Square D Settlement with Scott Electric Results in Recall of Counterfeit Circuit Breakers, Continued Sales of Gray Market Goods
Last week's Consumer Product Safety Commission announcement of a recall of counterfeit Square D circuit breakers sold by Scott Electric outlets in Pennsylvania and Texas from May 2005 to May 2006 was the result of a swift settlement of counterfeiting litigation between Scott Electric and Square D. Square D sued Scott Electric for selling counterfeit Square D circuit breakers in April 2006. According to an AP story in the Delaware News Journal , the circuit breakers were purchased from a "gray market" distributor and Scott Electric did not know they were fakes. Within three weeks after Square D's suit was filed, the case settled. Scott Electric signed a Consent Order for Permanent Injunctive and Other Relief that required it to allow Square D to inspect its inventory of circuit breakers labeled with the "Square D" trademark and to take possession of any counterfeits. It also agreed to the present recall effort and promised to provide Square D with a list of all of its suppliers of Square D inventory for the prior thirty-six months.
According to the News Journal, Square D agreed in the settlement that Scott may continue to sell gray market goods. Gray market products are goods manufactured for sale in foreign markets that are imported into the U.S. They are usually sold here for a lower price than their domestic U.S. counterparts. If the foreign imports are essentially identical to the products made for the U.S. market, their importation and sale should not raise any trademark issues. However, the importation and sale of gray market goods that are materially different from the authorized U.S. versions is a trademark violation. Because gray market goods are generally less expensive than goods intended for sale in the U.S., counterfeiters often pass off their fake wares as gray market goods.