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Archived updates for Monday, September 26, 2005

Non-Physical Differences Must Appear in Substantially All Gray Market Infringing Goods

In SKF USA, Inc. v. International Trade Commission, et al. (Fed Cir., September 14, 2005) the court held that physical material differences are not required to establish trademark infringement involving gray market goods.
"That is because trademarked goods originating from the trademark owner may have nonphysical characteristics associated with them, including services, such that
similar goods lacking those associated characteristics may be believed by
consumers to have originated from the trademark owner and, lacking such traits,
may mislead the consumer and damage the owner’s goodwill," wrote Judge
However, the court went on to affirm the Commission's determination on no trademark infringement because SKF USA did not establish a material difference between substantially all of its own products and the gray market imported goods based upon post-sale technical and engineering services.

. . . [W]e agree with the Commission that a plaintiff in a gray market trademark
infringement case must establish that all or substantially all of its sales are
accompanied by the asserted material difference in order to show that its goods
are materially different. If less than all or substantially all of a trademark
owner’s products possess the material difference, then the trademark owner has
placed into the stream of commerce a substantial quantity of goods that are or
may be the same or similar to those of the importer, and then there is no
material difference. Indeed, if it cannot be said that substantially all of a
trademark owner’s goods are accompanied by the asserted characteristic, then it
may properly be concluded that, in effect, there exists no material difference
between the trademark owner’s goods and the allegedly infringing goods. We have
reasoned before that "the consuming public, associating a trademark with goods
having certain characteristics, would be likely to be confused or deceived by
goods bearing the same mark but having materially different characteristics."
Gamut, 200 F.3d at 779. Conversely, then, a trademark owner’s argument that
consumers would be confused by gray goods lacking an asserted material
difference from the authorized goods is inconsistent with the owner’s own sale
of marked goods also lacking that material difference from its own authorized
goods. To permit recovery by a trademark owner when less than "substantially
all" of its goods bear the material difference from the gray goods thus would
allow the owner itself to contribute to the confusion by consumers that it
accuses gray market importers of creating. . . .

[Alhough] it was undisputed that 87.4% of SKF USA’s sales to authorized distributors were supported by the "full panoply" of post-sale technical and engineering services. . . ., [t]he Commission also found that "SKF USA’s bearings do not differ materially from respondents’ bearings" because "SKF USA has authorized the sale of SKF USA marked bearings by nonauthorized distributors, gray market distributors (including respondents), surplus distributors, and RBC/Tyson which we find are not predictably and consistently accompanied by post-sale technical and engineering services." Those are also findings of fact to which we defer.

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