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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

Trademark - Gray Market Goods - Internet Library of Law and Court Decisions - Updated May 28, 2008

2007 WL 725412 (S.D.N.Y., March 12, 2007)

Court denies defendants’ motion to dismiss and allows plaintiff Philip Morris USA Inc. (“Philip Morris”) to pursue trademark infringement claims arising out of defendants’ alleged distribution into the US of gray market cigarettes from their websites.  The Court rejected defendants’ argument that plaintiff’s trademark infringement claims should be dismissed because the disclaimers on defendants’ websites adequately disclosed that the cigarettes offered for sale are ‘gray market’ goods – goods manufactured by Philip Morris for different markets - and that the defendants’ websites are not affiliated with or sponsored by Philip Morris.  These disclaimers did not warrant dismissal because they failed to disclose that the ‘gray market’ cigarettes offered for sale by defendants were ‘materially different’ from those intended for the US market.  As such, consumers may be confused and led to believe they were purchasing a product they would not in fact receive.

The Court also rejected defendants’ motion to dismiss on the ground that the Court lacked personal jurisdiction over the defendants.  The Court held the complaint’s allegations that defendants shipped gray market goods into New York in violation of the Lanham Act were sufficient to establish that a New York federal court could exercise personal jurisdiction over the defendants.  Notably, defendants did not seek to challenge these factual assertions, or offer evidence as to either their lack of contact with the forum  or their actual location.

Finally, the Court denied that branch of defendants’ motion to dismiss which asserted that service of the complaint by fax and email pursuant to Fed. Rule Civ. Pro. Rule 4(f)(3) violated Due Process.

Case No. 06-C-843 (E.D. Wis., April 18, 2008)

Court holds that unauthorized reseller of plaintiff Standard Process Inc.’s products can use Standard Process’ trademark on its website, and in the website’s meta tags, to advertise the sale of such products.  The Court held that consumers were not likely to be confused by such conduct, because defendant’s site featured a prominent disclaimer that advised consumers that defendant is “not an authorized seller” of plaintiff’s products, “purchases Standard Process supplements from authorized third parties for resale, and is in no way affiliated with, authorized, sponsored or related to Standard Process Inc.”  In reaching this result, the Court rejected plaintiff’s argument that the use of its marks in the meta tags of defendant’s site was barred by application of the “initial interest confusion” doctrine, because the consumer who came to defendant’s site was presented with an opportunity to purchase actual Standard Process products. 

Finally, the Court rejected plaintiff’s claim that defendant was improperly selling ‘gray market’ goods which were ‘materially different’ from those plaintiff intended for sale in this market.  Plaintiff grounded this argument on the fact that authorized resellers are required to have a one-on-one consultation with the consumer before sale of the products, which consultation does not take place when the consumer purchases the product from defendant’s website.  The Court rejected this argument, because the products being resold were in fact the same as those offered by Standard Process, and because consumers were not likely to be confused, as they knew they were not receiving a one-on-one consultation prior to purchase.

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