Industry Eye: Shop Talk - Legal Matters, Letter to the Editor

A recent federal appellate court decision concluded that the 
removal of a product's universal product code (UPC) may constitute a trademark infringement. In Zino Davidoff SA v. CVS Corp., decided this past June, the court supported claims of a high-end distributor of luxury fragrances because "the UPC acts as a quality control mechanism which enables [the trademark owner] to protect the reputation of its trademarks by identifying counterfeits and by protecting 
against defects."

In 1988, Davidoff launched the "Cool Water" line of fragrance products, for which it holds valid trademarks. Manufactured under license from
Davidoff, the fragrances contain unique production codes on the bottom of each bottle as well as on the outer packaging. The court ruled Davidoff's use of the UPC plays an important role in fighting counterfeiters, who'll typically omit a UPC or repeatedly use sets of fake numbers on counter-
feit units.

The court also found that the UPC served a quality control function because if defective, the batch containing the defect could be identified, helping facilitate a product recall. Such quality control measures "preserve and protect" trade-
mark values.

The drugstore chain obtained "Cool Water" products from outside of Davidoff's normal distribution channels. Some were found to be counterfeit. On some items, the UPC had been removed by a variety of techniques, including cutting the portion of the box exhibiting the code, using chemicals to wipe it away and grinding away the bottom of the bottles to remove it.

CVS argued that ones with UPCs removed were gray market goods — i.e., genuine "Cool Water" goods sold by Davidoff through authorized channels in other countries and subsequently imported
into the U.S. Because these goods were sold in their original packaging with the Davidoff trademarks, CVS contended that the removal of the codes didn't constitute trademark infringement.

The court rejected CVS' argument and issued a preliminary injunction against sales of trademarked products with UPCs removed. The court contended that the removal of the UPC risks counterfeits while potentially damaging 
Davidoff's reputation.

The court added that removing UPCs may lead consumers to suspect the items are stolen, defective or had been recalled.

The key takeaway from this decision is that trademark owners now have an additional tool for combating counterfeiters and dealing with gray market goods that bear tampered UPCs. —George S. Isaacson, senior partner, Brann & Isaacson (gisaacson@brannlaw.com).