## Facts

- Zino Davidoff SA owned valid trademarks for the COOL WATER fragrance line and licensed manufacture/marketing to Coty and affiliates.
- Davidoff and Coty used a quality-assurance and anti-counterfeiting program centered on a unique production code (UPC) printed on each bottle and package.
- The UPC encoded unit-specific production information (e.g., time/place/line of manufacture and ingredients).
- Davidoff used the UPC to (1) detect counterfeits (missing or repeated fake codes) and (2) conduct targeted quality investigations and recalls by isolating specific lots or runs.
- Davidoff did not authorize CVS as a retailer; CVS obtained COOL WATER through gray-market distributors.
- Davidoff found counterfeit COOL WATER products at CVS in 1998 and again in 2005; CVS agreed to remove counterfeits and later claimed it would buy only from an authorized distributor.
- Davidoff subsequently found additional counterfeit and tampered products at CVS and also found many units with the UPC cut out, ground off, or otherwise removed.
- Removal of the UPC prevented Davidoff from using its system to detect counterfeits or trace potentially defective units.
- Davidoff sued under the Lanham Act and related theories, asserting that sale of otherwise genuine but UPC-stripped goods interfered with its legitimate quality-control measures.

## Issues

1. Whether resale of otherwise genuine gray-market goods with removed production codes constitutes trademark infringement by interfering with the trademark owner’s legitimate, non-pretextual quality-control system and creating likely consumer confusion as to quality.
2. Whether removal of the production codes makes the goods “materially different” from authorized-channel goods so that the first-sale doctrine does not bar an infringement claim.

## Decision

- The Second Circuit affirmed the district court’s preliminary injunction barring CVS from selling Davidoff goods with the UPC removed.
- The court held Davidoff was likely to succeed because the UPC was a legitimate, substantial, and non-pretextual quality-control and anti-counterfeiting device.
- The court concluded that stripping the UPC interfered with Davidoff’s ability to control quality and police counterfeits, supporting a likelihood of consumer confusion.
- The court also found the UPC removal created a material difference from authorized goods, defeating CVS’s first-sale defense for the altered products.
- The court agreed that impaired quality control and increased risk of undetected counterfeits supported irreparable harm and that the balance of hardships favored limited injunctive relief.

## Legal Principles

- Trademark law protects a mark owner’s ability to control the quality of goods sold under its mark; that control is part of what the mark signals to consumers.
- Even if goods originated with the trademark owner, interference with bona fide quality-control measures can render the goods non-genuine for Lanham Act purposes and can support a finding of likely confusion.
- Quality-control measures must be legitimate, actually used, and non-pretextual; disabling such measures can constitute actionable interference.
- The first-sale doctrine does not protect resale of trademarked goods that are materially different from authorized goods; a difference is material if it is likely relevant to consumers’ purchasing decisions, including differences affecting assurance of quality and authenticity.
- Preliminary injunctive relief is warranted where the plaintiff shows likelihood of success and irreparable harm from loss of control over reputation and goodwill tied to the mark.

## Conclusion

The court upheld a preliminary injunction because removing Davidoff’s unit-specific production codes undermined a bona fide quality-control and anti-counterfeiting system, creating likely confusion and a material difference from authorized goods, thereby supporting Lanham Act infringement despite the goods’ gray-market origin.


Zino Davidoff SA v. CVS Corp., 571 F.3d 238 (2d Cir. 2009)