The Bureau of Customs and Border Protection could impose a civil penalty upon an importer of watches bearing a counterfeit mark that were seized under the Tariff Act, even though the owner of the registered mark did not manufacture or sell watches at the time of the seizure, the U.S. Court of Appeals in San Francisco has determined. The importer's watches bore the mark TOMMY, which was a registered mark owned by a designer and manufacturer of cosmetics, cologne, and similar products. The Tariff Act's seizure and civil penalty provisions are applicable even if the owner of the registered mark at issue does not make or sell the same goods as those bearing the counterfeit mark.

The Tariff Act's seizure provision incorporated the definition of "counterfeit" from the Lanham Act --a spurious mark that is identical to, or substantially indistinguishable from, a registered mark. The Tariff Act also incorporated the Lanham Act's requirement that the offending merchandise "copy or simulate" a registered mark. Neither of these provisions contained a requirement that the goods or services be identical. Customs had defined a "copying or simulating" trademark as one that may so resemble a recorded mark as to be likely to cause the public to associate the copying or simulating mark with the recorded mark. This was equivalent to the traditional "likelihood of confusion" test for trademark infringement, the court said, which did not require identity of goods or services, particularly when other factors weighed in favor of a finding of confusion.

Liability under the Tariff Act's civil penalty provision also required the offending merchandise to bear a mark identical to or substantially indistinguishable from a registered mark owned by a U.S. citizen or corporation, where the offending merchandise copied or simulated the registered mark. Nowhere did this statutory scheme require the mark owner to make the same goods as those bearing the offending mark.

The Tariff Act's reference to "genuine" goods did not require the existence of a genuine article with which to compare the merchandise bearing a counterfeit mark, in the court's view. That reference appeared within a provision that affected the calculation of the civil penalty, not the initial determination of whether a penalty should apply. It stated that the fine must be no more than the manufacturer's suggested retail price that the merchandise would have had if it were genuine. The statute also did not require that the genuine merchandise be manufactured by the trademark owner. The term "genuine" could refer to genuine brand-name watches generally. Customs acted within its discretion by using the "domestic value" of the merchandise as an approximation of its retail price.

The legislative history of the Lanham Act and the Tariff Act supported this plain-text interpretation of the Tariff Act's seizure and civil penalty provisions, the court said. This interpretation did not create a "right in gross" for the TOMMY mark because the imported watches must be likely to cause confusion in order for a civil penalty to apply.

The case was remanded for a determination of (1) whether the mark on the watches was identical to or substantially indistinguishable from the registered mark and (2) whether the offending mark copied or simulated the registered mark, which amounted to the traditional likelihood of confusion test for infringement. Customs was not required to compare the registered mark as it appeared on actual merchandise with the allegedly counterfeit mark on the importer's watches. On remand, the finder of fact could compare the offending mark to the mark on the registration certificate, or the court could admit additional product samples bearing the registered mark into evidence.