A. The Garments Are Not Genuine Claiborne Garments For Lanham Act Purposes.
Mademoiselle's argument that the Claiborne garments were "genuine" and therefore may not be subject to trademark infringement is not supported by the law. The Second Circuit in El Greco Leather Products. Co. v. Shoe World, Inc., 806 F.2d 392 (2d Cir. 1986), held that the a shoe reseller was liable under the Lanham Act for selling shoes with the plaintiff's trademark attached that were manufactured without the authorization of the trademark holder. The shoes were manufactured by a Brazilian company pursuant to an agreement between the trademark holder and the manufacturer. The trademark holder accepted the initial shipments and then cancelled the remaining order. The manufacturer, however, sold the cancelled-but-already-manufactured shoes with the trademark to the reseller. Defendant claimed that the shoes were genuine, and therefore their sale could not infringe the trademark holder's rights. The court stated that "the mere act of ordering a product to be labeled with a trademark does not deprive its holder of the right to control the product and the trademark." Id. at 395. Accordingly, the court held that the shoes sold without plaintiff's permission could not be genuine. Id. at 395.
It is well settled that sale of genuine goods without authorization by the trademark holder generally will not constitute trademark infringement. See Polymer Tech. Corp. v. Mimran, 975 F.2d 58, 61 (2d Cir. 1992) ("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."). Such cases, however, usually arise when the initial sale of the trademarked goods was authorized, and the second or subsequent sale is contested. At that juncture, the first sale is exhausted. See Osawa & Co. v. B&H Photo, 589 F. Supp. 1163, 1173 (S.D.N.Y. 1984) (under the exhaustion doctrine, "a markholder may no longer control branded goods after releasing them into the stream of commerce. . . . Down the line retailers are free to display and advertise the branded goods. Secondhand dealers may advertise the branded merchandise for resale in competition with the sales of the markholder" (emphasis added)). The question of whether a good is genuine, however, presupposes the initial sale was authorized. As commented on in the Restatement: "Trademarked goods produced by a manufacturer under contract with the trademark owner are not genuine goods until their sale under the mark is authorized by the trademark owner. Thus, if the trademark owner rejects the goods, the manufacturer may not use the mark in reselling the goods to others." Restatement (Third) of Unfair Competition § 24, comment c (1995).
Polymer Tech. Corp. v. Mimran, 37 F.3d 74 2d Cir. 1994), cited by defendants, is inapposite. In Polymer, the plaintiff, a distributor of ophthalmic products including contact lens solutions, sought a preliminary injunction against a distributor of ophthalmic lens care products. The defendant obtained plaintiff's products from plaintiff's authorized distributors and then resold them to wholesalers and retail drug stores. Id. at 77. Plaintiff sought to prevent defendant from purchasing or selling their products on the theory that they intended the sales to be to professional care givers only. In Polymer, the goods were sold by plaintiff to plaintiff's authorized distributor, who in turn sold it to defendants. Id. at 78. Therefore, the question presented concerned the rights of the trademark holder to downstream resales of the product, and not the initial sale.
Mademoiselle's reliance on DEP Corporation v. Interstate Cigar Company, Inc., 622 F.2d 621 (2d Cir. 1980), is similarly off-point. The case involved downstream sales of a soap product by a discounter and it was not claimed that the product was obtained other than after the authorized first sale by the trademark rights holder. Id. at 621. Although, as the Second Circuit said in dicta,
it may be "anomalous" that a trademark infringement action would lie where the soap sold by defendant "is in fact genuine and not spurious," such is not the case here. Id. at 622 n.1. See also Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3, 8 (2d Cir. 1996) (downstream reseller of cough drops enjoined on grounds trademark infringed by failure to abide by trademark holder's quality controls).
Therefore the issue raised here of whether the goods are genuine is merely duplicative of the central question: whether Mademoiselle's alleged sales of, and offers to sell, Claiborne garments were authorized. If the first sale by Mademoiselle was not authorized, then the garments cannot be genuine for infringement purposes.
B. There Exists a Genuine Issue Of Material Fact Regarding the Scope of Authority to Sell-Off Seconds and Overruns
While Claiborne may have the better argument on the affidavits regarding the scope of authority granted to Mademoiselle to manufacture and sell sweaters with Claiborne trademarks, particularly in light of the absence of documentary proof showing consent, for summary judgment purposes there is a genuine issue of material fact. Mademoiselle has sufficiently refuted Claiborne's claim regarding the 200-piece rule, marking policy and waiting period to present a genuine issue of fact. Furthermore, the present record has too many gaps which need to be filled to complete Claiborne's explanations. For example, Claiborne does not adequately explain how the three-month waiting period should have been administered or how the Overrun sweaters should be marked. As the Supreme Court stated, "it is only when the witnesses are present and subject to cross-examination that their credibility and the weight to be given their testimony can be appraised. Trial by affidavits is no substitute for trial by jury which so long has been the hallmark of 'even handed justice.'" Poller v. Columbia Broad. Sys., Inc., 368 U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1962). Here, the determination of the actual scope of authority will turn on the credibility of the individual witnesses, and therefore summary judgment is precluded.
III. There Exists a Genuine Issue Of Material Fact Regarding Whether Stefansky's Taped Statements Constitute An "Offer to Sell" For Lanham Act Purposes
The Lanham Act provides that merely "offering for sale" a good is sufficient to find liability. 15 U.S.C. § 1114(1). In Vuitton Et Fils, S.A. v. Crown Handbags, 492 F. Supp. 1071 (S.D.N.Y. 1979), the court held after a bench trial that defendants violated Sections 1114 and 1125(a) of the Lanham Act by offering for sale six counterfeit handbags. Plaintiff's private investigator instigated a conversation with defendant at defendant's store regarding the purchase of the counterfeit handbags. After the defendant offered six handbags at a set price deliverable immediately, the investigator left the store without purchasing any handbags. The court found on these facts that an offer had been made sufficient to find liability. Id. at 1075-76.
Here, Claiborne alleges that a taped telephone conversation between Claiborne's private investigator and Mademoiselle employee Stefansky shows that Mademoiselle offered to sell garments in violation of any authority. Stefansky did offer to "stick in" extra pieces into a Claiborne production run to sell to the investigator the authority granted. This was contradicted in a subsequent taped conversation, however, when he said they never intentionally did overruns. Stefansky Tr. at 94. However, he then said "we never did that because we never had a reason to." Moreover, unlike Vuitton, the alleged "offer" did not refer to specific price, style, quantity, or delivery dates. Under the circumstances, the statements made by Stefansky to Claiborne's investigator are simply too ambiguous to say at this time that there is no genuine issue of material fact.
Because summary judgment is denied on the grounds that there remains genuine issues of material fact, the possible merits of defendant's affirmative defenses of laches, acquiescence and unclean hands will not be considered.
The motion of Claiborne for summary judgment is denied.
It is so ordered.
New York, N. Y.
September 29, 1997
ROBERT W. SWEET