in terms of the facts of the cases as indicated below, but basically, it isconstrued that the issue of whether or not Appellee's act of importing the goods is notsubstantially illegal should be determined on the basis of these three requirements.
Below, each requirement is examined.
(2) Regarding the first requirement
The first requirement only raises a question of whether the trademark in question
has been lawfully affixed by the trademark right holder, etc. As long as the firstrequirement is applied without modification, it is clear that this requirement is satisfied
in this case where the issue resides in the act of importing the Goods manufactured by
the trademark right holder.
Against such allegation, the Appellants allege that in this case, the first requirement
should be understood as not only meaning that the trademark is required to have been
lawfully affixed but also meaning that the goods to which the trademark has been
lawfully affixed are required to have been placed on the distribution route based on the
trademark right holder's intention.
In the case for which the 2003 Supreme Court Judgment was rendered, thetrademark was affixed not by the trademark right holder but by the person who had
obtained a license from the trademark right holder, and because of this, there was room
to question whether the trademark was lawfully affixed in the meaning of whether the
trademark was affixed by the licensee based on the authority granted thereto. On theother hand, in cases where trademark right holder itself manufactures and sells theiigoods, such as the present case, this requirement would rarely be discussed as an issue,
and therefore, a question may be raised as to whether there is any point at all in
considering, as an independent requirement, whether the trademark has been lawfully
affixed. Before the 2003 Supreme Court Judgment was rendered, a dominant view had
been that in cases such as the present case, the "trademark right holder has lawfully
affixed the trademark to the goods and placed them on the distribution route" should bea requirement, and the requirement to the effect that "the goods have been lawfully
placed on the distribution route" could mean to exclude cases of parallel import of goods
that have been acquired through an illegitimate channel. In light of this point in addition
to the point discussed above, it may be possible to consider that in the present case,which differs in terms of the facts from the case of the 2003 Supreme Court Judgme nt,
it may be necessary to question not only whether the trademark has been lawfully
affixed but also whether these goods have been lawfully placed on the distribution route(or whether they have been placed on the distribution route based on the trademark rightholder's intention; hereinafter the same applies). In this respect, the Appellants'
allegation may be understandable to some extent.
However, even based on such view, since Company M legitimately purchased theGoods from Appellant X1 via Company L, it is clear that at that point of time, the Goods
were "lawfully placed on the distribution route." The circumstances alleged by theAppellants, such as the termination of the Distributor Agreement between Company L
and Company M and the existence of the territory clause under that agreement, are notsufficient to affect this determination.
(3) Regarding the second requirement
In this case, since Appellant X1 is the trademark right holder in Japan and also thetrademark right holder in a foreign country, it is obvious that the trademark affixed to
the Goods and the registered trademark in Japan (the Plaintiffs' Trademark) indicate thesame source of goods.
(4) Regarding the third requirement
In the case of the 2003 Supreme Court Judgment, the imported goods were
manufactured not by the trademark right holder but by the licensee of the trademark.
Therefore, for the purpose of assuring the quality of the goods bearing the trademark,whether the trademark right holder was in the position of being able to directly or
indirectly exercise quality control with regard to the act of the trademark licensee (orany subcontractor thereof) could become an important issue. On the other hand, in cases
where the trademark right holder itself manufactures the goods, such as the present case,the quality of the goods is assured by the fact that they are manufactured by theiii

trademark right holder, and the trademark can be regarded as perfectly fulfilling thequality assurance function as long as the quality of the goods is maintained. The Goods
are men's underwear, and there is no risk that the Goods will degrade due to aging orother reasons during the distribution as long as they are on the distribution route withina reasonable period of time. There is also no risk of damage or other defect on the Goods
themselves as long as the measures for quality control provided to the Goods by thetrademark right holder (e.g., the package of the Goods) are maintained as they are.
If so, it is appropriate to consider that at least in cases where the goods are
manufactured by the trademark right holder, such as the present case, and because of
the nature of the goods, there is no risk that doubts would arise as to the trademark's
quality assurance function if special care is not taken for quality control, such asconcerning the risk of degradation due to aging, the goods are subject to the quality
control exercised directly or indirectly by the trademark right holder as long as themeasures for quality control provided by the trademark right holder (e.g., the packageof the Goods) are maintained as they are.
In this case, the Goods that the Appellee sells are contained in the package s, etc. as
they were when Appellee X1 manufactured and sold them, and even though the
packages, etc. are partially damaged, there is no evidence suggesting that such damage
affected the inside of the packages, etc. Therefore, the third requirement is satisfied.

iv

Judgment rendered on May 19, 2021
2020(Ne)10062, Case of appeal for injunction against trademark infringement(Court of prior instance: Tokyo District Court, 2018 (Wa) 35053)
Date of conclusion of oral argument: March 8, 2021
Judgment
Appellant: Harris Williams Design Inc.
(hereinafter referred to as "Appellant Harris")
Appellant eyeinthesky Inc.
(hereinafter referred to as "Appellant eyeinthesky")Appellee: Bright Co., Ltd.
(hereinafter referred to as "Appellee Bright")
Appellee Y(hereinafter referred to as "Appellee Y")

Main text
1. All of the appeals shall be dismissed.
2. The Appellants shall bear the cost of the appeals.
3. The additional period granted for Appellant Harris to file a final appeal or a petition
for acceptance of final appeal against this judgment shall be specified as 30 days.
Facts and reasonsNo. 1 Object of the appeals
1. The judgment in prior instance shall be rescinded.
2. Appellee Bright shall not assign, deliver or import the goods indicated in the list of
the goods attached to the judgment in prior instance, to which the marks indicated in
the list of the marks attached to the judgment in prior instance are affixed.
3. Appellee Bright shall not display or distribute advertisement of the goods indicatedin the list of the goods attached to the judgment in prior instance, with the marks
indicated in the list of the marks attached to the judgment in prior instance affixed
thereto.
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4. Appellee Bright shall destroy the goods specified in Paragraph 1.
5. The Appellees shall jointly and severally pay to Appellant Harris 2,825,758 yen andan amount accrued thereon at the rate of 5% per annum for the period from January 1,
2018, until the completion of the payment.
6. The Appellees shall jointly and severally pay to Appellant eyeinthesky 11,303,030
yen and an amount accrued thereon at the rate of 5% per annum for the period fromJanuary 1, 2018, until the completion of the payment.
No. 2 Outline of the case (Unless particularly noted, the same abbreviations used in the
judgment in prior instance shall be used herein.)
1. In this case, Plaintiff Harris, and Plaintiff eyeinthesky which holds a non -registeredexclusive license established by Plaintiff Harris for the trademark for which Plaintiff
Harris holds a trademark right (the "Plaintiffs' Trademark"), allege that Defendant
Bright's acts of importing, selling, and possessing men's underwear with the marks
indicated in 1 to 9 in the list of the marks attached to the judgment in prior instance(collectively referred to as the "Defendant's Marks" in this judgment) affixed thereto,and placing advertisement with the Defendant's Marks affixed thereto infringe thePlaintiffs' trademark right and non-registered exclusive license. Based on this allegation,
under Article 36, paragraphs (1) and (2) of the Trademark Act, the Plaintiffs demandthat Defendant Company B stop assigning, delivering, and importing the goods with
the Defendant's Marks affixed thereto, stop placing advertisement with the Defendant's
Marks affixed thereto, and destroy those goods; and under Article 709 and Article 719,
paragraph (1) of the Civil Code and Article 38, paragraph (2) of the Trademark Act, theAppellants also claim against Defendant Bright and Defendant Y the payment ofcompensation for damages with delay damages accrued thereon.
The court of prior instance dismissed all of the Appellants' claims. Dissatisfied with
this, the Appellants filed this appeal.
2. Basic facts
The basic facts of the case are as specified in No. 2, 2. in the "Facts and reasons"section of the judgment in prior instance (from page 3, line 6 to page 5, line 17 of thejudgment in prior instance) and therefore they are cited herein.
3. Issues
The issues of the case are as specified in No. 2, 3. in the "Facts and reasons" sectionof the judgment in prior instance (page 5, from line 18 to line 23 of the judgment inprior instance) and therefore they are cited herein.
(omitted)2

No. 4 Determination of this court
This court also determines that all of the Appellants' claims are groundless andshould be dismissed, for the following reasons.
1. Issue 1 (Similarity between the Plaintiffs' Trademark and the Defendant's Marks )This court also determines that all of the Defendant's Marks are similar to thePlaintiffs' Trademark, for the reasons specified in No. 3, 1. in the "Facts and reasons"section of the judgment in prior instance (from page 20, line 20 to page 23, line 5 o f thejudgment in prior instance) and therefore they are cited herein.
2. Issue 2 (Whether the Appellees' acts in question fall under the case where these acts
constitute what is generally called parallel import of genuine goods and they are notillegal in terms of constituting infringement of the trademark right)(1) Basic facts
The facts which serve as the basis for making a determination on this issue are as
specified in No. 3, 2. (2) and (3) of the judgment in prior instance (from page 23, line
12 to page 29, line 17 of the judgment in prior instance) and therefore cited herein,
except that the text from the phrase "Under the Distributor Agreement" on page 24, line
22 of the judgment in prior instance, to the end of line 8 on page 25 of the same iscorrected as follows.
"It is also found that under a general type of distributor agreement concluded byAppellant Harris and Lampion Enterprises Ltd. (hereinafter "Lampion") with theirdistributors (Exhibits Ko 33-1 and 2), it is provided as follows: [i] the distributor must
not, directly or indirectly, sell, distribute or otherwise handle the product in areas otherthan the predetermined territory (hereinafter referred to as the "territory clause"); and[ii] after the distributor agreement is terminated, the distributor must stop the sale ofthe product, and the seller of the goods (e.g., the trademark right holder) has the rightto purchase back the goods (hereinafter referred to as the "clause on prohibition of sale,etc."). There is no sufficient evidence for finding a fact that Lampion concluded withMST Golf Pte, Ltd. (hereinafter "M Golf") an agreement based on the abovementioned
distributor agreement, and there is also no sufficient evidence for finding that clausessuch as those mentioned in [i] and [ii] above were contained in the written declarationof intention that Lampion alleges to have delivered to M Golf. However, given that M
Golf is a distributor dealing with 2UNDR brand goods and that there is no reason totreat that company differently from other distributors, it may be undeniable that thereis the possibility that the territory clause and the clause on prohibition of sale, etc. thatare considered to have been generally applied to distributors were applied between
3Lampion and M Golf as well, based on explicit or implicit agreement between them
(there is no evidence that casts doubt about this). If so, it may be necessary to examine
the case on the premise that there is the possibility that these clauses are applicable to
M Golf as well. However, since there is no sufficient evidence for finding that Lampion
has exercised the abovementioned right to purchase back the goods, it is not necessary
to examine the case on the premise that the company has exercised the right to purchaseback the goods."(2) Regarding the 2003 Supreme Court Judgment
This Supreme Court judgment rendered in 2003 determined that an act that is what
is generally called parallel import of genuine goods is not substantially illegal in termsof constituting infringement of the trademark right under the following conditions: [i]the trademark in question has been lawfully affixed by a trademark right holder in aforeign country or a person who has obtained a license from such trademark right holder(hereinafter referred to as the "first requirement"); [ii] the trademark right holder in aforeign country and the trademark right holder in Japan are the same person or have arelationship wherein they can be regarded as being legally or economically the same
person, and because of this, the trademark in question indicates the same source as thatindicated by the registered trademark in Japan (hereinafter referred to as the "second
requirement"); and [iii] since the trademark right holder in Japan is in the position of
being able to exercise quality control over the imported goods directly or indirectly, theimported goods and the goods to which the trademark right holder in Japan has affixed
the registered trademark are evaluated as being not substantially different in terms of
the quality assured by the registered trademark (hereinafter referred to as the "third
requirement").
This Supreme Court judgment was rendered for the case where the defendant of thecase imported goods from a person that obtained a license for a trademark from thetrademark right holder and manufactured and sold goods with the trademark affixed
thereto. On the other hand, in the present case, the trademark right holder itself
manufactured the goods and sold them to its distributor, and Defendant Bright imported
the goods from that distributor. Thus, there is a critical difference between these casesin terms of whether the goods were manufactured by the trademark right holder itself.
This can raise a question as to whether the abovementioned requirements should be
modified depending on the difference in terms of the facts of the cases, but basically, it
is construed that the issue of whether or not Defendant Bright's act of importing thegoods is not substantially illegal should be determined on the basis of these threerequirements. Below, each requirement is examined.
4(3) Regarding the first requirement
A. As mentioned above, the first requirement only raises a question of whether the
trademark in question has been lawfully affixed by the trademark right holder, etc. Aslong as the first requirement is applied without modification, it is clear that thisrequirement is satisfied in this case where the issue resides in the act of importing theGoods manufactured by the trademark right holder (the Appellants allege that it is notproved that all of the Goods are goods that Lampion sold to M Golf; however, as alreadyfound above, it is found that M Golf was once a distributor of Lampion and had
purchased genuine 2UNDR goods from Lampion and retained them; in addition, while
the number of goods that Defendant Bright imported from M Golf (2,387 items) is
within a possible number of goods that M Golf could have purchased from Lampion
and retained at the time immediately before the import (2,448 items), there is noevidence that casts doubt that the goods that Defendant Bright imported had beenacquired from a channel other than the one mentioned above; for these reasons, it cannot
be denied that the Goods are genuine goods). The circumstances alleged by theAppellants, such as the termination of the Distributor Agreement and the existence ofthe territory clause, have no effect on this determination. This is in line with theAppellees' allegation.
B. Against such allegation, the Appellants allege that in this case, the first requirement
should be understood as not only meaning that the trademark is required to have b een
lawfully affixed but also meaning that the goods to which the trademark has been
lawfully affixed are required to have been placed on the distribution route based on the
trademark right holder's intention.
In the case for which the 2003 Supreme Court Judgment was rendered, thetrademark was affixed not by the trademark right holder but by the person who had
obtained a license from the trademark right holder, and because of this, there was room
to question whether the trademark was lawfully affixed in the meaning of whether the
trademark was affixed by the licensee based on the authority granted thereto. On theother hand, in cases where trademark right holder itself manufactures and sells the
goods, such as the present case, this requirement would rarely be discussed as an issue,
and therefore, a question may be raised as to whether there is any point at all in
considering, as an independent requirement, whether the trademark has been lawfully
affixed.Before the 2003 Supreme Court Judgment was rendered, a dominant view had
been that in cases such as the present case, the "trademark right holder has lawfully
affixed the trademark to the goods and placed them on the distribution route" should bea requirement, and the requirement to the effect that "the goods have been lawfully
5placed on the distribution route" could mean to exclude cases of parallel import of goods
that have been acquired through an illegitimate channel. In light of this point in addition
to the point discussed above, it may be possible to consider that in the present case,which differs in terms of the facts from the case of the 2003 Supreme Court Judgment,
it may be necessary to question not only whether the trademark has been lawfully
affixed but also whether these goods have been lawfully placed on the distribution route(or whether they have been placed on the distribution route based on the trademark rightholder's intention; hereinafter the same applies). In this respect, the Appellants'
allegation may be understandable to some extent.
However, even based on such view, since M Golf legitimately purchased the Goods
from Lampion, it is clear that at that point of time, the Goods were "lawfully placed on
the distribution route." The circumstances alleged by the Appellants, such as thetermination of the Distributor Agreement and the existence of the territory clause, may
not be sufficient to affect this determination, for the following reasons.
C. First, with regard to the relevance to the termination of the Distributor Agreement,
there is room to consider that, as found above, M Golf became obliged not to sell theGoods as a result of the termination of the agreement. However, the existence of aclause providing as such does not necessarily leads to depriving M Golf of the authority
to dispose of the Goods (the Appellants admit that the termination of the Distributor
Agreement does not immediately cause M Golf to forfeit the ownership of the Goods,
and as already pointed out, there is no such fact that Lampion exercised the right topurchase back the Goods). If that is the case, it should be said that even if M Golf soldthe Goods after the termination of the Distributor Agreement, this could only raise theissue of default in its relationship with Lampion but it would not go so far as to overturnthe evaluation that the Goods were "lawfully placed on the distribution route." Whenviewed from a substantial perspective, it cannot be said that the trademark's function asa source identifier would be damaged just because M Golf sold the goods which it had
purchased from the legitimate seller to others after the termination of the Distributor
Agreement. In this respect as well, there is no reason to deny the satisfaction of the firstrequirement.
This reasoning also applies to the relevance with the territory clause. Since theterritory clause is effective only between the parties to the agreement and does notdeprive M Golf of the authority to dispose of the Goods, the evaluation that the Goods
were "lawfully placed on the distribution route" would not be overturned just because
M Golf disposed of the Goods in breach of that clause. When viewed from a substantial
perspective, it cannot be said that the trademark's function as a source identifier would
6

be damaged just because M Golf sold the goods, which it had purchased from thelegitimate seller, in an area outside the territory under the territory clause. In this respect
as well, there is no reason to deny the satisfaction of the first requirement. (Since the2003 Supreme Court Judgment determined that the first requirement was not satisfied
for the reasons including the breach of the territory clause, the relevance to thisdetermination is explained here, just to make certain. In the case of that Supreme Court
judgment, the trademark licensing agreement contained a territory clause, and thelicensee was, in the first place, not authorized to affix the trademark to the goods outside
the territory. Therefore, when the licensee affixed the trademark to the goods outside
the territory, the licensee cannot avoid being evaluated as not having affixed thetrademark "lawfully." On the other hand, in the present case, M Golf's authority todispose of the goods was not subject to any restriction at all as explained above, and in
this respect, the present case differs from the case of the 2003 Supreme Court Judgment
in terms of the facts.)
D. For the reasons stated above, even where the substance of the first requirement istaken as determined in the 2003 Supreme Court Judgment or understood by adding arequirement of the goods having been "lawfully placed on the distribution route,"
concerning whichever case, it should be said that the first requirement is satisfied inthis case.
(4) Regarding the second requirement
In this case, since Appellant Harris is the trademark right holder in Japan and also
the trademark right holder in a foreign country, it is obvious that the trademark affixed
to the Goods and the registered trademark in Japan (the Plaintiffs' Trademark) indicate
the same source of goods.
Appellee Bright carried out advertising activities using the Defendant's Marks inJapan. As Appellee Bright performed such an act after importing the Goods, it isquestionable whether such circumstances have any effect at all on the determination
regarding the satisfaction of the second requirement. Even if it is necessary to take thesecircumstances into consideration, since the Plaintiffs' Trademark and the Defendants'
Marks are similar to each other as explained in 1. above by citing the judgment in pri or
instance, these circumstances do not affect the sameness of the source of goods, and inany case, it should be affirmed that the second requirement is satisfied.
(5) Regarding the third requirement
A. The third requirement presented in the 2003 Supreme Court Judgment is as follows:"since the trademark right holder in Japan is in the position of being able to exercise
quality control over the imported goods directly or indirectly, the imported goods and7the goods to which the trademark right holder in Japan has affixed the registeredtrademark are evaluated as being not substantially different in terms of the quality
assured by the registered trademark."
In the case of the 2003 Supreme Court Judgment, the imported goods were
manufactured not by the trademark right holder but by the licensee of the trademark.
Therefore, for the purpose of assuring the quality of the goods bearing the trademark,whether the trademark right holder was in the position of being able to directly or
indirectly exercise quality control with regard to the act of the trademark licensee (orany subcontractor thereof) could become an important issue. On the other hand, in cases
where the trademark right holder itself manufactures the goods, such as the present case,the quality of the goods is assured by the fact that they are manufactured by thetrademark right holder, and the trademark can be regarded as perfectly fulfilling thequality assurance function as long as the quality of the goods is maintained. The Goods
are men's underwear, and there is no risk that the Goods will degrade due to aging orother reasons during the distribution as long as they are on the distribution route withina reasonable period of time. There is also no risk of damage or other defect on the Goods
themselves as long as the measures for quality control provided to the Goods by thetrademark right holder (e.g., the package of the Goods) are maintained as they are.
If so, it is appropriate to consider that at least in cases where the goods are
manufactured by the trademark right holder, such as the present case, and, because of
the nature of the goods, there is no risk that doubts would arise as to the trademark's
quality assurance function if special care is not taken for quality control, such asconcerning the risk of degradation due to aging, the goods are subject to the quality
control exercised directly or indirectly by the trademark right holder as long as themeasures for quality control provided by the trademark right holder (e.g., the packageof the Goods) are maintained as they are.
B. Whether the third requirement is satisfied is examined from the perspective discussed
above. As stated in No. 3, 2. (4) E. in the "Facts and reasons" section of the judgmentin prior instance (from page 31, line 24 to page 32, line 17 of the judgment in priorinstance), the Goods and the goods sold by the distributors in Japan dealing 2UNDR
brand goods can be regarded as being not substantially different in terms of the quality
assured by the registered trademark. Since the package and other measures provided for
the Goods can be presumed to have been maintained as they are, it is safe to say thatthe requirement to the effect that "the trademark right holder in Japan is in the positionof being able to exercise quality control over the imported goods directly or indirectly"
is satisfied.
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C. The Appellants allege that since the territory clause is an important clause for the
trademark right holder to control the quality of goods until the goods are sold to end
consumers, the breach of this clause leads to damaging the trademark's quality
assurance function. However, an arrangement concerning the restriction on the sales
territory is usually made only for the reason of sales policy on the part of the trademark
right holder, and it cannot be considered to have some type of relationship to the purposeof controlling and maintaining the quality of goods. Therefore, this allegation of theAppellants is unreasonable.(The territory clause in the case of the 2003 Supreme Court
Judgment had meaning as a clause to restrict the territory where the goods should bemanufactured, and therefore it was possible to consider that where to manufacture thegoods could have an effect on the maintenance of the quality of the goods; on the othe rhand, in the present case, since the goods are manufactured by the trademark rightholder, where to sell these goods was the only point that mattered; thus, thecircumstances of these cases were completely different.) In addition, the fact that theDistributor Agreement was terminated can also hardly be regarded as having an effecton the satisfaction of the third requirement.
D. The Appellants allege as follows: there were remains of the stickers taken off on the
packaging boxes of the Goods and the advertisement of the Goods contains the text that
reads "Imperfect: Damaged package"; these facts damage the trademark's quality
assurance function.
However, the flaws such as the damage of the packaging boxes (packages) are notdirectly related to the quality of the goods (men's underwear) (there is no sufficientevidence for finding that the damage of the package affected not only the surface but
also the inside of the package). There is also no evidence suggesting that the quality of
the Goods was actually inferior to the quality of 2UNDR brand goods dealt by theAppellants. The text that reads "Imperfect: Damaged package" can be understood as
only expressing the damage of the package as being "imperfect," and hence, there is norisk that this text would raise doubts about the quality of 2UNDR brand goods.
Consequently, the Appellants' allegation on this point is unreasonable.
E. The Appellants also allege as follows: Appellant Harris guarantees that it will accept
a request for replacement, etc. with regard to goods imported into Japan via its
authorized distributors, thus it has established its own means for gaining credibility forthe quality of its goods; however, the Goods are outside the coverage of such guarantee
and those who purchased the Goods cannot receive replacements, etc. even if there are
defects in the goods, and therefore, the fact that Appellant Harris' guarantee for such
replacements, etc. is unavailable to these purchasers damages the trademark's quality
9assurance function.
However, it is too much to say that Appellant Harris has established a unique quality
assurance system just because it will replace goods at the request of customers, andother than that, there is no sufficient evidence for finding that the Appellants haveestablished their own system for gaining credibility that is sufficient to eliminate
parallel import.
Consequently, the Appellants' allegation on this point is also unreasonable.
(6) Summary
For the reasons stated above, in this case, it should be said that both the first andthird requirements are satisfied and therefore that Appellee Bright's act of importing theGoods is not substantially illegal.
3. Relationship between justification of parallel import and the manner of carrying out
the act of selling
The Appellants alleged that even if Appellee Bright's act of importing the Goods isjustified, its acts of advertising and selling the Goods by the method unauthorized by
the trademark right holder cannot be justified.
However, all of the circumstances alleged by the Appellants as the grounds for their
allegation above have already been examined in the process of determining justificationof parallel import. Rather, as mentioned in 2. above, these circumstances can be theevidence for proving the fact that the trademark's quality assurance function is notdamaged. In addition, Appellee Bright carries out advertisement of the Goods using the
Defendant's Marks. Some of the Defendant's Marks cannot be deemed to be completely
identical with the Trademark but they are similar to the Trademark as explained in 1.
above by citing the judgment in prior instance. It cannot be said that the use of thesemarks damages the Trademark's function, and therefore in this respect as well, thealleged circumstances can hardly be regarded as a sufficient reason for denying
justification of Appellee Bright's acts of advertising and selling.
Consequently, the Appellants' allegation mentioned above cannot be accepted.
4. Conclusion
For the reasons stated above, the Appellant' allegations are groundless, and thejudgment in prior instance that dismissed all of their claims is appropriate.
Intellectual Property High Court, Third Division
Presiding judge: TSURUOKA ToshihikoJudge: UEDA Takuya
Judge: TSUNO Michinori
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