Paul D. Supnik
Attorney at Law

Domestic and International Copyright and Trademark Law;
Motion Picture, Television, Publishing, Media and General Entertainment Law;
New Media and Internet Law; Licensing;
Related Litigation
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Copyright © 1984 the International Trademark Association and reprinted with permission from 74 TMR 1, January-February 1984 issue of The Trademark Reporter.
THE BELL AND HOWELL
MAMIYA CASE-WHERE NOW PARALLEL IMPORTS?
By Paul D. Supnik
1. Introduction

    The District Court's order in Bell and Howell: Mamiya v. Masel Supply Co.' preliminarily enjoined infringement of the MAMIYA trademark on medium format cameras which were imported in the United States by other than the authorized distributor. Recently that decision was vacated by the Second Circuit Court of Appeals.2 The treatment by the Second Circuit Court, in view of the record and the briefs submitted, was not special. Of interest to the trademark bar is the refinement of thinking on the long perplexing subject of parallel  importation nd sales of so called "genuine" goods. To what extent can an American trademark owner exclude genuine imported goods and otherwise prevent the marketing of such goods? May it do so under the Lanham Act? The Tariff Act? Under what (if any) circumstances is an American trademark registrant an American trademark owner that can prevent parallel imports? Except tangentially, most of these issues were not applicable in either the District or Appellate Court, but they were discussed by both the District Court and in the briefs submitted to the Circuit Court.3

2. Factual Background
A The Plaintiff

Plaintiff Bell and Howell: Mamiya Corporation (BHMC) was the registrant in the United States of the trademark MAMIYA for cameras (among other products). The cameras sold under the mark were manufactured in Japan by Mamiya Camera Co, Ltd.,  a publicly held Japanese corporation (Mamiya Co.). J. Osawa & Co. Ltd. (Osawa) was the exclusive world wide distributor of the goods outside Japan (there, Mamiya Co. distributed). Osawa owned seven percent of BHMC directly, and owned the other ninety-three percent of BHMC through a wholIy owned (United States) subsidiary. Three of BHMCs directors were directors of Osawa (including the presidents of Osawa and its United States subsidiary), and a fourth was the president of Mamiya. Osawa also furnished BHMC various forms of financial aid. At least from defendant Masel 's point of view, Osawa controlled BHMC.

B. The Defendants

The defendant Masel purchased MAMIYA cameras from Hong Kong, which were manufactured by Mamiya in Japan and sold into Hong Kong by Osawa, the world wide distributor. Apparently, there was no physical difference in the MAMIYA cameras sold by plaintiff BHMC in the United States from the cameras that Were imported by Masel, They were manufactured by the same company, presumably subject to the same quality control. The sole differences in the cameras sold by BHMC was that they carried a sticker applied to their packaging and carried a BHMC warranty.5

C. Defendant's Allegedly Infringing Activity

Customs already had allowed Masel's MAMIYA cameras imported from Hong Kong to enter the United States.6 As a result of fluctuations in currency exchange rates, it sometimes becomes possible to purchase goods in certain foreign countries and to import them to the United States for less than the price charged for sales direct from the manufacturer in Japan.7 Such redirecting of imports from a third country allows a lower retail price to be charged for the redirected imports than for goods from a so-called authorized distributor. In the trade, this is known as the "gray" market. It can have a significant competitive effect among retailers; those who purchase through the authorized channels must adjust their prices on the goods to compete with gray market dealers.

D. The District Court Decision

The preliminary injunction granted to BHMC was solely on plaintiff's claim of trademark infringement.' Masel, in turn, had counterclaimed for damages for violation of the antitrust and trademark laws and requested cancellation of BHMC 's trademark registration.10

The District Court issued a temporary restraining order which remained in effect until a hearing on a preliminary injunction. The preliminary injunction enjoining defendant's sale of cameras marked MAMIYA was granted on the basis of trademark infringement. The considerations for obtaining relief under Section 43(a) and state unfair competition law, while similar in many respects to trademark infringement, were not addressed specifically. Masel, the defendant appealed, and the Second Circuit Court vacated the preliminary injunction and remanded the case to the District Court.

The legal issue addressed by the District Court was limited to whether sales of such parallel imports constituted trademark infringement. But in discussing trademark infringement the court reviewed in some detail the historical implications of Section 42 of the Lanham Act and Section 526 of the Tariff Act.11 Neither the Lanham Act nor the Tariff Act makes specific reference to "genuine goods," though the Lanham Act has the language "copy or simulate." Rules promulgated under the Tariff Act provide that in some situations imports may not be barred if certain relationships exist between the American registrant of a mark and a foreign related company. In the seventeen page published opinion of the District Court, perhaps a half page is devoted to discussing the ultimate question of trademark infringement--likelihood of confusion.12 There was little if any mention of the facts on which that determination was made.

E. Issues Before the Court of Appeals

The Second Circuit Court of Appeals, after submission of briefs of the appellant Masel and pro-appellant amicus briefs, remanded the case for a determination of likelihood of confusion. The Circuit Court made it clear that the granting of a preliminary injunction is not automatic, and that it is generally necessary for there to be a finding of irreparable harm in the nature of the existence of likelihood of confusion.

The absence of factual support for the District Court's determination of likelihood of confusion was held to relate to the irreparable injury (rather than probability of success on the merits) prong of the preliminary injunction test.

[I]rreparable injury may well not be present herein since there would appear to be little confusion, if any, as to the origin of the goods and no significant likelihood of damage to BHMC's reputation since thus far it has not been shown that Masel 's goods, which have a common origin of manufacture with BHMC 's goods, are inferior to those sold by BHMC and are injuring BHMC 's reputation. The warranties did not appear sufficient to the court, and it suggested less drastic means, such as labels which can create an awareness on the part of consumers. Relief such as permanent injunction, accounting or damages may suffice, and thus the granting of the injunction was an abuse of discretion,13

The court plainly did not say that the importation of parallel goods could not be enjoined under the Lanham Act; it appears, based on the Supreme Court case of Bourjois v. Katzel,14 that it would have been hard pressed to do so. But it did suggest that establishing irreparable injury through likelihood of confusion must be made rather clear to the court. where the facts, as they did here, suggest that the primary issue relates to the rights of distributors in this country, and that the so-called deception of the public may he balanced by an opportunity to obtain goods at a competitively lower price, the defendant is likely to prevail. How is the consumer likely to be misled?

3. Historical Background

The history of restrictions on the importation of genuine goods traces back before the turn of this century. The Second Circuit Court dealt with the question in Appollinaris, which involved the importation of Hungarian bottled mineral water sold under the trademark HUNYADI JANOS. A British company acquired exclusive British and American rights and registered the trademark in the United States. The court held that because the then existing Tariff Act applied only to "spurious or counterfeit "goods" a third party could not he prevented from purchasing the same water in Germany, importing it into the United States and selling it under the same mark This case was said to establish the "universality" concept of trademarks.

Under the "universality" principle, goods manufactured abroad under a trademark and then imported and sold in the - United States were held not to infringe the rights of the owner of the American trademark, simply because the goods were genuine and the public, therefore, was undeceived.16

Shortly thereafter, the Tariff Act of 1890 was enacted; according to a 1902 Attorney General 's opinion17 it only applied to spurious or counterfeit, rather than real or genuine marks.

Section 27 of the Trademark Act of 1905 was carried into the Lanham Act substantially verbatim.

Section 42 provides in part:

Except as provided in ... (Section 526 of the Tariff Act of 1930 relating to articles for personal use), no article of imported merchandise - . . which shall copy or simulate a trademark registered in accordance with the provisions of this Act ... shall be admitted to entry at any customhouse of the United States;...

Section 526 of the Tariff Act provides in part:

it shall he unlawful to import into the United States any merchandise of foreign manufacture if such merchandise, or the label, sign, print, package, wrapper or receptacle, bears a trademark owned by a citizen of, or by a corporation or association created or organized within, the United States, and registered in the Patent and Trademark Office . .. and if a copy of the certificate of registration is filed with the Secretary of the Treasury, . .. unless written consent of the owner of such trademark is produced at the time of making entry at any customhouse of the United States.

Section 526 was amended slightly in 1930 and again in 1978. In 1936 the Customs Service ruled that merchandise would not copy or simulate an identical United States mark if the same person owned the mark both in the United States and abroad. The regulations were essentially rewritten when amended in 1963. Now, recordation is unavailable where the mark is owned by the same company or by related19 companies in the United States and abroad.

In 1916, the Gretch case considered the mark ETERNELLE for violin strings made in Germany. Strings imported by a third party were held not to infringe because they were genuine. The court said that the obvious purpose of Section 27 of the Act was to protect the public from goods which were not genuine.20

The case of major significance, on which District Court Judge Neaher appeared to rely in support of his granting of the preliminary injunction, was Bourjois v. Katzel.21 Bourjois owned the mark JAVA for dusting powder which (in fact) was imported from France. It had purchased rights to the mark from a French concern. The face powder was packaged in plaintiff's own boxes showing the American plaintiff as a packer. But defendant used boxes in France virtually identical to plaintiff's boxes, and imported and sold the foreign manufacturer's product under the same trademark in competition with the plaintiff. The District Court, holding for the United States plaintiff, noted that "The boxes of face powder under consideration are associated in the public mind with the plaintiff corporation.22 But the Second Circuit Court of Appeals reversed.23 Katzel then was appealed to the Supreme Court.

The Tariff Act of 1922 was enacted before the Supreme Court ruled. Section 526 was intended to supply "casus omissus" supposed to exist in the Second Circuit Katzel decision and thus over- turn that decision. The Tariff Act did not use the language "copy or simulate" as did the 1905 Trademark Act. It has since been argued that had the Supreme Court rendered its decision in Katzel first, there would be no necessity to enact Section 526 of the Act.

In 1923, the Supreme Court did render its decision in Bourjois v..Katzel, ruling that the exclusive American distributor and owner of American trademark rights by assignment from the foreign manufacturer could maintain its infringement suit." Its effect was said by Judge Neaher in BHMC to overrule the "universality " principle. It was this case that was said to establish the so-called American concept of territoriality--that is that trademark protection in this country is determined solely by the law of this country.

However, the Supreme Court noted that plaintiff used care in selecting colors suitable for the American market. While judge Neaher appeared to construe Katzel as overruling such prior decisions as Appollinaris. defendant Masel took the pains to distinguish Katzel on the facts.25 Probably the most significant aspect of the Mamiya case, is the implicitly narrow construction of the effect of Katzel.

The 1923 decision, Bourjois v. Aldridge26 was said by Judge Neaher to overturn the Gretch27 court construction of Section 27 of the Trademark Act without referring to the newly enacted Tariff Act legislation. Here, Bourjois challenged the refusal of the Collector of the Port of New York to bar importation of a face powder obtained from a different source, though it was chemically indistinguishable. Thus, this case is one step removed from Katzel in pertaining to genuine goods.

In Prestonettes, Inc. v. Coty, the Supreme Court distinguished its own prior holding in Bourjois v. Katzel on the ground that in Katzel the public understood the mark to originate in the American plaintiff. In Prestonettes, the Supreme Court permitted face powder and perfume sold under the trademark COTY to be repacked in compacts and smaller bottles with different labeling which utilized the COTY trademark, even though Coty argued that the perfume and the powder were delicate and could be spoiled by repacking.

Bills leading up to 1946 Lanham Act had provisions similar to that of the Tariff Act, but the Justice Department complained that they would apply to tourists and to genuine articles, as in the case of Sturges v. Pease.29 Thus the Lanham Act was enacted with Section 42 identical to Section 27 of the 1905 Act, and different from what had been proposed in legislation for the past eight years or so. The intention of the Lanham Act was to not exclude genuine goods, though 526 of Tariff Act appears to bar genuine goods.

In the 1950s, the Justice Department brought actions against toiletry manufacturers under Section 2 of the Sherman Act. The grounds for those actions were that the defendants lad committed acts of monopolization by their use of Section 526 of the Tariff Act in attempting to bar parallel imports. The position of the Justice Department then was where an international enterprise was used as a check on prices, this was exclusionary conduct. The District Court agreed with Justice Department's characterization of the defendants as being "component parts of an international enterprise," and held their conduct to constitute an attempt to monopolize. But on appeal to the Supreme Court, in anticipation of a legislative solution in conformity with its position, the Department made a policy determination to ask that the case be vacated and remanded to the District Court for dismissal in anticipation of pending legislation. That request was granted and the District Court thereafter dismissed.30

4.Competing Public Policy Uses

There are a variety of public policy issues raised by the Bell and Howell: Mamiya case. From the point of view of BHMC and its supporters, the trademark owner should be able to control the quality of goods and services under its mark. It should be able to prevent confusion of consumers as to warranties and it should be able to benefit from the ownership of a mark independent of the foreign source of the goods sold under that mark. Exclusive distributorship arrangements should be fostered and protected.

From the point of view of Masel and its supporters, price competition should not be thwarted by enforcement of customs or trademark laws. Only truly independent American trademark registrants should have the ability to obtain a competitive exclusionary advantage. It should not he possible simply to set up an American subsidiary of a foreign corporation to prevent intrabrand price competition.

The major consequence of the relief granted by Judge Neaher is not an improvement in the quality of imported merchandise, but the suppression of intrabrand price competition in the camera market.31

One of the reasons used to justify enforcement of such -trade- marks is for the protection of United States purchasers of foreign trademarks. It was thought that where such trademark rights truly are purchased, the trademark assignee should be protected against usage by selling the foreign entity. In Katzel, plaintiff had purchased trademark rights for the sum of $400,000.00. The new American owner was not only an independent American company, totally unrelated to the French concern; it had the right to determine its own source of supply.32

However, where there is a common, unified international enterprise, it is arguable that protection for the trademark owner is not required This was discussed by Edward Vandenburgh in an article published in 1959,33 while legislation on the subject was pending. There he suggested that the issue of protection for the trademark registrant is really not a trademark problem, but one involving contractual relationships between the foreign assignor and United States assignee. To treat the problem as a trademark one would create considerable bad press and publicity for trademark owners and the trademark law. Vandenburgh argued that the purpose is to protect the American distributor/purchaser of a mark, "but it is a perversion of the trademark concepts to say that trademark laws should extend protection to a situation that has been created by private contractual arrangements."34

Trademark laws have at times been criticized as monopolistic and as restraints of trade. Such criticisms are unfounded as to the trademark concepts per se. However, trademark lawyers should not provide a valid basis for such criticisms as is done here by supporting a law

which with some justification could be called a restraint of trade, with their support being in the guise of enforcing trademark "rights."35

3. Amicus Briefs

The position of those appearing amicus curiae, as well as a broad analysis of the legal issues, may be gleaned from a review of the amicus briefs.

Sanyo Electric Inc. claimed that enforcement of Tariff Act Section 526 is necessary to protect the good name of SANYO in the United States and to ensure that the American consumer is purchasing a SANYO product intend for the United States market. In opposing a limited construction of Katzel, it noted that Congress had the Tariff Act under review for long periods of time on a number of occasions and had never seen fit to amend its language as advocated by Masel. Sanyo's position was that Section 526 requires consent of the American owner or else the statute must be enforced; that Sturges v. Pease36 requires such an interpretation. (Sturges dealt with a tourist who wanted to bring a foreign vehicle into the country for personal use, not resale. The Tariff Act was held to cover that import; subsequently it was amended to undo the result in the case of goods for personal use.) The Fifth Circuit Court of Appeals was cited as identifying potential economic advantages to strict enforcement that were legitimate: "attracting competent and aggressive retailers, inducing retailers to engage in promotional activities, marketing distribution efficiency, and maintaining control over the safety and quality of the product." Otherwise, Sanyo said, suppliers prefer low selling prices, maximizing manufacturers' sales.

The American Free Trade Association (AFTA) and Importers Federation of America (IFA) were formed in response to the District Court's ruling. They characterized the ruling as having an anticompetitive effect on business. The plaintiff was accused of attempting to bypass normal market place forces of international competition.

This record shows that Masel offered to provide its own warranty service and to make full disclosure to avoid any likelihood of confusion with respect to post purchase warranty service... This offer was rejected by plaintiff.38

AFTA/IFA complained of the over broad injunction and of the failure of the court to reach the Section 43(a) and unfair competition issues.

The fundamental error in the District Court's decision is its erroneous classification of Masel 's sales of MAMlYA cameras as trademark infringement This prompted the District Court to enter an absolute preliminary injunction against all sales by Masel of the MAMIYA -trademarked products. The inquiry should have been to determine what Information if any was needed by the public so that Masel's sales could fairly compete with those of Osawa Delaware. Not surprisingly, Osawa Delaware expressed no interest in obtaining such disclosures from Masel. It preferred an absolute ban on defendant 's sales so as to totally insulate itself from price competition. .. .35

AFTA and IFA pointed out major distinctions in the Katzel case, among them that the powder was repackaged and recolored for the American purchaser. Katzel also was distinguished from Retch; in Katzel, the original owner parted with the business and its trademarks, selling them to one who proceeded on strength of ownership to develop an American market It was contended that The Second Circuit Court did not rule on "universality" in Katzel (which had been addressed below), but strictly on the grounds that goods were genuine and that no independent American good will had been established. Katzel was said not to overrule such prior law as Appollinaris-it was the Supreme Court's different view of the facts that caused the outcome. AFTA/IFA argued that the different view of the facts should not he misconstrued as overruling the prior case law sub silentio. They argued that not a scintilla of evidence supported a finding that the American public associates the MAMIYA mark with Osawa Delaware or with any other exclusive American source.

"Territoriality," however means nothing more than that the same trademark may identify independent entities in different countries without giving each the unfettered right to market their goods in the others' territory.40

Osawa, Japan, world wide distributor outside Japan, was portrayed as the true beneficial owner of the mark; while Judge Neaher spoke of piercing the corporate veil" the related companies concept in trademark law is an entirely different, far broader concept.

AFTA and IFA also presented interesting First Amendment arguments. Generally, First Amendment concerns have given way to trademark protection, but courts have recognized that the Lanham Act should not be construed to conflict with First Amendment interests. Limitations on free speech must be no more restrictive than reasonably necessary to prevent deception.41 They cite Better Business Bureau of Metropolitan Houston Inc. v. Medical Directors, Inc." for the proposition that importers, distributors and retailers have the right to identify the original origin and source of the products they sell so long as there is no deception of the public.

Clearly, the least restrictive remedy (if one is required) is to provide for full and fair disclosure of the circumstances surrounding the sale of competitive but genuine goods. Masel offered to make such disclosure but the District Court nevertheless entered a broad absolute injunction.42

The United States took an unusually aggressive approach in its Amicus Brief. Part of its direction was understandable in that there seems to find some disenchantment with antitrust laws that would place United States bigness in a disadvantageous position with respect to foreign cartels which are given greater freedom to operate in their own countries and on a transnational basis. In this particular instance, that objective might not be served, since significant questions are raised as to whether BHMC is simply part of an international enterprise rather than an independent United States business.

All interesting aspect of the Justice Department Brief was its commentary on appellants search for legislative meaning.44 The Government's Brief took the position that it is very difficult to determine true legislative intent; there are many factors that go into the development of legislation and the hidden meaning that is sought may be illusory. Therefore, argues the brief, legislative language used by Congress should control. Since nothing is specified in the Trademark Act or Tariff Act which limits their scope to United States owners of marks that are independent of owners of identical foreign marks, the statute should be given its plain meaning, and BHMC should not be foreclosed from excluding imports.

There is also the expressed attitude that the United States should take a more nurturing posture toward its businesses that invest money m marketing a product. Such an attitude encourages the investment of capital in businesses. That discussion comes close to advocating protection for limited forms of monopolies based on trademarks.

Also unusual is the characterization of trademark policy as being to protect trademark owners' investment and goodwill as well as to protect consumers from confusion.". . . here BHMC has paid for the good will of the MAMIYA mark through its own investment in promoting the mark." (A footnote talks about the defendant "freeriding" on BHMC promotional expenses.)'45 While benefit to business is certainly is a secondary aspect of trademark law, trademark enforcement without concern for likelihood of confusion of source or sponsors seems to stray far from current trends."

The seeming government position of supporting some sort of limited monopoly for trademarks was criticized in the reply of Masel as a

...one hundred-eighty degree turnabout by the involved governmental agencies--the Antitrust Division and the Customs Service from policies that past Administrations, both Demoocratic and Republican, have consistently conveyed to courts

and other public bodies.47

The Amicus Brief of Progress Trading Co. suggested that public confusion claimed by the plaintiff is not real foreign made merchandise is being sold by "unauthorized dealers, and that rather than being confused, the consumers are delighted that they paid perhaps $100 to $275 for their fine, genuine foreign cameras from unauthorized business' instead of several hundred dollars more elsewhere or at near 'List Prices'.48 According to Progress Trading Co., the District Court erroneously assumed that consumers can or will differentiate between products made by a foreign manufacturer who registers in its subsidiary's name and products made by a foreign manufacturer who holds United States trademarks in its own name. It mentions that the court justified its holding with two sentences that it is BHMC who defined the warranty for MAMIYA cameras and who provided repair services. The brief also argues that the District Court's decision was contrary to the deeply rooted principle against restraints on the alienation of property passed from the hands of the original owner.

6. Appropriateness of the Court's Decision

The Second Circuit Court's vacating the injunction of the District Court was by no means surprising. The District Court had based its injunction on trademark infringement. Little attention in the lower court was paid to the specifics of establishing likelihood of confusion. Without contrary findings of fact, it would have been just as appropriate for the court to conclude that the

public's perception of the source of the MAMIYA mark was a Japanese controlled corporation, rather than a United States corporation. The trademark conjures up a Japanese image, and there is nothing significant that would make the public think otherwise. The District Court had pointed out that source or origin need not be the manufacturer.'9 But the cases cited by it are not those in which the facts might well establish that the public had specific contrary perceptions concerning that origin. While technically it is correct that the source is generally considered to be the party that controls or determines the quality of the goods, it would be difficult here to attribute that to other than the manufacturer. What has BHMC controlled? What has it specified in the manufacturing process? The facts before the court only showed that it supplied a warranty and attached an identifying sticker.

In Bourjois v. Katzel, the image of the dusting powder was redesigned for the United States consumer. That public perception had been considered before by the Supreme Court. In Prestonettes, Inc. v. Coty,50 the Supreme Court distinguished its own prior holding in Bourjois on the ground that Coty was a case in which the public had understood the mark to originate in the American manufacturer.

The Second Circuit did not go as far as to say that it would be improper to issue an injunction against Masel--only that it would have to find that the facts warranted a finding of irreparable injury arising out of likelihood of confusion. The court, by vacating the injunction, paid little regard to the suggestion of the Justice Department that trademark enforcement goes beyond mere findings of likelihood of confusion.

In the perspective of history, the effect of the Second Circuit decision is to narrow or limit the effect of the Katzel decision. In Katzel, plaintiff's sole connection to the foreign manufacture (and originator of the mark) was as the exclusive American distributor and owner of the United States trademark rights; Bourjois could buy from anyone it chose. It was in the business of establishing its own good will. BHMC, on the other hand, could buy only from Osawa Japan.

The court found it unnecessary to discuss some of the thorny problems raised, including defenses such as antitrust misuse and First Amendment policies. Nor did it have to deal specifically with the Tariff Act, as the District Court based its decision solely on trademark infringement. In fact, it was free simply to ignore the essence of the discussion on interpretation of the historical development of case and statutory authority involving parallel importation.

Imports, since it turned on a failure of proof. The perplexities of the case law still perplex. The Tariff Act appears to say one thing, while Customs interprets it to say another. While trademark law offers the most certain remedy when and if likelihood of confusion plainly can be proven, this often will be a burden difficult or impossible to meet. Still, if Bell and Howell: Mamiya does not furnish clear answers, there are portents worth considering. The United States registrant seeking to prevent Importation or sale of "genuine" goods may face an uphill struggle to convince a court that it is entitled to injunctive relief.

A major hurdle to overcome is to show the court that the American owner is entirely Independent of the foreign manufacturer or distributor. While the District Court's examination of whether the plaintiff was part of a single international unit was brushed aside51--the court treating that exemption as being only part of the administrative enforcement of Section 526 of the Tariff Act--Section 526 of the Tariff Act itself provides for injunctive relief and is available as a tool that may be used without the necessity of proving likelihood of confusion. Even though the administrative enforcement provisions are not binding on a court, it is not likely that they will be ignored.

If independence of the American distributor is established, the nontrademark policy aspects of the preventing importation may be solved. The policy argument for protection of United States assignees in their contractual dealings is present. The American distributor also would have presumed freedom to choose other sources, or to vary the quality for the United States market; exercising either option would lead to product confusion in the United States market.

Establishing independence to a court is not likely to be accomplished at the last minute before litigation. That may be better accomplished in the initial structuring of the distributorship arrangement so that the American assignee maintains a significant degree of true control, establishes its own true good will and actively participates in defining the quality of the specific goods which are shipped in to the United States. In addition, real and significant consideration should be paid for those rights. There is likely to be a serious question whether the structuring of such relationships between the manufacturer, distributor and United States distributor is warranted In any event, this should

be a consideration in structuring any assignments or establishment of transnational distributorship agreements.

Additional helpful preparation in advance of litigation is obtaining evidence to prove that indeed there would be a likelihood of confusion that would result from sales of parallel imports. That may be established by laying the groundwork for a survey, even if such a survey is not undertaken until immediately prior to litigation. It also may be accomplished by following the lead of Bourjois who over sixty years ago developed modified products for the United States market. Significantly refining the product to match the United States market place, with those refinements specified by the United States distributor, should help establish that it is truly the good will of the United States company at stake.

In this case, BHMC sought the broadest possible injunction, refusing to accept less than the entire relief it asked of the court. A reasonably drawn, more limited injunction might have sufficed. An injunction is a drastic remedy, and courts are more conducive to providing relief that is the least drastic necessary. Some attorneys, though, prefer not to engage in moderating requested relief once it has been asked, for they believe the court might think their position lacks conviction. The litigant well might focus on what is truly necessary to prevent irreparable harm, not simply on what will be oppressive to an opponent. Such advance preparation and planning may be helpful in acquiring truly needed relief in District Court less willing than in BHMC to grant a preliminary injunction and in a skeptical appellate court.

Had expert testimony been introduced showing that there was likelihood of confusion, it would have been more difficult for the Second Circuit to vacate the preliminary injunction. A suitable, expert might have been an individual in the marketing area. His or her testimony might have been accompanied by use of survey evidence. The difficulty with expert testimony and survey evidence at the preliminary injunction stage is that there is usually barely enough time to get adequate paperwork put together in time for a hearing. This suggests that if a company is engaged in importing and anticipates litigation, lining up a simplified arrangement for a survey and experts long in advance of any potential litigation would increase their chances of success.

It also might be helpful not to forget the common sense interferences judges may draw from their own personal experiences. If the public associates the mark with some foreign origin it could be essential to establish that an American perception and separate American good will exists. This could be as a result of product differences or, perhaps in cases of products where service is critical, a unique commitment to service.

One would do well to consider establishing an advertising campaign explaining to the public the American component of the good will of the product, supporting that campaign with significant American components of the packaging, promotions, servicing and the product.

Conversely, one who wishes to import "genuine" goods into the United States might pay close attention to the nature of the specific goods sought to be imported, the true role of the American distributor and its relationship to the foreign source and any changes in the nature of the product imported for United States consumers rather than the foreign market. He certainly should take considerable pains to disclose, conspicuously, that his product is not sold, sponsored, guaranteed or serviced by the American distributor.

ADDENDA

. A recent, somewhat analogous, decision is Monte Carlo Shirt, Inc. v. Daewoo International (America) Corp. The United States owner of the brand ordered 2,400 dozen MONTE CARLO shirts from a Korean manufacturer. The shirts. as ordered, were labeled with and packaged under the MONTE CARLO trademark The trademark owner rejected shipment when the documentation necessary to clear the shipment arrived too late to permit the garments' sale during the Christmas season. The Korean manufacturer sold the shirts to its United States subsidiary, which distributed them with the MONTE CARLO markings intact. Suit under California state law for trademark infringement was unsuccessful, there being no likelihood of confusion (and the quality being that which the trademark owner was prepared to accept).

The case is of limited significance for at least two reasons: (1) no federal right was asserted by plaintiff; and (2) this really is not a parallel import case, and, despite the Court of Appeals' belief that there was no precedent, is consistent in result with the case of Puritan Sportswear Corp. v. Shure,53 which involved a contract manufacturer in the United States (Puerto Rico).

2. In January, a mandamus action was brought in the United States Court of International Trade to require Customs to amend it regulations to prohibit parallel imports The Government moved to dismiss on grounds of lack of jurisdiction in the forum, among others. As we go to press, the motion is undecided.54

3. On February 6, 1984, an action was filed in the United States District Court for the District of Columbia seeking a declaratory judgment that the Customs regulations55 violate both the Tariff Act and the Lanham Act and enjoining the enforcement of the regulations.56

Endnotes

Attorney in private practice in Beverly Hills, California. Associate Member of USTA; Member of the Editorial Board of The Trademark Reporter.®, USTA.

1. 548 F. Supp 1063, 215 USPQ 870 (EDNY 1982).

2. 719 F2d 42 (CA 2 1983).

3. Appearances as amicus curiae were made by the American Free Trade Association (AFTA) and Importers Federation of America (IFA), Plastics Manufacturing Company, Progress Trading Company, Sanyo Electric Inc., Trademark Group of the American Association of Exporters and Importers, American Watch Association, Bojorquez Mexican Foods Coalition, Jewelers of America, Inc. and the United States of America (USA). Presentations of many points of view (along with considerable background material) are available from the numerous briefs before the court.

4. Plaintiff BHMC received financial help from Osawa in the form of a direct loan later converted to equity, guarantees on bank loans in this country and a long term lease on its new headquarters. Plaintiff also sent frequent status and financial reports and projections directly to Osawa without going through its immediate United States parent and regularly bypassed the latter in dealing with Osawa. Supra note 1 at 1067, 215 USPQ at 874.

5. Id at 1068, 215 USPQ at 875.

6.  Id. at 1065, 215 USPQ at 873.  The mark was not recorded with Customs at the initiation of the lawsuit. Masel had checked with Customs before importing and was told there was no problem with importing the goods. Appellant's brief at 8-9. Only one year after the case had been filed did the Customs Office make a determination of the related companies question and record the mark. This suggests, as a practical matter, that it is imperative for the owner of a mark to be diligent in its dealings with Customs officials to make sure that the officials at particular ports have an awareness of the recorded registration.

7.. This is not necessarily, because someone in Japan has determined that the United States market should support a higher markup (though that is a possible explanation also). It may be because any business in any country must maintain a certain continuity of price, in the local currency or face adverse competitive effects. Thus, even if the products sold In Hong Kong and the United states were once identically priced (in terms of Japanese yen), as the two dollar currencies fluctuated against each other and the yen, it could become possible to undercut the United States price by buying in Hong Kong -- at times. The reverse situation also is theoretically possible.

8. See Why Camera Prices are Falling, Business Week at 64 (September 6, 1982).

9. Appellant's brief, supra note 6 at iC; appellees' brief at L

10. Appellant's brief, ibid.

11. 19 USC 1526.

12. Supra note 1 at 1079, 215 USPQ at 883.

13. Supra note 2 at 46.

14. 260 US 689,43 SCt 244,67 LEd 464 (1923).

15. Appolinaris Ltd. V. Scherer, 27 F. 18 (CC SDNY 1886)

16. Ibid.

17. 24 Op Atty Gen 551 (1902)

18. Section 42, 15 USC 1124.

19. Related company is defined in accordance with the definition in Section 45 of the Lanham Act. The present regulations of the Customs service, which have been in effect since 1972, provide that the ban on importation is not effective where, both foreign and United States registrations of a mark are owned by the same person or business entity, or parent and subsidiary companies or are otherwise subject to common ownership; or where articles of foreign manufacture bear a recorded mark applied under authority of the United States owner.

20. Fred Gretch Mfg. Co. v. Schoening, 238 F. 780 (CA 1 1916).

21. Supra note 14.

22.274 F 856 (SDNY 1920).

23. 275 F.2d 539 (CA 2 1921).

24.Supra note 14.

25.Appellant's brief, supra note 6 at 15-21.

26. 26 US 675, 44 S Ct 4, 68 L Ed 501 (1923).

27. Supra note 30.

28. 264 US 359, 44 SCt 350, 68 LEd 731 (1924).

29. 48 F2d 1035, 8 USPQ 375,377 (CA 2 1931) (a tourist bringing in an automobile for personal use was not able to do so even though it was a genuine article.

30. United States v. Guerlain, Inc. 155 F Supp 77, 114 USPQ 223 (SDNY 1957), vacated and remanded 358 US 915, 119 USPQ 501 (1958), action dismissed 172 P Supp 107 (SDNY 1959).

31. Appellant's reply brief at 3.

32. Amicus Brief of AFTA and IFA at 21.

33. E.G. Vandenburgh, The Problem of Importation of Genuine Marked Goods Is Not a Trademark Problem, 49 TMR 707 (1959).

34. Id at 714.

35. Id at 717 (footnote omitted).

36. Supra note 29.

37.Sanyo Amicus Brief at 22 citing Abvadir & Co. v. First Mississippi Corp 651 F2d 422, 427 (CA 5 1981).

38. Amicus Brief of AFTA and IFA, supra note 32 at 9.

39. Id at 12.

40. Id at 29.

41. Id at 47.

42. 681 F2d 397, 217 USPQ 209 ((CA 5, 1982)

43. Amicus Brief of AFTA and IFA, supra note 32 at 49.

44. Amicus Brief of USA at 8-9.

45. Id at 13.

46. This discussion by the Justice Department does not appear to mesh with the recent decisions tending to limit the scope of protection afforded the holder of a trademark. See e.g. International order of Job's Daughters v Lindeburg, 633 F2d 912, 208 USPQ 718-(CA 9 1980) in requiring a finding of likelihood of confusion as to source or sponsorship before according any protection.

47. Masel , reply brief at 4.

48. Amicus Brief of Progress Trading Co. at 4.

49. Supra note 1 at 1069, 215 USPQ at 876, citing Menendez v. Holt, 128 US 514, 520, 9 Sct 143, 144, 32 L Ed 526 (1888); and McLean v. Fleming, v. Fleming, 96 US 245, 254, 24 L Ed 828 (1877).

50. Supra note 28.

51. Supra note 1 at 1079,215 USPQ at 883.

52. 707 F2d 1054, 219 U5PQ 594 (CA 9 1953).

53. 307 F Supp 377, 165 USPQ 71 (WD Pa 1969) .

54. Vivitar Corp. v. United States

55. 19 CFR 133.21 (c)(1)-(3).

56. Coalition to Preserve the Integrity of American Trademarks v. United States.