Davidoff & CIE v. PLD Int'l Corp.

Citation263 F.3d 1297
Decision Date28 August 2001
Docket NumberNo. 00-14368,00-14368
Parties(11th Cir. 2001) DAVIDOFF & CIE, SA, a Swiss Corporation, and LANCASTER GROUP US LLC, a Delaware Limited Liability Corporation, Plaintiffs-Appellees, v. PLD INTERNATIONAL CORPORATION, a Florida Corporation, and PHILLIPE L. DRAY, an individual Florida resident, Defendants-Appellants
CourtU.S. Court of Appeals — Eleventh Circuit

Appeal from the United States District Court for the Southern District of Florida. D. C. Docket No. 00-02635-CV-DMM

Before ANDERSON, Chief Judge, FAY and BRIGHT*, Circuit Judges.

ANDERSON, Chief Judge:

This case appears to be the first time that this circuit has addressed the circumstances under which the resale of a genuine product with a registered trademark can be considered infringement. We recognize the general rule that a trademark owner's authorized initial sale of its product exhausts the trademark owner's right to maintain control over who thereafter resells the product; subsequent sales of the product by others do not constitute infringement even though such sales are not authorized by the trademark owner. However, we adopt from our sister circuits their exception to this general rule-i.e., the unauthorized resale of a materially different product constitutes infringement. Because we conclude that the resold products in the instant case are materially different, we affirm.

I. BACKGROUND

Davidoff & Cie, S.A., a Swiss corporation, is the manufacturer of DAVIDOFF COOL WATER fragrance products and owns the U.S. trademark. Davidoff & Cie, S.A. exclusively licenses Lancaster Group US LLC (collectively "Davidoff") to distribute its products to retailers in the United States. Working outside of this arrangement, PLD International Corporation ("PLD") acquires DAVIDOFF fragrances that are intended for overseas sale or that are sold in duty-free sales. PLD then distributes them to discount retail stores in the United States.

At the time that PLD acquires the product, the original codes on the bottom of the boxes are covered by white stickers, and batch codes on the bottles themselves have been obliterated with an etching tool. The etching leaves a mark on the bottle near its base on the side opposite the DAVIDOFF COOL WATER printing. The mark is approximately one and one-eighth inches in length and one-eighth of an inch wide. The batch codes are removed, according to PLD, to prevent Davidoff from discovering who sold the fragrances to PLD because Davidoff would stop selling to those vendors.

II. DISTRICT COURT PROCEEDINGS

Davidoff filed a complaint seeking, inter alia, a preliminary injunction against PLD1 for infringement of its trademark under the Lanham Trade-Mark Act, 15 U.S.C. § 1051 et seq.2 Davidoff alleged that PLD's distribution of the fragrances with the batch codes removed and obliterated constituted infringement. The district court held that PLD's distribution of DAVIDOFF fragrances constituted infringement by creating a likelihood of consumer confusion. In reaching this conclusion, the district court found that the product distributed by PLD differed from the genuine DAVIDOFF product because the removal of the batch code from the bottle by etching the glass "constitutes alteration of a product,"3 which would create a likelihood of consumer confusion. A consumer might believe that a product had been harmed or tampered with.4 Based on the infringement finding, the district court granted a preliminary injunction, prohibiting PLD from selling, repackaging or altering any product with the name "DAVIDOFF" and/or "COOL WATER" with an obliterated batch code. This appeal followed.

III. CONTENTIONS

PLD argues that it is selling genuine DAVIDOFF fragrances and that as a result no consumer can be confused. Therefore, it claims that it cannot be considered an infringer under the Lanham Act. PLD asserts that "[w]ith or without a manufacturer or batch code on its packaging, the product is absolutely the same." PLD states that the district court incorrectly relied on cases where the product itself and not just the packaging was altered.

Davidoff urges us to adopt a material difference test whereby a material difference between goods sold under the same trademark warrants a finding of consumer confusion. Davidoff argues that the obliteration of batch codes by PLD transforms the appearance of its product into a materially different, infringing product, which is likely to confuse consumers.

IV. PRELIMINARY INJUNCTION POSTURE

We review a district court's order granting or denying a preliminary injunction for abuse of discretion. McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998). A party seeking a preliminary injunction for trademark infringement must establish four elements: (1) substantial likelihood of success on the merits; (2) that it would be irreparably harmed if injunctive relief were denied; (3) that the threatened injury to the trademark owner outweighs the whatever damage the injunction may cause to the alleged infringer; (4) that the injunction, if issued, would not be adverse to the public interest. See id. It is well established in this circuit that "[a] preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly established the `burden of persuasion'" as to all four elements. Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir. 2000) (en banc) (internal citation omitted). The issues raised by PLD in this case primarily address the first element: substantial likelihood of success on the merits.

V. TRADEMARK INFRINGEMENT: LAW

In order to succeed on the merits of a trademark infringement claim, a plaintiff must show that the defendant used the mark in commerce without its consent and "that the unauthorized use was likely to deceive, cause confusion, or result in mistake." McDonald's Corp., 147 F.3d at 1307. Generally speaking, the determination boils down to the existence vel non of "likelihood of confusion." AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1538 (11th Cir. 1986).

A.Purpose

To understand what type of consumer confusion is actionable under the Lanham Trade-Mark Act, it is useful to review Congress' purposes for enacting trademark legislation. Congress sought to protect two groups: consumers and registered trademark owners. See S. Rep. No. 1333, 19th Cong. 2d Sess., reprinted in 1946 U.S. Code Cong. Serv. 1274. In protecting these groups lawmakers recognized that "[e]very product is composed of a bundle of special characteristics." Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 636 (1st Cir. 1992) ("Nestle"). Consumers who purchase a particular product expect to receive the same special characteristics every time. See id. The Lanham Act protects these expectations by excluding others from using a particular mark and making consumers confident that they can purchase brands without being confused or misled. See 15 U.S.C. § 1114(1); S. Rep. No. 100-515, at 4 (1988), reprinted in 1988 U.S.C.C.A.N. 5577, 5580. Thus trademark law ensures consistency for the benefit of consumers. See Nestle, 982 F.2d at 636; Original Appalachian Artworks, Inc. v. Granada Electronics, Inc., 816 F.2d 68, 75 (2d Cir. 1987) (Cardamone, J., concurring).

The Lanham Act also protects trademark owners. See S. Rep. No. 100-515 at 4. A trademark owner has spent time, energy and money in presenting a product to the public and building a reputation for that product. See Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 205 , 62 S.Ct. 1022, 1024 (1942); S. Rep. No. 1333, reprinted in 1946 U.S. Code Cong. Serv. 1274. The Act prevents another vendor from acquiring a product that has a different set of characteristics and passing it off as the trademark owner's product. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 778 , 112 S. Ct. 2753, 2762 (1992) (Stevens, J., concurring) (noting that passing off is a form of infringement prohibited by the Lanham Act). This would potentially confuse consumers about the quality and nature of the trademarked product and erode consumer goodwill. See Iberia Foods Corp. v. Romeo, 150 F.3d 298, 303 (3d Cir. 1998); Nestle, 982 F.2d at 638.

B.Resale of a Genuine Trademarked Product and the Material Difference Exception

The resale of genuine trademarked goods generally does not constitute infringement. See, e.g., Matrix Essentials, Inc. v. Emporium Drug Mart, Inc., 988 F.2d 587, 590 (5th Cir. 1993); NEC Electronics v. CAL Circuit Abco, 810 F.2d 1506, 1509 (9th Cir. 1987). This is for the simple reason that consumers are not confused as to the origin of the goods: the origin has not changed as a result of the resale. See Enesco Corp v. Price/Costco Inc., 146 F.3d 1083, 1085 (9th Cir. 1998) (quoting NEC, 810 F.2d at 1509). Under what has been sometime been called the "first sale" or "exhaustion" doctrine, the trademark protections of the Lanham Act are exhausted after the trademark owner's first authorized sale of that product. See Iberia Foods, 150 F.3d at 301 n.4; Enesco 146 F.3d at 1085; Allison v. Vintage Sports Plaques, 136 F.3d 1443, 1447-48 (11th Cir. 1998). Therefore, even though a subsequent sale is without a trademark owner's consent, the resale of a genuine good does not violate the Act.

This doctrine does not hold true, however, when an alleged infringer sells trademarked goods that are materially different than those sold by the trademark owner. Our sister circuits have held that a materially different product is not genuine and therefore its unauthorized sale constitutes trademark infringement. See Nestle, 982 F.2d at 644 (1st Cir.); Original Appalachian Artworks, 816 F.2d at 73 (2d Cir.); Iberia Foods, 150 F.3d at 302-3 (3d Cir.); Martin's Herend Imports, Inc. v. Diamond & Gem Trading USA, Co., 112 F.3d 1296, 1302 (5th Cir. 1997); cf. Enesco, 146 F.3d at 1087 (9th Cir.) (quoting Warner- Lambert Co. v. Northside Dev. Corp., 86 F.3d 3, 6 (2d Cir. 1996)) (noting...

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