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The U.S. courts have also developed an exception to Katzel where there is a parent-subsidiary
relationship between the U.S. trademark holder and the foreign manufacturer. The rationale
generally relied on for this exception is that the trademark owner, as part of the corporate entity,
has already benefited from the profits it received from the foreign sales, and should not be able to
use the U.S. trademark laws to set up discriminatory pricing schemes which prejudice U.S. consumers.
In Weil Ceramics and Glass, Inc. v. Dash, the Third Circuit distinguished Katzel and extended
the Supreme Court's interpretation of the Tariff Act in K-Mart Corp. v. Cartier, Inc. to deny
trademark protection as a means of preventing parallel imports. Weil, the plaintiff trademark holder,
was the wholly owned subsidiary and exclusive U.S. distributor of Lladro, a Spanish company. The
defendant purchased Lladro porcelain from the Spanish manufacturer and imported it into the United
States without Weil's permission. The Third Circuit denied trademark protection to prevent the
importation because of the common ownership between Weil and the Spanish manufacturer:
Weil is not independent of the foreign manufacturer … Thus, even if Weil loses some share of
its United States market to [the defendant], it nonetheless benefits from the profits it
received as part of the corporate entity from which [the defendant] purchased the goods
abroad … the Lanham Act … [does not] protect a foreign manufacturer - that either owns or is
owned by a domestic trademark holder - from compensation … in the United States by a domestic
importer that it has supplied.
(section 526 inapplicable where American trademark owner was owned indirectly by foreign manufacturer of imported LLADRO porcelain).
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