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Second Circuit Keeps a Close “Watch” on IP Owners Pursuing the Secondary Market 

The United States Court of Appeals for the Second Circuit recently affirmed a decision by the District Court for the Southern District of New York, finding that refurbished antique watches retaining an original manufacturer’s trademark and sold by a third-party defendant were not infringing.
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According to the appellate court, the watches’ origins were adequately disclosed and the defendant sufficiently disassociated itself with the trademark holder such that confusion was unlikely. (See Hamilton Int'l Ltd. v. Vortic LLC, 13 F.4th 264 (2d Cir. 2021).)

Overview

Swiss watch manufacturer Hamilton International Ltd. (“Hamilton”) originally filed suit against antique watch restorer and manufacturer Vortic Watch Co., and its founder, R.T. Custer (collectively, “Vortic”), asserting trademark infringement, counterfeiting, dilution, and unfair competition. Hamilton alleged Vortic reconstructed HAMILTON branded watches and sold them under the HAMILTON brand without the company’s consent. In particular, the “Lancaster” style watch sold by Vortic included a wrist strap and internal engineering and mechanical parts manufactured by Vortic, such as crowns and screws, yet contained a restored original front dial made by Hamilton that prominently displayed the HAMILTON trademark. 

Hamilton claimed the Lancaster watch was likely to cause confusion as to the watch’s origin and give the false impression that the watch was offered by, or affiliated with, Hamilton. The District Court and the Second Circuit, however, disagreed, relying on the famed Polaroid likelihood of confusion factors, and the Supreme Court’s decision in Champion Spark Plug Co. v. Sanders, 331 U.S. 125, (1947).  

In Champion, the Supreme Court previously explained that adequate disclosure of the product’s restorer – such as through conspicuous labeling of the second-hand good as “used” or “repaired” – can constitute full disclosure of the product’s origins, thereby making consumer confusion unlikely. This is particularly true where the reconditioning is not so extensive or basic such that calling the article by its original name would be a misnomer.  

In this case, the Second Circuit found no error in the District Court’s findings that Vortic’s advertisements, marketing materials, and the reconstructed watches themselves likewise provided full disclosure under Champion. Vortic’s advertisements and third-party news articles, for example, referred to Vortic’s watches as vintage, antique, and/or comprised of 100+ year old parts that “started their life in a Railroad-era pocket watch made by the Hamilton Watch Company.” The court also noted that while Vortic’s reconstructed watches displayed Hamilton’s trademarks, they also displayed Vortic’s trademarks “prominently engraved on the [watch] case.” Moreover, the overall look of the reconstructed watches, including their patina and style, clearly conveyed that the watches were restored antiques.  

In addition to focusing on the provided disclosures suggesting the defendant’s origin, the lack of actual confusion, and defendant’s good faith, the court also analyzed the sophistication of the buyers. Because Vortic’s watches are “very expensive,” the relevant consumer base is “highly sophisticated” and would be “particularly attuned to the disclosure provided and almost certainly seek out easily accessible information about the watch” before purchase, according to the court.  

Notably, whereas a “disclaimer” can be proffered at the remedy stage of an infringement action (to assist the court in determining an injunction after a defendant has proved the disclaimer’s efficacy, for example), this should not be confused with “full disclosure” as provided under Champion, the court explained. In contrast, “full disclosure” is relevant to an initial finding of likelihood of confusion. As a result, it can impact the plaintiff’s ability to prove likelihood of consumer confusion, a requirement for prevailing in a trademark infringement action.

Consistent with its finding of no likelihood of consumer confusion between Hamilton and Vortic, the court likewise found against Hamilton on its remaining counterfeiting, dilution, and unfair competition claims.

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