Ninth Circuit Upholds Customs’ Right to Impose Civil Penalty on Importer of Counterfeit Hilfiger Watches Even Though Hilfiger did not make Watches at Time of Seizure

The Ninth Circuit Court of Appeals has reversed a district court ruling that U.S. Customs could not impose a civil penalty on an importer of counterfeit Tommy Hilfiger watches because Hilfiger itself did not make watches at the time of the seizure. U.S. v Able Time, Inc., — F.3d —-, 2008 WL 4350027 (9th Cir. Sept. 25, 2008).  Able Time, Inc. imported a shipment of watches into the United States. The watches bore the mark “TOMMY,” which is a registered trademark owned by Tommy Hilfiger Licensing, Inc. Tommy Hilfiger did not make or sell watches at the time of the seizure.  However, it owned a U.S. trademark registration for the mark “TOMMY” in International Class 3 for cosmetics, cologne and similar products. The Bureau of Customs and Border Protection seized the watches pursuant to the Tariff Act, which authorizes seizure of any “merchandise bearing a counterfeit mark.”  19 U.S.C. § 1526(e).  Customs’ forfeiture action against the watches was dismissed for defective service of process and could not be re-filed because the statute of limitations had run.  However, Customs also imposed a civil penalty upon Able Time pursuant to 19 U.S.C. § 1526(f), which authorizes the imposition of a fine upon any person who imports merchandise that is seized under § 1526(e). The district court concluded on summary judgment that, because Tommy Hilfiger did not make watches at the time of the seizure, the watches imported by Able Time were not counterfeit, and the civil penalty imposed by Customs was unlawful.  The Ninth Circuit reversed, holding that Customs may impose a civil penalty pursuant to 19 U.S.C. § 1526(f) upon an importer of merchandise bearing a counterfeit mark, even though the owner of the registered mark does not manufacture or sell the same type of merchandise.  Under the Ninth Circuit’s ruling, “to run afoul of the civil penalty provision of the Tariff Act,… the offending merchandise must bear a mark identical to or substantially indistinguishable from a registered trademark owned by a United States citizen or corporation, where the offending merchandise copies or simulates the registered trademark, meaning that it is likely to cause the public to associate the offending merchandise with the registered trademark under the” traditional likelihood of confusion test applied in the Ninth Circuit (the Sleekcraft test).  It remanded the case to the district court to determine whether (1) the mark on the watches is identical to or substantially indistinguishable from the registered mark pursuant to 15 U.S.C. § 1127, and (2) whether the offending mark copies or simulates the registered mark pursuant to 15 U.S.C. § 1124, which amounts to the traditional likelihood of confusion test for infringement.