Addressing the issue of infringement by "grey market" goods, the U.S. Court of Appeals for the Ninth Circuit has held that there is no infringement when the goods are genuine and the use of the trademark does not undermine a party’s goodwill or leave consumers in a state of "legal confusion," and an American trademark holder cannot prevent importation. American Circuit Breaker Corp. v. Oregon Breakers, Inc., Case No. 03-35375 (Ninth Cir. Apr. 25, 2005) (McKeown, J.).
American Circuit Breaker Corp. (ACB) holds the U.S. registration for the trademark STAB-LOK. Schneider Canada holds the Canadian registration for the identical mark. Schneider manufacturers black circuit breakers, which ACB markets in the United States under the STAB-LOK mark. Schneider also manufactures grey circuit breakers, which it markets itself in Canada. The parties stipulate that casing color is the only difference between the two products.
The dispute arose when Oregon Breakers bought grey circuit breakers from Schneider in Canada, imported them and sold them in the United States without ACB’s permission.
ACB argued that the Oregon Breakers product was an unauthorized "grey market" import and should be enjoined. The Ninth Circuit held that labeling the product "grey market" did not change the ultimate issue: "whether there is a likelihood of confusion as to source . . . ." Based on the parties’ stipulation that the goods were genuine and the customers who purchase the grey circuit breakers get exactly what they expect they are purchasing—circuit breakers produced by Schneider—the Ninth Circuit held that there was no confusion in this case and, therefore, no infringement.
Practice Note: The holding in this case may be of limited application in view of the parties’ stipulation that the goods at issue were "genuine." For example, determined litigants in ACB’s situation may want to look for facts suggesting that consumers view as "genuine" only those goods originally sold by the U.S. mark holder.
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