Why Are Temporary Restraining Orders A Common Mechanism To Stop The Sale Of Gray Market Goods?

Gray market goods are those that are exchanged in a market that is unauthorized or unintended by the original manufacturer of the goods. Many of these goods contain either a copyright or trademark that is registered and owned by the original manufacturer. However, the manufacturer does not reap the benefits of the exchange of his goods in the gray market because it is done in an unauthorized manner. In order to stop those selling their goods on the gray market, an owner might seek to have the court grant a temporary restraining order (“TRO”) against the seller to stop the alleged infringing conduct immediately and to preserve evidence for eventual litigation.

Owners of a copyright or trademark will often bring infringement claims against those selling goods containing their mark on the gray market. However, it is possible that those receiving notice of impending litigation could conceal or destroy evidence of infringing behavior during the time between notification and discovery. In order to avoid this problem, plaintiffs often seek to have a court issue a TRO against defendants.

Under Rule 65(b) of the Federal Rules of Civil Procedure, a TRO may be granted without notice to the opposing party (or the party’s counsel) when “it clearly appears from the specific facts shown by affidavit…that immediate and irreparable injury, loss or damage will result to the applicant before the adverse party or that party’s attorney can be heard in opposition.” F.R.C.P. 65(b).

TROs can be an effective way for mark owners to shut down the infringing behavior of defendants. An example is North Face Apparel Corp. v. Fujian Sharing Import & Export Lts. Co., No. 10-cv-1630 (S.D.N.Y. December 20, 2010). In that case, the defendants were alleged to have been operating hundreds of websites that were similar to the sites operated by North Face and Polo. Examples of the websites included “4thenorthface.com,” “northfaceoutletsale.com,” “poloralphworld.com” and “poloshirtcompany.com.” Upon filing their complaint, North Face and Polo Ralph Lauren (“Polo”) requested that a TRO prohibiting this be issued.

The Court granted the TRO, determining that the brand owners were likely to succeed at trial and that the defendant’s infringing conduct was likely to cause the brand owners irreparable harm. The temporary injunction restrained the defendants from committing any of the acts alleged in the complaint, which included claims for federal trademark infringing, unfair competition and false designation of origin. The TRO enabled the mark owners to shut down many of the sites and to seize some of the counterfeit sales from the defendants’ accounts.

There are several other recent examples within the United States District Court for the Southern District of New York of this approach to prohibiting gray market goods. See Rolex Watch U.S.A., Inc. v. Oganesyan, No. 11-CIV-8182 (S.D.N.Y. Nov. 14, 2011), Coach, Inc. v. Andre, No. 11-CIV-6215 (S.D.N.Y. Sept. 6, 2011), Coach, Inc. v. Smith, No. 11-CIV-3573 (S.D.N.Y. May 26, 2011).

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