Managing product distribution channels is a critical part of business.  Goods need to go the right place.   

For electrical appliances, voltage requirements and power cord prong configurations, for example, must match the end use market.  A mismatch detracts from functionality.  For automobiles, air emissions equipment must match the legal requirements of the end use market.  A mismatch can result in fines.  For luxury goods, the product must be limited in distribution through selected merchants.  A mismatch can destroy exclusivity and potentially erode the brand.

That was the situation Zino Davidoff found itself in when its Davidoff Cool Water cologne was found for sale in CVS stores, a mass merchandising drug store chain.  Even though most of the product found there was genuine, as opposed to counterfeit, it was still in the wrong place.  It had been obtained through improper channels of distribution.  They were gray market goods.  Davidoff sued.

What is interesting about the case that the UPC codes were removed or defaced from the Davidoff bottles of cologne – either cutting them out of the box, or chemically removing them, or going so far as to grind them off the bottom of the bottles.  What is also interesting is that Davidoff sued on the basis of trademark infringement and won.

The UPC code was viewed by the court as an indicator of the goods’ source of origin.  It functioned as an indicator by allowing the company to determine whether the goods were genuine or not.  It also functioned as an indicator of quality – containing information about manufacture and providing information valuable in the event of a product recall.

Allowing UPC codes to act as trademarks gives businesses another weapon in their arsenal for policing and protecting the integrity of their distribution channels.

Centuries ago, when unscrupulous competitors tried to pass off their wares for the real deal merchant guilds began to affix “marks” to their goods to avoid confusion among customers and to prevent fraud.   These “trademarks,” as they became known, let customers easily identify names they could trust and the  origin of the goods they wanted to buy.    

Today, the Internet has added a vast new dimension to merchant trade and the unscrupulous have again found ways to divert attention from the real deal.  As you probably know, the virtual world is a combination of things you see on your screen and things you don’t.  Included in the netherworld of HTML code are things called “meta tags,” words and phrases that search engines can read and use to identify relevant websites and rank web pages. 

There has long been debate about whether a competitor’s trademark, when used as a meta tag or is elsewhere hidden on a web page like a subliminal Internet message, constitutes a willful infringement of that competitor’s trademark.  A recent First Circuit Court of Appeals decision now says it does (Venture Tape Corp. v. Mcgills Glass Warehouse). 

It’s something you might want to let your webmaster and webdesigner know because “willful” infringement raises the ante considerably.  The penalty for violation ranges up to $1 million per violation.

Smart business owners and managers know that trademarks are powerful tools for protecting their brand platform.  The smartest ones will use them wisely and fairly.  Don’t let a hidden meta tag turn into a huge hidden liability for your company.