South-Western Legal Studies in Business

Breach of Contract No Excuse for Trademark Infringement
Description Appeals court held that when a French manufacturer breached its distribution agreement for its trademarked goods in the U.S., the U.S. distributor did not have the right to then obtain counterfeit goods to sell instead. The trademark rights in the U.S. revert to its owner, and the U.S. distributor must cease sales of counterfeit goods.
Topic Intellectual Property
Key Words Trademark; Infringement; Counterfeit; Distributorship; Breach of Contract
C A S E   S U M M A R Y
Facts ICE, in New York, agreed to become the exclusive distributor in the U.S. for a French brand of cosmetics, trademarked "Fair & White," for CLM, a French corporation. ICE agreed to certain sales minimums. Later, Gapardis, a Miami company, also agreed to become the exclusive distributor of "Fair & White" in the U.S. for CLM. CLM stopped selling its products to ICE. ICE then had imitation products made which it sold as "Fair & White." ICE sued CLM and Gapardis for trademark infringement and breach of contract. The trial court held for defendants; ICE appealed.
Decision

Affirmed. CLM breached the distributorship agreement by selling to Gapardis. However, ICE then breached the agreement by procuring counterfeit goods. This breach caused the trademark rights for "Fair & White" to revert, in the U.S., to CLM. Such reversion occurs even though there was no reversion clause in the distribution agreement. ICE also infringed on CLM's trademark by selling counterfeit goods. The injury to CLM outweighs any injury suffered by ICE, so CLM is entitled to an injunction against the selling of counterfeit goods by ICE.

Citation International Cosmetics Exchange v. Gapardis, 303 F.3d 1242 (11th Cir., 2002)

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