The U.S. District Court for the Southern District of New York (Forrest, J.) has dismissed Lanham Act claims brought by Swiss watch manufacturer TechnoMarine SA against Pryor Cashman client Jacob Time, Inc., an online discount retailer of watches. The case, TechnoMarine SA v. Jacob Time, Inc., No. 12 Civ. 0790 (KBF), deals with the sale of so-called “grey market” goods, which are goods that are resold through unauthorized channels.

TechnoMarine alleged that Jacob Time was not specifically authorized to sell “TechnoMarine” brand watches, and that TechnoMarine had purchased the watches from other, authorized dealers, in violation of those dealers’ distribution contracts. TechnoMarine alleged that Jacob Time’s discount sales of “TechnoMarine” watches constituted sales of counterfeit or non-genuine goods that confused consumers, thereby entitling TechnoMarine to damages under the federal Lanham Act for trademark infringement, trademark dilution and false designation of origin. TechnoMarine also sought damages under the Copyright Act and various state common law theories.

The Court dismissed all of TechnoMarine’s Lanham Act claims and its state unfair competition claim at the pleadings stage, agreeing with Pryor Cashman’s arguments that TechnoMarine did not “plausibly” plead counterfeiting or consumer confusion. To the contrary, by alleging that Jacob Time had acquired genuine “TechnoMarine” products, albeit through allegedly unauthorized means, TechnoMarine’s pleading embraced the notion that the watches sold by Jacob Time were not “counterfeits.” In addition, the complaint failed to provide a reasonable basis to infer that customers were actually or likely to be confused, particularly where Jacob Time’s discounted sales prices varied substantially from the price-point maintenance observed by TechnoMarine’s specifically cited “authorized” dealers.

The decision is an important illustration of how federal courts today are not required to accept all allegations by plaintiffs as true when those allegations appear implausible on their face.

This was the second time that the Court had dismissed TechnoMarine’s claims. In an earlier decision, the Court dismissed TechnoMarine’s complaint in its entirety but allowed TechnoMarine an opportunity to replead with additional facts. In its October 24, 2012 decision, the Court agreed with Pryor Cashman’s arguments that TechnoMarine’s Second Amended Complaint did not resolve its pleading deficiencies. The Court dismissed the trademark dilution and unfair competition claims, this time with prejudice, and allowed TechnoMarine an opportunity to replead its other Lanham act claims at a later date if discovery warrants.

The Court also dismissed without prejudice claims alleging that Jacob Time had acquired “stolen” watches from an unidentified authorized distributor in Latin America, but allowed TechnoMarine’s claim for tortious interference with contract to proceed.

The Court additionally allowed TechnoMarine’s copyright infringement claim to proceed based primarily upon the highly controversial decision by the U.S. Court of Appeals for the Second Circuit in John Wiley & Sons, Inc. v. Kirtsaeng, which is currently being reviewed by the U.S. Supreme Court. That case addresses whether the so-called “first-sale doctrine” under the Copyright Act, which bars copyright infringement suits against the resale of goods that have been legitimately sold into commerce in the first place (such as grey market goods), applies only to domestically-manufactured goods or to goods manufactured abroad (as TechnoMarine alleges its watches to be). The Court specifically noted that this matter is currently the subject of Supreme Court review and “that the bounds of the legitimate first sale doctrine remain unsettled.” The Supreme Court’s eventual ruling in the Kirtsaeng case, expected later this term, may impact TechnoMarine’s ability to maintain its copyright claim against Jacob Time.

To read the full decision in TechnoMarine SA v. Jacob Time, Inc., please click here.

Pryor Cashman Litigation Partner William Charron and Associate Saritha Reddy represented Jacob Time in the litigation.