Altered Cartier watches are counterfeit, says court

In Cartier v Aaron Faber Inc (2007 WL 2823691, September 27 2007), the District Court for the Southern District of New York has held that the Second Circuit rule requiring a showing of wilful violation for an award of monetary relief in counterfeiting cases did not survive the 1999 amendment to Section 35 of the Lanham Act.

When is a genuine Cartier watch deemed to be counterfeit under US law and can a plaintiff obtain damages absent a showing of wilfulness? The Lanham Act states that a 'counterfeit' is a spurious mark which is identical to, or substantially indistinguishable from, a registered mark.

Aaron Faber Inc buys and sells premium watches and arranges for third-party jewellers, such as J & P Jewellers, to mount diamonds onto watches bearing the CARTIER mark and other famous trademarks. Aaron Faber then sells or offers for sale on consignment the newly bejewelled watches to auction houses. The watches retain the brand owners' original marks and display no additional mark indicating that the diamonds have been added by J & P and are not original to Cartier. At least some of the watches are modified to appear identical to more expensive genuine Cartier models.

Cartier sought a permanent injunction against the unauthorized alteration of its watches by Aaron Faber. Aaron Faber cited a number of cases - including Prestonettes Inc v Coty (264 US 359 (1924)) and Champion Spark Plug Co v Sanders (331 US 125 (1947)) - to back its claim that trademark law does not preclude the unauthorized sale of genuine goods bearing an original mark. However, the district court found that both cases explicitly required that the original mark not be used in such a way as to deceive the public.

In this situation, the district court concluded that the retention of the CARTIER mark with no indication that the watches had been significantly altered by J & P's addition of diamonds to the bezel, case and/or bracelet created a likelihood that customers would be deceived into believing that the alterations were performed by the original manufacturers. In granting the permanent injunction, the court stated:

"A customer or secondary purchasers of the watches would directly attribute to Cartier the bejewelled bezels, cases and/or bracelets, and any flaws in the workmanship or quality of the watch resulting from that alteration."

The court held that the sale of the altered watches created a likelihood of confusion and permanently enjoined Aaron Faber from altering the watches.

Cartier also sought an award for profits and costs, but not actual damages. Aaron Faber opposed the award, arguing that Cartier's claim should be denied on the grounds that the Lanham Act requires a showing of wilful deception or actual confusion for an award of monetary relief. The district court disagreed and stated that the plain language of the statute indicates that wilfulness is not a prerequisite for an award of damages.

The case shows that the pre-1999 holding in Second Circuit cases that the damage provision requiring a wilful violation in trademark infringement and counterfeiting cases no longer applies. The district court found that the 1999 amendment to Section 35 of the Lanham Act provides for damages to be awarded in cases of trademark dilution, but only if a wilful violation is found. In granting Cartier's award, the district court reasoned that Congress, by implication, rejected the pre-1999 Second Circuit's rule that a wilful violation must be shown before damages can be awarded in counterfeiting cases.

Brian E Banner, Rothwell Figg Ernst & Manbeck PC, Washington DC

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