In the latest issue of U.S. Customs and Border Protection's Customs Bulletin, the agency announced that it was extending “Lever rule” protection to cover certain watches bearing valid trademarks. Customs will now forbid the importation of the watches, unless they bear labels warning potential purchasers that they are “physically and materially” different from watches normally sold in the United States under those trademarks.
Customs is always authorized to block imports of counterfeit goods, but few people know that even goods manufactured abroad under a validly licensed trademark—so called “gray-market goods”—can be kept out of the United States if the trademark owner objects. Under the “Lever rule,” this ban on the importation of “gray-market” goods can be extended even to merchandise actually produced abroad by the trademark owner or its affiliate, so long as the foreign merchandise is not physically identical with the product marketed in the United States.
The reasons involve the right of trademark owners to sell goods with different physical characteristics in different markets. For example, the Acme Global Candy Company may market a different formulation of its famous Choco-Bars in the United Kingdom than in the United States, but use the same trademark in both countries. Under the “Lever rule,” Acme can petition Customs to forbid the importation of the U.K. version of the candy if it is not accompanied by a warning alerting the buyer that the candy is different from the product normally sold in the United States.
It wasn't always this way. For many years, Customs allowed the importation of foreign-made, validly trademarked goods, even where the merchandise was not physically identical with U.S. products, if the foreign merchandise was actually manufactured by the trademark owner or its affiliate. This rule was overturned in Lever Bros. Co. v. United States, 981 F.2d 1330 (D.C. Cir. 1993), which held that such physically and materially distinguishable merchandise could cause customer confusion. The court found that, because U.S. trademark law is primarily focused on preventing customer confusion, Customs could not allow the importation of confusing merchandise simply because it had been manufactured by the trademark owner or a related party.
Customs’ announcement of “Lever rule” protection for certain watches can be found here.