## Facts

- A U.S. mushroom seller marketed domestically produced, certified-organic mushrooms in the United States under distinctive trademarks and trade dress.
- Its Japanese parent produced mushrooms in Japan under non-organic standards using different packaging and labeling practices.
- A third-party importer brought the Japanese, non-organic mushrooms into the United States and sold them in U.S. stores using the same or similar marks associated with the U.S. seller’s certified-organic products.
- The imported products were at times placed near or among “organic” products, increasing the risk that consumers would assume the goods were the U.S.-produced certified-organic mushrooms.
- The U.S. seller sued for trademark infringement and related claims; the importer counterclaimed and sought cancellation of the parent’s trademark registrations for fraud and abandonment via naked licensing.
- The district court granted summary judgment for the trademark owners and entered a permanent injunction barring the importer from selling the Japanese mushrooms in the United States under the marks.

## Issues

1. Whether the importer was shielded from infringement liability under the first-sale/gray-market doctrine on the theory that the imported goods were “genuine.”
2. Whether the importer’s sale of the imported mushrooms under the marks created a likelihood of confusion under the Lanham Act.
3. Whether the trademark registrations were subject to cancellation for (a) fraud in procurement or (b) abandonment through naked licensing due to inadequate quality control.

## Decision

- The Ninth Circuit affirmed summary judgment for the trademark owners and affirmed the permanent injunction.
- The imported goods were not “genuine” for first-sale purposes because they differed materially from the authorized U.S.-market goods.
- The record compelled a finding of likelihood of consumer confusion as to source, affiliation, and product qualities.
- The importer failed to show fraud on the PTO or abandonment by naked licensing; the parent–subsidiary relationship supported a finding of adequate quality control.

## Legal Principles

- The first-sale/gray-market doctrine does not bar infringement claims when unauthorized imported goods are materially different from the authorized domestic goods in ways consumers would likely consider.
- Material differences may include quality attributes and marketing representations such as organic certification, country of origin, and labeling conventions relevant to U.S. purchasers.
- Likelihood of confusion can be established on summary judgment where marks and trade dress are highly similar, goods and channels overlap, and differences that matter to consumers are obscured by use of the same marks.
- Trademark-registration fraud requires proof of a knowing, material false representation to the PTO.
- A naked-licensing/abandonment claim fails where the trademark owner maintains sufficient quality control; close corporate affiliation and coordinated standards may evidence such control.

## Conclusion

The Ninth Circuit upheld liability and injunctive relief because the importer sold materially different, non-organic, foreign-produced mushrooms under marks associated with U.S.-market certified-organic goods, creating likely consumer confusion, and the importer did not establish fraud or abandonment through naked licensing.


Hokto Kinoko Co. v. Concord Farms, Inc., 738 F.3d 1085 (9th Cir. 2013)