Intellectual Property, Trademarks

Our Version Of... Trademark Infringement?

Some trademark disclaimers are more valuable than others -- and some are completely worthless.

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Unless they are Allen Iverson seeking to punish a defender assigned to stop him from scoring, people want to smell good. In fact, dealing in perfumes and colognes has been a path to riches throughout history.  As anyone who has shopped for a significant other’s birthday gift knows, there is a wide selection of aroma-enhancing products available for purchase, ranging in cost from the merely overpriced to the obscene. Perfumes equal profits for companies large and small, and there is a reason that perfumes enjoy prime selling space at retailers. Just walk into any upscale department store (or any international airport duty-free shop, for that matter,) and you will notice that the ground floor is replete with perfume purveyors, often branded with the names of famous fashion designers.

It is a good business for everyone in the supply chain. The famous fashion designer licenses his or her naming rights for perfumes to a wholesaler, who actually produces the smelly liquid either directly or in conjunction with outside manufacturers. In exchange, the wholesaler pays a royalty to the brand owner, and will likely also invest in the advertising necessary to have a particular scent stand out in a crowded market. There is plenty of profit for the wholesaler, even after incurring these costs, based on their sales of perfumes either direct to consumers or through retailers. Again, anyone who has actually bought a 3.25 oz or so bottle of perfume for an astronomical sum per ounce knows that retailers also have plenty of profit opportunity themselves for these goods. Hence the preferred placement in their stores. Even pharmacies selling cheaper mass-market perfumes have a habit of placing these items in display cases (often under lock and key, another hint that they are valuable) near the registers, hoping for that impulse purchase from the nervous college student hoping to smell respectable on a big date.

If perfumes equal profits, it should no surprise that they are a magnet for infringers — including criminal elements looking to move counterfeit goods at huge profit. In fact, most of my anti-counterfeiting experience to date has come in the perfume space, and the worldwide scale of the counterfeiting networks I encountered as part of that prior work was always at once impressive and intimidating. In some cases, we needed to track down counterfeit perfumes that were manufactured and packaged in China, routed through Dubai for shipment to Mexico, and smuggled across the border into Texas for distribution in the US. Organized crime networks, including drug cartels looking to launder profits, have been associated with counterfeiting activity. For IP lawyers lucky enough to work at firms with sophisticated anti-counterfeiting practices, the work can be exhilarating and challenging — from preparing the filing documents in order to secure a seizure order, to actually going on a raid of a storage or sales facility for the counterfeit goods. As the IP lawyer, you might be the only one on the raid unarmed, but that does nothing to take away from the experience.

Not all perfume IP disputes, however, involve counterfeiting, even though counterfeiting allegations may be present in a lot of those types of cases. A recent decision by Judge Jesse Furman of the Southern District of New York offers a compelling look at the trademark issues present in high-value perfume IP disputes. The case was brought by Coty, a leading licensee of brands like Calvin Klein, against Excell, an admitted manufacturer of cheaper, made in India “alternative versions” of popular blockbuster perfumes and colognes. Unlike Coty’s designer bottles, Excell’s perfumes were designed to target the lower-income consumer, and sold to retailers targeting that market segment. Putting aside that certain Excell executives were indicted in 2015 on money laundering and other charges, Coty’s complaint centered on Excell’s attempt to profit from the goodwill associated with the famous marks on Coty’s own products.

In his decision, which came after a three-day bench trial and post-trial briefing, Judge Furman reached a number of conclusions of law — notably concluding that while Excell’s “imitation crossed the line from flattery to infringement, dilution, unfair competition, and false advertising,” it “did not cross the line far enough to constitute counterfeiting within the meaning of federal law. “ As relief for Coty, Judge Furman declined to award attorney’s fees or enhanced damages, but did award Excell’s profits as well as injunctive relief. In perhaps the most interesting finding in what was otherwise a comprehensive, albeit predictable decision in a trademark infringement case, Judge Furman rejected Excell’s argument that its inclusion of a disclaimer — namely, an indication that a particular perfume was “Our Version Of” or “Not Associated With” — made clear that its products were not associated with Coty. The following example of a disclaimer was incorporated into the opinion:

As Judge Furman found, “[S]ignificantly, however, Coty’s marks are significantly more prominent and accentuated on Excell’s fragrances than both the supposedly disclamatory language (“Our Version Of” and “Not Associated With”) and Excell’s own marks. In similar circumstances, courts have held that disclaimers are not only ineffective, but actually cut against the allegedly infringing party.” In short, Excell’s attempt at a disclaimer defense actually served as evidence of their wrongdoing.

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To some, this might be a little bit of a surprising finding, since the presence of the disclaimer should have reduced the likelihood of customer confusion, even with Excell’s clever embellishments. But trademark disputes can often turn on discrete decisions taken by the alleged infringer that can support or dispel a likelihood of confusion argument. Whether one is hawking pricey perfumes or not, the value of a disclaimer in a trademark will depend on what the court thinks its value is. As such, there will be some, like Excell, who find that their disclaimers are worse than worthless.   

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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