Weil Ceramics and Glass, Inc. v. Dash

• Decision Date: 10 July 1989
• Docket Number: 86-5207,Nos. 86-5187,s. 86-5187
• Citation: 878 F.2d 659,11 USPQ2d 1001
• Parties: , 57 USLW 2732, 11 U.S.P.Q.2d 1001 WEIL CERAMICS AND GLASS, INC. a New York Corporation v. Bernard DASH, an individual and Jalyn Corp., a corporation. Appeal of WEIL CERAMICS & GLASS, INC. Appeal of Bernard DASH and Jalyn Corp. . Re
• Court: U.S. Court of Appeals — Third Circuit

Page 659

878 F.2d 659

11 ITRD 1293, 57 USLW 2732, 11

U.S.P.Q.2d 1001

WEIL CERAMICS AND GLASS, INC. a New York Corporation v. Bernard DASH, an individual and Jalyn Corp., a corporation Appeal of WEIL CERAMICS & GLASS, INC Appeal of Bernard DASH and Jalyn Corp.

Nos. 86-5187, 86-5207.

United States Court of Appeals Third Circuit.

Reargued Nov. 14, 1988.

Decided May 25, 1989.

As Modified July 10, 1989.

John N. Bain (argued), Carella, Byrne, Bain & Gilfillan, Roseland, N.J., for appellants & cross appellee.

Bernard R. Gans (argued), Poms, Smith, Lande and Rose, Los Angeles, Cal., for appellee & cross appellants.

Jamie S. Gorelick (argued), Nathan Lewin, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for amicus--47th Street Photo, Inc.

Before HIGGINBOTHAM and BECKER, Circuit Judges, and DUMBAULD, District Judge. ^*

OPINION OF THE COURT

A. LEON HIGGINBOTHAM, Jr., Circuit Judge.

On this appeal we are asked to determine the availability of trademark and tariff act protections to an American company--which is owned by the same entity that owns the foreign manufacturer of a good, but which holds a valid American trademark for the foreign manufactured good--against parallel imports or so-called "gray-market" goods. Specifically, we are asked to determine whether Sec. 32 of the Lanham Act, 15 U.S.C. Sec. 1114 (1982), makes damages available to the American trademark holder for trademark infringement and if Sec. 42 of that act, 15 U.S.C. Sec. 1124 (1982), may be employed on behalf of the American company to prohibit the importation of gray-market goods.

This appeal also raised the question of whether Sec. 526 of the Tariff Act, 19 U.S.C. Sec. 1526 (1982), could be employed to preclude the importation of gray-market goods. That section has been construed by the Customs agency in its regulations as allowing the importation of gray-market goods in those cases where the American trademark holder is owned by, or owns, the foreign manufacturer of the good. See 19 C.F.R. Sec. 133.21 (1987). Appellee/Cross-Appellant contended, and the district court found, that the Custom's agency's regulation was inapplicable. Since the filing of this appeal, however, the agency's regulation was construed in a decision of the Supreme Court--unrelated to the present appeal--which raised the same issue. See K Mart Corp. v. Cartier, Inc., --- U.S. ----, 108 S.Ct. 1811, 100 L.Ed.2d 313 (1988). That decision controls the claim raised by the Appellee/Cross-Appellant regarding Sec. 526 in this case, and directs that the decision entered by the district court on its behalf be reversed. K Mart is also instructive to the disposition of the Appellee/Cross-Appellant's contentions regarding Secs. 42 and 32. We conclude that neither of these sections provides the relief sought and, accordingly, we will reverse the decision of the district court.

Finally, we conclude that the district court erred by dismissing the contention raised by Appellee/Cross-Appellant under Sec. 33(b) of Lanham Act, 15 U.S.C. Sec. 1115(b) (1982), on the grounds that that section does not expressly or implicitly provide a right for private action. We conclude that Sec. 33(b) may be used by a private litigant in an infringement action and, therefore, we will reverse the judgment of the district court. Notwithstanding that conclusion, however, we will remand with instructions that judgment be entered in favor of the Appellant/Cross-Appellee. We review, de novo, the appropriate scope of the statute and conclude that Sec. 33(b) does not provide the remedy sought by the Appellee/Cross-Appellant in this case.

I. Background

This is an appeal about gray-market goods. ¹ Appellee/Cross-Appellant, Weil Ceramics & Glass, Inc., ("Weil"), is the wholly owned subsidiary of Lladro Exportadora, S.A., a Spanish corporation that is a sister corporation to Lladro, S.A., which manufactures fine porcelain in Spain. ² The porcelain is handmade and each piece bears the trademark "LLADRO," accompanied by a flower logo.

In February 1966, Weil, a New York corporation in the business of importing and selling fine porcelain and glassware, became the exclusive distributor in the United States of Lladro porcelain. The following year Weil obtained a valid United States registration for the LLADRO trademark and continued as the exclusive distributor of the porcelain.

In 1973, Lladro, S.A. acquired 50% of Weil's stock. At that time, Weil assigned all of its rights in its United States LLADRO trademark to Lladro, S.A. In 1977, Lladro Exportadora obtained Lladro, S.A.'s shares of Weil stock, as well as the remaining 50% of Weil stock, and became the sole owner of Weil. In 1983, Lladro Exportadora assigned the United States LLADRO trademark back to Weil.

In 1982, Appellants/Cross-Appellees Jalyn Corporation and its president, Bernard Dash, (together "Jalyn"), began importing LLADRO porcelain. Jalyn legally obtained the porcelain in Spain from distributors of Lladro, S.A. and sold it in the United States without the consent of Weil. In 1984, Weil filed a complaint in the federal district court for the district of New Jersey seeking declaratory and injunctive relief against Jalyn's continued import of Lladro porcelain and money damages for trademark infringement.

The District Court's Decision

In its complaint, Weil contended that Jalyn's import and sale of Lladro porcelain violated Weil's exclusive right to use the trademark pursuant to Sec. 33(b) of the Lanham Act. 15 U.S.C. Sec. 1115(b)(1982). Weil further contended that Jalyn's actions constituted an infringement on its trademark in violation of Secs. 32(1)(a) and 42 of the Lanham Act, and a violation of Sec. 526 of the Tariff Act. 19 U.S.C. Sec. 1526 (1982). After the completion of discovery, Weil and Jalyn filed cross motions for summary judgment.

The district court dismissed Weil's contention under Sec. 33(b) because it concluded that that section does not provide for private enforcement. It held that the language of Sec. 33(b) "does not establish any intent by Congress to create a cause of action." Weil Ceramics & Glass, Inc. v. Dash, 618 F.Supp. 700, 703 (D.N.J.1985). The district court determined that Sec. 33(b) "merely states the evidentiary status of an incontestable mark," id., and noted that "Sec. 32 [of the Lanham Act] provides an effective remedy for the owner of a mark which has been improperly used by another.... [and] since Sec. 32 expressly provides a remedy, the statutory scheme effectively negates any congressional intent to create a cause of action under Sec. 33(b)." Id. at 704.

In light of its conclusion regarding Sec. 33(b), the district court stated its view that Weil's infringement action turned upon Sec. 32. On the claim based on that section, however, the district court granted Weil's motion for summary judgment. It held, in pertinent part, that "[i]n order to prevail on its claim under Sec. 32(1)(a), Weil must show that ... [Jalyn's] use [of the LLADRO trademark] is likely to cause 'confusion.' " Weil Ceramics, 618 F.Supp. at 704. Jalyn had argued, as it does on this appeal, that because the porcelain that it sold was genuine--i.e., the trademark was affixed by the manufacturer and was no different in character from the porcelain sold by Weil--the goods did not cause the "confusion" to which Sec. 32(1)(a) refers. The district court rejected that argument. It found that the porcelain goods imported by Jalyn "are not a copy or imitation," Id. at 703, but nonetheless concluded that the trademark act proscriptions applied. Noting that "relatively few cases have confronted this issue and the courts have split, ... [the district court] conclude[d] ... that genuine goods may cause confusion." Id. at 706.

As support for its holding, the district court relied principally upon the Supreme Court's decision in A. Bourjois & Co. v. Katzel, 260 U.S. 689, 43 S.Ct. 244, 67 L.Ed. 464 (1923). The district court read that decision as having established the "territoriality principle" of trademark law which views trademarks as having separate legal existences in each country in which they are registered, and as symbolic of "the goodwill of the domestic markholder whose reputation backs the particular product in that territory." Weil Ceramics, 618 F.Supp. at 705. In that light, the district court concluded that "even if a trademark correctly identified the manufacturer of the goods, it would still be an infringing product if it deceived the public into believing that the domestic markholder's goodwill stood behind the product." Id. The district court then analyzed the factual evidence of Weil's independent goodwill in the LLADRO trademarked porcelain, and concluded that Weil had demonstrated that no issue of material fact existed concerning Weil's claim that Jalyn's distribution of the porcelain in the United States had infringed Weil's trademark. See id. at 706-14.

Finally, the district court reviewed Weil's contention that Sec. 42 of the Lanham Act and Sec. 526 of the Tariff Act precluded Jalyn's continued importation of the LLADRO porcelain. Jalyn sought summary judgment on this contention on two bases: first, Jalyn contended that Sec. 42, like Sec. 32, does not provide that genuine goods are subject to claims raised under the trademark act. The district court rejected that argument and cited the Supreme Court's decision in A. Bourjois & Co. v. Aldridge, 263 U.S. 675, 44 S.Ct. 4, 66 L.Ed. 501 (1923) for the proposition that "genuine goods may infringe under the trademark laws and further that such infringing goods would be excludable under both the trademark and customs laws." Weil Ceramics, 618 F.Supp. at 715. It noted that a separate federal statute provides that Sec. 42 and Sec. 526 are not applicable to importations into the Virgin Islands of "genuine foreign merchandise bearing a genuine foreign trademark." Id. at 715 (citing 48 U.S.C. Sec. 1643 (1982)). In light of that specific preclusion, the district court concluded that "...