Davidoff markets COOL WATER, a prestige brand of cologne that Davidoff only permits luxury retailers to sell. When Davidoff declined to permit CVS to sell the product, CVS obtained COOL WATER from unauthorized channels with the UPC codes removed that it then sold through its stores. Davidoff brought suit for trademark infringement, arguing that CVS’s sales of COOL WATER products without UPCs (“decoded products”) hinders Davidoff from guarding against counterfeits and from protecting the reputation of its brand. CVS denied that the products were counterfeit, instead arguing that removing the UPCs and selling gray market goods was not illegal. The district court preliminarily enjoined CVS from selling any Davidoff trademarked products with the UPCs removed and the Second Circuit affirmed.
The Second Circuit affirmed based on the importance of UPCs to both Davidoff’s counterfeit protection program and its quality controls. CVS raised as a defense that the decoded products are gray market goods and thus genuine goods. The Second Circuit stated “[t]he fact that the goods in question may be gray-market goods does not furnish CVS with a valid defense.” Rather, the injunction was justified on the basis of interference with Davidoff’s trademark rights. (more…)