Page 171 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes that bear an identical mark. The statute would seem to allow US trade mark owners to exclude
all grey market goods by simply denying permission for their import. However, the customs
service, over the years, interpreted the statute so as to allow many grey market imports.
Grey market practices came up before the Supreme Court in 1988, in a case brought by a trade
association and by Cartier Inc. against K Mart and 47th Street Photo Inc., two of the United States’
largest grey market importers. In K Mart vs Cartier, 108 US 1811 (1988), the Supreme Court, in
an extremely confusing decision with different majorities for different parts of the decision, set
out an analytical framework and some guidelines for grey marketers.
The Court set out five structures for grey market imports, and for each, ruled on whether section
526 required customs to exclude the goods unless the US trade mark owner authorised the
import.
Case 1: A US firm purchases the rights to register and use a foreign firm’s trade mark in the
United States, to sell the foreign firm’s products in the United States. In this case, the court ruled
that imports of the same goods by the foreign manufacturer or by a third party who has purchased
the goods from the foreign manufacturer would unfairly jeopardise the value of the US trade
mark holder’s investment. Thus, section 526 requires the customs service to exclude imports in
this case.

Case 2A: A foreign firm manufactures goods overseas. A US subsidiary of that firm registers the
foreign trade mark in the United States. The court held that Customs could allow the grey
market goods to enter the United States.
Case 2B: This case is the reverse of 2A. Here, a US corporation creates a foreign subsidiary to
manufacture and sell trade marked goods. Again, the Court held (by a different majority) that
customs could allow the goods to enter the United States.
Case 2C: Here, the US enterprise establishes a branch or a division to manufacture goods offshore.
The Court held that these goods were not “of foreign manufacture”, as the statute required, so
customs could allow the goods to enter.
Case 3: In this case, a US holder of a US trade mark authorises a foreign manufacturer to make
goods and use a trade mark in foreign markets. That manufacturer or a third party then imports
the goods. The Court ruled that section 526 required the exclusion of those imports, unless the
US trade mark holder consented to the import.
The net effect of the several different votes on the grey market scenario was that grey market
imports were somewhat restricted. If there is common control between the United States and the
foreign firm, either as parent, subsidiary or branch, the imports may enter. If the US and foreign
businesses are independent, the US trade mark holder has the right to prevent unauthorised
imports.

Self Assessment

Fill in the blanks:

15. ....................... goods appear either because a seller has priced goods differently in different
markets or because currency values change, making it profitable to acquire goods in other
markets and import them.
16. The same laws that bar the import of ....................... goods may also bar the import of some
grey market goods.

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