Champion Spark Plug Co. v. Sanders et al.

Supreme Court of United States
331 U.S. 125 (1947)

ELI5:

Rule of Law:

A reseller of genuine trademarked goods may retain the original trademark on the goods after repairing or reconditioning them, provided the reseller makes full disclosure to the public that the goods are not new and that the original manufacturer is not responsible for the reconditioning.

Facts:

Petitioner, Champion Spark Plug Co., manufactures and sells new spark plugs under the trademark 'Champion.'
Respondents, Sanders et al., collect used Champion spark plugs.
Respondents repair and recondition the used spark plugs.
Respondents then resell the reconditioned plugs, retaining the 'Champion' trademark on the plugs themselves.
The word 'Renewed' is stamped on each plug in small, sometimes illegible letters.
The plugs are sold in cartons also marked 'Champion' and 'Renewed Spark Plugs', but these cartons do not display the respondents' business name or address.
Respondents provide customers with petitioner's official charts recommending the use of Champion plugs.

Procedural Posture:

Champion Spark Plug Co. (petitioner) sued Sanders et al. (respondents) in U.S. District Court, alleging trademark infringement and unfair competition.
The District Court found for Champion and issued an injunction requiring respondents to remove the 'Champion' trademark from the reconditioned plugs.
The case was appealed to the U.S. Circuit Court of Appeals.
The Circuit Court of Appeals affirmed the finding of infringement and unfair competition but modified the injunction, allowing respondents to keep the 'Champion' mark if they clearly labeled the plugs as 'REPAIRED' or 'USED'.
Champion Spark Plug Co. petitioned the U.S. Supreme Court for a writ of certiorari, which was granted.

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Issue:

Does a reseller of repaired and reconditioned trademarked goods engage in trademark infringement or unfair competition by retaining the original trademark on the product, if the reseller clearly discloses that the goods are used and repaired?

Opinions:

Majority - Mr. Justice Douglas

No. Retaining the original trademark on a repaired product is permissible so long as the reseller does not deceive the public. The court reasoned that the reconditioned spark plugs are still genuinely Champion plugs, not products of another make being passed off as Champion's. Citing Prestonettes, Inc. v. Coty, the court affirmed that a trademark's purpose is to protect goodwill against the sale of another's product as the owner's, and the mark is not 'taboo' from being used to tell the truth. While the reconditioned plugs are admittedly inferior to new ones, inferiority is expected in second-hand goods and is legally immaterial as long as the article is clearly and distinctly sold as repaired. Full disclosure that the product is used and reconditioned by the reseller gives the original manufacturer all the protection to which it is entitled, even if the reseller gains some advantage from the trademark's goodwill.

Analysis:

This decision clarifies the application of the 'first sale' or 'exhaustion' doctrine to repaired and reconditioned goods. It establishes a critical balance, allowing for a secondary market in used goods while protecting consumers and trademark holders from deception. The case sets the precedent that the right to resell a trademarked item includes the right to use the mark to identify the product's origin, conditioned on the absolute requirement of full and clear disclosure of the item's condition. Future cases involving altered or second-hand goods will look to this standard of 'full disclosure' to determine the line between permissible resale and impermissible consumer confusion.

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