07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

1 1 UN ITED STA TES C OU RT OF AP P EA LS 2 F OR THE SE CO ND CI RC UI T

3 August Term, 2008 4 (Argued: Octobe r 15, 2008 Dec ided: J une 19, 2009 5 Amended: June 30, 2009) 6 Docke t No. 07-2872-c v

7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X 8 Z I NO DAV I DOF F SA, 9 Plaintif f - Appellee , 10 v. 11 CVS COR PORATI ON, 12 Defendant - Appellant

. 13 14 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X 15 16 17 18 Be fore : L EVAL , KATZ MANN, a nd L IVI NGSTON, Circuit Judges

. 19 Def

endant a ppeals fr om a pre liminary injunction ordere d by

the United States District 20 Court for the Southern D istrict of NewYork (K ara s, J. ), which e njoined defe ndant, inter alia, 21 from sellingplaintiff’s tra demar ked produc ts with the unique production code remove d. The 22 Court of Appea ls (L eval, J. ) a ff ir ms. B e c a us e the pr od

uc tio n c od e s p lay

an im po rt ant r ole in 23 helpingthe trade mark owne r to guard a g ainst counterf eits and protec t the reputation of the mark, 24 the district court prope rly found that its unauthorized removal by a seller could justify

a finding07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

Th e or de r a lso e njo ine d CV S f ro m a numbe r o f a c tiv iti e s c on c e rn ingc ounte rf e it 1 Davidoff products, and f

rom tamperingwith or destroying busine ss rec ords re lated to such a c tiv iti e s. Th at pa

rt of the or de r i s n ot at is su e in t his a pp e a l. 2 1 of tr a de mark

inf ri ng e me nt. 2 L I S A P EA R S ON (Christopher L ick, on the brief ; 3 Adam H. Char nes and W. Andre w Pequig not, of 4 counsel ), Kilpatrick Stockton L L P, New Yor k, NY, 5 for Plaintif f-Appellee

. 6 M EG AN M UOI O (Nichola s Fortuna , on the brief ), 7 Ally n & F ortuna L L P, New Yor k, NY, for 8 Defendant- Appellant

.

9 L EVAL , Circuit Judge : 10 Def

endant CVS Corporation, a r etail drug store cha in, appea ls from the orde r of the 11 United States District Court for the Southern D istrict of NewYork (K ara s, J .) , gra nti ngto 12 plaintiff Z ino Davidoff SA ( “Da vidoff”) , a Swiss corporation, a preliminary injunction which 13 enjoined CVS from dea ling in any way in tradema

rked g oods of the plaintiff with Davidoff’s 14 un iqu e pr od

uc tio n c od e (“ UPC ” ) r e mov e d. Th e dis tr ic t c ourt fo un d th at th e pla int if

f w a s li ke ly 1 15 to s uc c e e d o n th e me ri ts o f i ts tra de mark inf ri ng e me nt c la im b e c a

us e the UPC a c ts a s a

qu a lity 16 control mec hanism which ena bles Davidoff

to protect the r eputation of its trade marks by 17 identifying c ounterfe its and by protec ting a g ainst defe cts. We ag ree and af firm the district 18 court’s or der. 19 BACK GR OUND07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

3 1 Davidoff

has bee n a we ll-reg arde d brand f or hig h-end luxury

g oods for pe rsonal 2 consumption since 1911. In 1988, Davidoff launche d DAVI DOF F COOL WATER, a colog ne 3 fo r m e n, fo llo we d b y a CO OL WAT ER f

ra g ra nc e fo r w ome n in

19 97 . D avid of

f h old s v a lid 4 uncontested tra demar ks for a ll of the COOL

WATER products at issue in this case. The COOL 5 WAT ER f

ra g ra nc e s are ma

nu fa c tur e d a

nd mark e te d b y

Coty Inc . ( “ Cot

y” ) a nd its su bs idi ari e s, 6 under lice nse fr om Davidoff. 7 Da

vid of f a nd Coty tog e the r h ave de ve lop e d a c omp re he ns ive qu a lity

a ssu ra nc e and anti

8 counter feitingprog ram. Part of this progr am involves the plac ement of a unique produc tion code 9 on the bottom of eac h COOLWATER fragranc e bottle and on the bottom of its corr esponding 10 packa g e. As its name sug g ests, the UPC is a multi -dig it code unique to ea ch unit. Embedded 11 within the code is a va riety of information about that particular unit, such as the time and plac e of 12 production, the produc tion line, ingre dients used, the distributor, the intended c ustomer, etc. 13 Davidoff

’s use of the UPC play s an important role in fighting c ounterfe its. Bec ause of 14 the high e xpe ns e inv olv e d in pla c inga un iqu e numbe r o n e a c h unit , c ounte rf e ite rs wi ll g e ne ra lly 15 either omit such a numbe r fr om their pac kag ing or repe atedly

use sets of f

ake numbe rs on a se ries 16 of counte rfe it units . The UPC sy stem theref ore f acilitates the spottingof counte rfe it units by 17 allowinginvestigators to make a de termination based on the absenc e of a UPC on the packa g ing 18 or

the us e of

a re pe atin gand , th

us , f ake UPC numbe r. Al so , th e ide nti fi c atio n o f a fa ke UPC 19 number a llows investigator s to searc h for other fake s merely

by identifying pr oducts bea

ringthe07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

4 1 same fa

ke number . Fur

thermore , Davidoff

’s own investig ators ar e not the only rec ipients of 2 these be nefits. Davidof f re gularly

instructs its retailers a

nd office rs of U.S. Customs and Borde r 3 Pr ote c tio n ( “ Cus tom s” ) i n th e us e of the UPC sy ste m and

re lay s in fo rm atio n r e g ard ingfa ke UPC 4 numbers known to be use d by counter feiter s. Armed with this knowledg e, Customs and retailer s 5 are more e asily

able to che ck new ly -re ceive d COOLWATER shipm ents and set a side suspecte d 6 c ounte rf

e its

. 7 Us e of

the UPC sy ste m a lso a ssi sts Da vid of f’ s a bil ity to p ro te c t it s b ra

nd a g a ins t qu a lity 8 slippag e in g enuine a uthorized products. When a quality problem surfa ces, the UPC identifies 9 the place of manufa cture , the batch which produc ed the de fec t, and other ide ntifying inf ormation. 10 This information helps Davidoff both to reca ll alrea dy

distributed product that may share the 11 defe ct and to pre vent furthe r re curr ence of the de fec t. The ability derive d from the use of the 12 UPC helps Davidoff a ssure that its marks will not appea r on def ective pr oduct and thus pre serve 13 and

pr ote c t th e va lue of

its tr a de mark s. 14 In an ef

fort to maintain the pre stige of its brand, Da vidoff limits sales of COOLWATER 15 products to lux ury reta ilers and ha s declined to sell to CVS. Though not a n authorized reta iler, 16 CVS is nonetheless able to sec ure stock of COOLWATER from outside of Davidoff ’s normal 17 dis tr ibutio n c ha

nn e ls. Da

vid of f p ro du c ts a

re amon gCV S’ s to p- se lli ngfr a g ra nc e s. Some of the 18 COOLWATER fragranc es sold by CVS have bee n found to be c ounterfe it. In addition, some of 19 the COOL

WATER stock purchase d by CVS that is notcounter feit consists of g ray-marke t07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

Section 32(1) of

the L anham Ac t provides, in part, that “ [a] ny person who . . . w ithout 2 the conse nt of the re g istrant . . . use[s] in commerc e any repr oduction, counter feit, copy , or colora ble imitation of a reg istered mar k in connec tion with the sale, offe ringfor sa le, distribution, or advertisingof any g oods [t hat] is l ikely

to cause confusion, or to c ause mistake, or to dec eive . . . sha ll be liable in a civil ac tion.” 15 U.S.C. § 1114(1). In addition, Section 43(a) of the Ac t pr ov ide s th at “ [a]ny pe rs on wh o . . . us e s in

c omm e rc e any

wo rd , te rm , n ame , s y

mbo l, or de vic e , o r a

ny c omb inatio n th e re of

. . . whic h .

. . is l ike ly

to c a us e c on fu sio n, or

to c a us e mistake, or to dec eive a s to the aff iliation, connection, or a ssociation of such pe rson with another person, or as to the orig in, sponsorship, or approva l of his or her g oods . . . by another person . . . shall be liable in a c ivil action.” 15 U.S.C. § 1125(a)( 1). F inally , Section 43(c) of the Ac t provides that “the owner

of a f amous mark that is distinctive . . . shall be entitled to an injunction a g a ins t ano the r p e rs on

wh o . . . c omm e nc e s u se of a mark

. . . in c omm e rc e that is lik e ly

to c a us e 5 1 g o o d s , me an in g“ g o o d s th at a r e ma nu f a c tu r e d [un d e r a u th o r iz ati o nf

r o m t h e tr a d e ma

r k o w n e r ], 2 are leg ally

purcha sed [outsi de the United States] from author ized dist ributors, and a re the n 3 imported by

persons other

than the tra demar

k holder a nd without the markholder’ s permission.” 4 Olympus Corp. v. United States , 792 F.2d 315, 317 ( 2d Cir. 1986). 5 On two occ asions, in 1998 and 2005, Davidof f discover ed that counte rfe it COOL 6 WAT ER p ro du c ts w e re be ingso ld at CV S. O n b oth oc c a sio ns , D avid of

f s e nt c e a se -a

nd -d e sis t 7 letters to CVS and provided infor mation to CVS on how to identify counter feits base d on the 8 product’s U PC. CV S a ssu re d D avid of

f t hat it wo uld c on du c t an inve nto ry

re vie w, re mov e a ll 9 c ounte rf

e it p ro du c ts, and

so ur c e on ly

fr om a uth or ize d d istri butor s. De sp ite the se a ssu ra nc e s, 10 Davidoff

discovere d in 2006 that CVS was continuing to sell counte rfe it COOLWATER 11 fra g ranc es. Davidoff then brought this action ag ainst CVS alleging , inte r a lia , trade mark 12 infring ement, unfa ir competition, and trade mark dilution in viol ation of Sections 32(1) a nd 43(a) 13 and (c ) of the L anham Ac t, 15 U.S.C. §§ 1114(1), 1125(a) and 1125(c ). Davidoff ’s orig inal 207- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

dilution by

blurringor dilution by

tarnishment of the f

amous mark, r eg ardle ss of the pre sence or absenc e of a ctual or likely confusion, of c ompetition, or of actua l economic injury .” 15 U.S.C. § 1125(c) (1). Da vid of f h a s n ot t e ste d th e 16 ,6 00 pr od uc ts at is su e , a

nd the re fo re is n ot ye t a

ble to 3 deter mine how many , if any , are counter feit. 6 1 complaint soug ht relief only as to CVS’s marketingof counte rfe it Davidoff pr oducts. On 2 Dec ember

22, 2006, the district court grante d a tempora ry restra ining or der a

nd authorized 3 Davidoff

to inspect all undistributed products in CVS’s inventory bear ing the Davidoff

mark. 4 Duri ngthe c ours e of thi s in sp e c tio n, Da

vid of f d isc ov e re d th at, i n th e c a se of 16 ,6 00 ite ms 5 in CVS’s inventory , the UPCs on the packa g es and la bels aff ix ed to the bottle had be en 6 remove d. The c odes had be en re moved throug h a var iety of tec hniques, includingcutting the 3 7 portion of the box or label exhibi ting the U PC, usi ngchemica ls to wipe awa y the UPC on the 8 label, and grindingawa y the bottom of the bottles to remove the U PC. I t was appa rent in many 9 instances that the pa ckag ing ha d been ope ned. 10 On Fe bruar y 7, 2007, Davidoff

amende d its complaint to i nclude a lso claims for re lief 11 based upon CVS’s sale of Davidoff produc ts with the UPC removed. On Mar ch 2, 2007, CVS 12 voluntarily

agree d to halt the sale of c ounterfe it Davidoff pr oducts, but not the products with the 13 c od e s r e mov e d. Da vid of f t he n mo ve d f

or a pr e lim ina

ry inj un c tio n f

or bid din gthe sa le of

a ll i ts 14 trade marke d g oods with code re moved. The c ourt g rante d Davidoff ’s motion. Zino Davidoff SA 15 v. CVS Corp. , No. 06-c v-15332, 2007 WL1933932 (S.D.N.Y. July 2, 2007). The c ourt rea soned 16 that remova l of the code s from Davidoff’s tra demar ked produc t impaired Davidoff’s mar ks by07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

7 1 interfe ringwith the trade mark owne r’s a bility to identify

counter feit g oods and to control the 2 quality

of its leg itimate products by identifying a

nd rec alling de fec tive products. The court thus 3 c on c lud e d th at D avid of f w a s li ke ly

to s uc c e e d o n th e me ri ts o f i ts t ra de mark inf ri ng e me nt c la ims 4 on the theory

that CVS’s sale of Da

vidoff’s tra demar

ked produc ts with the codes re moved 5 c on sti tut e d tr a de mark inf ri ng e me nt. CV S br ou g ht t his a pp e a l. 6 DI SCU SSIO N 7 We reviewa district cour t’s g rant of a

preliminary

injunction for abuse of discre tion. 8 Almontaser v. N.Y . City Dep’t of Educ ., 519 F.3d 505, 508 ( 2d Cir. 2008). 9 In case s involving cla ims of tradema rk infring ement and dilution, as in other ty pes of 10 case s, a par ty seekinga pre liminary

injunction mustdemonstrate ( 1) the likelihood of 11 irrepa

rable injury

in the absenc e of suc h an injunction, and (2) either ( a) likelihood of 12 succe ss on the merits or (b) sufficie ntly serious questions g oing to the me rits to make 13 them a fa ir g round for litigation plus a bala

nce of hardships tipping de cidedly toward the 14 party

reque sting the pr eliminary relief

. 15 Fed. Ex

press Corp. v. Fed. Espre sso, Inc ., 201 F.3d 168, 173 ( 2d Cir. 2000). CVS argues that 16 Da

vid of f f a ile d to e sta

bli sha lik e lih oo d o f s uc c e ss o n th e me ri ts a nd wo uld no t su ff e r i rr e pa ra ble 17 harm in the a

bsence of an injunction. We disag ree and af firm the district cour

t’s g rant of a 18 preliminary

injunction. 19 I. Tr ade m ar k Infr ing e m e nt 20 CVS contends that the district court e rre d in ruling that Davidoff is likely to succe ed on 21 the merits of its trade mark infr inge ment claims. CVS asserts that the g oods with the codes 22 remove d are g ray-marke t goods – i.e. , gen u i n e D av i d o ff go o d s s o l d

b y Da v i d o ff th ro u gh07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

8 1 authorized cha

nnels in other countr ies and subseque ntly imported by

others into the United 2 States. Be cause these g oods are sold in their orig inal packa g ing w ith the Davidoff tr adema rks 3 c le arl y

vis ibl e and

un a lte re d, CV S c onte nd s th at th e re mov a l of the c od e s d oe s n ot n e g ate the ir 4 g enuinene ss or constitute infring ement. CVS’s argument misses the point. The fac t that the 5 g oods in question may be gray-marke t goods doe s not furnish CVS with a valid defense . The 6 question befor e us is not whether , or under what cir cumstance s, the sale of g ray-marke t goods 7 infring es their tra demar k. The district cour

t did not jus tify

its gra nt of a pre liminary

injunction 8 by the proposition that the g oods authorized by Davidoff for sa le in another

country are not 9 g enuine whe n sold in the United States. The injunction was justified rather on the ba sis that the 10 remova l of Davidoff ’s code s interfe red unla

wfully with Davidoff’ s tradema rk rights reg ardle ss of 11 whether

the g oods were orig inally authorized by

Davidoff for sa le in the United States or 12 elsewhe re. 13 CVS argues that neither the plain text nor the leg islative history of the L anham Ac t 14 supports the district court’s c onclusion that a re tailer may be found liable for tra demar k 15 infring ement for

selling a g enuine pr oduct in its original pa ckag ing w ith the reg istered tra demar k 1 6 i n t a c t , s i mp l y

b e c a u s e th e m ar

k h o l d e r ’ s p r o d

u c t i o nc o d e h a s b e e na l t e r e d o r r e m o v e d

. In 17 support of its argument, CVS point s to past failed leg islative attempts seekingto amend the 18 L anh am A c t to inc lud e a pr oh ibi tio n o n th e a lte ra

tio n o r r e mov a l of

pr od uc tio n c od e s. 19 To the e xtent CV S’ s argume nt r e sts on the fa ile d e ff

or ts t o ame nd

the g ov e rn ingstatut e s,07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

9 1 we re

je c t it . T he Sup re me Court ha s c a uti on e d th at “ fa ile d le g isl ativ e pr op os a ls a re a pa rt ic ula rl y 2 dang erous ground on which to re st an interpre tation of a prior statute.” Ce ntral B an k

of D e nv e r, 3 N.A. v. First Interstate Bank of De nver, N.A., 511 U.S. 164, 187 (1994) (inter nal quotation marks 4 omi tte d) . “ Con g re ssi on a l in a c tio n la c ks pe rs ua siv e signif ic anc e be c a

us e se ve ra l e qu a lly

te na ble 5 infere nces ma

y be dra wn from suc h inaction, includingthe infer ence that the exist ing le g islation 6 alre ady

incorporated the off

ere d chang e.” Id . (interna l quotation marks omitted). The fa ct that 7 proponents of a

particula r view sought unsucce ssfully to have a statute amende d to state a 8 proposition with unmi stakable c larity tells nothing about whe ther the pr eexisti nglaw alr eady 9 c o v e r e d

th e p o i n t , a l b e i tl e s s c l e ar l y. 10 In o ur

vie w, fu rt he rm or e , th e dis tr ic t c ourt c or re c tly fo un d th at D avid of

f w a s li ke ly

to 11 succe ed on the mer its in i ts contention that CVS’s sales of its products with the UPC removed 12 constituted tradema rk infring ement. We re cognize that, as a g ener al rule, the L anham Ac t does 13 not impose liabili ty for “ the sale of

g enuine g oods bear ing a

true mar k even though the sale is not 14 authorized by

the mark owner” beca

use such a

sale doe s not inherently

cause confusion or 15 dilution. Polyme r Tech. Corp. v. Mimran , 975 F.2d 58, 61 ( 2d Cir. 1992). Howe ver, w e have 16 held that g oods are not ge nuine if they do not conform to the tra demar k holder’s qua lity

control 17 standards, Polyme r Tech. Corp. v. Mimran , 37 F.3d 74, 78 ( 2d Cir. 1994), or if they differ 18 materia lly

from the pr oduct authorized by the trade mark holder

for sa le, Original Appalachian 19 Artworks, Inc. v. Granada Elecs., Inc ., 816 F.2d 68, 73 ( 2d Cir. 1987). 20 Where the a lleg ed infring er ha s interfe red w ith the tradema rk holder’ s ability

to control07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

10 1 quality , the trade mark holder ’s claim is not defe ated be cause of fa ilure to show that the g oods 2 sold were defe ctive. That is because the interfe renc e with the tra demar k holder’s le g itimate steps 3 to control quality

unrea sonably

subjects the tra demar

k holder to the risk of injury to the 4 reputation of its mark. “One of the most valuable a nd important protections af forde d by the 5 L anham Ac t is the right to contr ol the quality of the g oods manufac tured a nd sold under the 6 holder’s tra demar

k.” El Greco Leathe r Prods. Co. v. Shoe W orld, Inc. , 806 F.2d 392, 395 ( 2d 7 Cir. 1986). In attachingits mark to its goods over time, a holder a ssures consume rs that the 8 g oods confor

m to the mark holder’ s quality standards. Reputation for quality , whether g ood or 9 ba d, be c ome s a sso c iate d w itha mark in t he min ds of

c on sume rs . M any

c on sume rs are wi lli ngto 10 pay

more to buy

g oods bear ing a

mark whic h experience has taught the consumer r epre sents an 1 1 a s s ur an c e o f

h i g hqu a l i ty. 12 Davidoff

asser ts that its codes serve as a c ontrol of quality in two way s: (1) the c odes 13 permit the ea sy

detec tion of counterf

eits, and (2) they

improve Davidoff’s a

bility to identify 14 de fe c tiv e pr od

uc ts, e ff e c tuate a targ e te d r e c a ll, and

re me dy pr od uc tio n d e fe c ts. We r

ule d in 15 W

ar ne r- Lam be rt C

o. v . No rth sid

eDe v . Co rp ., 86 F.3d 3 ( 2d Cir. 1996), that a tra demar k holder 16 is entitled to an injunction ag ainst one who would subver t its qualit y

control mea sures upon a 17 sh ow ingthat ( i) the a sse rt e d q ua lity c ontr ol p ro c e du

re s a re e sta bli sh e d, le g iti mate , s ub sta nti a l, 18 and

no np re te xtua l, ( ii) it a

bid e s b y the se pr oc e dure s, and

(i ii) sa le s o f p ro du c ts t

hat f a il t o 19 confor

m to these proce dures will diminish t he value of the mar k. Id . at 6. The district c ourt 20 found that these r equire ments were met. We ag ree .07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

11 1 1. Det ect ion of Counterfeits 2 Be cause the cr eation of unique production code s for e ach pa ckag e is expensive, 3 counter feiter s often either omit the UPC altog ether

or use se ts of identical bogus codes on 4 nume ro us pa c ka g e s. Da vid of f’ s e vid e nc e sh ow e d th at th e UPC sy ste m f a c ili tate s it s a

bil ity to 5 identify

counter feit Davidoff produc ts by allowingit to scan for pr oducts which e ither lac k a 6 UPC or exhi bit a UPC known to be used by counter feiter s. The district cour t found that Davidoff 7 re gula

rl y tr a ins re ta ile rs , p ri vate inv e sti g ator s, and U. S. Cu sto ms t o u se UPC s in thi s ma nn e r t o 8 identify

and seize counte rfe it goods. As a result, it determined that the first two prong s of the 9 W ar ne r- Lam be rt formulation wer e met bec ause the proce dures we re “ leg itimate, substantial, and 10 nonprete x tual” and D avidoff “ abides by these proc edure s.” The district c ourt conc luded that the 11 thi rd

pr on gwa s a lso me t be c a us e the los s o f t

he se pr ote c tio ns a g a ins t c ounte rf e its wo uld

e xpos e 12 Da

vid of f t o a highe r i nc ide nc e of

su bs tanti a l sa le s o f c ounte rf e it g oo ds , whic h a

re inv ari a bly 13 no n- c on fo rm ingand inf e ri or , a nd thu s h arm

Da vid of f’ s r e putatio n a

nd dim ini shthe va lue of

its 14 trade mark. 15 CVS argues that the pre sence or abse nce of a UPC on a par

ticular unit of a D avidoff 16 product doe s not prove the unit’s authe nticity or lac k there of, and a s a re sult, cannot be 17 considere d a leg itimate quality control proc edure . The a rgument ag ain misses the point. The 18 code sy stem enhanc es the e ffe ctiveness of Davidoff ’s ability to detect a

nd preve nt the sale of 19 counter feits. Removal of the c odes make s it more difficult to detec t counterf eits. Reg ardle ss of 20 whether

the pre sence or abse nce of a code on an individual unit of Davidoff product e stablishes07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

12 1 the authenticity

of that unit, the remova l of the code s exposes Davidoff to an inc rea sed risk that 2 any

g iven unit sold at retail will be counter feit. Davidoff ade quately showed that the a ffixation 3 of the c od e is a

le g iti mate , s ub sta

nti a l, n on -p re te xtua l pr oc e dure to d e te c t c ounte rf e its , th at it 4 abides by

the proc edure , and that re moval of the c odes exposes it to a realistic risk of incr ease d 5 incidence of counte rfe its with resultant damag e to the re putation of its mark. That showingwas 6 sufficie nt to support the court’s grant of the preliminary injunction. 7 2. Ide nt ific at ion of D e fec ti ve P r oduc ts and E ffec ti ve Re c all 8 Th e dis tr ic t c ourt a lso ba se d it s f

ind ingon the ro le Da

vid of f’ s c od e sy ste m pl ay s to he lp 9 pr ote c t a g a ins t qu a lity de fe c ts i n g e nu ine Da

vid of f p ro du c ts. Em

be dd e d w ith in t

he UPC 10 numbers ar e seve ral piec es of infor mation about the produc t, including whe re a nd when it was 11 pr od

uc e d, ingre die nts us e d, and dis tr ibutio n p ath. Da

vid of f s ho we d th at th is i nf

or matio n c ou ld 12 assist its qualit y

controls in sever al way s. When a defe ct in quality is discovere d in a par

ticular 13 item, refe renc e to the code helps identify the source of the proble m and thus fac ilitates 1 4 c o r

r e c t i o n . F urth e r

m o r e , w h e na

qu a l i ty p r o b l e mi s d i s c o v e r e d , th e c o d e s ys t e mp e r m i t s e a s y, 15 rapid identification of aff ecte d product a lrea dy

in the chain of

distribution, s o as to fac ilitate a 16 targ eted r eca ll that will remove the def ective g oods from the c hannels of c ommerce while leaving 17 unaff

ecte d g oods in place. 18 CV S c onte nd s th e c od e sy ste m is me re ly pr e te xtua l. F ir st, CV S no te s th at th e UPC is 19 minimi zed in small print at the bottom of the box and bottle, and Davidoff ’s re tailers and 20 customers a

re not made awa

re of it. Second, CVS point s out that Davidoff ha s never enac ted a07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

13 1 targ eted r eca ll of the ty pe that the UPC sy stem is alleg edly desig ned to fa cilitate. Thus, CVS 2 contends that Da

vidoff’s qua lity

control cla ims are pr etextual and that the true pur pose of the 3 UPC sy ste m is to a llo w D avid of f t o s e arc h o ut gra

y -m ark e t g oo ds

. 4 These a

rguments are not convincing . Whether Davidoff’s r etailer s and consumer s are 5 awa

re of how to obtain information from the U PC number is of no significanc e. The codes a re 6 desig ned to assist Davidoff and its ag ents in quality

control and the detec tion of counterf eits as 7 descr ibed above . Whether consumer s and/or re tailers under stand the code s is irreleva nt to the 8 codes’ perf

ormanc e of the ir function. More over, if the need a rose, Da vidoff could se ek the 9 assistance of re tailers and c onsumers by instructing the m to look for units whose UPC numbers 10 are a sso c iate d w iththe pr ob le m. 11 The district cour t properly relied on the testimony

of Davidoff’s Vic e President f or 12 Regulatory

Affa irs and Qua lity

Assuranc e, amongothers, as suppor t for Davidoff’s a ctual use of 13 the a sse rt e d q

ua lity c ontr ol p ro c e dure . T his te sti mony re ve a le d th at D avid of

f h a d, on mul tip le 14 occa sions, relied on the UPC sy stem to assist with qualit y issues, including unde r-filled or over15 fi lle d b ott le s, de fe c tiv e dis pe ns e rs , a nd imp ro pe r p a c ka g ing . T he fa c t th at no ne of the se 16 instances r esulted in a lar g e-sc ale r eca ll does not help CVS. To the contrar y , an important 17 benef

it of the UPC sy stem is that it permits Davidoff to keep r eca lls small and targ eted. 18 Nor doe s the fac t that the UPC sy stem also may allow Davidof

f to ensnar e distributors 1 9 o p e r at i n go u t s i d e th e a u th o r i z e d d i s tr i b u t i o nan d

r e t a i l n e tw o r

k an d t o i d e n t i f y i mp o rt e r s o f

g r ay20 marke t goods de fea t its claim. W hat matters is whe ther Da vidoff’s c odes ar e a bona fide c ontrol07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

14 1 device upon which Da vidoff ac tually

relies. I f the c odes ser

ved only to help Davidoff

exert 2 control over

the distribution and sales networ k, differ ent questions would arise. B ut the mere 3 fa c t th at th e UPC sy ste m pr ov ide s D avid of f a dd iti on a l be ne fi ts that ma y be unre late d to qu a lity 4 c ontr ol d oe s n ot n e g ate its le g iti mate fu nc tio n in pr ote c tin gDa

vid of f’ s ma rk s f ro m qu a lity 5 d ef

ec t s an d co un t er fe i t i n g. 6 CVS also argues Davidoff has not shown that a ny of CVS’s sales involved infe rior 7 product. CVS notes that the purpose of the injunction in W ar ne r La mb e rt

was to protec t the 8 mark holder

ag ainst distributi on of stale, infe rior cough drops. Se eW ar ne r La mb e rt , 86 F.3d at 9 7-8 & n.1. I t contends no such issue is at stake here

. 10 For

at least two re asons, CVS’s argument is meritless. First, such proof is unnece ssary . 11 In El Greco , we c lear ly articulated that, for pur

poses of a naly zing trade mark infr inge ment 12 inv olv ingint e rf

e re nc e wi th q

ua lity c ontr ol p ro c e dure s, “ the a c tua l qu a lity of the g oo ds is 13 irrele vant; it is t he contr ol of quality that a tra demar

k holder is entitled to maintain.” El Greco , 14 80 6 F .2 d at 39 5. Th e mark ho lde r i s e nti tle d to pr ote c tio n a g a ins t a c ts that su bv e rt its a bil ity to 15 pr ote c t th e re putatio n o f i ts m ark s b y e xer c isi ngqu a lity

c ontr ols

. 16 Second, it is untrue that none of CVS’s sales of produc t with code re moved involve 17 inf

e ri or pr od uc t. C ha ra c te ri sti c a lly , s e lle rs of

luxur y g oo ds , s uc h a s f

ra g ra nc e s, g o to g re at le ng th 18 and

e xpe ns e to p re se nt t

he tr a de mark e d me rc ha

nd ise in a pp e a lin gpa c ka g ing . F or

a se lle r t o 19 damag e the pa ckag ing by cutting a way portions or applying a cids to blur marking s detrac ts from 20 the value of

the produc t. The evide nce show ed that re moval of the UPC require d tampering– the07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

15 1 cutting of

packa g ing, the application of c hemicals to wipe a way the labeling , and the grindingof 2 the bottles – all of which is visible to a consumer . I t is a logic al infer ence that consumers ma y 3 reg ard a

product whose packa g ing ha s been tampere d as infer ior and pe rhaps suspicious. 4 Mutil atio n o f p a c ka g ingto c on c e a l ma rk ing s ma y le a d th e c on sume r t o s us pe c t th at th e ite m is 5 sto le n me rc ha

nd ise , o r i s d e fe c tiv e and

ha s b e e n d ive rt e d f

ro m a re c a ll, or is o the rw ise 6 untrustworthy . Fur thermore , fra g ranc es ar e ofte n purcha sed to be off ere d as romantic g ifts. 7 Mutilated packa g ing makes the item less appe alingto such a purc haser , who runs the r isk that the 8 g ift will be viewed by the re cipient as a

sketchy , chea

p purcha se fr om an illicit source or of the 9 so rt

g ive n b y To ny Sop ra no to C arm e la . In s ho rt , tr a de mark e d g oo ds wh os e luxur y pa c ka g ingis 10 damag ed ar e mater ially differ ent from those that are intact. Ac c or d Da v ido ff & CI E, S. A. v . P

LD 11 In t’ l Co rp ., 263 F.3d 1297, 1303- 04 (11th Cir. 2001). 12 Thus, Davidoff is likely to succe ed in its trademar k infring ement cla im not only on the 13 basis of CVS’s interfe renc e with Davidof f’s qua lity

control, but bec ause CVS is selling unde r 14 Davidoff

’s mark g oods that are materia lly differ ent from Da

vidoff’s g enuine tra demar ked 15 product. See O riginal Appalachian Artw orks , Inc. , 8 1 6 F

. 2 d at7 3 ( e n j o i n i n gth e s a l e o f

g r ay16 marke t products which a re “ materia lly

differ ent” be cause such sales c onstitut e tra demar k 17 infring ement). In the context of g ray-marke t goods, in c omparingthe trade mark holder ’s produc t 18 with the g ray-marke t product, we apply a low thre shold of materia lity , requiringno more than a 19 slight diffe renc e which c onsumers would likely deem r eleva

nt when conside ringa purc hase of 20 the produc t. Acc ord Bourdeau Bros. v. I nt’l Trade Comm’n , 444 F.3d 1317, 1323 ( Fe d. Cir.07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

16 1 2006); Societe de

s Produits N

estle, S.A. v. Casa He lvetia, Inc

. , 982 F.2d 633, 641 ( 1st Cir. 1992) 2 (“Any

highe r threshold would e ndang er a manufa cture r’s investment in produc t goodw ill and 3 unduly

subject consumer s to potential confusion by severing the tie betwee n a manuf actur er’ s 4 protec ted mark a

nd its associated bundle of traits.”). The damag e to the pac kag ing f urnishes an 5 a dd iti on a l ba sis , o ve r a nd a bo ve the de tr ime nt t o th e mark ho lde r’ s a

bil ity to d e te c t c ounte rf

e its 6 and to guard a g ainst defe cts, to justify the g rant of the preliminary injunction. 7 II. Irre parable Injury 8 We h ave pr e vio us ly he ld t hat a “ pla int if f who e sta

bli sh e s th at an in fr ing e r’ s u se of its 9 trade mark c reates a likelihood of consume r conf usion ge nera lly

is entitled to a presumption of 10 irrepa

rable injury .” W

eight W atchers Int’l, I

nc. v. Luigino’s, Inc

. , 423 F.3d 137, 144 ( 2d Cir. 11 2005). The district c ourt found that Davidoff had e stablished a likelihood of conf usion and was 12 thus entitled to thi s presumption. CVS argues on appe al that the district cour t did not adduce 13 evidenc e suff

icient for it to conc lude that consumer s were likely to be conf

used by CVS’s sale of 14 decode d g ray-marke t Davidoff pr oducts. We disag ree . Even without the bene fit of a 15 presumption, Davidoff ’s evidenc e showe d a likelihood that the abse nce of codes inc rea sed the 16 risk that consumers w ould unwittingly purcha se counte rfe it or defe ctive produc t beca use of the 17 dis a

bli ngof Da vid of f’ s d e vic e to gua

rd a g a ins t th e se thi ng s. 18 We find neither e rror nor abuse of discre tion in the dist rict cour t’s g rant of the 19 preliminary

injunction. 20 CO NC LU SION07- 2872- cv

Z i no D avi dof

f SA v. C V S C orp .

17 1 The district cour t’s order for a preliminary

injunction is hereby

AFF I RMED.