Opinion ID: 597410
Heading Depth: 2
Heading Rank: 2

Heading: The Provisions at Issue Here.

Text: 16 In this court, as below, the plaintiffs ground their trademark infringement and unfair competition claims in Lanham Trade-Mark Act sections 32(1)(a), 42, and 43(a)(1), 15 U.S.C. §§ 1114(1)(a), 1124, 1125(a)(1) (1988). The district court considered and rejected each provision as a basis for relief. In so doing, the court misinterpreted the proper scope of the protection these three sections confer. 17 1. Section 32(1)(a). The court below found no violation of Lanham Trade-Mark Act section 32(1)(a). 5 It reasoned that Alimentos used the PERUGINA trademark with Nestle's consent and that merely exporting [the chocolates] outside the area defined in a restrictive territorial clause ... [would] not turn an otherwise genuine PERUGINA product into a counterfeit one or a colorable imitation. Societe Des Produits Nestle, 777 F.Supp. at 165. 18 On this point, the district court's analysis is doubly flawed. First, if consent is at all germane in determining whether a defendant's sale violates section 32(1)(a), the relevant consent is not the registrant's consent to a third party's use of the mark abroad but the registrant's consent (or lack thereof) to the defendant's sale of the gray good in the domestic market. See Original Appalachian Artworks, Inc. v. Granada Elecs., Inc., 816 F.2d 68, 73 (2d Cir.), cert. denied, 484 U.S. 847, 108 S.Ct. 143, 98 L.Ed.2d 99 (1987). 19 Second, although it has been said that [t]rademark law generally does not reach the sale of genuine goods bearing a true mark even though such sale is without the mark owner's consent, NEC Elecs., 810 F.2d at 1509; see also Shell Oil Co. v. Commercial Petroleum, Inc., 928 F.2d 104, 107 (4th Cir.1991), the maxim does not apply when genuine, but unauthorized, imports differ materially from authentic goods authorized for sale in the domestic market. Thus, contrary to the district court's thinking, an unauthorized importation may well turn an otherwise genuine product into a counterfeit one. In other words, the unauthorized importation and sale of materially different merchandise violates Lanham Trade-Mark Act section 32 because a difference in products bearing the same name confuses consumers and impinges on the local trademark holder's goodwill. See Original Appalachian, 816 F.2d at 73; El Greco Leather Prods. Co. v. Shoe World, Inc., 806 F.2d 392, 395-96 (2d Cir.1986), cert. denied, 484 U.S. 817, 108 S.Ct. 71, 98 L.Ed.2d 34 (1987); PepsiCo Inc. v. Giraud, 7 U.S.P.Q.2d 1371, 1373 (D.P.R.1988); Dial Corp. v. Encina Corp., 643 F.Supp. 951, 955 (S.D.Fla.1986). 20 It follows that the Venezuelan chocolates purveyed by Casa Helvetia were not genuine within the meaning of section 32 if they (a) were not authorized for sale in the United States and (b) differed materially from the authorized (Italian-made) version. Cf. Monte Carlo Shirt, Inc. v. Daewoo Int'l (Am.) Corp., 707 F.2d 1054, 1057 (9th Cir.1983) (finding no section 32 violation where imported goods were identical to domestic goods and were intended for sale in the United States); Sasson Jeans, Inc. v. Sasson Jeans, L.A., Inc., 632 F.Supp. 1525, 1528 (S.D.N.Y.1986) (similar). 21 The first prong of this two-part test is easily resolved. The mere licensing of production abroad does not support an inference of consent to import the licensed products into the United States. See Lever Bros., 877 F.2d at 109-10; see also Osawa, 589 F.Supp. at 1171 (rejecting the proposition that merchandise with a lawful trademark in one country carr[ies] that mark lawfully wherever it [goes]). Here, the record is pellucid that Nestle never authorized the sale of Venezuelan-made chocolates in Puerto Rico. The question of whether Casa Helvetia infringed the PERUGINA mark under section 32, therefore, boils down to whether material differences exist between the Italian-made product and the Venezuelan-made product sufficient to create a likelihood of consumer confusion, mistake, or deception. 22 2. Section 42. The district court held that plaintiffs' claims under Lanham Trade-Mark Act section 42 lacked merit because the plain language of the statute does not bar importation if the goods are genuine, only if they 'copy or simulate' a trademark. Societe Des Produits Nestle, 777 F.Supp. at 165. 6 We think this view is overly simplistic. 23 Section 42 draws no indelible line between genuine goods and goods that copy or simulate a trademark. See Lever Bros., 877 F.2d at 105. However, the statute aims to eradicate deceit and minimize consumer confusion. See id. at 111. As underscored by Katzel's recognition of territorial values in trademark law, the potential for consumer confusion is extremely high when a product catering to the indigenous conditions of a foreign country competes domestically against a physically different product that bears the same name. In such a case, the foreign product can legitimately be said to copy or simulate the domestic mark because use of the identical nomenclature is simply not truthful. Id. at 108. 24 Accordingly, the importation of a gray good identical to a good authorized for sale in the domestic market does not violate section 42. See Weil Ceramics & Glass, Inc. v. Dash, 878 F.2d 659, 668 (3d Cir.), cert. denied, 493 U.S. 853, 110 S.Ct. 156, 107 L.Ed.2d 114 (1989); Olympus Corp. v. United States, 792 F.2d 315, 321 (2d Cir.1986), cert. denied, 486 U.S. 1042, 108 S.Ct. 2033, 100 L.Ed.2d 618 (1988). But, the existence of physical differences changes the result. See Lever Bros., 877 F.2d at 111 (the natural, virtually inevitable reading of § 42 is that it bars foreign goods [that] bear[ ] a trademark identical to a valid U.S. trademark but [that] physically differ[ ], regardless of the trademarks' [sic ] genuine character abroad). Therefore, under section 42, as under section 32, the question of whether Casa Helvetia infringed the PERUGINA mark hinges on whether physical or like material differences exist between the Italian-made and Venezuelan-made products. 7 25 3. Section 43(a)(1). In respect to Lanham Trade-Mark Act section 43(a)(1), 8 the district court rejected Nestle's claim because the parties' boxes clearly specified the respective countries of origin, i.e., Casa Helvetia's chocolates were labelled made in Venezuela and Nestle's chocolates were labelled made in Italy. See Societe Des Produits Nestle, 777 F.Supp. at 164. Section 43's proscriptions, however, are not so narrow in scope. The statutory prohibition against false designation of origin encompasses more than deceptions as to geographic origin; it extends, as well, to origin of source, sponsorship or affiliation. 2 McCarthy, supra, § 27:3, at 345. In short, the use of a mark may be deceptive and, thus, violative of section 43(a), in light of the overall appearance of the package, despite the existence of fine print identifying the true origin; that is, such a package may falsely convey the impression that the domestic mark holder intended the importation of the good into the local market. 26 The case of Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 753 F.Supp. 1240 (D.N.J.), aff'd, 935 F.2d 1281 (3d Cir.1991), aptly illustrates the point. There, the district court invoked section 43(a) and enjoined the parallel importation of TIC TAC mints despite the fact that the infringing product was identified as originating with the sole importer for the U.K. Id. at 1243. The court emphasized that material differences in caloric content and size, in conjunction with a virtually identical outward appearance, created the distinct potential for consumer confusion. See id. at 1247. 27 We conclude, therefore, that the key question in determining Casa Helvetia's liability under section 43(a) is whether material differences likely to confuse consumers exist between Venezuelan-made and Italian-made chocolates bearing the same mark. Accord New West Corp. v. NYM Co. of Cal., Inc., 595 F.2d 1194, 1201 (9th Cir.1979) (under section 43(a), the ultimate test is whether the public is likely to be deceived or confused); Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 160 (1st Cir.1977) (The basis for an action under [section 43(a) ] is use of a mark ... which is likely to cause confusion or to deceive purchasers concerning the source of the goods.); see also 2 McCarthy, supra, § 27:3, at 345-48 (explaining that section 43 covers traditional trademark claims for which the test of liability is likelihood of confusion). 28