More effort required to plead around first sale than that goods aren't genuine

TechnoMarine SA v. Jacob Time, Inc., 2012 WL 2497276 (S.D.N.Y.)

HT Eric Goldman

TechnoMarine, a watchmaker, sued Jacob Time for trademark infringement, dilution, copyright infringement, tortious interference with contract, and unfair competition.  TechnoMarine owns trademark registrations and has a copyright registration in its logo (shades of the Omega v. Costco misuse case now returning to the 9^th Circuit!).  It sells, or tries to, “exclusively through authorized channels--including prestigious retailers such as Tourneau, Neiman Marcus and Saks Fifth Avenue.”  It uses contracts to control authorized dealers; most aren’t authorized to sell online and all are barred from selling to unauthorized third parties or online retailers.

Jacob Time sells premium brand watches at discount prices through its website, which puts the following disclaimer on each relevant page: “Jacobtime is not an authorized dealer for any company, due to our extremely low  pricing. All of our watches are 100% authentic and brand new. We offer a 2 year Jacobtime Warranty on all watches.”

The court held that TechnoMarine’s claims flunked Iqbal/Twombly.  There were no facts alleged that the watches were counterfeit, non-genuine, or even authentic but “unlawfully” acquired.  The complaint merely speculated that they “may” be counterfeit. 

Trademark doesn’t bar the unauthorized sale of genuine goods.  Without facts alleged that the watches were counterfeit or likely to cause confusion as to source/affiliation, there could be no infringement claim (and also no copyright claim, with no sufficient allegation of unlawful copying).  Unauthorized sales by someone not contractually bound to TechnoMarine “may not be the transactional path envisioned by plaintiff, but such a scenario is not necessarily or even evidently unlawful.”  At the least, TechnoMarine would have to plead facts tending to show that Jacob Time’s watches failed to conform to its quality control standards or were materially different.  It also failed to plead sufficient facts raising a reasonable inference that discovery would reveal likely confusion as to source/affiliation, “especially in light of the disclaimer on the Jacob Time website and plaintiff's assertion that its watches are typically sold ‘in the most prestigious stores.’” 

TechnoMarine initially alleged that the watches were of lesser quality because they didn’t enjoy the same warranty protection.  But it dropped that allegation, which it was wise to do because New York law bans refusals to honor warranties based solely on a dealer’s unauthorized status.  “Jacob Time's customers would not have received lesser warranty protections--and, in turn, lesser quality watches--on account of Jacob Time being an allegedly unauthorized retailer.”

TechnoMarine argued that it couldn’t determine the source of the products, the conditions of their appearance on Jacob Time’s site, or the presence of any alterations without discovery, but you can’t get discovery with only conclusory allegations.

So too with dilution, though the court noted that material differences in the watches could undergird a dilution by tarnishment claim.

On tortious interference, TechnoMarine failed to plead facts showing that Jacob Time, with knowledge of the contractual restrictions, induced one or more Doe defendants to breach its contract with plaintiff.  Based on the alleged facts, it was just as possible that unknown Doe retailers voluntarily sold TechnoMarine watches to Jacob Time.  Likewise, the unfair competition claim was the trademark claim plus bad faith, and thus insufficiently pleaded.