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Matrix Essentials v Quality King, 522 F.Supp.2d 470 (2007)

In 1989, Matrix sued Quality King in federal district court in the state of Florida (the "Florida Action"). That action alleged that Quality King was making unauthorized sales of Matrix products. The Florida Action was settled in April of 1989. Pursuant to the settlement, Matrix agreed to buy back its products from Quality King. On March 28, 1990, Matrix commenced this lawsuit against the Quality King Defendants in New York. Matrix alleged the Quality King Defendants obtained Matrix products and sold those products outside of the Matrix chain of distribution for direct sale to the general public. Approximately two months after the March 1990 commencement of this action, the parties agreed to a settlement and entered into a consent judgment and permanent injunction that permanently barred the Quality King Defendants as well as their employees, successors and assigns, from, inter atia, purchasing, acquiring, distributing, selling or offering for sale any product manufactured or distributed by Matrix or bearing the Matrix name. L'Oreal USA has since acquired all rights to Matrix. The diversion of Matrix products beyond the professional hair care market occurs when L'Oreal's authorized distributors sell Matrix products outside of the professional chain of distribution. These sales are made to entities referred to as "collectors" or "jobbers," that stock large quantities of Matrix product. The product is then sold to companies like Quality King and Pro's Choice that, in turn, sell the product to retail sales outlets for sale to the general public. Matrix products sold by Quality King and/or Pro's Choice to retail sales outlets were neither expired, adulterated or anything other than genuine Matrix products. Court ruled: Under the "first sale" doctrine, long a basic premise of trademark law, a trademark owner cannot control distribution of a trademarked item beyond its first sale. The resale of such genuine goods does not create consumer confusion and supports neither a claim of infringement nor unfair competition. and "The sale of genuine, unadulterated product beyond the first sale to distributors and outside of the professional chain of distribution was and remains entirely legal."