By Eric Schweibenz
Further to our September 22 post, on October 1, 2009, the International Trade Commission issued a public version of its opinion in Certain Cigarettes and Packaging Thereof (Inv. No. 337-TA-643).

By way of background, on February 3, 2009, ALJ Gildea issued an Initial Determination (“ID”) finding that Respondent Alcesia SRL (“Alcesia”) violated Section 337 by reason of infringement of various U.S. Trademark registrations owned by Complainant Phillip Morris USA (“PM USA”).  As explained in our April 16 post, on April 9, 2009, the Commission issued a notice indicating it’s determination to review, in its entirety, ALJ Gildea’s ID.

In the opinion, the Commission found in favor of PM USA, issuing a general exclusion order directed to gray market cigarettes bearing the Marlboro®, Virginia Slims®, and Parliament® trademarks.

Specifically, the Commission adopted the ID’s finding that PM USA did not authorize gray market sales of the cigarettes at issue, and that substantially all of the gray market cigarettes in this case were materially different from the authorized US market cigarettes.  In doing so, the Commission affirmed ALJ Gildea’s finding that the lack of an English-language Surgeon General warning satisfied the material difference requirement under gray market infringement law.  It declined to adopt, however, the ID’s finding that the gray market cigarettes are materially different because they are susceptible to seizure under the Imported Cigarette Compliance Act.  The Commission took no position on whether Phillip Morris USA’s lack of quality control over gray market cigarette distribution, storage, and transportation constituted a material difference.

The Commission found that consumer confusion was likely to occur based on (1) the fact that the marks on both the PM USA cigarettes and the cigarettes sold by Alcesia are identical for use on the exact same types of goods, (2) the strength, length of exclusivity, and fame of the PM USA trademarks at issue, and (3) the record evidence of at least on instance of actual confusion as to the source of the cigarettes sold by Alcesia.

Regarding remedy, the Commission issued a general exclusion order.  Describing the necessity of such a remedy, the Commission cited multiple factors, including: widespread unauthorized use, a pattern of violation, established demand, the ready supply abroad, the low barrier to entry and low capital investment required for starting such an online retail website, high profit margins, and the difficulty of identifying infringing products.  Further, the Commission noted that a general exclusion order was warranted in view of the respondents’ “general willingness to avoid the legal consequences of their actions.” The Commission also determined that “it would be simple for Alcesia and the defaulting respondents to quickly create new entities and shift their operations to new websites, enabling them to bypass a limited exclusion order.”

The Commission further determined that the public interest factors did not preclude the issuance of a general exclusion order in this investigation.  Also, the Commission “determined to set the bond amount at 100 percent of the entered value of gray market cigarettes.”