American Circuit Breaker Corporation v. Oregon Breakers Inc.
406 F.3d 577 (2005)
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Rule of Law:
The unauthorized importation and sale of genuine goods bearing a true trademark (gray market goods) does not constitute trademark infringement under the Lanham Act if the imported goods are not materially different from the goods sold by the U.S. trademark holder, as there is no likelihood of consumer confusion.
Facts:
- American Circuit Breaker Corporation (ACBC) holds the United States trademark for STAB-LOK circuit breakers.
- Schneider Canada holds the Canadian STAB-LOK trademark, and its subsidiary, Federal Pioneer Limited (Pioneer), manufactures all STAB-LOK circuit breakers.
- Under an agreement, Pioneer manufactures black STAB-LOK breakers for ACBC's sale in the U.S. and gray STAB-LOK breakers for its own sale in Canada.
- The black U.S. breakers and gray Canadian breakers are physically identical in all aspects except for the color of the casing.
- A third-party company, Oregon Breakers, purchased the gray STAB-LOK circuit breakers from a Canadian supplier.
- Without permission from ACBC, Oregon Breakers imported the gray circuit breakers into the United States and began selling them.
Procedural Posture:
- American Circuit Breaker Corporation (ACBC) filed suit against Oregon Breakers in the U.S. District Court for the District of Oregon, alleging trademark infringement and unfair competition.
- ACBC moved for partial summary judgment on its claims.
- The district court denied the motion, ruling that there were material questions of fact as to whether the gray circuit breakers were 'genuine' and whether quality control differences existed.
- After the ruling, the parties stipulated that there were 'no material differences' between the black and gray breakers and that the gray breakers were 'genuine products.'
- Based on the parties' stipulation, the district court entered a final judgment dismissing all of ACBC's claims with prejudice.
- ACBC, as the appellant, appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit, with Oregon Breakers as the appellee.
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Issue:
Does the sale in the United States of genuine gray market goods, imported without the U.S. trademark holder's consent, constitute trademark infringement when the parties stipulate that there are no material differences between the imported goods and the authorized domestic goods?
Opinions:
Majority - McKeown, J.
No. The sale of genuine gray market goods does not constitute trademark infringement when there are no material differences between the imported and domestic products because the core element of trademark infringement, a likelihood of consumer confusion, is absent. The court relied on the 'genuine goods' doctrine, which holds that trademark law generally does not reach the sale of genuine goods bearing a true mark, even without the mark owner's consent. Because the parties stipulated that there were 'no material differences' between the breakers and that the imported goods were 'genuine,' consumers purchasing from Oregon Breakers received exactly what they expected. The purpose of trademark law is to prevent consumer confusion, and no such confusion exists when a genuine article is sold.
Analysis:
This decision solidifies the 'material differences' test as central to gray market trademark infringement claims in the Ninth Circuit. It clarifies that the mere unauthorized importation and sale of a product is insufficient to establish infringement; the plaintiff must prove a material difference between the authorized and unauthorized goods that could confuse or deceive consumers. This ruling places the burden on U.S. trademark holders to demonstrate how gray market goods negatively impact their goodwill or the consumer experience, such as through differing quality control, warranties, or service. The case underscores that without consumer confusion, the protective function of trademark law is not triggered.
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