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Edmund Burke

[page 356]
B. Downstream Confusion

In addition to point-of-sale confusion, the Sixth Circuit recognizes that a likelihood of downstream confusion, also called "post-sale" confusion, is actionable: "Since Congress intended to protect the reputation of the manufacturer as well as to protect purchasers, the Act's protection is not limited to confusion at the point of sale." Ferrari S.P.A. Esercizio, 944 F.2d at 1245; see also 3 McCarthy, supra, at 23:5. Thus, injection of knockoffs into the stream of commerce may lead to a likelihood of confusion among the general public. To assess the likelihood of downstream confusion, we first apply the eight-factor test and then discuss the potential harm from the influx of Tong Yang's grilles into the stream of commerce.

[page 358]
2. Downstream Harm

Our review of cases discussing the harm of injecting knockoffs into the stream of commerce further signals the likelihood of downstream confusion in this case. Even without point-of-sale confusion, knockoffs can harm the public and the original manufacturer in a number of ways, including: (1) the viewing public, as well as subsequent purchasers, may be deceived if expertise is required to distinguish the original from the counterfeit, see Hermes, 219 F.3d at 108; (2) the purchaser of an original may be harmed if the widespread existence of knockoffs decreases the original's value by making the previously scarce commonplace, see id.; (3) consumers desiring high quality products may be harmed if the original manufacturer decreases its investment in quality in order to compete more economically with less expensive knockoffs, see United States v. Torkington, 812 F.2d 1347, 1353 n. 6 (11th Cir.1987); (4) the original manufacturer's reputation for quality may be damaged if individuals mistake an inferior counterfeit for the original, see Ferrari S.P.A. Esercizio, 944 F.2d at 1244-45; (5) the original manufacturer's reputation for rarity may be harmed by the influx of knockoffs onto the market, see id.; and (6) the original manufacturer may be harmed if sales decline due to the public's fear that what they are purchasing may not be the original, see Hermes, 219 F.3d at 108. On the other hand, courts should be wary of overprotecting public domain ideas and works whose exploitation can lead to economic efficiency, greater competition, and lower costs for consumers.[2] Cf. 1 McCarthy, supra, at 2:2 (reciting the policies underlying the laws of trademark and unfair competition).

Applying these principles in Ferrari S.P.A. Esercizio, this Court upheld the verdict of a bench trial enjoining the production of knockoff Ferrari automobiles which could damage Ferrari's reputation for quality and rarity. 944 F.2d at 1245. Other courts have reached similar conclusions in cases involving knockoff Rolex watches, Rolex Watch U.S.A., 645 F.Supp. at 488, designer purses, Hermes, 219 F.3d at 108, and other products, see 3 McCarthy, supra, at 23:7.

The instant case carries similar potential for downstream confusion and corresponding harm to GM and the public - if the public can actually see the underlying placeholders after the "bow tie" or "GMC" emblems are affixed to the grilles. Unaided by the defendants' conspicuously [page 359] marked packaging, the invoice disclaimer, or a collision shop's expertise, the viewing public could mistake a Tong Yang grille for a GM grille. Such confusion could damage GM's reputation for quality if the public associates any inferior attributes (e.g., improper fit or cracking) of Tong Yang's grilles with GM. Other types of possible downstream harm, such as that resulting from a product's reduced scarcity, however, are largely inapplicable to this case. Nonetheless, visibility of the placeholder after the automobile is repaired and returned to the road may harm the public and GM.


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