September 14, 2015

Scraping off UPCs Can Give Rise to Trademark Infringement


Courts can hold parties liable for Trademark Infringement under the federal Lanham Act for something seemingly as trivial as scraping off unique production codes (UPCs).

Under the First Sale Doctrine, a purchaser of another's genuine trademarked good can ordinarily resell that product. In other words, that person could potentially use the First Sale Doctrine to defend against possible trademark infringement claims.

However, goods are only “genuine” if they conform to the quality control measures established by the trademark holder. Thus, a reseller or retailer must avoid altering the physical appearance of a trademarked good. For example, they must not scrape off UPCs or otherwise deface others' products.

Stated differently, if a product for sale is “materially different” from an authentic trademarked good, this could give rise to trademark infringement claims, in spite of the First Sale Doctrine.

And a finding of trademark infringement can give rise to injunctive relief and monetary damages.

Second Circuit Case

In 2009, the U.S. Court of Appeals for the Second Circuit held that interfering with a company’s reasonable efforts to control the quality of its trademarked products “unreasonably subjects” them to “the risk of injury to the reputation of its mark.” Zino Davidoff SA v. CVS Corp., 571 F.3d 238 (2d Cir. 2009).

In this case, CVS Corporation was not an authorized retailer of Davidoff’s fragrances. Yet they were selling its products, including some counterfeit versions.

Despite assuring Davidoff that it would remove any counterfeit products, CVS continued to sell them. Davidoff sued and eventually amended its complaint when it discovered that thousands of its products in the CVS inventory had had their UPCs removed.

The lower court granted Davidoff’s preliminary injunction, prohibiting the drugstore retail chain from selling Davidoff products without UPCs. The court reasoned that removal of the UPCs harmed Davidoff’s marks in two respects. First, the ability to easily identify counterfeits, and second, the ability to identify defective products (for the purposes of correcting defects, such as through a recall).

The Second Circuit affirmed the lower court’s decision. Specifically, the court rejected CVS’ arguments that a consumer or retailer would not understand the presence or absence of UPCs as affecting authenticity. The court called CVS’ argument irrelevant; the Second Circuit held that Davidoff intended its codes to assist the business with controlling its products and detecting counterfeits.

Eleventh Circuit Case

Several years earlier, the Eleventh Circuit similarly upheld a lower court’s ruling. Specifically, in Davidoff & Cie, S.A. v. PLD Int'l Corp., the court determined that the “obliteration” of batch codes constituted a material difference, giving rise to liability for trademark infringement. 263 F.3d 1297 (11th Cir. 2001),,

The district court had found that the defendants had deprived plaintiffs of “their exclusive right to control the quality of their products,” and that the substantial risk of irreparable harm established outweighed the defendants’ interests.

In upholding the lower court’s ruling, the Eleventh Circuit also found that there was a difference in physical appearance of the products (actually the same products as in the 2009 Second Circuit case). This difference in physical appearance caused a likelihood of confusion.

Trademark Enforcement

In short, manufacturers must take the necessary steps to protect their trademarked products and enforce their trademarks. Even while the First Sale Doctrine generally permits the re-selling of others' trademarked goods, manufacturers must ensure that other parties do not erode the goodwill of their trademarks, whether by altering product packaging, scraping UPCs, or by other means.

Not only can a manufacturer legally enforce its trademarks by obtaining injunctions, but a court can also award money damages against infringing parties.