You Can Sue, But You Can’t Hide

You Can Sue, But You Can't Hide by Mark S. KaufmanThe United States Court of International Trade was recently the setting for an action brought by a company that wished to remain anonymous.

The plaintiff, referred to as XYZ Corporation, had been importing DURACELL batteries into the United States for 27 years. When goods that are genuine products of a trademark owner like DURACELL – but are manufactured outside the United States before being imported – they are called gray goods.

Gray goods are not counterfeit goods, because they are actually licensed to be created. Under certain circumstances, they’re entitled to be imported. The only way that a trademark owner like DURACELL can stop the importation of gray goods is a) if DURACELL registered with Customs and Border Protection (CBP or Customs) under the Intellectual Property Rights e-Recordation (IPRR) system; b) the goods are not manufactured by a company overseas that is controlled by DURACELL (that is, they are owned by two different companies); and c) the goods are manufactured by someone controlled by DURACELL but are materially different and inferior to what is sold in the US.

XYZ’s goods were being stopped at the border, because DURACELL had registered with Customs and had shown that the gray goods – the batteries and packaging – were inferior to DURACELL’s domestically made goods. Specifically, the packaging lacked warranty information and a 1-800 “help” number.

XYZ Corporation sued to prevent Customs from stopping their goods at the border, but they sought to bring the action anonymously. They feared retaliation from DURACELL in the form of a potentially ruinous civil suit where XYZ would have to prove that it was not infringing. If DURACELL found out that XYZ was the plaintiff in the Court of International Trade, XYZ would become a sitting duck for a potential lawsuit for trademark infringement.

The court denied XYZ’s motion to treat its identity as confidential information. The court said that XYZ’s economic interest in not being sued was not among the things that are considered confidential (which have included fear of physical violence, deportation or arrest); it’s not within the confines of an agreement between the parties, there’s no precedent for it, and the public interest in knowing who is bringing litigation outweighs the detriment to the party bringing the action.

The moral of the story is that gray goods, “legitimate” or not, undermine the profitability of the trademark owner. Furthermore, any company importing gray goods to the United States should do so with the knowledge that they can be sued at any time – even if the goods are legitimate, and especially if they start their own lawsuit.
Mark Kaufman

Mark S. Kaufman
Kaufman & Kahn

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