Intellectual Property Law

Text of Decision in Davidoff v CVS (Removal of UPC Code On Grey Goods Is Actionable)

By Marty Schwimmer

As a result of a prior injunction, Plaintiff Manufacturer had right to inspect Defendant retailer's inventory, and uncovered 16,000 units of its product, with the UPC code removed (either cut off or chemically 'erased.'). As a result, Plaintiff could not determine if the product was counterfeit or merely 'grey good' (goods that were authorized by the manufacturer but imported without the trademark owner's permission). Defendant alleged that it purchased the product with the UPCs already removed. Defendant refused to cease sale.

Held:

Davidoff asserts that its codes serve as a control of quality in two ways: (1) the codes permit the easy detection of counterfeits, and (2) they improve Davidoff?s ability to identify defective products, effectuate a targeted recall, and remedy production defects. We ruled in Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3 (2d Cir. 1996), that a trademark holder is entitled to an injunction against one who would subvert its quality control measures upon a showing that (i) the asserted quality control procedures are established, legitimate, substantial, and nonpretextual, (ii) it abides by these procedures, and (iii) sales of products that fail to conform to these procedures will diminish the value of the mark. Id. at 6. The district court found that these requirements were met. We agree.

The mutiation of the packaging was found to be a second rationale for enjoining the sale:

Furthermore, fragrances are often purchased to be offered as romantic gifts. Mutilated packaging makes the item less appealing to such a purchaser, who runs the risk that thegift will be viewed by the recipient as a sketchy, cheap purchase from an illicit source or of the sort given by Tony Soprano to Carmela. In short, trademarked goods whose luxury packaging is damaged are materially different from those that are intact. Int?l Corp., 263 F.3d 1297, 1303-04 (11th Cir. 2001).

As an aside, Defendant had argued that recent legislative attempts to amend the Lanham Act to specify alteration of packaging to remove identification systems, was evidence that the existing statute isn't intended to cover such behavior as actionable. The Court noted that failed legislative attempts are not determinative of a statute's interpretation, as they may merely be an attempt to clarify, not to add.

davidoff v cvs

Full post as published by Trademark Blog on June 27, 2009 (boomark / email).