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Nonphysical Differences Are Enough to Create Material Differences with Gray Market Goods

By G. Brian Busey and Rory J. Radding

Under U.S. law, the resale of imported genuine goods bearing a valid U.S. trademark generally does not constitute trademark infringement. This is in part because, under the first sale doctrine, the trademark protections under U.S. law can be exhausted after the trademark owner's first authorized sale anywhere of the product bearing the trademark. Thus, U.S. law does not generally preclude the sale of identical genuine goods bearing a legitimate trademark even if the sale in the United States is unauthorized by the trademark owner.

However, there is an exception: the sale of imported gray market goods in the United States if such goods are “materially different” from authentic goods authorized for sale in the United States. A number of the circuit courts of appeals have adopted the “material difference” standard: Societe Des Produits Nestle S.A. v. Casa Helvetia, Inc. 982 F.2d 633, 644 (1st Cir. 1992); Original Appalachian Artworks, Inc. v. Granada Elecs., Inc., 816 F.2d 68, 73 (2d Cir. 1987); Iberia Foods Corp. v. Romeo, 150 F.3d 298, 302-03 (3d Cir. 1998); Martin's Herend Imports v. Diamond & Gem Trading USA, 112 F.3d 1296, 1302 (5th Cir. 1997); Gamut Trading Co. v. United States ITC, 200 F.3d 775, 781 (Fed. Cir. 1999). A recent decision by the U.S. Court of Appeals for Federal Circuit, SKF USA, Inc. v. International Trade Commission, 423 F.3d 1037 (Fed. Cir. 2005), clarified what constitutes a “material difference.”

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