## Facts

- Plaintiffs manufactured indoor tanning lotions sold under the Australian Gold, Caribbean Gold, and Swedish Beauty marks and distributed them through an exclusive distributor using independent distributors.
- Distributor agreements generally restricted sales to qualifying salons and, since 2001, typically prohibited internet sales and sales to persons who would sell to the public over the internet.
- Defendants acquired genuine plaintiffs’ products and resold them online without authorization, despite knowing plaintiffs objected to internet sales.
- Defendants used plaintiffs’ trademarks on websites (including in site content and traffic-diverting techniques such as domain-name and metatag use) and used non-specific disclaimers stating no affiliation.
- Plaintiffs alleged defendants’ online marketing created consumer confusion about sponsorship or affiliation and interfered with plaintiffs’ contractual distribution system.
- A jury found for plaintiffs on Lanham Act claims (trademark infringement/false designation/false advertising) and a state-law tortious-interference claim, awarding substantial compensatory and punitive damages; the district court also entered an injunction and imposed discovery sanctions.

## Issues

1. Whether sufficient evidence supported Lanham Act liability for trademark infringement/false designation and false advertising based on defendants’ online use of plaintiffs’ marks in connection with resale of genuine goods.
2. Whether the district court properly exercised supplemental jurisdiction over the state-law tortious-interference claim and whether the evidence supported that verdict.
3. Whether the injunction barring defendants from selling plaintiffs’ products online and from using plaintiffs’ trademarks with their websites was an abuse of discretion.
4. Whether discovery-abuse sanctions against defendants were an abuse of discretion.

## Decision

- The Tenth Circuit affirmed the judgment and denial of judgment as a matter of law.
- The court held the evidence permitted a reasonable jury to find a likelihood of confusion and misleading representations under the Lanham Act based on defendants’ trademark use and marketing practices.
- The court held supplemental jurisdiction over the tortious-interference claim was proper and the evidence supported intentional interference with distributor contracts restricting internet sales.
- The court affirmed the injunction as a permissible equitable remedy tailored to prevent continued confusion and future violations given defendants’ conduct.
- The court affirmed discovery sanctions, finding no abuse of discretion in light of defendants’ discovery misconduct.

## Legal Principles

- Resale of genuine trademarked goods does not bar Lanham Act liability when the reseller’s use of marks is likely to cause confusion as to sponsorship, affiliation, or authorization.
- Likelihood of confusion may be shown through evidence concerning the manner of trademark use in online marketing, including prominent trademark placement, traffic diversion methods, and the adequacy and specificity of disclaimers.
- False advertising under 15 U.S.C. § 1125(a) can be established by materially misleading website statements about affiliation or authorization that are likely to influence consumers.
- Federal courts may exercise supplemental jurisdiction over state-law claims that arise from the same nucleus of operative facts as federal trademark and unfair-competition claims.  
- Injunctive relief in Lanham Act cases may be broad where necessary to prevent future confusion and continued unlawful conduct, particularly when prior behavior indicates a risk of recurrence.
- Discovery sanctions are reviewed for abuse of discretion and may be upheld when supported by a record of noncompliance or obstructive behavior.

## Conclusion

The Tenth Circuit upheld a jury verdict imposing Lanham Act and tortious-interference liability on unauthorized online resellers whose trademark-focused website practices supported findings of likely consumer confusion and misleading advertising, and it affirmed a broad injunction and discovery sanctions as appropriate remedies for ongoing and obstructive conduct.


Australian Gold, Inc. v. Hatfield, 436 F.3d 1228 (10th Cir. 2006)