Opinion ID: 425183
Heading Depth: 2
Heading Rank: 1

Heading: Average Purchaser or Expert?

Text: 42 The central disagreement dividing the parties on appeal concerns the standard that should be applied in determining whether the marks on the Grand Jewels bracelets bear a counterfeit mark under Sec. 1526(e). Customs contends that only an expert can determine whether the bracelets are identical with or substantially indistinguishable from Rolex's mark. On the other hand, Rolex argues, Grand Jewels concedes, and Judge Broderick below held, that this determination should be made from the standpoint of an average purchaser. 43 Neither Sec. 1526(e) itself, the applicable regulations, nor prior case law sheds any light on this question. As we earlier indicated, the statute and the regulations together incorporate the Lanham Act's definitional distinction between counterfeits and those colorable imitations that merely infringe a protected mark. Unlike the customs laws and regulations, however, the Lanham Act does not impose different penalties for these two types of violations. As a result, courts deciding cases directly under the Lanham Act have never had to wrestle with this distinction. Thus, while it is well settled that whether an article is an infringement, i.e., sufficiently similar to cause public confusion, must be determined from the perspective of an average consumer, see, e.g., Electronic Communications, Inc. v. Electronic Components for Industry Co., 443 F.2d 487, 492 (8th Cir.), cert. denied, 404 U.S. 833, 92 S.Ct. 80, 30 L.Ed.2d 63 (1971); Maternally Yours, Inc. v. Your Maternity Shop, Inc., 234 F.2d 538, 542 (2d Cir.1956), there is no similar body of law construing the definition of counterfeit. 44 Nor is there any legislative history directly on point. The Customs Procedural Reform and Simplification Act of 1978 was a multi-faceted measure which effected major substantive and procedural changes in the customs laws. Section 211, codified at 19 U.S.C. Sec. 1526(e), represented only one of many changes, and the precise meaning of the term counterfeit, as used in the amendment, did not receive express consideration in any of the written reports that were generated, in any of the hearings that were conducted, or in any floor debate that took place. 45 On the other hand, the general thrust of Sec. 1526(e) is easy to discern from the context, as opposed to the express recitals, of the legislative history. Prior to 1978, imported goods caught bearing a counterfeit mark could be admitted into this country after removal of the offending mark, or they could be exported to another country. 19 U.S.C. Sec. 1526; 19 C.F.R. Sec. 133.21(c)(1)-(7); see Walker, A Program To Combat International Commercial Counterfeiting, 70 Trade-Mark Rep. 117, 125-26 (1980). Counterfeiters therefore ran very little risk, since even if their goods were intercepted by Customs, they could still salvage, perhaps even profit from, their investment. 46 Section 211 was not included in the version of the Customs Procedural Reform and Simplification Act that was originally introduced in the House of Representatives. It was added by the Senate Finance Committee, apparently at the behest of a coalition of European and American companies which had mounted an international lobbying effort to combat commercial counterfeiting. See Walker, supra, 70 Trade-Mark Rep. at 126. One of the reasons for this amendment was expressed in the Senate Finance Committee report: 47 The committee believes that there is now no effective sanction against violations of section 42 [42 U.S.C. Sec. 1124] as it relates to merchandise which simulates or copies a registered trademark. Under present law, Customs may immediately sell goods bearing a counterfeit trademark after forfeiture. Such a disposition puts the counterfeit goods in competition with legitimate trademark goods. 48 S.Rep. No. 778, 95th Cong., 2d Sess. 34, reprinted in 1978 U.S.Code Cong. & Ad.News 2211, 2245. This was expanded upon in the House Conference report: 49 [T]he amendment is intended solely to strengthen the remedies available to prevent the importation of merchandise bearing [a counterfeit] mark and to require the obliteration of the counterfeit trademark where feasible in all cases before disposition of the merchandise by the Customs Service. 50 H.R.Rep. No. 1517, 95th Cong. 2d Sess. 17, reprinted in 1978 U.S.Code Cong. & Ad.News 2249, 2259. 51 As even the importer in this case is forced to concede, these references demonstrate that Sec. 1526(e) represents a specific effort by Congress to stiffen the penalties for and to deter the use of infringing marks which amount to 'counterfeits'. In our view, these related purposes will best be furthered by adopting the average purchaser test applied by Judge Broderick below. The alternative test proposed by the government would be not nearly as strict, since an expert, aided by a loupe or a microscope, could readily discern differences between allegedly counterfeit and registered marks that would be unnoticed or even undetectable by the average purchaser. Indeed, one of the distinguishing characteristics of an expert is his ability to see differences that the rest of us do not, and, once the expert sees a difference between the imported object and the registered mark it is unlikely he could find them to be substantially indistinguishable. 52 Consequently, the expert test would tend to frustrate the central purpose underlying the amendment: to provide an effective sanction against merchandise which simulates or copies a registered trademark. S.Rep. No. 778, supra. In the absence of any more explicit congressional guidance, we believe that the proper course is to adopt the test that ensures the efficacy of the sanction added by the amendment. While it is true that forfeiture of merchandise is a severe penalty, Congress clearly intended such severity to be inflicted upon counterfeiters. 53 Customs argues that determining from the perspective of an average purchaser both whether an allegedly offending mark constitutes an infringement and whether it constitutes a counterfeit will utterly [destroy] the distinction carefully drawn by the statute. We disagree. Incorporating the average purchaser test into both tiers of the statutory scheme will only require that the two very different statutory standards be applied from the same standpoint. 54 We recognize that in a case like the one at bar, the difference between these two standards may be more theoretical than real, i.e., the challenged mark, when viewed from the perspective of the average purchaser, would not be likely to cause confusion unless it was substantially indistinguishable from the registered mark. But this will not always be so. We are aware of at least three Customs rulings in which different results would likely follow under the two standards. 55 For example, in In re Louis Vuitton, (C.S.D. 80-97, August 31, 1979), both the legitimate and the bogus merchandise bore marks comprised of two capital letters superimposed one upon the other, surrounded by a fleur-de-lis pattern. Customs ruled that the use of a superimposed P rather than an L over a V created a substantial likelihood of customer confusion. However, it is doubtful that the average purchaser would have viewed these marks as substantially indistinguishable. 56 The same is true of In re Amazonas, (C.S.D. 80-39, July 17, 1979). At issue there was the use of the name Amazonas as opposed to Amazon on shoe heels and soles. While Customs found that these two marks were similar enough to cause confusion, it could not be seriously contended that the average consumer would have found them substantially indistinguishable. 57 Similarly, in In re Bulova Watch Co., (C.S.D. 80-77, 14 Cus.Bull. No. 30, July 23, 1980), which involved the use of the name Bolivia as opposed to Bulova, Customs found an infringement. Once again, however, it is unlikely that an average purchaser would have found the marks on the two watches to be substantially indistinguishable. 58 These cases demonstrate that Judge Broderick's interpretation of the statutory scheme does retain the distinction that Congress created. While the two standards may converge in certain applications, that possibility is hardly a sufficient justification for construing Sec. 1526(e) in a manner that would undermine its principal objective of severely punishing counterfeiting activities. 59 B. The Registered Mark as It Appears on Actual Merchandise or as It Appears on the Registration Certificate? 60 Customs next argues that Judge Broderick misconstrued the statutory scheme by comparing the designs on the Grand Jewels bracelets with the Rolex crown as it appears on actual merchandise. Customs emphasizes that Sec. 1526(e) requires it to protect only a registered mark and contends that Rolex must bear the risk of deviating from that mark. Further, Customs submits that Judge Broderick's interpretation of Sec. 1526(e) would create additional administrative burdens which Congress deliberately declined to impose upon Customs when it required in Sec. 1526(e) that Customs contact the trademark holder only after it determined that a counterfeit mark had been used. 61 We are not persuaded by these arguments. To begin with, the deviation that serves as the factual predicate for Customs' position is slight and inconsequential. Whenever a two-dimensional paper facsimile of a mark like the Rolex crown is compared with the three-dimensional mark fabricated on actual merchandise, some differences will be detectable. To allow such differences to undercut the protection Congress intended to grant the trademark owner would be absurd. Cf. Ilco Corp. v. Ideal Security Hardware Corp., 527 F.2d 1221 (C.C.P.A.1976) (a mark may be modified in such a fashion as to retain its trademark impact and symbolize a single and continuing commercial impression; a change which does not alter the distinctive characteristics of a mark represents a continuity of trademark rights). 62 Furthermore, the narrow construction of Sec. 1526(e) urged by Customs is inconsistent with the commercial realities of the counterfeit trademark trade. It seems safe to assume that counterfeiters copy actual merchandise, not registration certificates. In this case, for example, the designs on the Grand Jewels bracelets more closely resemble the Rolex mark as it appears on actual merchandise than they do the registered Rolex mark. Thus, just as the protected mark on actual merchandise is unlikely to be identical with the two-dimensional facsimile of the mark recorded on the registration certificate, so, too, an infringing mark would be unlikely to be substantially indistinguishable from that facsimile. As a result, if Customs' exclusive focus on the registered mark were to prevail, infringing merchandise with three-dimensional marks could rarely, if ever, be deemed counterfeit. Given the punitive and deterrent purposes underlying Sec. 1526(e), we cannot acquiesce in so narrow an interpretation. 63 Nor do we see much merit to Customs' concern with the administrative burdens that Judge Broderick's interpretation of the statute would impose. If Customs' experience in this case is any indication, there will be no problem at all obtaining samples of the trademark owner's actual merchandise for purposes of comparison. We see no reason why a trademark owner would not eagerly cooperate with Customs in this regard, and even if the owner failed to do so after receiving notice of the seizure, Customs could still make its determination based on the mark as registered.C. Counterfeit or Colorable Imitation? 64 Applying the standards we have indicated are appropriate, we have little difficulty concluding that Judge Broderick properly determined that the Grand Jewels bracelets were counterfeits. We examined the actual bracelets at oral argument and found the Grand Jewels samples to be the spitting image of the Rolex merchandise. An average purchaser would surely find the real and fake bracelets to be substantially indistinguishable. We do not understand the government to have argued otherwise on appeal.