Article - A Not Too Precious Moment

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Source: http://www.ipcounselors.com/19980713.htm#a3

U.S. Intellectual Property and New Media Law Update
Volume II, Issue XXVII - Monday, July 13, 1998
A NOT TOO PRECIOUS MOMENT
Enesco Corp. et al. v. Price/Costco, Inc. (Ninth Cir. -Decided- June 22, 1998)
Plaintiff is in the giftware business. Under an exclusive copyright and trademark license Plaintiff markets a line of porcelain bisque figurines under the licensed mark "PRECIOUS MOMENTS." This line is one of the world's largest selling collectible lines of figurines. Without Plaintiffs' consent, Defendants began selling "Precious Moment" figurines to its customers in a different packaging. After each figurine is removed from Plaintiff's original outer carton, the figurine, along with the carton is placed and sold in a clear blister-pack type package that allegedly does not provide adequate protection from damage. Plaintiffs contend that they are unable to control the quality of the figurines as repackaged, displayed and sold by the Defendant and, thus, they claim that such repackaged goods are no longer truly genuine "Precious Moment" figurines.
Defendants moved to dismiss on the grounds that the suit is barred by the first sale doctrine, that the necessary use in commerce element is missing and the likelihood of confusion cannot be established as a matter of law. The District Court dismissed with prejudice and here, the Ninth Circuit overturns the dismissal and restores the case to the District Court's docket.
Plaintiff's argued that the first sale doctrine is not applicable because of the repackaging notice exception, the potential defect exception and the quality control exception to the first sale doctrine. Under the first, trademark infringement may occur in repackaging if the Defendant fails to disclose that the product repackaging was done by Defendant rather than Plaintiff. The Ninth Circuit agreed. While a repackaging notice wasn't requested in the Complaint, the Circuit Court construed the complaint broadly and reversed the District Court's order of dismissal since it appears from the face of the complaint that some relief could be granted. However, with regard to the quality control exception, the Ninth Circuit found that Plaintiff wished to push it beyond its reasonable limit. This exception involves some defect or potential defect in the product itself and the customer would not be able to readily detect.
On the whole, this may be a Pyrrhic victory.