E. Hair Spray
Defendant offered for sale three types of Canadian hair spray. The first is an aerosol spray labeled "Regular Hold Hair Spray." (Pl. Ex. 4a-1.) The U.S. product identified as bearing the most similar description is the aerosol "Natural Hold Hair Spray." (Pl. Ex. 4b-2.) Again, Dr. Meltzer testified that the formulas of these products are not identical; and, more specifically, he explained that, unlike the U.S. product, the percentage of Volatile Organic Compounds ("VOCs") in the Canadian product exceeds eighty percent, in violation of the law of certain states. (Tr. at 25.) Finally, although the products are packaged in similar blue canisters, they contain different-colored accent stripes.
The second Canadian aerosol hair spray product offered for sale by Defendant is labeled "Extra Hold Hair Spray." (Pl. Ex. 4a-2.) The comparable U.S. product bears an identical description. (Pl. Ex. 4b-1.) Again, however, the formulas of these two products are not identical, and, unlike the U.S. product, the percentage of VOCs in the Canadian product exceeds eighty percent. (Tr. at 25-26.) The accent stripes on the canisters are also different in color.
Defendant also offered for sale a non-aerosol Canadian hair spray, labeled "Extra Hold Unscented Non-aerosol Hair Spray." (Pl. Ex. 5a.) The comparable U.S. product, which bears a similar description, is labeled "Unscented Extra Hold Hair Spray Non-Aerosol." (Pl. Ex. 5b.) As with the other hair spray products listed above, the formulas are not identical, and the percentage of VOCs in the Canadian product exceeds eighty percent. (Tr. at 26-27.) The products are packaged in similar blue bottles, although the protective covering for the bottlenecks differ greatly in size.
F. Spray Gel
Defendant offered for sale a styling product labeled "Ultimate Control Spray Gel." (Pl. Ex. 6a.) The comparable U.S. product bears an identical name. (Pl. Ex. 6b.) Again, Dr. Meltzer testified that the products do not possess identical formulas. More specifically, he explained that the Canadian product contains more alcohol than the U.S. product, and the amount of alcohol affects the drying characteristics of the product. (Tr. at 27, 29.) Packaging of the products is virtually identical, although the labels bear different-colored accent stripes.
Defendant also offered for sale a Canadian product labeled as "Regular Control" mousse. (Pl. Ex. 7a.) Dr. Meltzer testified that three U.S. products bearing comparable descriptions are labeled "Bodifying Mousse" (Pl. Ex. 7b), "Moisturizing Mousse" (Pl. Ex. 7c), and "Soft Curls Mousse." (Pl. Ex. 7d.) None of these formulas are identical. All of the mousse varieties are packaged in similar blue canisters, but each product bears a different-colored accent stripe.
II. Conclusions of Law
It is well-settled in this Circuit that, to obtain a preliminary injunction, the moving party must demonstrate: (a) that in the absence of injunctive relief, it will suffer irreparable harm; and (b) either (1) a likelihood of success on the merits, or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor. Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979). Moreover, a preliminary injunction is an extraordinary remedy not to be routinely granted. Medical Soc'y v. Toia, 560 F.2d 535, 538 (2d Cir. 1977).
A. Likelihood of Success on the Merits
The Court first considers Plaintiff's contention that Defendant's sale of the Canadian goods violates Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1). This Section prohibits the unauthorized sale of goods bearing a registered trademark where there is a likelihood of confusion, mistake, or deception of purchasers.
Original Appalachian Artworks, Inc. ("OAA") v. Granada Elecs., Inc., 816 F.2d 68, 71 (2d Cir.), cert. denied, 484 U.S. 847, 98 L. Ed. 2d 99, 108 S. Ct. 143 (1987). Defendant contends that, in this case, there is no likelihood that consumers will be "confused" by the Canadian products,
in that the Canadian products are "genuine" Finesse products.
As a general rule, "trademark law does not reach the sale of genuine goods bearing a true mark even though the sale is not authorized by the mark owner," Polymer Technology Corp. v. Mimran ("Polymer I"), 975 F.2d 58, 61 (2d Cir. 1992), as genuine goods do not lead to customer confusion. Because gray market goods are often similar in composition and appearance to their United States counterparts, and because the manufacturer of the gray market goods is often related in some manner to the United States trademark holder, it is often difficult to determine whether such goods are genuine. The Second Circuit has established certain standards, however, for such determinations.
1. Quality Control
The Second Circuit has explained that "one of the most valuable and important protections afforded by the Lanham Act is the right to control the quality of the goods manufactured and sold under the holder's trademark." El Greco Leather Prods. Co. v. Shoe World, Inc., 806 F.2d 392, 395 (2d Cir. 1986) (citation omitted), cert. denied, 484 U.S. 817, 98 L. Ed. 2d 34, 108 S. Ct. 71 (1987). Thus, "goods . . . that do not meet the trademark owner's quality control standards will not be considered genuine goods, and their sale will constitute trademark infringement," Polymer Technology Corp. v. Mimran ("Polymer II"), 37 F.3d 74, 78 (2d Cir. 1994), for the sale of such goods could mislead consumers into believing that the trademark owner had approved the goods for domestic sale. See OAA, 816 F.2d at 72; see also Societe Des Produits Nestle, S.A. ("Nestle") v. Casa Helvetia, Inc., 982 F.2d 633, 639 (1st Cir. 1992) (interpreting a similar section of the Lanham Act, the court explained that "the use of a mark may be deceptive and, thus, violative of [the Lanham Act], in light of the overall appearance of the package, despite the existence of fine print identifying the true origin; that is, such a package may falsely convey the impression that the domestic mark holder intended the importation of the good into the local market"). For purposes of this standard, "the actual quality of the goods is irrelevant; it is the control of quality that a trademark holder is entitled to maintain." El Greco, 806 F.2d at 395.
In this case, Dr. Meltzer testified that his department is responsible for "formula control." (Tr. at 4.) Prior to the acceptance of a particular formula, Plaintiff "spend[s] millions of dollars a year on the testing of the products with consumers to make sure a particular formula meets the niche or is satisfactory to the intended consumer." (Id. at 6.) Moreover, Dr. Meltzer's department monitors the manufacturing process of the U.S. products to ensure that it "is the same every time" (id.); and "during that [manufacturing] process at various stages, tests are run on the batch as it is being manufactured to make sure that it meets the proper specifications that we have set forth." (Id. at 7.) Based upon this testimony, the Court finds that formula control, as well as control over the manufacturing process, are integral parts of Plaintiff's quality control efforts. Because Plaintiff has not been afforded the right to control the product formulas or the manufacturing process of the Canadian goods, Plaintiff has met its burden of proof in establishing that the Canadian goods are not genuine. Cf. Caterpillar, Inc. v. Nationwide Equip., 877 F. Supp. 611, 1994 WL 762809, at *5 (M.D. Fla. 1994) (granting injunction where Plaintiff was deprived of quality control, in that "Plaintiff did not oversee the assembly" of the products at issue).
Aside from formula and manufacturing control, the Court is persuaded that Plaintiff's lack of quality control is demonstrated by an additional factor: the improper labeling of the Canadian products. The labels of the Canadian products do not bear ingredient lists, 21 C.F.R. § 701.3, quantities expressed in fluid ounces, id. at § 701.13, or conspicuous country of origin statements. 19 C.F.R. § 134.11. As such, the products are "misbranded," see 21 U.S.C. § 362(b) & (c); 15 U.S.C. § 1456, and are subject to seizure. See 21 U.S.C. § 334. In contrast, all of the U.S. products comply with the relevant statutes and regulations; and, according to Dr. Meltzer, the improperly-labeled Canadian products would not pass Plaintiff's quality control standards. (Tr. at 35.) Such improper labeling, viewed in conjunction with the evidence regarding the rigorous quality control standards utilized by Plaintiff for its domestic products, demonstrates that the Canadian goods are not genuine. Compare Polymer II, 37 F.3d at 78-79. As noted above, see supra at 11, the sale of goods that do not meet the trademark owner's quality control standards would likely confuse consumers,
and, therefore, such sale constitutes trademark infringement. Plaintiff has thus established a likelihood success on the merits under this standard.
2. Intended for U.S. Sale/ Material Differences
The Second Circuit has set forth an additional approach for determining whether gray market goods are genuine. The Second Circuit has explained that the sale of gray goods also violates the Lanham Act if the goods (1) are not intended to be sold in the United States, and (2) are materially different from the authentic goods that are authorized for sale in the U.S. market. See OAA, 816 F.2d at 72-73; Nestle, 982 F.2d at 638.
Plaintiff has clearly met its burden with respect to the first prong of this test. Plaintiff's licensing agreement with Helene Curtis Canada states that Plaintiff "hereby grants to [Helene Curtis Canada] the right to use [Plaintiff's] trademarks . . . on such products . . . which [Helene Curtis Canada] will manufacture, sell and distribute in Canada. . . ." (Licensing Agmt. at P 1 (emphasis added).) Further evidence that the goods were not intended for sale in the U.S. is that none of the Canadian goods comply with federal laws and regulations regarding disclosure of ingredients, and certain of the products fail to comply with state laws regarding Volatile Organic Compounds. As such, Plaintiff has satisfied its burden with respect to the first prong of the test, in that the Canadian goods were not intended to be sold in the United States.
The Court also finds that Plaintiffs have demonstrated a likelihood of success on the second prong of the test. At issue in this prong of the test is whether the Canadian products are "materially different" from the U.S. products.
Materiality is, by its very nature, a subjective concept that is difficult to define. See Nestle, 982 F.2d at 641. Indeed, it has been stated that "there is no mechanical way to determine the point at which a difference becomes 'material.'" Id. The determination of materiality is not, however, without standards; instead, the Court must look to the policies underlying the Lanham Act, as well as the context of the sale of gray market goods.
Initially, the Court considers the policies underlying the Lanham Act. The Act serves two principal functions. First, because "every product is composed of a bundle of special characteristics," and "the consumer who purchases what he believes is the same product expects to receive those special characteristics on every occasion," the Lanham Act strives to protect consumers from confusion and deceit. Id. at 636. Secondly, because a trademark owner often shapes its reputation through its product, the Lanham Act seeks to "protect the trademark owner's goodwill." Id.
To protect both of these policies in the context of gray market goods,
the existence of any difference between the registrant's product and the allegedly infringing gray good that consumers would likely consider to be relevant when purchasing a product creates a presumption of consumer confusion sufficient to support a Lanham Trade-Mark Act claim. Any higher threshold would endanger a manufacturer's investment in product goodwill and unduly subject consumers to potential confusion by severing the tie between a manufacturer's protected mark and its associated bundle of traits.