Weil Ceramics & Glass, Inc. v. Dash

878 F.2d 659, 1989 WL 54859

• Court: Court of Appeals for the Third Circuit
• Decided: May 25, 1989
• Docket: Nos. 86-5187, 86-5207
• Status: Published

Opinions

OPINION OF THE COURT

A. LEON HIGGINBOTHAM, Jr., Circuit Judge.

On this appeal we are asked to determine the availability of trademark and tariff act protections to an American company— which is owned by the same entity that owns the foreign manufacturer of a good, but which holds a valid American trademark for the foreign manufactured good— against parallel imports or so-called “gray-market” goods. Specifically, we are asked to determine whether § 32 of the Lanham Act, 15 U.S.C. § 1114 (1982), makes damages available to the American trademark holder for trademark infringement and if § 42 of that act, 15 U.S.C. § 1124 (1982), may be employed on behalf of the American company to prohibit the importation of gray-market goods.

This appeal also raised the question of whether § 526 of the Tariff Act, 19 U.S.C. § 1526 (1982), could be employed to preclude the importation of gray-market goods. That section has been construed by the Customs agency in its regulations as allowing the importation of gray-market goods in those cases where the American trademark holder is owned by, or owns, the foreign manufacturer of the good. See 19 C.F.R. § 133.21 (1987). Appel-lee/Cross-Appellant contended, and the district court found, that the Custom’s agency's regulation was inapplicable. Since the filing of this appeal, however, the agency’s regulation was construed in a decision of the Supreme Court — unrelated to the present appeal — which raised the same issue. See K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 108 S.Ct. 1811, 100 L.Ed.2d 313 (1988). That decision controls the claim raised by the Appellee/Cross-Appel-lant regarding § 526 in this case, and directs that the decision entered by the district court on its behalf be reversed. K Mart is also instructive to the disposition of the Appellee/Cross-Appellant’s contentions regarding §§ 42 and 32. We conclude that neither of these sections provides the relief sought and, accordingly, we will reverse the decision of the district court.

Finally, we conclude that the district court erred by dismissing the contention raised by Appellee/Cross-Appellant under § 33(b) of Lanham Act, 15 U.S.C. § 1115(b) (1982), on the grounds that that section does not expressly or implicitly provide a right for private action. We conclude that § 33(b) may be used by a private litigant in an infringement action and, therefore, we will reverse the judgment of the district court. Notwithstanding that conclusion, however, we will remand with instructions that judgment be entered in favor of the Appellant/Cross-Appellee. We review, de novo, the appropriate scope of the statute and conclude that § 33(b) does not provide the remedy sought by the Appel-lee/Cross-Appellant in this case.

I. Background

This is an appeal about gray-market goods.¹ Appellee/Cross-Appellant, Weil Ceramics & Glass, Inc., (“Weil”), is the wholly owned subsidiary' of Lladro Expor-tadora, S.A., a Spanish corporation that is a sister corporation to Lladro, S.A., which manufactures fine porcelain in Spain.² The porcelain is handmade and each piece bears the trademark “LLADRO,” accompanied by a flower logo.

In February 1966, Weil, a New York corporation in the business of importing and selling fine porcelain and glassware, became the exclusive distributor in the United States of Lladro porcelain. The following year Weil obtained a valid United States registration for the LLADRO trademark and continued as the exclusive distributor of the porcelain.

In 1973, Lladro, S.A. acquired 50% of Weil’s stock. At that time, Weil assigned all of its rights in its United States LLA-DRO trademark to Lladro, S.A. In 1977, Lladro Exportadora obtained Lladro, S.A.’s shares of Weil stock, as well as the remaining 50% of Weil stock, and became the sole owner of Weil. In 1983, Lladro Exportado-ra assigned the United States LLADRO trademark back to Weil.

In 1982, Appellants/Cross-Appellees Jal-yn Corporation and its president, Bernard Dash, (together “Jalyn”), began importing LLADRO porcelain. Jalyn legally obtained the porcelain in Spain from distributors of Lladro, S.A. and sold it in the United States without the consent of Weil. In 1984, Weil filed a complaint in the federal district court for the district of New Jersey seeking declaratory and injunctive relief against Jalyn’s continued import of Lladro porcelain and money damages for trademark infringement.

The District Court’s Decision

In its complaint, Weil contended that Jal-yn’s import and sale of Lladro porcelain violated Weil’s exclusive right to use the trademark pursuant to § 33(b) of the Lan-ham Act. 15 U.S.C. § 1115(b)(1982). Weil further contended that Jalyn’s actions constituted an infringement on its trademark in violation of §§ 32(l)(a) and 42 of the Lanham Act, and a violation of § 526 of the Tariff Act. 19 U.S.C. § 1526 (1982). After the completion of discovery, Weil and Jalyn filed cross motions for summary judgment.

The district court dismissed Weil’s contention under § 33(b) because it concluded that that section does not provide for private enforcement. It held that the language of § 33(b) “does not establish any intent by Congress to create a cause of action.” Weil Ceramics & Glass, Inc. v. Dash, 618 F.Supp. 700, 703 (D.N.J.1985). The district court determined that § 33(b) “merely states the evidentiary status of an incontestable mark,” id., and noted that “§ 32 [of the Lanham Act] provides an effective remedy for the owner of a mark which has been improperly used by another.... [and] since § 32 expressly provides a remedy, the statutory scheme effectively negates any congressional intent to create a cause of action under § 33(b).” Id. at 704.

In light of its conclusion regarding § 33(b), the district court stated its view that Weil’s infringement action turned upon § 32. On the claim based on that section, however, the district court granted Weil’s motion for summary judgment. It held, in pertinent part, that “[i]n order to prevail on its claim under § 32(l)(a), Weil must show that ... [Jalyn’s] use [of the LLADRO trademark] is likely to cause ‘confusion.’ ” Weil Ceramics, 618 F.Supp. at 704. Jalyn had argued, as it does on this appeal, that because the porcelain that it sold was genuine — i.e., the trademark was affixed by the manufacturer and was no different in character from the porcelain sold by Weil — the goods did not cause the “confusion” to which § 32(l)(a) refers. The district court rejected that argument. It found that the porcelain goods imported by Jalyn “are not a copy or imitation,” Id. at 703, but nonetheless concluded that the trademark act proscriptions applied. Noting that “relatively few cases have confronted this issue and the courts have split, ... [the district court] conclude[d] ... that genuine goods may cause confusion.” Id. at 706.

As support for its holding, the district court relied principally upon the Supreme Court’s decision in A. Bourjois & Co. v. Katzel, 260 U.S. 689, 43 S.Ct. 244, 67 L.Ed. 464 (1923). The district court read that decision as having established the “territoriality principle” of trademark law which views trademarks as having separate legal existences in each country in which they are registered, and as symbolic of “the goodwill of the domestic markholder whose reputation backs the particular product in that territory.” Weil Ceramics, 618 F.Supp. at 705. In that light, the district court concluded that “even if a trademark correctly identified the manufacturer of the goods, it would still be an infringing product if it deceived the public into believing that the domestic markholder’s goodwill stood behind the product.” Id. The district court then analyzed the factual evidence of Weil’s independent goodwill in the LLADRO trademarked porcelain, and concluded that Weil had demonstrated that no issue of material fact existed concerning Weil’s claim that Jalyn’s distribution of the porcelain in the United States had infringed Weil’s trademark. See id. at 706-14.

Finally, the district court reviewed Weil’s contention that § 42 of the Lanham Act and § 526 of the Tariff Act precluded Jal-yn’s continued importation of the LLADRO porcelain. Jalyn sought summary judgment on this contention on two bases: first, Jalyn contended that § 42, like § 32, does not provide that genuine goods are subject to claims raised under the trademark act. The district court rejected that argument and cited the Supreme Court’s decision in A. Bourjois & Co. v. Aldridge, 263 U.S. 675, 44 S.Ct. 4, 66 L.Ed. 501 (1923) for the proposition that “genuine goods may infringe under the trademark laws and further that such infringing goods would be excludable under both the trademark and customs laws.” Weil Ceramics, 618 F.Supp. at 715. It noted that a separate federal statute provides that § 42 and § 526 are not applicable to importations into the Virgin Islands of “genuine foreign merchandise bearing a genuine foreign trademark.” Id. at 715 (citing 48 U.S.C. § 1643 (1982)). In light of that specific preclusion, the district court concluded that “[i]f Congress did not believe that genuine goods were excludable under § 42 and § 526, then it would not have had to create a special exception for imports into the Virgin Islands.” Id. It held, therefore, that Jalyn’s importation of the LLADRO porcelain infringed Weil’s trademark pursuant to § 42 and was excludable under § 526.

Alternatively, Jalyn argued that neither § 526 nor § 42 could be employed to bar importation of the porcelain because of the federal regulation that explicitly excludes from § 526’s prohibition against parallel imports those goods that are distributed by a United States trademarkholder that has a corporate relationship with the foreign manufacturer. See 19 C.F.R. § 133.21(c)(2) (1987). The district court also rejected that argument. It concluded that “Weil has established a separate and independent goodwill for the Lladro mark,” Weil Ceramics, 618 F.Supp. at 715, and therefore had demonstrated that it was the “owner” of the trademark. In the district court’s view, “whether the domestic markholder is independent does not depend on its relation to a foreign entity, but rather upon whether there is a distinct goodwill for the product in the United States.” Id. at 716. The district court held that the “common control” exclusion from the prohibition of parallel imports was inapplicable because that exclusion did not define or limit the scope of § 526 or § 42, but rather only defined the Customs agency’s role administering the statute. Id. at 717. It held that the exclusions in §§ 133.21(e)(1) and (2) provided only that the goods imported by Jalyn were not subject to “automatic exclusion by Customs under the regulations.” Id. at 718. (emphasis in original). Accordingly, the district court held that the regulation did not proscribe a judicial determination that the goods “cause[d] confusion under § 42 and may be excluded under § 526.” Id. It found that such confusion existed and, therefore, that both § 42 and § 526 were available to preclude Jalyn’s continued import of the porcelain.

Jalyn filed this appeal from the decision of the district court granting summary judgment to Weil on its claims regarding §§32 and 42 of the Lanham Act and § 526 of the Tariff Act. Weil cross-appealed the dismissal of its claim based upon § 33(b) of the Lanham Act. Subsequent to the filing of appeals in this case, the Supreme Court granted certiorari review of a consolidation of cases, decided by the Court of Appeals for the District of Columbia, in which that Court of Appeals had determined that the Customs Agency’s promulgation of § 133.21 was inconsistent with § 526. We held disposition of this appeal in abeyance curia advisari vult, pending the decision of the Supreme Court. In K Mart, the Supreme Court resolved explicitly one of the principal issues raised in the present appeal, and gave important guidance for the resolution of the remaining issues.

II. K Mart v. Cartier, Inc.

K Mart, similar to the present case, concerned the import of parallel goods without the consent of the American trademark holder. The focus of the Court’s opinion was the Customs Agency’s construction of § 526 of the Tariff Act as reflected by its promulgation of § 133.21. Section 526 prohibits the importation

into the United States [of] any merchandise of foreign manufacture if such merchandise ... bears a trademark owned by a citizen of, or by a corporation or association created or organized within, the United States, and registered in the Patent and Trademark Office by a person domiciled in the United States ... unless written consent of the owner of such trademark is produced at the time of making entry.

19 U.S.C. § 1526(a) (1982).³ By its promulgation of § 133.21, however, the Customs Agency construed § 526 to except goods for which the United States trademark is not solely “owned by” a domestic entity. Accordingly, that regulation permits the entry of goods manufactured abroad by the “same person” who holds the United States trademark or by a person who is “subject to common control” with the United states trademark holder. 19 C.F.R. §§ 133.-21(c)(1), (2) (1987).⁴

In K Mart, the Court addressed claims that these two exceptions for “common control” and “authorized use” to § 526’s prohibition against parallel imports are inconsistent with § 526. 108 S.Ct. at 1816-17. The Court determined that §§ 133.-21(c)(1) & (2) were reasonable constructions of ambiguity in the language of § 526 and concluded that those sections were consistent with the intent of § 526. 108 S.Ct. at 1814.

In its analysis, the Court identified three general case scenarios in which the gray-market goods issue is presented, and evaluated the reasonableness of the application of § 133.21 to each of those scenarios. The case 1 scenario, which the Court described as prototypical, involves a domestic company — that is independent of the foreign manufacturer — which purchases the right from the foreign company to register and use that company’s trademark in the United States. The case 2 scenario involves a domestic company that registers a trademark for a good produced by a foreign manufacturer with which the domestic company shares a corporate affiliation. This scenario has three variations: a foreign company that has an incorporated subsidiary in the United States which distributes its product domestically (case 2a); a domestic company that incorporates a subsidiary manufacturing company abroad and then imports its goods (case 2b); or a domestic company that establishes an unincorporated manufacturing division abroad and then imports the foreign manufactured product into the United States (case 2c). The case 3 scenario involves a domestic trademark holder that authorizes an independent foreign manufacturer to use its trademark. See id. 108 S.Ct. at 1814-15.

The opinion of the Court, written by Justice Kennedy, was founded upon different majorities for each of the holdings announced in its separate parts.⁵ Significantly, however, that opinion stated the unanimous judgment of the Court regarding application of § 133.21 to the scenario in which a domestic subsidiary is the trademark holder for foreign manufactured goods that are produced by its foreign parent. See K Mart, 108 S.Ct. at 1818. (“All Members of the Court are in agreement that the agency may interpret the statute to bar importation of gray-market goods in what we have denoted case 1 and to permit the imports under case 2(a).”) (emphasis added). The Court concluded that the term “owned by,” as it appears in § 526, “is sufficiently ambiguous, in the context of the statute, that it applies to situations involving a foreign parent, which is case 2a.” Id. The Court noted further that “[t]his ambiguity arises from the inability to discern, from the statutory language, which of the two entities involved in case 2a can be said to ‘own’ the U.S. trademark if, as in some instances, the domestic subsidiary is wholly owned by its foreign parent.” Id.6

The ease before us most closely resembles the case 2(a) scenario. Weil is the wholly owned subsidiary of the foreign manufacturer and, consistent with the Supreme Court’s decision regarding that scenario, we are persuaded that § 133.21 excludes the goods imported by Jalyn from § 526’s prohibition of parallel imports.

Weil argues that K Mart does not preclude it from protection against parallel importation by § 526 because Weil has demonstrated factually that it is the independent owner of the United States LLA-DRO trademark even though Weil is not independent of the foreign manufacturer, Lladro, S.A. It reads K Mart as affirming only the application of § 133.21 to instances of sham incorporation, in which a foreign manufacturer incorporates a shell domestic corporation so that it can control the distribution of its product in the United States without competition. Weil contends, essentially, that § 133.21 is properly viewed as a presumption against the extension of § 526 to goods imported in the 2(a) circumstance, but that that presumption should not be irrebuttable. Accordingly, it asserts that since it can demonstrate factually that it was not a sham incorporation by Lladro, S.A., and that it independently owns the LLADRO trademark, § 133.21 should not operate to preclude the application of § 526.

Although Weil is not a subsidiary that was incorporated by its parent, its affiliation with Lladro, S.A. enables it nonetheless to enjoy every benefit that inheres in the corporate relationship that the Supreme Court described in the case 2(a) scenario. More significantly, that relationship also provides the opportunity for the foreign manufacturer’s control of the United States market — under the auspices of the trademark act — that § 133.21 intended to preclude. Thus, although Weil was not a “sham” incorporated by Lladro with the specific intent to benefit from the protections of the trademark act, its present relationship with Lladro nonetheless presents the potential for undesired monopoly of the domestic market and warrants application of § 133.21. Moreover, we note that the Court did not limit its holding in K Mart to the decision that § 133.21 is a reasonable construction of § 526 only so far as that regulation provides a “presumption” of ownership in the trademark. We read § 133.21 as providing an absolute exception from § 526 for the import of parallel goods in the case 2a scenario and we read K Mart as upholding that construction.⁷

III. Sections 42 and 32

Weil argues that even if § 526 does not bar importation by Jalyn of the LLADRO porcelain, § 42 — which was not specifically addressed in K Mart8 — does. Moreover, Weil contends that nothing in K Mart precludes its recovery of damages for infringement under § 32 for Jalyn’s distribution of the LLADRO porcelain in the United States. We are persuaded, however, because of the relationship that Weil has with Lladro, S.A., that the protections afforded by §§ 42 and 32 of the Lanham Act are also inapplicable.

Weil’s argument on this point has two components: first, it asserts that it owns the United States LLADRO trademark independently of its foreign parent and, pursuant to the territoriality theory attributed to Katzel, it is entitled to the full measure of trademark protection provided by the Lanham Act. In that light, Weil contends that § 42’s preclusion of goods that “copy or simulate” a trademark and that § 32’s preclusion of marks that “imitate” a registered trademark are applicable —notwithstanding the fact that the goods are genuine and bear the trademark of the manufacturer — because Jalyn’s importation of LLADRO porcelain into the United States, without Weil’s permission, represents a “copying” of the registered United States trademark.

a. The “territoriality” theory

Weil’s argument relies in large measure upon a theoretical concept of trademark law, attributed to the Supreme Court’s decision in Katzel, that is the subject of significant debate in the courts, compare NEC Electronics v. CAL Circuit Abco, 810 F.2d 1506 (9th Cir.) (rejecting the theory and distinguishing Katzel on its facts), cert denied — U.S. -, 108 S.Ct. 152, 98 L.Ed.2d 108 (1987); Olympus Corp. v. United States, 792 F.2d 315 (2d Cir.1986) (same), cert. denied, — U.S. -, 108 S.Ct. 2033, 100 L.Ed.2d 618 (1988), with Dial Corp. v. Manghnani Inv. Corp., 659 F.Supp. 1230, 1238 (D.Conn.1987); Dial Corp. v. Encina Corp., 643 F.Supp. 951, 954 (S.D.Fla.1986); Bell & Howell: Mamiya Co. v. Masel Supply Co., 548 F.Supp. 1063, 1066 (E.D.N.Y.1982), preliminary injunction vacated, 719 F.2d 42 (2d Cir.1983). That theory is also the subject of significant discussion among the commentators. Compare Bicks, Antitrust and Trademark Protection Concepts in the Import Field, 49 T.M.R. 1255, 1257 (1959) (arguing that the holding of Katzel should be limited to the circumstances of that case) with Knoll, Gray-Market Imports: Causes, Consequences and Responses, 18 Law & Pol. in Int’l Bus. 145 (1986) (endorsing territoriality theory). As we discussed above, that theory recognizes the separate existence of a trademark in each territory in which it has been registered. In the present case, the district court was persuaded that the theory should be available to Weil in the circumstances of this case. We do not agree.

In reaching its decision, the district court relied significantly upon the rationale of the Supreme Court’s decision in Katzel. That case also concerned the import of genuine goods without the consent of the holder of a valid United States trademark. It involved a United States company, Bour-jois, that purchased all of the United States business, the good will and rights to the United States trademark in “Java” face powder from the French manufacturer. Bourjois was completely independent of the French company, and its purchase of the rights to the United States trademark in the face powder was made at significant expense. A competitor of Bourjois was able to purchase the face powder abroad, import it into the United States and market it here under the French trademark in competition with Bourjois. The Supreme Court, reversing the decision of the Court of Appeals for the Second Circuit, held that the import of the competing goods infringed the domestic trademark holder’s rights.

The Court noted that the French manufacturer would violate its assignment agreement if it marketed the product in the United States itself and similarly, it could not usurp that agreement by benefitting from the sale abroad to Bourjois’s United States competitor.

That case, however, does not present the same scenario as the present case. First, and perhaps most significantly, Bourjois was completely independent from the foreign manufacturer. It entered into an arms-length exchange to acquire the rights to the trademark with the clear intent that the foreign manufacturer would not market the trademarked good in the United States. See Katzel, 260 U.S. at 691, 43 S.Ct. at 245 (noting that the statute authorizing assignments clearly precluded the French manufacturers from directly entering the United States market and distributing the trademarked goods in competition with Bourjois). Moreover, Bourjois obtained control over the quality of the product and, presumably, could have improved the quality of the product that it marketed in the United States while retaining use of the trademark. It had no control over the goods that the foreign manufacturer sold abroad which were imported into the United states and sold with the same trademark. See NEC Electronics, 810 F.2d at 1509.

In the present case, no such compelling circumstances exist. Weil is not independent of the foreign manufacturer. Although it was not incorporated by Lladro, S.A., it nonetheless benefits from the corporate relationship that exits.⁹ Thus, even if Weil loses some share of its United States market to Jalyn, it nonetheless benefits from the profits it received as part of the corporate entity from which Jalyn purchased the goods abroad. Moreover, if that corporate entity decides that the profit margin from the sale of the goods to Jalyn abroad is not as significant as would be the profit margin from a United States market in which Jalyn did not compete, it has an obvious self-help mechanism: it can cease the sale to Jalyn abroad and thereby eliminate effectively its United States competition with Weil.¹⁰ We do not read the Lan-ham Act, however, to protect a foreign manufacturer — that either owns or is owned by a domestic trademark holder— from competition in the sale of its product in the United States by a domestic importer that it has supplied. Moreover, the LLA-DRO porcelain that Jalyn imports is identical to the porcelain that Weil distributes. See Weil Ceramics, 618 F.Supp. at 703 (the district court found that goods sold by Jal-yn are “genuine Lladro merchandise and are not a copy or imitation.”)¹¹ Weil has made no contention that, pursuant to its agreement with Lladro, S.A., Weil is entitled to, and does in fact, alter the quality of the porcelain that it distributes in the United States.

In our view, the Court’s conclusion in Katzel does not represent the establishment of a broad “territoriality theory” applicable to every instance in which a domestic company acquires the United States trademark for a foreign manufactured good. We read that decision as creating an exception to the general application of trademark law in order to protect adequately the interests of domestic trademark holders such as Bourjois.

Our conclusion is consonant with both K Mart and Katzel, and illustrates the synthesis between those Supreme Court decisions. If placed within the context of the scenarios identified by the Court in K Mart, Katzel would be described as case 1. K Mart clearly held that § 526 was intended to protect domestic trademark holders in that type of case and, indeed, § 526 was enacted specifically to counter the decision of the Court of Appeals for the Second Circuit in Katzel which had reached the opposite result.¹² In our view, Katzel was intended specifically to reach the case 1 scenario and extend trademark act protection to domestic trademark holders that are truly independent of the foreign manufacturer. We do not read Katzel to extend beyond that circumstance. Indeed, in his explication of Katzel in K Mart, Justice Brennan noted that Bourjois, the domestic trademark holder in Katzel, was “the prototypical (case 1) gray-market victim, [that had] purchased its trademark rights, at arms length and at a substantial cost, from an unaffiliated foreign producer.” K Mart, 108 S.Ct. at 1822 (Brennan, J. concurring). Justice Brennan stated that it was on the basis of those facts that the Supreme Court extended the trademark act protections to Bourjois. He noted, however, that

the gray-market encroachment on the Java market would have been considerably less troubling had Bourjois had control over the foreign manufacturer’s import conduct or over its sales abroad to third parties who might import; it would essentially have been seeking to protect itself from its own competition.

Id. (emphasis added). Justice Brennan concluded that the reasons that compelled application of § 526 to the case 1 instance (i.e. that the independent domestic trademark holder, unlike the affiliated holder, stands to lose the full benefit of its investment as the result of gray-market interference and it has no control over the importation of the competing goods or the sale to third parties abroad), do not apply to the case 2 instance. See id. at 1823. In his view,

[t]hese differences furnish perfectly rational reasons that Congress might have intended to distinguish between a domestic firm that purchases trademark rights from an independent foreign firm and one that either acquires identical rights from an affiliated foreign firm or develops identical rights and permits a manufacturing subsidiary or division to use them abroad.

Id. In that light, Justice Brennan perceived no basis for the conclusion that § 526 was intended to reach the case 2 circumstance. In our view, Justice Brennan’s opinion also demonstrates that Katzel was not intended to extend the provisions of § 42 or § 32 to the case 2 instance.

The view that we express today is shared by the Court of Appeals for the Ninth Circuit, which noted in NEC Electronics that the rationales supporting the Supreme court’s decision in Katzel “presuppose the American owner’s real independence from the foreign manufacturer, and courts interpreting Katzel have repeatedly emphasized this factor.” NEC Electronics, 810 F.2d at 1509. The appellate court noted further that “[wjhere the American trademark owner is a wholly-owned and controlled subsidiary of the foreign manufacturer, neither of the Katzel rationales applies.” Id. at 1510. See also Olympus Corp., 792 F.2d at 321 (limiting Katzel to the “equities” presented by that case and holding that “[a]bsent the Katzel situation, [§ 42] applies only to merchandise bearing counterfeit or spurious trademarks that ‘copy or simulate’ genuine trademarks”).

b. Goods that “copy,” “simulate,” “counterfeit,” or “imitate”

Having concluded that Katzel did not create a broad territoriality principle that is applicable to every instance of parallel imports, we can more easily resolve the remainder of Weil's argument regarding § 42 and § 32. Essentially, Weil argues that our reading of § 42’s prohibition of goods that “copy or simulate” a United States trademark, and of § 32’s similar proscription of the commercial distribution of goods that “counterfeit” or “imitate” a valid United States trademark, should be informed by the principle attributed to Katzel. Accordingly, it argues, Weil’s registration of the LLADRO trademark in the United States should be viewed as having created a trademark in the United States that is distinct from any other mark (even the identical mark placed by the same manufacturer) and that that mark should be accorded the full measure of United States trademark law. Weil contends, therefore, that its trademark is “copied” by any unauthorized use. In that light, Weil argues that, notwithstanding the fact that the porcelain imported by Jalyn is genuine and that the marks affixed to the porcelain are placed by the manufacturer just as the marks affixed to the porcelain sold by Weil, the porcelain that Jalyn imports “copies” Weil’s trademark.

Because of our conclusion that nothing in Katzel extends the trademark act protections to the circumstances of this case, we need not attempt the strained interpretation of the language of § 42 or § 32 that Weil advocates. Our inquiry is only to discern the plain meaning of the language of those sections and, on that review, we do not reach the conclusion urged by Weil.¹³

As the starting point for our analysis, we must ascertain the appropriate definition to be given to the terms employed by § 42 and § 32 of the Lanham Act. In pertinent part § 42 provides that

no article of imported merchandise ... which shall copy or simulate a trademark registered in accordance with the provisions of this chapter ... shall be admitted to entry at any custom house of the United States.

15 U.S.C. § 1124 (1982). Section 32(l)(a) provides that

(1) [a]ny person who shall, without the consent of the registrant—

(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause a mistake or to deceive; ... shall be liable in a civil action by the registrant for the remedies hereinafter provided

15 U.S.C. § 1114(l)(a) (1982), Weil urges that § 42 is applicable to provide injunctive relief against importation even if § 526 does not and that § 32 is applicable to make damages available, and to provide injunctive relief against distribution, even if neither § 526 or § 42 bar importation. It contends that “the words ‘copy or simulate’ are neutral terms and are only directed to the physical and visual similarity between the registered mark and the mark on the imported product.” Supplemental Brief of Appellee (Dec. 5 1988) at 2. Consequently, it argues, “[w]hether or not the act of importation is a violation of § 42 depends on whether the importation is with or without the consent of the registrant.” Id. We can perceive of no basis, either in the specific language of the statute or in its underlying intent that supports such a reading.¹⁴

In this inquiry of statutory construction, we are assisted again by the Supreme Court’s decision in K Mart which noted that “[i]n ascertaining the plain meaning of [a] statute, the court must look to the particular statutory language at issue, as well as [to] the language and design of the statute as a whole.” K-Mart, 108 S.Ct. at 1817 (citing Bethesda Hospital Ass’n v. Bowen, 485 U.S. 399, -, 108 S.Ct. 1255, 1258, 99 L.Ed.2d 460 (1988); Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 220-21, 106 S.Ct. 2485, 2494, 91 L.Ed.2d 174 (1986)).¹⁵ In the light of these precedents, we look first to the plain language of the statute, which do we do not find to be ambiguous. In our view, the language of these sections reflects Congress’ intent to provide a remedy only to the domestic trademark holder who is injured by the distribution of like goods, which bear facsimile marks, that result in confusion to consumers or detriment to the goodwill developed by the trademark holder in the trademarked goods. “Trademark law generally does not reach the sale of genuine goods bearing a true mark even though such sale is without the owner’s consent.” NEC Electronics, 810 F.2d at 1509 (citing Monte Carlo Shirt, Inc. v. Daewoo Int’l (Am.) Corp., 707 F.2d 1054, 1057-58 & n. 3 (9th Cir.1983); Diamond Supply Co. v. Prudential Paper Products Co., 589 F.Supp. 470, 475 (S.D.N.Y.1984)).

The terms “copy,” “simulate,” “counterfeit” and “imitate” have readily comprehensible ordinary meanings. They are used commonly to refer to items that resemble, but are not themselves, the original or genuine artifacts. We are convinced that the Congress understood this commonly held meaning of these terms and intended to apply them literally in §§ 42 and 32.¹⁶ We are, therefore, unpersuaded that those sections are properly applied to the present case.

Our analysis of the “design of the statute as a whole” compels us even more to the conclusion that we have reached. The stated intent of the trademark act is

to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce; to protect registered marks used in such commerce from interference by State, or territorial legislation; to protect persons engaged in such commerce against unfair competition; to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits, or colorable imitations of registered marks; and to provide rights and remedies stipulated by treaties and conventions respecting trademarks, trade names, and unfair competition entered into between the United States and foreign nations.

15 U.S.C. § 1127 (1982). From this statement of purpose, we discern two broad policy goals that Congress sought to foster by this legislation: (1) protection against consumer deception (i.e. purchase of a good that is not what the consumer intended to purchase, but because of packaging or other deceptive imitation of the trademark appears to be the genuine trademarked good); (2) protection of the trademark holder’s investment in goodwill and noteworthiness that has been generated by the holder’s advertisements and quality from imitative goods over which the trademark holder has no control of quality.¹⁷ Sections 42 and 32 advance these policy goals but neither of the goals is undermined by the importation of genuine goods as in this case. Consumers who purchase Jalyn imported LLADRO porcelain get precisely what they believed that they were purchasing. For that same reason, Weil’s investment in and sponsorship of its trademark is not adversely affected because the goodwill that stands behind its product is not diminished by an association with goods of a lesser quality.

The only “injury” that we perceive Weil endures is the uncompensated for benefit that its advertisement and promotion of the trademark confers upon Jalyn. That loss to Weil is not inconsequential or insignificant. The remedy for it, however, is not properly found in the trademark law, particularly not in this case. Moreover, as we noted earlier, that “injury” is not completely uncompensated because Weil’s parent corporation profits by the sale of Jalyn abroad.¹⁸

It is more than likely that the framers of the trademark act did not contemplate the instance in which the “source” of a trademarked good would be different from its place of manufacture. The primary concern was to protect consumers and trademark holders from spurious imitations. In Katzel, the Court recognized that a broader measure of protection was necessary because of the difference in “source” between the trademark holder and the manufacturer in instances in which a foreign manufacturer sells its rights in the United States trademark to a domestic company. The Court, therefore, reasonably extended the trademark protections to that circumstance. In this case, however, for all intents and purposes, the trademark holder and the manufacturer are the same and there is no reason that compels us to read anything in the language of the act and extend further the protections of the trademark act to this circumstance.¹⁹

IV. Section 33

Finally, we consider the contention, raised by Weil on appeal, that the district court erred by refusing to adjudicate the claim of infringement predicated upon § 33 of the Lanham Act. 15 U.S.C. § 1115 (1982). In pertinent part, that section of the trademark act provides that

[i]f the right to use the registered mark has become incontestable under [the applicable provision] of this title, the registration shall be conclusive evidence of the registrant’s exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the affidavit filed [pursuant to the provisions of this title] ...

15 U.S.C. § 1115(b). As we have noted above, the district court did not reach this issue because it concluded that § 33(b) did not provide a private right of action. In the district court’s view, § 33(b) only “makes an incontestable mark conclusive evidence of an owner’s right to use the mark. It merely states the evidentiary status of an incontestable mark.” Weil, 618 F.Supp. at 703. The district court’s judgement rests upon a misreading of the Supreme Court’s decision in Park’N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985) and, accordingly, we will reverse.

a. Private Enforcement of § 33(b)

In its discussion of § 33, the district court correctly noted that the Supreme Court’s then recent decision in Park’N Fly was controlling. In our view, however, the district court’s interpretation of that decision is in error. The district court concluded that Park’N Fly held only that the appellate court’s decision in that case that § 33 could only be used “defensively” was in error. In the district court’s view, the Supreme Court’s decision provided “that § 33(b) could be used either offensively (by the registrant in an infringement action) or defensively. The Court did not, however, hold that § 33(b), in and of itself, provided a private right of action.” Weil, 618 F.Supp. at 704. This conclusion, however, appears internally inconsistent and, more significantly, directly contrary to the holding of Park’N Fly.

The district court notes that Park’N Fly may be used “offensively by the registrant in an infringement action,” Weil, 618 F.Supp. at 704. The district court does not, however, explain how that use is made other than in the context of a private litigant (i.e., the registrant) seeking equitable enforcement of a registered trademark. Moreover, the district court does not reconcile its interpretation of Park’N Fly with the fact that that case itself was a private action by a registered trademark holder seeking injunctive relief pursuant to § 33(b). The district court’s conclusion regarding § 33(b) is infected by the same error of interpretation that requires reversal of its decision regarding § 32.

In the district court’s view, the evidence of legislative intent that § 33(b) not be enforced by private action is that § 32 provides the enforcement mechanism for the rights provided by § 33(b). We read these sections as providing protection for different rights. Section 33(b) was designed to provide an equitable remedy to the holder of a registered trademark whose ownership or entitlement to use of the trademark has been challenged by another party. Section 32, however, reaches an entirely different circumstance. That section provides a remedy to trademark holders whose trademarks have been infringed by spurious imitations or copies. In the latter instance, the challenging party is not asserting a right to use the exact mark, which is the circumstance of a § 33(b) action, but rather contends that the copy that it employs is not sufficiently similar to the registered trademark to cause confusion. These actions are substantively different, and the district court was mistaken in its view that the remedy for a violation of § 33(b) is found in § 32.

Park’N Fly demonstrates clearly the Supreme Court’s view that § 33(b) provides for private enforcement. In its holding that § 33(b) was intended to provide a basis for equitable remedy to a registrant whose right to use a trademark has been challenged, the Court noted that “[section] 33(b)’s declaration that the registrant has an ‘exclusive right’ to use the mark indicates that incontestable status may be used to enjoin infringement by others. A conclusion that such infringement cannot be enjoined renders meaningless the ‘exclusive right’ recognized by the statute.” Park’N Fly, 469 U.S. at 198, 105 S.Ct. at 663. “Moreover,” the Court noted, “the language in three of the defenses enumerated in § 33(b) clearly contemplates the use of incontestability in infringement actions by plaintiffs.” Id. (citing §§ 33(b)(4)-(6), 15 U.S.C. §§ 1115(b)(4)-(6) (1982)) (emphasis added).

In the present case, the district court’s conclusion that § 33(b) did not provide for private enforcement is inconsistent with the legislative intent of the Lanham Act, and with the Supreme Court’s holding that “a conclusion that incontestable status can provide the basis for enforcement of the registrant’s exclusive right to use a trade or service mark promotes the goals of the statute.” Park’N Fly, 469 U.S. at 198, 105 S.Ct. at 663. Accordingly, the Court concluded that “[t]he incontestability provisions, as the proponents of the Lanham Act emphasized, provide a means for the registrant to quiet title in the ownership of his mark.” Id. In light of the Supreme Court’s guidance in Park’N Fly, we will vacate the decision of the district court in this case regarding § 33(b).

b. Inapplicability of § 33(b) to the present case

Our conclusion that the district court erred in its holding that § 33(b) does not provide the basis for a private action, however, does not lead us to the conclusion that Weil can prevail on that claim in this case.

In the context of its discussion of the appropriate application of § 33(b), the Supreme Court noted that “[t]he Lanham Act provides national protection of trademarks in order to secure to the owner of the mark the good will of his business and to protect the ability of consumers to distinguish among competing producers.” Park’N Fly, 469 U.S. at 198, 105 S.Ct. at 663. This explication of the rationale underlying the Lanham Act is consistent with our holding in this case regarding §§ 32 and 42, and its application to § 33(b) leads us similarly to the conclusion that that section is not properly applied to the circumstances of this case.

As we have noted above, § 33(b) was intended to provide the means for a registered trademark holder to “quiet title in the ownership of his mark.” Id. It is appropriately employed in the circumstance where a competing producer of a different good displays a registered trademark in the promotion of its good and contends on some ground (for example, it adopted use of the mark without knowledge of the registrant’s prior use and before the registration under § 33(b), see e.g., Thrifty Rent-A-Car System v. Thrift Cars, Inc., 831 F.2d 1177 (1st Cir.1987), or that the registrant abandoned the use of the trademark, see e.g., Kardex Systems, Inc. v. Sistemco, N. V., 583 F.Supp. 803 (D.Me.1984)) that the registrant should not have exclusive use of the trademarked item. This circumstance does not exist in the present case. The goods at issue are identical and the trademarks were affixed by the same party in both cases: the manufacturer. In our view, § 33(b) was not intended to reach this case and, accordingly, we conclude that summary judgment in favor of Jalyn is appropriate. Cf. Wynn Oil v. Thomas, 839 F.2d 1183, 1187 (6th Cir.1988)(evaluating trademark infringement action that was brought pursuant to § 33(b) and noting that its inquiry was “to determine whether consumers will be confused as to the origin of the product” because of something in the marks used to promote different products).

V. Conclusion

In light of the foregoing, we will reverse the decision of the district court granting summary judgment in favor of Weil on its claims that § 42 and § 526 are correctly employed to enjoin Jalyn’s importation of LLADRO porcelain. We will also reverse the decision of the district court granting summary judgment on behalf of Weil on its claim that § 32 provides damages for infringement for Jalyn’s distribution of the porcelain. Finally, we conclude that the district court erred by its dismissal of Weil’s claim on § 33(b), but notwithstanding that error, summary judgment in favor of Jalyn is appropriate. Accordingly, we will vacate the district court’s judgment as to that claim, and remand with instructions that the district court enter summary judgment on behalf of Jalyn.

All parties to this appeal will bear their own costs.

1 . The term “gray-market goods” refers to foreign manufactured goods, for which a valid United States trademark has been registered, that are legally purchased abroad and imported into the United States without the consent of the American trademark holder.

Appellants in the present case note that the term "gray-market" unfairly implies a nefarious undertaking by the importer, and that the more accurate term for the goods at issue is "parallel import." We agree that the term parallel import accurately describes the goods and is, perhaps, a better term because it is devoid of prejudicial suggestion. For that reason, we use that term in this discussion. However, we also employ the term “gray-market” good because, for better or worse, it has become the commonly accepted and employed reference to the goods at issue. See K Mart, 108 S.Ct. at 1814.

2 . The specific character of the relationship between Lladro, S.A. and Weil is that they share a common parent corporation, Sodigei, S.A. Sodi-gei is a Spanish corporation that is wholly owned by the Lladro family. It owns Lladro, S.A. as well as three other Spanish corporations which together own 100% of the stock of Lladro Exportadora, S.A. Lladro Exportadora owns 100% of Weil.

3 . The section is commonly referred to as § 526, notwithstanding its enumeration as § 1526 in its present statutory codification. The statute was originally enacted as § 526 of the Tariff Act of 1922, 42 Stat. 975. It was subsequently reenacted in identical form as § 526 of the 1930 Tariff Act, 19 U.S.C. § 1526, hence its present statutory designation.

4 . Section 133.21 implements the "[rjestrictions on importations of articles bearing recorded trademarks and tradenames.” 19 C.F.R. § 133.21 (1987). Significantly, however, the section delineates specific circumstances in which the restrictions do not apply. In pertinent part, the regulation provides that

[t]he restrictions set forth in [this section] do not apply to imported articles when:

(1) Both the foreign and the U.S. trademark or trade name are owned by the same person or business entity; [or]

(2) The foreign and domestic trademark or trade name owners are parent and subsidiary companies or are otherwise subject to common ownership or control

19 C.F.R. §§ 133.21(c)(1), (2) (1987) (emphasis added).

5 . In part I of Justice Kennedy’s opinion, in which Chief Justice Rehnquist and Justices White, Blackmun, O’Connor and Scalia joined, the Court held that "the common-control exception of the Customs Service Regulation, 19 C.F. R. § 133.21(c)(l)-(2) (1987), is consistent with § 526.” K Mart, 108 S.Ct. at 1817. That holding was concurred with in an opinion by Justice Brennan in which Justices Marshall and Stevens joined. See id. 108 S.Ct. at 1819-22.

Significantly, a separate majority of the Court concluded that subsection (c)(3) of the regulation, which precluded the domestic trademark holder from prohibiting the importation of goods made by an independent foreign manufacturer whom the domestic markholder has authorized to use the trademark, could not stand. As to that scenario (case 3), the Court concluded that

[u]nder no reasonable construction of the statutory language can goods made in a foreign country by an independent foreign manufacturer be removed from the purview of the statute.

K Mart, 108 S.Ct. at 1818-19 (emphasis added). In this holding, as in the Court’s holding as to the case 1 and case 2 scenarios (and, in our view, Katzel) the court relied upon the corporate relationship between the domestic mark-holder and the foreign manufacturer in the determination of the appropriate trademark protection.

6 . The concurring opinion of Justice Brennan went further than the majority’s view that § 133.21 was valid because it was a reasonable construction of ambiguous language in § 526. Justice Brennan stated explicitly that "Congress did not intend to extend § 526's protection to affiliates of foreign manufacturers (case 2)”. 108 S.Ct. at 1820 (Brennan, J., concurring). He concluded that

the legislative history and purpose of § 526 confirm ... that if Congress had any particular intent with respect to the application of § 526 to trademark owners affiliated with foreign manufacturers, it was to exclude them from its shield.

Id. 108 S.Ct. at 1826. It appears, therefore, that at least three of the Justices are of the explicit view that § 133.21 is not only a reasonable construction of § 526 in the case 2a scenario, but that it is the correct interpretation of the legislative intent of that statute.

7 . Our prior holding in Premier Dental Products v. Darby Dental Supply Co., 794 F.2d 850 (3d Cir.1986), is not contrary to our holding today, and neither is it inconsistent with K Mart. Premier Dental was a case 1 circumstance in which we held that § 526 was applicable to preclude the import of parallel goods. That holding was limited to the instance in which the domestic trademark holder and the foreign manufacturer were separate entities. Specifically,

[w]e conclude[d] that where a trademark is owned and registered in this country by an exclusive distributor who is independent of the foreign manufacturer and who has separate goodwill in the product, the distributor is entitled under Section 526 to prevent the importation even of genuine merchandise obtained from the same foreign manufacturer.

Premier Dental, 794 F.2d at 858 (emphasis added).

8 . See K Mart, 108 S.Ct. at 1832 n. 1 (Scalia, J., dissenting in part and concurring in part) (noting that 19 C.F.R. § 133.21(a), which the majority invokes and which concerns the copying or simulation of trademarks or trade names, is unrelated to § 526(a), “but rather implements § 42 of the Lanham Trade-mark Act").

9 . That corporate relationship began in 1968 when Lladro, S.A. purchased fifty percent of Weil.

10 . Cf. K Mart, 108 S.Ct. at 1823 (Brennan, J., concurring). Justice Brennan noted that

if the gray market harms a U.S. trademark holder in case 2a, 2b, or 2c, that firm and its foreign affiliate (whether a parent, subsidiary, or division) can respond with a panoply of options that are unavailable to the independent purchaser of a foreign trademark. They could, for example, jointly decide in their mutual best interests that the manufacturer (1) should not import directly to any domestic purchaser other than its affiliate; (2) should, if legal, impose a restriction against resale (or against resale in the United States) as a condition on its sales abroad to potential parallel importers; or (3) should curtail sales abroad entirely.

We note that additional self-help mechanisms available to the corporate entity in the case 2 circumstance include: sale of the products abroad at the same price as they are sold domestically, thereby assuring the same margin of profit; or distinguishing the goods sold abroad — either by producing or packaging or marking them differently, thereby assuring that the trademark will not be placed in domestic competition. See note 16 infra. Because this "panoply" of options is available to the domestic trademark holder in the case 2 scenario, the arguments for extension of the protections provided by the trademark act are much less compelling than they are in the case 1 circumstance.

11 . This is the conclusion reached by the district court. The fact that it made no finding that the porcelain distributed by Jalyn and that distributed by Weil are materially different is significant to our disposition of this appeal. Weil has contended on this appeal that the porcelain imported by Jalyn was of a materially different grade and quality from the porcelain imported by Weil. If true, that fact would provide a stronger argument for Weil’s claim of trademark infringement. See Original Appalachian Artworks v. Granada Electronics, 816 F.2d 68, 73 (2d Cir.1987) (holder’s trademark was infringed where dolls manufactured abroad were "materially different” from those manufactured in U.S., despite the fact that a single entity owned the trademark worldwide); El Greco Leather Products Co. v. Shoe World, Inc., 806 F.2d 392, 395 (2d Cir.1986) (Lanham Act protects “the right to control the quality of the goods manufactured and sold under the holder’s trademark.") However, we cannot reach that conclusion on the findings of record, and we premise our decision on the assumption that the porcelain imported by Jalyn was essentially identical to that imported by Weil.

12 . See H.R. 1223, 67th Cong., 2d Sess. 158, 62 Cong.Rec. 11602-05 (1922).

13 . The argument is well made that, having resolved the appropriate scope of § 526, there is nothing left to the inquiry regarding § 42. Section 526 was enacted specifically in response to the intermediate appellate court’s opinion in Katzel with the intent to close an interstice that Congress perceived existed in the then existing trademark law and resulted in the decision by the Court of Appeals for the Second Circuit in Katzel. Thus, the scope of protection that Congress intended § 42 to provide is embodied in § 526. (Indeed, some commentators have suggested that, in light of the Supreme Court's subsequent decision in Katzel, § 526 was rendered a nullity as a redundant statement of what the trademark law already provided.) Moreover, the legislative history reflects that, by passing § 526, Congress intended not only to amend the customs laws but to amend the trademark law as well. In that light, the reasonable interpretation of the scope of § 526 may also be read as the reasonable interpretation of § 42. See K Mart, 108 S.Ct. at 1824 & 1824 n. 5 (Brennan, J., Concurring); see also Note, Vivltar Corp. v. United States and Osawa & Co. v. B & H Photo: The Issue of Common Control in the Parallel Importation of Trademarked Goods, 17 Law & Policy in Int’l Bus. 177 (1985).

The alternate view to this interpretation is that the scope of the trademark law was extended by the Supreme Court’s decision in Katzel, which, although decided subsequent to the passage of § 526, did not make reference to that section in its holding. (In deciding Katzel, the Supreme Court applied § 27 of the Trademark Act of 1905, Act of Feb. 20, 1905, ch. 592, § 27, 33 Stat. 730, which is identical to the § 42 of the present act). It is argued, therefore, that § 42 should be read with broader authority, without reference to § 526. We will assume, arguendo, the correctness of this view. It does not, however, affect the disposition of this case. As we have held, supra, Katzel is properly read only to apply to the case 1 circumstance. Thus, any extension of the protective authority of § 42 that Katzel established is limited to that scenario and, accordingly, is not applicable to the present case.

14 . We note incidentally that, at the time of the enactment of section 42, there apparently was a long-standing regulatory interpretation of section 27, the predecessor of section 42, that the importation of genuine goods with genuine marks was not under the purview of the import provisions of the Lanham Act. Rather the terms "copy or simulate" applied only to counterfeit marks. Congress carried forward section 27’s “copy or simulate” language into section 42, fully aware that it had been interpreted to mean "counterfeit,” in effect ratifying Customs’ interpretation of section 27 when it passed section 42 with identical language, I believe that, under those circumstances, Congress cannot be deemed to have intended the terms "copy or simulate" in section 42 to be given a “plain” meaning. To the contrary, Congress carried over the already interpreted and defined language as a means of continuing the Customs import practices that had been in existence since the passage of section 526 in 1922.

15 . See also, Park’N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 194, 105 S.Ct. 658, 661, 83 L.Ed.2d 582 (1985) ("Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose”) (emphasis added) (citing American Tobacco Co. v. Patterson, 456 U.S. 63, 68, 102 S.Ct. 1534, 1537, 71 L.Ed.2d 748 (1982)).

16 . Although the statute does not define each of these terms individually, it offers some definitions that we find instructive to our disposition. Section 1127, which is titled "Construction and Definitions; intent of chapter,” defines the term “colorable imitation” to mean “any mark which so resembles a registered mark as to be likely to cause confusion or mistake or to deceive.” 15 U.S.C. § 1127 (1982) (emphasis added). Similarly, the term "counterfeit" is defined to mean "a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” Id. (emphasis added). Neither of these definitions encompass the goods that are at issue in the present case and, in light of this clarifying statutory language, we are further inclined to our conclusion that the sections are not applicable.

17 . The legislative history of § 42 is in accord with this statement of the purposes underlying the Lanham Act. The Senate report of the act noted that

[t]he purpose underlying any trade-mark statute is twofold. One is to protect the public so it may be confident that, in purchasing a product bearing a particular trade-mark which it favorably knows, it will get the product which it asks for and wants to get. Secondly, where the owner of a trade-mark has spent energy, time, and money in presenting to the public the product, he is protected in his investment from its misappropriation by pirates and cheats.

S.Rep. No. 1333, 19th Cong.2d Sess., reprinted in 1946 U.S.Code Cong.Serv. 1274.

The Report stated further, in its enumeration of the specific goals of the Lanham Act, that that act would "secure trade-mark owners in the goodwill which they have built up and ... protect the public from imposition by the use of counterfeit and imitated marks and false trade descriptions.” Id. at 1276.

18 . We note further that this "injury” to Weil occurs as the result of its expenditure of money to popularize the foreign manufacturer's mark in the United States. As one commentator has noted, a domestic company in Weil’s circumstance could certainly ensure to themselves the full protections of the trademark law and avoid this "injury" by developing and registering its own trademark for the foreign manufactured goods, and expending its resources popularizing that mark. See Vandenburgh, The Problem of Importation of Genuinely Marked Goods is Not a Trademark Problem, 49 T.M.R. 707, 718 (1959). The article notes, however, that that approach is often less desirable to the distributor and suggests two reasons to explain why: (1) the foreign manufacturer's mark is already known in this country, and therefore the product is easier to sell; and (2) the foreign manufacturer's product is a high quality product that cannot be duplicated by another supplier. Id. If these reasons are accurate, they provide further demonstration of the inapplicability of the trademark law to this case. They indicate, as the article suggests, that the " ‘source’ that the public looks to for the quality of the product [is] really that of the manufacturer rather than that of the distributor,” id., and, consequently, that the distributor’s "good will” in the product is not diminished by the distribution of other genuine goods.

19 . We are aware that our conclusion results in the seeming anomaly that the language of the trademark act will be read one way in light of the circumstances of some cases (i.e., case 1) and that that same language will be read another way in all other circumstances. This result, however, we believe is correct and mandated by the decision of the Supreme Court in Katzel. The seeming conflict is made scrutable, however, with the recognition that the source of the added protection to trademark holders in the case 1 scenario is Katzel and § 526 (as that statute has been construed by the Customs Agency) — not in a subjectively different reading given to the text of the statute.