Tariff Act’s civil penalty provisions strengthened as anti-counterfeiting tool

In United States v Able Time Inc (Case 06-56033, September 25 2008), the US Court of Appeals for the Ninth Circuit has delineated the scope of the Tariff Act to clarify that the civil penalty provisions of the act do not require an identity of goods with the relevant trademark registration. Until this decision, if a counterfeiter used a registered trademark on products not manufactured or sold by the trademark owner, the applicability of the act’s civil penalty provision remained uncertain. 

 

The Able Time Case focused on the use of the trademark TOMMY on watches manufactured and imported by Able Time Inc. The Bureau of Customs and Border Protection seized a shipment of watches under the act (19 USC §1526(e)). The act provides for the imposition of civil penalties for seized merchandise which bears "a counterfeit mark" (§1526(e) and (f)). At the time of the seizure, the trademark owner, Tommy Hilfiger Licensing Inc, did not sell watches bearing the TOMMY mark and did not own a federal registration for the TOMMY mark covering watches. However, it owned registrations for the TOMMY mark for other goods. 

 

On a motion for summary judgment, Able Time successfully argued to the district court that, at the time of the seizure, its watches were not counterfeit and subject to the civil penalties of the act, given that Tommy Hilfiger did not own any registration for the TOMMY mark for watches. 

 

On appeal, the Ninth Circuit disagreed with the summary judgment decision, concluding that the act does not require an identity of goods with the relevant registration for the civil penalties to apply. After examining the legislative history and the express language of the governing provision of the act, the Ninth Circuit concluded that the touchstones of the act were actual trademark use of the registered mark and likelihood of confusion, not a simple identity of goods. Relying on the language of the statute (which prohibits the importation of merchandise bearing a registered trademark without the permission of the trademark owner), the court held that the statutory language did not require the owner of the registered mark to make or sell the same goods as those seized from the importer. 

 

Rather, the Ninth Circuit held that the test is consumer confusion. While public confusion may be more likely where the trademark owner actually offers the same type of goods, confusion may still exist where the goods offered by the trademark owner under the mark differ from those seized by the government. Given the touchstone of likelihood of confusion, the court rejected Able Time’s argument that such a broad reading of the act's provisions would result in a registered trademark providing a "right in gross". The Ninth Circuit held that the statutory scheme did not provide any "right in gross", but "sufficiently connected the marks and the goods on which they are used" with the need to prove a likelihood of confusion. Further, the court held that the act "prevents a step backwards towards a ‘right in gross’ theory of trademark because it requires the owner to use the registered mark". 

 

The court’s construction of the application of civil penalties under the act reinforces the value of recording trademark registrations with Customs in order to address the issue of the importation of counterfeit goods. If a likelihood of confusion can be established, the act’s civil penalty provisions will apply even if there is no identity of goods.