The U.S. Court of Appeals for the Ninth Circuit has ruled that a company that imports a product bearing a counterfeit mark can be liable for penalties under federal law (the Tariff Act) even if the owner of the mark in question does not make the product in question. United States of America v. Able Time, Inc., Case No. 06-56033 (9th Cir., Sept. 25, 2008) (Clifton, J.).

Able Time imported a shipment of watches into the U.S. bearing the mark TOMMY, a registered trademark owned by Tommy Hilfiger Licensing. U.S. Customs officials seized the watches pursuant to the Tariff Act, which authorizes seizure of any “merchandise bearing a counterfeit mark” under 19 U.S.C. § 1526(e). Tommy Hilfiger did not make or sell watches at the time of the seizure. U.S. Customs later imposed a civil penalty upon Able Time pursuant to § 1526(f) of the Tariff Act, which authorizes the imposition of a fine upon any person who imports merchandise that is seized. The district court concluded that, because Tommy Hilfiger did not make watches at the time of the seizure, the watches imported by Able Time were not counterfeit, and the civil penalty imposed by Customs was unlawful. Customs appealed.

The government argued that the Tariff Act does not require the owner of the registered mark to make the same type of goods as those bearing the offending mark, even though such a requirement is commonplace in many related trademark statutes. Able Time responded that Congress expressed its intent to require identify of goods in related statutes and in legislative history of the Tariff Act.

The Ninth Circuit concluded that the Tariff Act does not impose an identity of goods or services requirement and that Customs may impose a civil penalty upon an importer of merchandise bearing a counterfeit mark, even though the owner of the registered mark does not manufacture or sell the same type of merchandise.

The court explained that the Tariff Act prohibits the importation of merchandise bearing a registered trademark without the permission of the owner of the trademark and also authorizes seizure and forfeiture if the merchandise bears a counterfeit mark as well as the imposition of a civil penalty upon an importer whose goods are seized, in an amount not more than the value the merchandise would have had if it were genuine.

As found by the Court, “[N]one of these provisions [of the Tariff Act] require the owner of the registered mark to make or sell the same goods as those bearing the offending mark.” Although the Tariff Act incorporates two sections of the Lanham Act, neither contains an identity of goods or services requirement. One of the Lanham Act sections is only used to define the term “counterfeit” and the other to impose the requirement that the offending merchandise is likely to cause confusion.

Thus, the Court concluded that “[T]o run afoul of the civil penalty provision of the Tariff Act … the offending merchandise must bear a mark identical to or substantially indistinguishable from a registered trademark owned by a United States citizen or corporation, where the offending merchandise copies or simulates the registered trademark, meaning that it is likely to cause the public to associate the offending merchandise with the registered trademark under the Sleekcraft factors.” (Citations omitted.)