Altered Cartier Watch Case Addresses Standard for Damages and Scope of Injunction
Another district court judge has weighed in on the question of whether the Second Circuit Court of Appeals’ rule requiring a showing of willful deception or actual confusion for an award of monetary relief in counterfeiting cases survived the 1999 amendment of Section 35 of the Lanham Act (15 U.S.C. §1117(a)). The 1999 amendment provided for damages to be awarded in cases of trademark dilution, but only if a “willful violation” is found. Although the damage provision that applies in trademark infringement and counterfeiting cases does not explicitly require a “willful violation,” this requirement had been read into the statute by the Second Circuit in pre-1999 cases such as George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532 (2d Cir.1992). New York federal Judge Marrero has now joined several other district courts in holding that, by specifying that a “willful violation” must be found before damages can be awarded in a dilution case, Congress, by implication, rejected the Second Circuit’s rule that a willful violation must be shown before damages can be awarded in counterfeiting cases.
The case, Cartier v. Aaron Faber, Inc., 2007 WL 2823691 (S.D.N.Y. Sept. 27, 2007), involved an enterprise in the business of buying and selling premium watches that had admitted that it had caused third-party jewelers to mount diamonds on watches bearing the marks CARTIER, PANERAI, PIAGET, and VAN CLEEF & ARPELS, which it then sold or offered for sale on consignment to auction houses. The altered watches retained the brand owners’ original marks and displayed no additional mark indicating that the diamonds had been added by J & P. At least some of the watches were modified to appear identical to more expensive genuine models. The court held that the altered watches were counterfeits:
"The retention of the Plaintiffs' marks with no indication that the watches had been significantly altered by J & P creates a likelihood that customers would be deceived into believing that the alterations were performed by the original manufacturers. As the Court stated in granting the preliminary injunction: 'A customer viewing the watches on her own or secondary purchasers of the watches would directly attribute to Cartier the bejeweled bezels, cases and/or bracelets, and any flaws in the workmanship or quality of the watch resulting from that alteration.'”
In addition to the dispute over whether willfulness had to be shown to support a damage award, the parties disagreed as to whether the injunction entered in the case should outright prohibit sales of altered watches or permit such sales so long as J & P added another trademark to the watches to indicate that they had been altered. Cartier and the other plaintiff brand owners argued that the court could rule on a motion for summary judgment (i.e., without holding an evidentiary hearing) that addition of an independent mark would not adequately convey to the public that the watches had been altered. However, the Court declined to rule without an evidentiary hearing that it would be impossible for J&P to mark the modified watches in such a way as to make clear to consumers that it had performed after-market alterations. Instead, the scope of the permanent injunction will be determined after evidence is heard on this issue.