A Hypothetical
Y is a chocolate cookie that is legitimately sold in Australia. A grocery store, X, in New York City is importing and selling this chocolate cookie without the permission of Y’s U.S. trademark owner Z. Z is also selling a U.S. version of Y in the United States.
However, the Y sold by Z in the United States has fewer calories, a slightly different taste, and USDA organic certification on the packaging, unlike the Y imported from Australia. Can Z claim trademark infringement against X upon discovering the imported Y?
Gray Market Goods and Material Difference
The Y imported from Australia is known as a gray market good. If there are material differences between the gray market good and the U.S. version, selling the gray market good is highly likely to constitute trademark infringement, assuming that the gray market good was not intended to be sold in the U.S. A difference is material if consumers are likely to consider it relevant when purchasing a product.
Physical and Non-physical Material Differences
Material differences can be divided into physical and non-physical differences. Physical differences include packaging, ingredients, calories, and organic certification, while non-physical differences include product warranty protection, service commitments, and add-ons.
Analysis
In the previous example, X imported and sold Y in the United States without Z’s permission. The imported Y has physical differences compared to Y’s U.S. version. The calories are different, the taste is slightly different, and there is a difference in organic certification. These differences are very likely to be relevant when consumers purchase cookies.
Conclusion
Therefore, assuming that the gray market good in the above is not intended to be sold in the United States, it is highly likely that X’s import and sale of Y will constitute trademark infringement against Z.
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