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This information is taken directly from the court opinion. It is not taken out of context nor is it altered.
From Matrix Essentials v. Cosmetic Gallery, 870 F. Supp. 1237 (D.N.J. 1994):

Paddington shows that even intentional defacement will not create a likelihood of consumer confusion unless it: (1) causes consumers to believe that the seller is authorized to distribute the product, when it is not; or (2) compromises the manufacturer's quality control standards. Here, defendants did not attempt to deceive consumers as to their relationship with Matrix, and their sale of Matrix products did not damage Matrix's business reputation. Furthermore, we have already found that the esthetic damage done to Matrix bottles would not lead consumers to believe that Matrix dealt in shoddy goods.

In sum, while intentional defacement of a product may support an inference of consumer confusion, it will only create a likelihood of consumer confusion if the product is defaced in a way that would confuse consumers. In this case, defendants did not even intend to deceive consumers by altering the product, but simply sought to avoid detection by Matrix. Furthermore, even if this defacement was "intentional," it did not create a likelihood that consumers will believe either that defendants are in some way authorized to sell Matrix products, or that Matrix lowered its quality control standards. Thus, defendants' intentional defacement of the product does not constitute trademark infringement.

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