A recent case involving fragrance manufacturer Davidoff and retailer CVS addressed the importance of quality control procedures related to fragrance product packaging. In Davidoff v. CVS Corporation, Davidoff, the trademark holder for his line of "Cool Water" fragrances, alleges that CVS violated the Lanham Act by selling counterfeit Cool Water products and by selling decoded gray-market products. On June 25, 2007, the Southern District of New York granted Davidoff’s request for preliminary injunction enjoining CVS from selling any counterfeit and gray-market Davidoff goods, finding that Davidoff had shown a likelihood of success on the merits of his case.
Davidoff assures the quality of its products through a unique numeric production code (the Unique Production Code or UPC) or a numeric batch code attributed to each unit to permit Davidoff to trace and resolve quality issues. Davidoff uses UPC on all of its luxury brands. The UPC system plays an important role in preventing anti-counterfeiting, assuring quality and theft protection. Counterfeit products either lack a UPC number or repeat the same UPC number on multiple units. Once Davidoff identifies counterfeit UPC numbers, it is able to differentiate an authentic product from a counterfeit, and can train investigators, customs officials and law enforcement authorities to spot the fakes. The UPC also enables Davidoff to pinpoint exactly where and when the quality issue arose and what units are affected.
When Davidoff conducted inspections of CVS’s inventory of Cool Water products, it found hundreds of units identified as counterfeit and 16,600 decoded gray-market products. Gray-market goods are goods manufactured abroad by the owner of a United States trademark, legally purchased abroad from authorized distributors and then imported by persons other than the trademark holder and without the trademark holder’s permission. The UPCs had been removed from the decoded goods using different techniques like cutting portions of the box or the label on the bottle to remove the UPCs or using chemicals to wipe away the UPCs. Davidoff argued that removal of the UPCs weakens Davidoff’s quality control procedures by restricting the manufacturer’s ability to identify and remove counterfeit goods, undermines Davidoff’s ability to identify, inspect and recall defective product and limits Davidoff’s anti-theft systems.
Davidoff also established that the non-conforming sales will diminish the value of the mark. According to Davidoff’s expert on branding, repeated inconsistent delivery in relation to that expected of a quality brand results in negative associations for consumers. Davidoff thus has an interest in controlling the quality of all goods in the marketplace. Davidoff’s witnesses also testified that the decoded gray-market fragrances make detection of counterfeit products more difficult because such goods do not have UPCs.
Davidoff’s protection of his trademark for Cool Water products is particularly important as his fragrances are considered "prestige" products for which he can command a price premium over competitors. Active detection of counterfeit and gray-market goods through use of the UPC system and enforcement of trademarks helps manufacturers maintain the good name of their products.