1998 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-30-1998

Iberia Foods Corp v. Romeo

Precedential or Non-Precedential:

Docket 97-5424

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Recommended Citation

"Iberia Foods Corp v. Romeo" (1998). 1998 Decisions. Paper 178.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/178
Filed July 30, 1998 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 97-5424 

IBERIA FOODS CORP. 

v. 

ROLANDO ROMEO, JR. 

d/b/a ROL-ROM FOODS 

Rolando Romeo, Jr., t/a 

Rol-Rom Foods, 

 Appellant 

On Appeal from the United States District Court 

for the District of New Jersey 

(D.C. No. 93-cv-01690) 

Argued Monday, April 27, 1998 

BEFORE: ALITO, RENDELL and GARTH, 

Circuit Judges 

(Opinion filed July 30, 1998) 

 Stephen L. Baker (Argued) 

 Stephen L. Baker, P.A. 

 359 East Main Street 

 Somerville, New Jersey 08876 

 Attorney for Appellant 
 John G. Gilfillan, III (Argued) 

 Kenneth L. Winters 

 Carella, Byrne, Bain, Gilfillan, 

 Cecchi, Stewart & Olstein 

 6 Becker Farm Road 

 Roseland, New Jersey 07068 

 Attorneys for Appellee 

OPINION OF THE COURT 

GARTH, Circuit Judge: 

This is a trademark action brought by Iberia Foods 

against Rolando Romeo, Jr. and his company, Rol-Rom

Foods (collectively, "Rol-Rom"), to enjoin Rol-Rom's sale of 

household cleaning products under the Mistolin trademark 

owned by Iberia. The district court granted summary

judgment in favor of Iberia, and Rol-Rom has appealed. 

Because the Mistolin products sold by Rol-Rom are 

"genuine" under Section 32 of the Lanham Act, 15 U.S.C. 

S 1114, we will reverse. 

I. 

Iberia Foods is a Brooklyn-based wholesale distributor of 

grocery store products that owns the United States 

trademark to Mistolin household cleaners. The line of 

Mistolin products includes soaps, tile cleaners, and laundry 

detergents, and is offered for sale at grocery stores and 

supermarkets both in Puerto Rico and in certain 

metropolitan areas in the United States for a few dollars a 

bottle. 

Mistolin products are manufactured exclusively in Puerto 

Rico by Mistolin Caribe, Inc. ("Caribe"). In addition to 

selling Mistolin to Iberia for resale in the United States, 

Caribe markets Mistolin directly to distributors in Puerto 

Rico for resale in the Puerto Rican market. Although both 

Iberia and Caribe sell Mistolin products, the two companies 

service entirely separate markets: Caribe sells Mistolin only 

in Puerto Rico to Puerto Rican distributors, and Iberia sells 

Mistolin only in the continental United States. 

 2 
The business arrangement between Iberia and Caribe 

dates back to 1988, when Iberia acquired the United States 

trademark to Mistolin from Caribe's parent company,

Mistolin Dominicana, C.A. ("Dominicana").1 Although the 

legal effect of the 1988 agreement is disputed, its terms 

granted Iberia "all the rights, title and interest in and to 

[the Mistolin] trademark insofar as they relate to the United 

States." In exchange for ownership of the Mistolin 

trademark, Iberia agreed to purchase Mistolin exclusively 

from Caribe. 

The defendant in this case, Rol-Rom Foods, is a New

Jersey-based distributor of household cleaning products 

that purchases Mistolin products on the open market in 

Puerto Rico and sells them in New York and New Jersey. 

Although Rol-Rom has never purchased Mistolin products 

directly from Caribe, it is undisputed that the Mistolin sold 

by Rol-Rom was originally sold by Caribe for resale in the 

Puerto Rico market. By obtaining Mistolin in Puerto Rico 

and selling it in New York without Iberia's involvement, RolRom has been able to offer Mistolin for sale in direct 

competition with Iberia at a substantial discount from 

Iberia's price. 

II. 

In April 1993, Iberia filed a four count complaint against 

Rol-Rom seeking injunctive relief and damages. The 

principal count in the complaint alleged that Rol-Rom's sale 

of Mistolin products constituted infringement of Iberia's 

trademark in violation of S 32 of the Lanham Act, codified 

at 15 U.S.C. S 1114.2 Rol-Rom's answer denied that it had 

infringed Iberia's mark, alleged several affirmative defenses, 

and added a number of counterclaims. Following discovery, 

_________________________________________________________________ 

1. Although Caribe is technically a subsidiary of Dominicana, for the 

sake of simplicity we will refer to Caribe rather than Dominicana when 

discussing the 1988 agreement. This substitution has no effect on our 

resolution of this appeal. 

2. The remaining counts against Rol-Rom alleged violations of common 

law trademark and service mark infringement, common law unfair 

competition, and New Jersey statutory unfair competition under N.J.S.A. 

56:4-1. 

 3 
both parties moved for summary judgment on the federal 

trademark infringement count. 

Before the district court on summary judgment, Iberia 

argued that Rol-Rom had clearly infringed Iberia's 

trademark. According to Iberia, the 1988 agreement 

between Iberia and Caribe had transferred the rights to the 

Mistolin trademark in the continental United States to 

Iberia, but had allowed Caribe to retain the trademark 

rights to Mistolin in Puerto Rico. By buying Mistolin in 

Puerto Rico and selling it in the continental United States, 

Iberia contended, Rol-Rom had circumvented the quality 

control measures enforced by Iberia on all the Mistolin 

products it sold. Accordingly, Iberia claimed, Rol-Rom's 

Mistolin was not "genuine," and Rol-Rom's sales constituted 

infringement of Iberia's trademark because it injured the 

goodwill Iberia had invested in the mark. 

Rol-Rom's view of the case contrasted sharply with 

Iberia's. According to Rol-Rom, the 1988 agreement had 

transferred all of Caribe's United States trademark rights to 

Iberia. Because Puerto Rico is considered part of the 

"United States" for the purpose of federal trademark law, 

see 15 U.S.C. S 1127, Rol-Rom claimed that the 1988

agreement had granted Iberia the Mistolin trademark rights 

in Puerto Rico as well as in the continental United States. 

According to Rol-Rom, Iberia's longstanding failure to 

challenge Caribe's sales of Mistolin to Puerto Rican 

distributors provided Rol-Rom with two affirmative defenses 

to Iberia's action. First, Rol-Rom argued that Iberia's failure 

to exercise control over its mark constituted a"naked 

license" that had led to de facto abandonment of the 

Mistolin trademark.3 Second, Rol-Rom claimed that Iberia 

had impliedly consented to Caribe's sales of Mistolin in 

Puerto Rico, such that Iberia had relinquished its 

_________________________________________________________________ 

3. Rol-Rom's pleadings describe its abandonment argument as a 

counterclaim, rather than as an affirmative defense. Abandonment, 

however, is generally considered an affirmative defense to infringement, 

rather than the type of actionable wrong that would sustain an 

independent claim or counterclaim. See, e.g., Exxon Corp. v. Oxxford 

Clothes, Inc., 109 F.3d 1070, 1075-76 (5th Cir.), cert. denied, 118 S. Ct. 

299 (1997). For the sake of simplicity, we will refer to Rol-Rom's 

abandonment argument as an affirmative defense. 

 4 
trademark rights to the Mistolin sold by Rol-Rom pursuant 

to the "first sale" or "exhaustion" doctrine.4 

On March 26, 1996, the district court entered an order 

denying Rol-Rom's motion for summary judgment and 

granting Iberia's summary judgment motion. Addressing 

Rol-Rom's defenses first, the district court held that RolRom's first sale and abandonment defenses were meritless 

because the uncontroverted evidence in the record made 

clear that neither Caribe nor Iberia had intended that Iberia 

would possess the right to prevent Caribe from marketing 

Mistolin in Puerto Rico. When Caribe and Iberia had agreed 

to transfer the Mistolin trademark rights to Iberia "insofar 

as they relate to the United States," the district court held, 

they had intended to transfer only the rights covering the 

continental United States, where Iberia was already

distributing Mistolin products. Because Iberia had no right 

to control Caribe's sales of Mistolin in Puerto Rico, it had no 

ability either to authorize Caribe's "first sale" of Mistolin or 

to grant Caribe a "naked license" to sell it in Puerto Rico. 

Accordingly, the district court held that the first sale 

(exhaustion) and abandonment doctrines were inapplicable. 

In any event, the district court noted, the Mistolin 

trademark had clearly not been abandoned because the 

mark continued to have significance among purchasers in 

the continental United States. 

Having dispensed with Rol-Rom's affirmative defenses, 

the district court turned to Iberia's motion for summary 

judgment. Here, the district court referenced its prior 

discussion of Iberia's view that the Mistolin sold by Rol-Rom 

was not "genuine" because it never passed through Iberia's 

post-manufacture quality controls. In that discussion, the 

district court had also noted the presence of "record 

evidence showing that [Iberia] has in fact instituted some 

quality control procedures over products it received from 

_________________________________________________________________ 

4. According to the "first sale" or "exhaustion" doctrine, a trademark 

owner's authorized initial sale of its product into the stream of commerce 

extinguishes the trademark owner's rights to maintain control over who 

buys, sells, and uses the product in its authorized form. See, e.g., 

Sebastian Int'l, Inc. v. Longs Drug Stores Corp., 53 F.3d 1073, 1076 (9th 

Cir. 1995). 

 5 
Caribe." In its motion for summary judgment, Iberia argued 

that this evidence entitled Iberia to summary judgment on 

its federal trademark infringement count. The district court 

agreed, although it did not specify the basis for its implicit 

conclusion that Rol-Rom's Mistolin was not "genuine." 

The litigation regarding Iberia's remaining claims and 

Rol-Rom's counterclaims continued until June 4, 1997, 

when the district court acceded to the parties' request to 

enter a final order and injunction that would allow Rol-Rom 

to pursue an appeal without further delay. The final order 

enjoined Rol-Rom from selling Mistolin products that had 

not first been distributed by Iberia, and ordered that if RolRom violated the injunction it would be held in contempt, 

fined, and forced to pay Iberia's attorney's fees. Further, the 

final order stated that Rol-Rom's counterclaims and Iberia's 

claim for damages were withdrawn with prejudice, subject 

to the right of the parties to reinstate their claims if the 

district court's March 26, 1996 were to be reversed on 

appeal.5 

Rol-Rom filed a timely appeal. We will reverse. 

III. 

On summary judgment, we exercise plenary review, 

construing all evidence and resolving all doubts raised by 

affidavits, depositions, answers to interrogatories, and 

admissions on file in favor of the non-moving party. See 

SEC v. Hughes Capital Corp., 124 F.3d 449, 452 (3d Cir. 

1997). Our task is to identify and explain the substantive 

law governing the action, and then in light of that law 

determine whether there is a genuine dispute over 

dispositive facts. See Ciarlante v. Brown & Williamson 

_________________________________________________________________ 

5. Although we need not reach such issues to resolve Iberia's S 32 claim, 

we think it is proper in light of the district court's arrangement and our 

remand to note that we agree with the district court's conclusion that 

the 1988 agreement transferred to Iberia only those trademark rights 

relating to the continental United States. Thus, we agree with the 

district 

court that Iberia owns the trademark rights to Mistolin in the continental 

United States; that Caribe retains the rights to Mistolin in Puerto Rico; 

and that Rol-Rom's abandonment and "first sale" arguments are 

meritless. 

 6 
Tobacco Corp., 143 F.3d 139, 145 (3rd Cir. 1998) (citing 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. 

Ct. 2505, 2510, 91 L. Ed.2d 202 (1986)). If upon review of 

cross motions for summary judgment we find no genuine 

dispute over material facts, then we will order judgment to 

be entered in favor of the party deserving judgment in light 

of the law and undisputed facts. See Ciarlante, 143 F.3d at 

145-46. 

IV. 

Although the parties have devoted their attention to the 

merits of Rol-Rom's affirmative defenses, we consider the 

primary question raised by this appeal to be one addressed 

only in passing by the parties. The question is: has Iberia 

established that the Mistolin sold by Rol-Rom is not 

"genuine" according S 32 of the Lanham Act? Because we 

conclude that Iberia has failed to establish that the Mistolin 

sold by Rol-Rom is not "genuine," we hold that Rol-Rom is 

entitled to summary judgment, and that the order of the 

district court must be reversed. 

A. 

Iberia's federal trademark claim proceeds under S 32 of 

the Lanham Act, 15 U.S.C. S 1114.6 Under the sway of 

Justice Holmes's landmark opinion in A. Bourjois & Co. v. 

Katzel, 260 U.S. 689, 43 S. Ct. 244 (1923), courts have 

construed this statute to grant trademark owners the right 

to enjoin the sale of products containing the owner's 

_________________________________________________________________ 

6. This statute states in relevant part that: 

 (1) Any person who shall, without the consent of the registrant-- 

 (a) use in commerce any reproduction, counterfeit, copy, or 

colorable 

 imitation of a registered mark in connection with the sale, 

offering 

 for sale, distribution, or advertising of any goods or services on 

or 

 in connection with which such use is likely to cause confusion, or 

 to cause mistake, or to deceive . . . 

 . . . shall be liable in a civil action by the registrant for the 

 remedies hereinafter provided. 

15 U.S.C. S 1114 (1997). 

 7 
authentic mark when the products offered for sale are 

similar but not identical to those offered by the trademark 

owner. The need for such protection has arisen most often 

in the context of so-called "gray goods" cases. In such 

cases, holders of United States trademarks affixed to 

products manufactured abroad have used S 32 of the 

Lanham Act as a means of preventing the sales of inferior 

parallel imports. See, e.g., Original Appalachian Artworks, 

Inc. v. Granada Elecs., Inc., 816 F.2d 68 (2d Cir. 1987) 

(owner of Cabbage Patch Kids trademark entitled to 

injunctive relief from sales in United States of Spanish 

version of dolls without "adoption" feature). The scope of 

the action is not limited to gray goods cases, however. The 

same theory has been used to enjoin the sale of domestic 

products in conditions materially different from those 

offered by the trademark owner. See, e.g., Warner-Lambert 

Co. v. Northside Dev. Co., 86 F.3d 3 (2d Cir. 1996) (owner 

of Halls cough drops trademark entitled to injunction 

against sale of Halls cough drops past their expiration 

date). 

As a matter of doctrine, a trademark owner attempting to 

use S 32 to prevent an infringement must establish that the 

products sold by the alleged infringer are not "genuine." 

See, e.g., Weil Ceramics and Glass, Inc. v. Dash, 878 F.2d 

659, 671-73 (3d Cir. 1989); El Greco Leather Prod. Co. v. 

Shoe World, Inc., 806 F.2d 392, 395-99 (2d Cir. 1986); Shell 

Oil Co. v. Commercial Petroleum, Inc., 928 F.2d 104, 107-08 

(4th Cir. 1991). The test for whether an alleged infringer's 

products are genuine asks whether there are "material 

differences" between the products sold by the trademark 

owner and those sold by the alleged infringer. See Societe 

Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 

633, 638 (1st Cir. 1992); Martin's Herend Imports, Inc. v. 

Diamond & Gem Trading USA, 112 F.3d 1296, 1302 (5th

Cir. 1997). If there are no material differences between the 

products sold, then the products offered by the alleged 

infringer are "genuine" and an infringement action under 

S 32 of the Lanham Act must fail. Whether differences are 

material so that an alleged infringer's products are nongenuine is a matter of law that we review de novo. See El 

Greco, 806 F.2d at 395; Casa Helvetia, 982 F.2d at 642, 

642 n.9. 

 8 
The purpose of the material differences test is to 

determine whether the allegedly infringing products are 

likely to injure the goodwill developed by the trademark 

owner in the trademarked goods. See Weil Ceramics, 878 

F.2d at 671. When the products sold by the alleged 

infringer and the trademark owner contain identical marks 

but are materially different, consumers are likely to be 

confused about the quality and nature of the trademarked 

goods. See Casa Helvetia, 982 F.2d at 641. Characteristics 

of the alleged infringer's goods that are not shared by the 

trademark owner's goods are likely to affect consumers' 

perceptions of the desirability of the owner's goods. See 

Weil Ceramics, 878 F.2d at 671; Martin's Herend, 112 F.3d 

at 1302. Sales of the alleged infringer's goods will tarnish 

the "commercial magnetism" of the trademark, injuring the 

trademark owner. Mishawaka Rubber & Woolen Mfg. Co. v. 

S.S. Kresge Co., 316 U.S. 203, 205, 62 S. Ct. 1022, 1024 

(1942) (Frankfurter, J.).7 In such circumstances, the alleged 

_________________________________________________________________ 

7. A few examples may prove helpful here. In Original Appalachian 

Artworks, Inc. v. Granada Elecs., Inc., 816 F.2d 68 (2d Cir. 1987), the 

Second Circuit granted an injunction to the owner of the United States 

trademark for Cabbage Patch Kids dolls against the importation of 

Cabbage Patch Kids dolls manufactured in Spain for the Spanish 

market. Although the Spanish dolls looked very similar to the domestic 

ones, the Spanish dolls lacked certain features (in particular, the 

ability 

to be "adopted" by the owner) that had sparked consumer interest and 

sales in the United States. The court held that the domestic trademark 

owner was entitled to an injunction because the domestic trademark 

owner's goodwill was injured by consumer association of its mark with 

the less desirable Spanish dolls. See 816 F.2d at 73. 

In Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 

633, 638 (1st Cir. 1992), the First Circuit granted an injunction to the 

owner of the United States trademark for Italian-made Perugina 

chocolates against the parallel importation of Venezuelan-made Perugina 

chocolates. The court catalogued a series of differences between the 

Venezuelan imports and the products sold by the trademark owner, 

including differences in the composition of the chocolate, the packaging, 

the price, and the conditions under which the chocolates were 

transported and stored. The court held that the differences were likely to 

result in consumer confusion and that the trademark owner was entitled 

to injunctive relief. See 982 F.2d at 644. 

 9 
infringer's goods are considered "non-genuine" and the sale 

of the goods constitutes infringement. 

In contrast, when the differences between the products 

prove so minimal that consumers who purchase the alleged 

infringer's goods "get precisely what they believed that they 

were purchasing," Weil Ceramics, 878 F.2d. at 672, 

consumers' perceptions of the trademarked goods are not 

likely to be affected by the alleged infringer's sales. See 

Casa Helvetia, 982 F.2d at 641. Although consumers may 

be unaware of the precise avenues that a given product has 

traveled on its way to the supermarket shelf, the authentic 

trademark on the alleged infringer's goods is an accurate 

indicator of their nature and quality. Cf. Prestonettes, Inc. 

v. Coty, 264 U.S. 359, 368, 44 S. Ct. 350, 351 (1924). 

Thus, the goods may be considered "genuine." This does 

not mean that the trademark owner suffers no economic 

harm from the alleged infringers' sales, but it does mean 

that S 32 of the Lanham Act does not offer a remedy to the 

trademark owner. See Weil Ceramics, 878 F.2d. at 672. 

Because consumer preferences are as fickle and diverse 

as the human imagination, it is impossible to devise an 

exhaustive list of the types of differences between products 

that can be considered material for the purposes of the 

genuineness test. Compare Granada Elecs., 816 F.2d at 73 

(holding that imported Cabbage Patch Kids dolls are

materially different from domestic dolls because imported 

dolls cannot be "adopted" by domestic owners) with Shell 

Oil, 928 F.2d at 107-08 (holding that bulk oil purchased 

_________________________________________________________________ 

Finally, in Martin's Herend Imports, Inc. v. Diamond & Gem Trading 

USA, 112 F.3d 1296, 1302 (5th Cir. 1997), the Fifth Circuit enjoined the 

parallel importation of Hungarian Herend porcelains brought to the 

United States over the objections of the United States trademark owner. 

The court held that there were material differences between the 

porcelains sold by the trademark owner and the alleged infringer 

because the trademark owner had chosen to sell only select items in the 

United States. The alleged infringer, in contrast, sold many items that 

were not offered by the trademark owner. In light of the delicate task of 

maintaining goodwill in high-end artistic products, the court held, this 

difference was enough to entitle the United States trademark owner to 

an injunction against the parallel importation. See 112 F.3d at 1302. 

 10 
from Shell and resold by oil wholesaler was not genuine 

because it was not stored according to Shell's 

specifications). Any differences that are likely to damage the 

goodwill developed by the trademark owner can be deemed 

material. 

B. 

Iberia argues that material differences exist between the 

Mistolin sold by Rol-Rom and that sold by Iberia because 

Iberia conducts a "quality control" inspection of every 

shipment of Mistolin on receipt from Caribe. 8 According to 

the record, Iberia inspects every box of Mistolin it receives, 

and rejects products that do not meet its specifications. 

Iberia contends that its rejection of substandard goods has 

raised the quality of the Mistolin sold by Iberia so that it is 

materially different from the uninspected Mistolin sold by 

Rol-Rom. 

When a trademark owner arranges to have its mark 

placed on a product manufactured by another company, 

the owner's rigorous quality control and inspection

procedure on receipt from the manufacturer has often been 

recognized as the basis of a material difference between 

products sold by the trademark owner and those offered by 

another company without the trademark owner's stamp of 

approval. See, e.g., El Greco, 806 F.2d at 395 (shoes); Casa 

Helvetia, 982 F.2d at 642 (chocolates). The reason for this 

is evident. Because the quality of a manufacturer's output 

can be uneven, and consumers can be expected over time 

_________________________________________________________________ 

8. In the "Statement of the Case" portion of its brief, Iberia remarks in 

passing that Rol-Rom has sold Mistolin products, and in particular, 

Mistolin All Purpose Cleaner, "which Iberia has discontinued and/or has 

determined not to sell under the Mistolin mark." Appellee's Br. at 8. Were 

this statement supported in the record, it might have provided the basis 

for a material difference between the Mistolin products sold by Iberia and 

Rol-Rom. See, e.g., Martin's Herend, 112 F.3d at 1302 (holding that 

parallel importer's porcelain figurines were materially different from 

trademark owner's figurines because "at least 50 percent" of the 

figurines sold by the parallel importer were not sold by trademark 

owner). Here, however, the record fails to support Iberia's statement: the 

record indicates that both Iberia and Rol-Rom discontinued selling 

Mistolin All Purpose Cleaner. See App. 167 (Iberia); App. 281 (Rol-Rom). 

 11 
to notice the quality of the products they purchase, a 

trademark owner's inspection on receipt from the 

manufacturer may be a necessary part of maintaining

consumer goodwill associated with its mark. Cf . Casa 

Helvetia, 982 F.2d at 643. 

Because quality control measures may create subtle 

differences in quality that are difficult to measure but 

important to consumers, courts do not require trademark 

owners to show that the actual quality of the inspected 

goods is measurably higher than that of the uninspected 

goods. See, e.g., El Greco, 806 F.2d at 395; Shell Oil, 928 

F.2d at 107. At the same time, "quality control" is not a 

talisman the mere utterance of which entitles the 

trademark owner to judgment. See, e.g., Polymer Tech. 

Corp. v. Mimran, 37 F.3d 74, 78-80 (2d Cir. 1994) (rejecting 

trademark owner's claim of infringement based on 

circumvention of owner's quality control efforts). Rather, 

the test is whether the quality control procedures 

established by the trademark owner are likely to result in 

differences between the products such that consumer

confusion regarding the sponsorship of the products could 

injure the trademark owner's goodwill. See Warner-Lambert 

Co. v. Northside Dev. Co., 86 F.3d 3, 6 (2d Cir. 1996) 

(trademark holder must show that it uses substantial and 

nonpretextual quality control procedures such that nonconforming sales will diminish the value of the mark). 

According to Jesus Garcia, the chairman of the board of 

Iberia, Iberia's inspection of Mistolin upon receipt from 

Caribe consists of looking for "external self-evident 

problems." App. 139. First, the exterior packaging of the 

deliveries is inspected to make sure that the boxes are not 

damaged. Second, an Iberia employee takes a "random

sample" of Mistolin and looks at it. If the packaging is 

damaged or there is "something wrong" with the sample, 

Iberia destroys the goods and receives credit from Caribe. 

Iberia has no standard explaining when there is"something 

wrong" with a sample, however: the employee simply looks 

at the Mistolin and smells it to determine whether or not it 

seems "off." Although Garcia stated in his deposition that 

Iberia sends products to a laboratory for inspection if 

something seems "wrong" with a shipment of Mistolin, 

 12 
Garcia could not recall any time within the previous ten 

years when this was actually done. App. 136-40. 

The reason that Iberia's inspection is limited to looking 

for obvious defects is that since acquiring the trademark in 

1988, Iberia has never made any efforts to learn how Caribe 

manufactures Mistolin products or what ingredients they 

contain. App. 92 ("Iberia Foods Corp. has no knowledge as 

to what are the contents or ingredients used in the

products manufactured by Mistolin Caribe Inc.") (statement 

of Jesus Garcia). Iberia simply orders Mistolin products 

from Caribe, and assumes that the bottles it receives 

contain "Mistolin" cleaner. In fact, Iberia's sole participation 

in the design or manufacture of any Mistolin product 

entailed helping Caribe design new U.S. labels when federal 

law began mandating that labels contain new product

warnings. App. 147-48. Otherwise, everything about 

Mistolin, from its ingredients to the U.P.C. symbols placed 

on its bottles, has been determined by Caribe. The result of 

Iberia's "hands off " approach is that its quality control 

process is limited to determining whether the Mistolin 

products it receives from Caribe have been damaged during 

shipment, and whether random samples look and smell 

"right."9 

We conclude that Iberia's quality inspections are 

insufficient to create a material difference between the 

inspected Mistolin sold by Iberia and the uninspected 

Mistolin sold by Rol-Rom. By limiting its inspection to "selfevident" defects, Iberia does no more than weed out those 

bottles of Mistolin that are entirely unsaleable on the open 

market. This "weeding out" is insufficient because bottles 

so obviously defective as to be unmarketable are not likely 

to reach consumers in any event. First, distributors will 

generally try to catch such blatant defects to keep their 

_________________________________________________________________ 

9. In the one instance in which Iberia rejected Mistolin sent by Caribe 

for 

a defect that was not obvious, Garcia conceded that the defect had not 

been discovered during Iberia's inspection. This occurred in 1993, when 

Caribe sent Iberia a shipment of Mistolin that looked normal when it first 

arrived, but later deteriorated in the bottle. Although Garcia did not 

explain how this defect was eventually discovered, he did state that it 

was not detected when the shipment underwent Iberia's quality control 

procedures. App. 136. 

 13 
retailers happy: this is as true when the distributor 

happens to be the trademark owner as when the distributor 

is another company such as Rol-Rom. See App. 285 ("[W]e 

don't sell anything that's damaged or broken . . . because 

our clients wouldn't stand for it.") (statement of Rolando 

Romeo, Jr.). Those defects that do pass by the distributors 

will be caught by retailers, who are unlikely to place broken 

bottles of Mistolin on their shelves if they expect to stay in 

business for long. Because unmarketable Mistolin products 

will not generally reach consumers regardless of whether 

Iberia catches the defects first, Iberia's limited inspection is 

insufficient to create a material difference between the 

Mistolin offered to consumers through Iberia and that 

offered to consumers through Rol-Rom. 

The limited scope of the inspection performed by Iberia 

distinguishes this case from other cases in which a

trademark owner's quality control mechanism created a 

material difference between the products offered by the 

trademark owner and the alleged infringer. In those cases, 

the trademark owner's inspection reflected a deliberate 

effort to ensure that the quality of the product matched the 

high standards set by the trademark owner. For example, 

in El Greco, the trademark owner's agent would inspect the 

manufacturer's product before shipment. Unless the agent 

issued an inspection certificate stating that the 

manufacturer's goods fully complied with the trademark 

owner's standards and specifications, the goods were never 

shipped to the trademark owner for sale. See 806 F.2d at 

395. In Casa Helvetia, the trademark owner conducted 

laboratory tests on the chocolates it received from the 

Italian manufacturer, destroyed those chocolates that were 

beyond a fixed expiration date, and transported its

products in special refrigerated containers. Even the alleged 

infringer conceded that its quality control procedures 

differed "radically" from the strict regimen followed by the 

trademark owner to maintain the quality of the products 

sold. See 982 F.2d at 642-43. 

In both El Greco and Casa Helvetia, the trademark 

owner's inspection was an integral part of a careful effort to 

ensure that the quality of the product matched the high 

standards set by the trademark owner. Circumventing that 

 14 
inspection threatened the trademark owner's efforts to 

maintain the goodwill that consumers associated with the 

mark. In this case, however, Iberia has hardly set any 

standard at all: rather, it has deferred almost entirely to 

Caribe's judgment of what Mistolin products are and how 

they are to be manufactured. Iberia's "hands off " approach 

has reduced its quality control inspection to a de minimis 

check designed to make sure that the products it receives 

from Caribe are not obviously unmarketable. We are 

satisfied that such an inspection is insufficient to create a 

material difference between the products sold by Iberia and 

those sold by Rol-Rom. 

V. 

Because there is no material difference between the

Mistolin sold by Iberia and that sold by Rol-Rom, we hold 

that the Mistolin sold by Rol-Rom is "genuine" and that 

Iberia's attempt to use S 32 of Lanham Act to block RolRom's sales must fail. Because buyers of Rol-Rom's Mistolin 

get precisely what they believe that they are purchasing, 

see Weil Ceramics, 878 F.2d at 672, the goodwill associated 

with Mistolin products is not harmed by Rol-Rom's sales. 

We therefore reverse so much of the district court's June 

4, 1997 order as entered judgment for Iberia on the federal 

trademark infringement count, and direct the district court 

to enter judgment for Rol-Rom on this count. Pursuant to 

the terms of the June 4, 1997 order, which directed the 

reinstatement of remaining claims if the district court's 

order were reversed, we will remand to the district court for 

further appropriate proceedings. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

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