Rockwell Automation, Inc. (Rockwell), a leading industrial parts manufacturer, recently sued industrial parts distributor Radwell International, Inc. (Radwell), alleging numerous violations of the Lanham Act, including claims of trademark infringement and false advertising, as well as multiple violations of state unfair competitions laws. According to the complaint, Radwell has sold various Rockwell-branded products without authorization, while falsely claiming that these products are warranted by Rockwell. The case, Rockwell Automation, Inc., v. Radwell International, Inc., No. 1:15-cv-05246 (D. N.J. filed July 6, 2015), is currently pending in New Jersey federal district court.
Rockwell, which is headquartered in Milwaukee, Wisconsin, describes itself as the “world’s largest company dedicated to industrial automation and information.” It sells an array of industrial automation products—including programmable controllers, sensors, human-machine interfaces, power supplies, and safety control devices—on an exclusive basis, either directly to consumers or through authorized distributors. In doing so, Rockwell provides a warranty on all products purchased directly from Rockwell or from an authorized distributor; however, like many companies, it refuses to honor warranties on products that are obtained from unauthorized distributors.
Meanwhile, Radwell is a New Jersey-based industrial parts distributor that sells a variety of products manufactured by other companies, including industrial automation products. Rockwell alleges that Radwell has been selling its automation controllers, which bear Rockwell’s federally registered trademarks, without authorization for several months, and that Radwell resells these products after first obtaining them from third-party sources. Further, Rockwell claims that Radwell uses the designation “FNFP–Factory New Factory Package / Factory Warranty,” despite the fact that these products are neither “Factory New” nor covered by the Rockwell warranty.
Rockwell first objected to Radwell’s activities in February, at which time Radwell purportedly agreed to remove the warranty language from some of its products. However, according to the complaint, Radwell fulfilled that promise only after Rockwell filed suit in federal court in Wisconsin in April. That case was later voluntarily dismissed by Rockwell, but in early July it filed another federal suit in New Jersey, bringing claims under the Lanham Act for trademark infringement and dilution, false advertising, and false designation of origin, as well as statutory and common law unfair competition claims under New Jersey state law. In its complaint, Rockwell argues that Radwell is misleading consumers regarding the origin and nature of the unauthorized products it sells, and that consumers will mistakenly believe that these products come directly from Rockwell and are therefore covered by its factory warranty. Rockwell further claims that the resulting consumer confusion will injure its reputation and dilute the distinctive quality of its trademarks.
This case provides a cautionary tale for both sides of the manufacturer-distributor relationship. On one hand, a distributor should always take steps to ensure that it has the proper authorization to resell products purchased from third parties, and that any warranty-related claims are consistent with that authorization. Failing to do so can lead to violations of federal and state law and result in often costly litigation. Conversely, manufacturers must closely monitor how their products are sold, and by whom. Failing to exercise sufficient control can harm a company’s credibility and the goodwill associated with its brand, and potentially result in the abandonment of trademark rights.