Montres Rolex, S.A. v. Snyder, 651

Decision Date14 September 1983
Docket NumberD,No. 651,651
Citation718 F.2d 524
Parties, 72 A.L.R.Fed. 843, 220 U.S.P.Q. 10 MONTRES ROLEX, S.A., Plaintiff-Appellee, v. Dennis SNYDER, Regional Commissioner, United States Customs Service and United States Customs Service, Defendants-Appellants, Grand Jewels, Inc., Intervenor. ocket 82-6168.
CourtU.S. Court of Appeals — Second Circuit

David H.T. Kane, New York City (Siegrun D. Kane, Barbara A. Larsen, Kane, Dalsimer, Kane, Sullivan and Kurucz, New York City, of counsel), for plaintiff-appellee.

Jonathan A. Lindsey, Asst. U.S. Atty., S.D.N.Y., New York City (John S. Martin, Jr., U.S. Atty., S.D.N.Y., Peter C. Salerno, Asst. U.S. Atty., New York City, of counsel), for defendants-appellants.

Russell H. Falconer, New York City (Doreen J. Leavens, Brumbaugh, Graves, Donohue & Raymond, New York City, of counsel), for intervenor.

Before OAKES, PRATT and WEIS *, Circuit Judges.

GEORGE C. PRATT, Circuit Judge:

This case of first impression presents important questions concerning Congress's effort to protect domestic trademarks from foreign counterfeiters. The major issues are (1) whether the definition of a "counterfeit" trademark, incorporated from the Lanham Act by Sec. 211 of the Customs Procedural Reform and Simplification Act of 1978, Pub.L. No. 95-410, 92 Stat. 888, 903-04, 19 U.S.C. Sec. 1526(e) (Supp. V 1981), should be applied from the standpoint of an average purchaser or an expert, and (2) whether the alleged counterfeit mark should be compared with the "registered mark" as the latter appears on actual merchandise or as it appears on a registration certificate filed with Customs. Adopting the average purchaser test and comparing the challenged mark with the registered mark imprinted on actual merchandise, Judge Broderick below ruled that the designs on a shipment of 18-karat gold watch bracelets imported by intervenor Grand Jewels, Inc. ("the importer") were counterfeits of plaintiff Montres Rolex, S.A.'s registered trademark. Accordingly, he ordered Customs to comply with the mandatory forfeiture provisions of Sec. 1526(e). Because Judge Broderick's interpretation and application of Sec. 1526(e) is fully consistent with its punitive and deterrent purposes, we affirm.

I. Facts, Administrative Proceedings, and Decision Below.

In early May 1981, a Customs import specialist at J.F.K. International Airport in New York detained a shipment of approximately 100 18-karat solid gold watch bracelets, each bearing a fan or crown-like design on the clasp. The bracelets were destined for Grand Jewels, Inc., a New York City retailer. Suspecting a possible violation of Rolex's trademark rights, the specialist forwarded samples of the bracelets to Joseph J. DeNardo, Assistant Chief of Customs' Imports Compliance Branch. Following standard operating procedures, DeNardo compared the designs on the bracelets' clasps with the drawing of the Rolex trademark on the registration certificate Rolex had filed with Customs pursuant to 19 C.F.R. Sec. 133.1-.7. By letter dated May 12, 1981, DeNardo advised the importer that:

Examination of two samples from the shipment reveals that they both bear a crown design which is considered to infringe on the registered and recorded "Crown Design" trademark owned by Montres Rolex S.A. in violation of the Trademark Law (15 U.S.C. Sec. 1124).

Accordingly, this merchandise is a prohibited importation and subject to seizure and forfeiture unless written consent is received from the trademark owner * * *.

When advised that the Grand Jewels bracelets had been detained, Rolex refused to consent to the importation, notwithstanding Grand Jewels' offer to remove the offending marks. Rather, Rolex contended that the imported bracelets bore counterfeit marks within the meaning of Sec. 1526(e) and demanded that they be forfeited.

With the importer and the trademark owner thus at loggerheads, DeNardo again examined the designs on the surface of the imported bracelets' clasps to determine formally whether they constituted counterfeits. He carefully compared those designs, element-by-element and as a whole, with the crown design protected as Rolex's trademark filed with Customs. Because of the minute size of the crowns and their elements, DeNardo used a jeweler's magnifying loupe in the course of his examination.

In a brief letter decision dated July 22, 1981, DeNardo ruled that the designs on the sample bracelets were not counterfeit trademarks. He concluded, therefore, that the detained goods need not be forfeited and could be lawfully imported after the infringing marks were removed or obliterated. A later examination of an authentic Rolex bracelet, supplied by Rolex, did not lead him to change his mind.

Upon Rolex's request for review, Darrell D. Kast, Chief of Customs' Entry, Licensing, and Restricted Merchandise Branch, affirmed DeNardo's decision. Kast reasoned that:

Although the appearance of the mark used on the imported bracelet is very similar to that of the crown design applied to the Rolex bracelet, it can easily be distinguished from the drawing of the official "Crown Design" on the trademark registration. For example, we note that the spikes on the crown design on the sample bracelets submitted are not nearly as long or as tapered in appearance as they are in the official version of the "Crown Design" and that the spacing between the balls at the top of the spikes is minimal and not as clearly defined.

Accordingly, we are of the opinion that the mark that appears on the imported [Grand Jewels] bracelets merely copies or simulates the genuine Rolex "Crown Design" trademark. While the mark in question is close enough in appearance to cause some confusion on the part of the average purchaser at retail as to the source of the bracelet, the infringement, in our opinion, does not amount to a "counterfeit trademark" violation, and the laws and regulations governing "counterfeit trademark" violations would not apply.

Rolex then brought this suit seeking a preliminary and permanent injunction that would require Customs to declare the bracelets counterfeit and therefore forfeited. Following a trial on the merits, accelerated pursuant to Fed.R.Civ.P. 65(a)(2), Judge Broderick in an oral decision found that Rolex had standing to challenge Customs' determination that the Grand Jewels bracelets were not counterfeits, and that jurisdiction was available under the Mandamus Act, 28 U.S.C. Sec. 1361 (1976) and under the general federal question provision, 28 U.S.C. Sec. 1331 (Supp. V 1981). On the merits, Judge Broderick ruled that Customs had erred as a matter of law in two respects in determining whether the Grand Jewels bracelets were counterfeits: it should have compared the designs on the accused bracelets with the marks on actual Rolex bracelets, rather than with the pen-and-ink drawing on the Rolex trademark registration certificate, and it should have examined the bracelets from the perspective of an average purchaser rather than an expert. Applying the proper standards, Judge Broderick held that "the average buyer examining a bracelet carrying the infringing mark would, if he or she were familiar with plaintiff's mark, conclude that the infringing mark was in fact plaintiff's mark." He then entered judgment (1) determining Customs' ruling to be erroneous, (2) declaring that the marks on the imported bracelets were counterfeits and that the bracelets should be forfeited in the absence of Rolex's consent, and (3) directing Customs to declare the marks counterfeit and to dispose of the merchandise.

II. The Statutory and Regulatory Scheme.

The statute at the center of this dispute, 19 U.S.C. Sec. 1526(e), provides as follows:

Any such merchandise [manufactured abroad] bearing a counterfeit mark (within the meaning of section 1127 of Title 15) imported into the United States in violation of the provisions of section 1124 of Title 15, shall be seized and, in the absence of the written consent of the trademark owner, forfeited for violations of the customs laws. Upon seizure of such merchandise, the Secretary [of the Treasury] shall notify the owner of the trademark, and shall, after forfeiture, obliterate the trademark where feasible and dispose of the goods seized * * *

See also 19 C.F.R. Sec. 133.23a(b), (c).

The statutory provisions to which Sec. 1526(e) refers, 15 U.S.C. Secs. 1124 and 1127, correspond to sections 42 and 45 of the Lanham Act. Section 1127, the Lanham Act's general definitional section, defines a "counterfeit" as "a spurious mark which is identical with, or substantially indistinguishable from, a registered mark." Section 1124 generally prohibits the importation of goods which "copy or simulate" a registered trademark. Under 19 C.F.R. Sec. 133.21(a), a " 'copying or simulating' mark or name" is either "an actual counterfeit of the recorded mark" or "is one which so resembles it as to be likely to cause the public to associate the copying or simulating mark with the registered mark or name." The latter component of this definition tracks the language of that part of section 1127 which defines the term "colorable imitation" as "any mark which so resembles a registered mark as to be likely to cause confusion or mistake or to deceive." Similarly, 19 C.F.R. Sec. 133.23a(a) tracks section 1127 by defining a "counterfeit trademark" as "a spurious trademark which is identical with, or substantially indistinguishable from, a registered trademark."

Thus the customs laws and regulations create a two-tier classification scheme. The first category consists of marks which are merely infringements, judged by whether they are likely to cause the public to associate the copying mark with the recorded mark. In the second category are those marks which not only infringe but in addition are such close copies that they amount to counterfeits.

The significance of this distinction emerges from the consequences that are attached to...

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