Removal of UPCs constitutes trademark infringement, says Second Circuit

United States of America
In Zino Davidoff SA v CVS Corporation (Case 07-2872-cv, June 19 2006), the US Court of Appeals for the Second Circuit has upheld the district court’s grant of a preliminary injunction in a case in which the defendant had in its possession cologne and perfume in packaging having the unique production code (UPC) removed or otherwise defaced, notwithstanding the fact that the product may, in fact, have been genuine. 
Zino Davidoff SA sued CVS Corporation after learning that CVS was selling Davidoff Cool Water perfumes and colognes that Davidoff believed to be counterfeit. The district court granted Davidoff’s request for a temporary restraining order and authorized an inspection of CVS’s undistributed inventory. During the inspection, Davidoff determined that CVS was in possession of more than 16,000 packages of Cool Water product that had had their UPC removed - either by cutting the box, using a chemical to wipe off the writing or grinding the UPC off the bottle itself. Davidoff thereafter filed an amended complaint and was granted preliminary injunctive relief as to the products with the missing UPCs.
The district court concluded - and, on appeal, the Second Circuit agreed - that the removal of the UPCs from the packaging of the trademarked product “impaired Davidoff’s marks by interfering with the trademark owner’s ability to identify counterfeit goods and to control the quality of its legitimate products by identifying and recalling defective products”. As a result, Davidoff was found likely to succeed in its trademark infringement claims, notwithstanding the fact that the packages in CVS’s possession bore the authentic trademark and may even have been genuine product (as of the time of the preliminary injunction, the product had not yet been analyzed for authenticity purposes).
In considering CVS’s appeal, the Second Circuit focused on the fact that Davidoff made real use of the UPCs for counterfeit detection and quality control purposes. Davidoff persuaded the court that the UPCs worked to permit the detection of counterfeits, and also assisted in the identification of defective products to effectuate product recalls and remedy production defects. Because the codes were a legitimate and actively utilized quality control avenue for Davidoff, the absence of the codes from the products in CVS’s possession rendered such products non-genuine and “subvert[ed]” Davidoff’s quality control methods. As such, preliminary injunctive relief was warranted. 
CVS unsuccessfully argued that the fact that the products did not have a UPC did not mean that they were counterfeit. However, the Second Circuit felt that this argument missed the point. Instead, the key was the fact that the code system permitted Davidoff to detect and prevent the sale of counterfeits. By distributing products - whether legitimate or not - with the code removed, CVS was interfering with an established and followed quality control protocol. Given the importance of a trademark owner’s right to control the quality of products sold under its mark and to prevent counterfeiting, this interference was enough to warrant preliminary injunctive relief.
CVS also unsuccessfully argued that a preliminary injunction was unwarranted because Davidoff had failed to show that any of the products in CVS’s possession were inferior. Rather, CVS maintained that the products were 'grey market' products and were thus genuine Davidoff products, albeit products intended for another market. Again, the Second Circuit was not persuaded. First, it held that such proof was unnecessary: "the actual quality of the goods is irrelevant; it is the control of quality that the trademark owner is entitled to maintain". Here, the court found that CVS had interfered with Davidoff’s right to control quality. Second, the court held that the removal of the UPC did, in fact, result in a lower quality product because without the code, the packages were defaced and thus materially different from legitimate Davidoff products.
Timothy J Kelly, Fitzpatrick Cella Harper & Scinto, New York

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