Mark owner's ability to stop repackaging of authentic goods remains limited

In Farouk Systems Inc v Target Corp Inc (Case 06-20883, January 22 2008), the US Court of Appeals for the Fifth Circuit has upheld a grant of summary judgment in favour of defendants Target Corp Inc and Pro's Choice Beauty Care Inc, which had repackaged Farouk Systems Inc's products with a disclaimer. In doing so, the court addressed the reach of the Supreme Court's landmark decision in Prestonettes Inc v Coty.

Pro's Choice combined bottles of Farouk's BIOSILK-branded hair care products into boxed sets for sale by Target. Farouk's products were visible through a front cut-out and the BIOSILK mark appeared on all sides of the packaging. A disclaimer appeared on the back panel in type size that was significantly smaller than the BIOSILK mark. The disclaimer stated that:

  • the original product had been repackaged and distributed by Pro's Choice, which was unrelated to and not licensed by the trademark holder; and

  • Pro's Choice assumed full responsibility for the product and the package.

Farouk brought federal and state trademark infringement claims against Target and Pro's Choice. The defendants were granted summary judgment and Farouk appealed.

In an unpublished decision, the Fifth Circuit affirmed the grant of summary judgment for the defendants. The court began by noting that whether there is a likelihood of confusion is a question of fact in the Fifth Circuit. However, summary judgment is still appropriate if there is no issue of material fact and the movant is entitled to judgment as a matter of law. Farouk argued that summary judgment was inappropriate because it had not had an opportunity to conduct discovery or obtain expert survey evidence. The court disagreed, stating that a party cannot evade summary judgment by arguing simply that additional discovery is needed.

The court then turned to the packaging itself. Farouk conceded that the repackaged products were genuine, unaltered and in their original bottles, and that no defects had been found in the repackaged products. As a result, consumers were correct in believing that by buying the packaged sets, they were buying genuine BIOSILK-branded products. However, Farouk argued that:

  • the disclaimer was not sufficiently prominent and did not contain all the elements required under Coty; and

  • consumers might believe that Farouk created or commissioned the packaged sets.

The court countered that trademark law does not apply to the sale of genuine goods, even where the trademark owner does not consent to the sale. Further, repackagers are allowed to use another company's trademarks to identify a product as being or containing the product to which the trademark applies. The court rejected a per se rule that a repackaging disclaimer must be in the same size as the trademark or that all the elements of a Coty disclaimer are required on all packages. The court also held that a review of the packaging plainly showed that the disclaimer was sufficiently conspicuous to dispel any confusion as to which company had packaged Farouk's genuine goods.

Robert W Zelnick and Sarah Brown, McDermott Will & Emery, Washington

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