## Facts

- Rolex Watch, U.S.A., Inc. owned multiple incontestable Rolex trademarks and served as the exclusive U.S. distributor of new Rolex watches.
- Micha Mottale, doing business as Michel Co., reconditioned used Rolex watches and sold them primarily to jewelry dealers and selected retail jewelers.
- Michel Co. replaced or refurbished major watch components using non-Rolex parts (including dials, bracelets, bezels, and other components) while leaving Rolex trademarks on the watch cases and/or dials.
- Michel Co. also sold generic replacement parts compatible with Rolex watches and offered reconditioning services.
- Rolex alleged that the altered watches were materially different from genuine Rolex watches yet continued to trade on Rolex’s marks, and it sued for trademark counterfeiting and infringement under 15 U.S.C. § 1114(1)(a) and for contributory infringement based on Michel Co.’s sale of generic parts.

## Issues

1. Whether a remedy limited to marking non-Rolex parts and providing written disclosures was sufficient where used Rolex watches were substantially altered but still sold bearing Rolex trademarks.
2. Whether denial of attorney’s fees in a counterfeiting case was erroneous where 15 U.S.C. § 1117(b) potentially required fees.
3. Whether Rolex was entitled to damages greater than those awarded by the district court.
4. Whether selling generic, non-branded parts compatible with Rolex watches constituted contributory trademark infringement.

## Decision

- The Ninth Circuit held the district court’s injunction was inadequate and ordered an injunction prohibiting Michel Co. from retaining Rolex trademarks on the altered watches it sold.
- The court reversed the denial of attorney’s fees on the counterfeiting claim and remanded for consideration under 15 U.S.C. § 1117(b).
- The court affirmed the district court’s refusal to award greater damages.
- The court affirmed rejection of Rolex’s contributory infringement claim based on sales of generic replacement parts.

## Legal Principles

- A reseller’s substantial, material alterations to a branded product can render the product non-genuine for trademark purposes; continued sale bearing the original trademark may warrant injunctive relief barring use of the mark on the altered goods.
- Disclosures and additional markings may be insufficient where alterations are so extensive that the trademark no longer accurately designates source and consumers are likely to be misled.
- In a Lanham Act counterfeiting case, a court must apply the statutory framework of 15 U.S.C. § 1117(b) when deciding attorney’s fees; a flat denial without engaging the statutory standard is improper.
- Contributory trademark infringement requires more than selling compatible, non-branded parts; liability depends on proof of the required knowledge or intent that purchasers will use the goods to infringe.

## Conclusion

The Ninth Circuit required an expanded injunction barring retention of Rolex trademarks on materially altered watches, remanded for proper consideration of attorney’s fees under § 1117(b), and otherwise left the district court’s damages ruling and rejection of contributory infringement liability intact.


Rolex Watch, U.S.A., Inc. v. Michel Co., 179 F.3d 704 (9th Cir. 1999)