Mark Owner Must Show Substantially No Gray Market Sales of its Own

In Bourdeau Bros., Inc. v. ITC, et al. (March 30, 2006), the Federal Circuit vacated the International Trde Commission's decision to exclude gray market tractors under a "substantial evidence"standard. Citing SKF Inc. v. Int'l Trade Comm'n, 423 F.3d 1307 (Fed. Cir. 2005), the court reiterated 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."

Although the allegedly infringing tractors were manufactured in the U.S., the court agreed with the ITC, "that the importation and sale of a trademarked good of domestic manufacture, produced solely for sale abroad and not authorized by the owner of the trademark for sale in the United States, may violate section 1337 if the imported good is materially different from all or substantially all of those goods bearing the same trademark that are authorized for sale in the United States." However, after discussing why the differences between the domestic and imported goods were material, it concluded that Deere did not establish that all or substantially all of its sales in the United States were of North American forage harvesters intended for the U.S. market.

In their briefing to the ALJ and to this court, appellants argued that Deere actually sold European forage harvesters in the United States through its network of authorized dealers. In particular, appellants argued that, as early as 1997 and continuing through July of 2003, certain Deere dealers with authority from Deere sold used European forage harvesters in the United States. Appellants asserted that more than fifty used European forage harvesters were sold to them by authorized Deere dealers in the United States and in Europe, and that authorized Deere dealers purchased more than ten European forage harvesters from them. Appellants additionally argued that Deere was aware of the sales of European forage harvesters in the United States as early as 1999, but took no action to stop these sales by authorized Deere dealers until at least 2002. Indeed, appellants argued that Deere permitted its corporate employees to assist authorized dealers in the importation, purchase, and sale of European forage harvesters in the United States, and that "[i]n some instances Deere corporate representatives assisted authorized Deere dealers prior to the sale of European harvesters to U.S. customers."

If appellants are correct that Deere authorized such United States sales of European forage harvesters, and if such sales were sufficient in number to show that Transcript of Hearing at 2365, not all or substantially all of Deere's United States sales were not materially different, Deere would not be entitled to section 1337 relief.
Indeed, the ALJ recognized this point, stating during the hearing that "[i]f John Deere authorizes the importation of [European forage harvesters], then the Staff agree there are no material differences."4 Certain Agric. Vehicles & Components Thereof, Inv. No. 337-TA-487 (Sept. 30, 2003).

. . . Indeed, because SKF places the burden on Deere of establishing that all or substantially all of the authorized sales in the United States were of North American forage harvesters, the ITC must presume that sales by authorized dealers were in fact authorized by Deere. To hold otherwise would enable a plaintiff to simply disclaim the sales of any products that do not contain the alleged material differences; Deere could disclaim the sales of any European forage harvesters by simply asserting that such sales were not authorized. On remand, Deere may rebut
the presumption that all sales by its authorized dealers were authorized. However, Deere bears the burden of proving that sales of European forage harvesters by its authorized dealers were not authorized sales.

Nonetheless, even if Deere cannot establish on remand that the sales of European forage harvesters by authorized Deere dealers were not authorized, it may still prevail if it can establish that the number of sales of European forage harvesters was so small that substantially all of Deere's sales in the United States were of North American forage harvesters, such that substantially all of the authorized sales were of goods bearing the asserted material differences.

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