Gray Market Enforcement Checklist: Proving Material Differences and Controlling Distribution

By Casey Scott McKay · 2024-06-24

This checklist is the operational distillation of the Marksy gray market cluster: eleven phases, each a set of concrete actions, that take a parallel-import problem from the first suspicious listing to a filed case, a border remedy, and a distribution system that makes the next incident cheaper. It starts where the money is saved, confirming the goods are genuine rather than counterfeit and refusing to write the word "counterfeit" anywhere in the file, then moves through a defensible test-purchase and chain-of-custody protocol, an eleven-category material-difference audit built as a trial exhibit, and the "all or substantially all" self-audit of the brand owner's own domestic sales that decides whether a case exists at all. Three phases handle the infrastructure: documenting a quality-control program that satisfies the Warner-Lambert elements, recording the registration with Customs and Border Protection and applying for Lever-rule protection under 19 CFR 133.2(e), and tracing the leak through lot codes, INFORM Consumers Act seller disclosures, import data, and Customs Form 7501. The back half covers contract and product remediation, the demand letter that does not create a declaratory judgment problem, the preliminary injunction package and its Rule 65(c) bond, and a defense phase for the legitimate reseller. Every phase carries the Northlade Instruments worked example from the companion guide, and the checklist closes with a Common Mistakes section and a Deadlines at a Glance table covering the detention clock, recordation renewal, and the federal case-management dates.

IP and Technology > Trademarks | Checklist | Published 24 June 2024 - Updated 6 December 2025 | Casey Scott McKay - marksy.us

Summary. Eleven phases that take a parallel-import problem from the first suspicious marketplace listing to a filed complaint, a Lever-rule application, and a distribution agreement with teeth. It assumes the doctrine — first sale, material differences, the common-control exception, the Lever rule — and spends its length on the sequence: what to buy, what to compare, what to audit about your own conduct before you accuse anyone, what to record with Customs, what to trace, what to redraft, what to demand, and what to file. Every phase carries the same worked example as the companion guide, and the last phase is written for the reseller on the other side, who is usually doing something lawful and losing anyway.

Keywords: gray market enforcement checklist · parallel imports · material differences · first sale doctrine · lever rule application · cbp recordation · 19 cfr 133.23 · section 526 tariff act · quality control documentation · warner-lambert elements · all or substantially all audit · supply chain investigation · distribution agreement remediation · serialization and product codes · test purchase protocol · inform consumers act · product identification training guide · preliminary injunction bond · authorized dealer program · reseller disclosure

What this checklist is for

Work it top to bottom and you will have done everything a gray market matter requires: a defensible classification of the goods, an evidence set that survives authentication, a material-difference record built as an exhibit rather than an argument, a self-audit that tells you whether you have a case, a quality-control file that survives cross-examination, a border filing, a traced supply chain, a redrafted distribution agreement, a demand that does not hand the other side a forum, and a preliminary injunction package.

It is not a substitute for the doctrine. Why any of this works — A. Bourjois & Co. v. Katzel, 260 U.S. 689 (1923), the materiality test of Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633 (1st Cir. 1992), why K Mart Corp. v. Cartier, Inc., 486 U.S. 281 (1988), took Section 526 away from most multinationals — is in Gray Market Goods: The First Sale Doctrine, Material Differences, and Parallel Imports. The reasoning behind each box below, with cost bands and model language, is in Fighting or Defending Parallel Imports.

Who should use it. In-house trademark counsel and brand-protection managers running a diversion problem; outside counsel taking one in; and, at Phase 11, resellers and their counsel responding to a demand.

What you'll need before you start.

The U.S. registration certificate and serial/registration numbers for every mark and class on the accused product, plus the current identification of goods.
The corporate chart showing who owns the U.S. mark and who owns the foreign mark, with ownership percentages.
The U.S. and foreign product specifications, bills of materials, and label artwork for the model at issue.
Read access to the client's ERP, order-management, warranty, and service-ticket systems for the last 36 months.
The distribution and license agreements for the territory the goods came from.
A budget authority for $3,000 to $10,000 of test purchases before anyone drafts a letter.
A named operations witness and a named quality witness. Not a department — a person who will sign a declaration.

The phases at a glance

| Phase | What it produces | Realistic clock | Who owns it | |---|---|---|---| | 1. Confirm the goods are genuine | A one-page classification memo | 2-6 hours | Counsel | | 2. Buy and control the evidence | Sealed units, chain of custody, listing captures | 1-3 weeks | Investigator | | 3. Material-difference audit | The comparison matrix, exhibit-ready | 4-8 weeks | Counsel + engineering | | 4. "All or substantially all" self-audit | A signed operations memo on your own U.S. sales | 2-4 weeks | Operations | | 5. Quality-control documentation | SOPs, logs, deviations, a surviving witness | 2-5 weeks | Quality | | 6. CBP recordation and Lever-rule application | TMK number, PITG, a published grant | 2 weeks to 14 months | Counsel | | 7. Supply-chain investigation | The named diverter and the leaking distributor | 1-3 weeks, longer offshore | Brand protection | | 8. Contract and product remediation | A redrafted agreement and a differentiated SKU | 6-12 weeks | Counsel + product | | 9. Demand and settlement | Cessation, an accounting, source identification | 2-6 weeks | Counsel | | 10. Suit and preliminary injunction | An order that names serial prefixes | 3-8 months | Litigation | | 11. Reseller defense | Clean invoices, clean copy, durable disclosure | 1-4 weeks | Reseller's counsel |

The worked example. Northlade Instruments, a Boston maker of the NL-7 instant-read kitchen thermometer, $340 at retail, sells in the United States through 60 authorized dealers and in Japan through Kanto Kitchen Supply KK of Osaka. On 4 March a marketplace seller called ChefKit Direct begins listing "Northlade NL-7" at $229. The units are NL-7J: 100V adapter, Celsius-only display, Japanese quick-start card, serial prefix JP. General counsel Priya Raghunathan has forty-one failed warranty registrations and a board asking what this costs. Northlade appears at the end of every phase.

Phase 1 — Confirm the goods are genuine

[ ] Write a one-page classification memo answering six questions before anything leaves the office: (1) Was the mark applied by or with the brand owner's authority? (2) Were the goods made abroad and imported? (3) Who owns the U.S. registration and who owns the foreign mark, at what percentage? (4) Do the goods differ from the U.S. version, and is any difference physical? (5) Have the goods been repackaged, repaired, or refurbished? (6) Is the seller claiming to be authorized?
- Why. Each answer routes you to a different weapon and a different burden. Question 3 alone decides whether Section 526 of the Tariff Act exists for you.
- Authority. 19 U.S.C. § 1526(a); 19 C.F.R. § 133.2(d) (common ownership is more than 50%; common control is effective control over policy and operations, and is not synonymous with common ownership); 19 C.F.R. § 133.23(a).
[ ] Put the accused unit next to the registration certificate and confirm the mark on the goods is the registered mark as applied by the owner, not a reproduction.
- Why. If it is a spurious mark you are in a counterfeiting matter with ex parte seizure and statutory damages available, and a completely different playbook — see Trademark Counterfeiting.
- Authority. 15 U.S.C. § 1127 (definition of "counterfeit"); 15 U.S.C. § 1116(d) (ex parte seizure); 18 U.S.C. § 2320 (criminal trafficking).
[ ] Rule out domestic diversion. If the units were made and first sold in the United States and simply left the authorized channel, close the trademark file and open a contract file.
- Trap. Suing a drugstore for reselling genuine U.S.-market goods bought from a jobber is a Rule 11 problem, not a case. Matrix Essentials, Inc. v. Emporium Drug Mart, Inc., 988 F.2d 587, 593 (5th Cir. 1993).
[ ] Ban the word "counterfeit" from the matter — letters, emails, marketplace complaints, internal decks.
- Why. It is the single most expensive unforced error in this practice area.
- Authority. A counterfeiting accusation easily creates a justiciable controversy for a declaratory judgment action in the defendant's chosen forum. 28 U.S.C. §§ 2201-2202; MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). It also colors the exceptional-case analysis for the rest of the matter. 15 U.S.C. § 1117(a); Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014).
- Trap. Substitute "unauthorized," "not intended for the U.S. market," and "materially different." Write the substitution into the litigation hold so the sales team uses it too.
[ ] Issue the litigation hold and the buy protocol in the same email, naming custodians in legal, brand protection, customer service, quality, and the sales channel.
[ ] Flag any claim of authorization or paid-search bidding on the mark for immediate, separate treatment.
- Why. Misrepresented authorization is independently actionable regardless of whether the goods differ at all, and it is the cheapest win in the field. 15 U.S.C. § 1125(a)(1); Australian Gold, Inc. v. Hatfield, 436 F.3d 1228, 1241 (10th Cir. 2006). See the Keyword Advertising Compliance and Enforcement Checklist.
[ ] Finish the classification work in the Pre-Litigation Enforcement Checklist before anything goes out on letterhead.

Northlade. Question 3 is the good news: Kanto is an independent Japanese distributor, not a subsidiary, so the common-control exception of 19 C.F.R. § 133.23(a) does not shut Northlade out of Section 526. Question 4 is also good — the 100V adapter and the Celsius-only display are physical. Memo signed 8 April.

Phase 2 — Buy the goods and control the evidence

[ ] Draft a one-page buy protocol before the first purchase: who buys, on what account, to what address, what gets captured, who opens, where units are stored.
[ ] Buy at least three units, on two or more dates, from at least two listings or fulfillment centers, through a neutral buyer — an investigator or outside counsel's vendor using a residential address unconnected to the client.
- Why. One unit is an anecdote. A spread across dates and sellers forecloses the "you bought the only bad one" cross-examination and establishes a continuing course of sales for willfulness.
- Trap. Never buy through the client's domain, corporate card, or a shipping address that appears in the dealer file. The seller will find it in discovery and argue entrapment of the channel.
[ ] Capture the full listing before you click: page screenshots with visible URL and timestamp, the storefront page, the seller's stated identity and address, price, shipping origin, and every claim about warranty, authorization, and condition. Print to PDF and hash each file.
- Authority. Fed. R. Evid. 901 authentication; the summary chart you build later runs on Fed. R. Evid. 1006.
[ ] Screenshot the marketplace's seller-identity disclosure specifically, before you send anything.
- Why. Sellers edit it the day a letter arrives.
- Authority. INFORM Consumers Act, 15 U.S.C. § 45f. A "high-volume third party seller" is one with 200 or more discrete sales of new or unused consumer products and $5,000 or more in gross revenues in any continuous 12-month period during the prior 24 months; the consumer-facing name, physical address, and contact disclosure is triggered at $20,000 or more in annual gross revenues on that marketplace.
[ ] Photograph each shipping carton sealed, including the label and any customs declaration, then open on video with a date-stamped clock in frame.
[ ] Photograph the retail packaging on six sides, every printed panel, the serial or lot code area, and the contents laid out.
[ ] Buy the U.S. comparator the same week, at retail, from an authorized dealer, documented identically.
- Why. Your comparison exhibit is only as good as the authorized specimen sitting next to the gray one, purchased in the same period.
[ ] Keep one unit sealed and unexamined as a control for later expert work.
[ ] Maintain one evidence log with purchase date, purchaser, order number, price paid, carrier, tracking number, receipt date, opener, and current storage location. Seal each unit in a labeled bag.

Trap. A sales manager who buys a unit "just to see," opens it at his desk, and emails photos to eight colleagues has not created evidence. He has created a chain-of-custody hole and eight discoverable emails.

Northlade. Six NL-7J units over three weeks from ChefKit Direct and a second seller; three NL-7U units from authorized dealers in Boston, Chicago, and Portland. Total spend $3,414. Two JP units stay sealed for the engineering comparison.

Phase 3 — Run the material-difference audit

[ ] Build one comparison matrix with five columns: attribute, U.S. specification, gray specification, source of proof, named declarant.
- Why. Materiality is judged by whether consumers would likely consider the difference relevant to a purchasing decision, and a demonstrated material difference raises a rebuttable presumption of confusion. Nestle, 982 F.2d at 641, 644. A table with a witness on every row is what converts that from argument into record.
[ ] Work these categories in order, strongest first: composition and formulation; regulatory and safety compliance; electrical and physical fit; packaging and labeling; language; warranty; service and parts entitlement; authentication and traceability codes; quality-control procedures; accompanying materials and program benefits; product line and SKU.
- Authority. Courts have found each of these material on the right facts — composition, Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44, 46 (3d Cir. 1991); labeling, Moroccanoil, Inc. v. Perfumes World Com, Inc., 234 F. Supp. 3d 1026, 1031 (C.D. Cal. 2017); warranty, Beltronics USA, Inc. v. Midwest Inventory Distrib., LLC, 562 F.3d 1067, 1073 (10th Cir. 2009); removed production codes, Zino Davidoff SA v. CVS Corp., 571 F.3d 238, 243-46 (2d Cir. 2009).
[ ] Write a consumer reason into every row. Not "the manual is in Japanese," but "a purchaser who cannot read the calibration procedure cannot verify the instrument's accuracy, which is the entire function of the product."
[ ] Split the finished matrix into two lists — physical differences and non-physical differences — and keep them separate for the rest of the matter.
- Why. The border remedy in Phase 6 requires physical differences. Warranty terms, service entitlements, and invisible batch codes are material in court and worthless at the port.
- Authority. 19 C.F.R. § 133.2(e).
[ ] Cite the governing regulation on every compliance row — the FCC Part 15 statement at 47 C.F.R. § 15.19, the FDA labeling provision, the CPSC or UL standard — rather than describing the difference in prose.
- Why. A product that cannot lawfully be sold here as labeled is materially different on the face of the record, without a survey. Novartis Animal Health U.S. Inc. v. Abbeyvet Exp. Ltd., 409 F. Supp. 2d 264, 266-67 (S.D.N.Y. 2005).
[ ] Delete the price row.
- Trap. A lower price is never a material difference. It is the reason gray goods exist; if it counted, the doctrine would swallow itself. Nor is shipping speed, absent evidence the method degrades the product. Maui Jim, Inc. v. SmartBuy Guru Enters., 459 F. Supp. 3d 1058, 1085 (N.D. Ill. 2020).
[ ] Decide the survey question now, not at expert disclosure. Budget $35,000 to $75,000 and eight to twelve weeks if the difference is invisible — a removed code, a warranty term, a service entitlement.
- Trap. A survey with the wrong universe, no control, or a leading stimulus gets excluded under Fed. R. Evid. 702 and takes your credibility with it. Design it with counsel in the room: Consumer Surveys in Trademark Cases, Commissioning and Attacking a Trademark Survey, and the Trademark Survey Design and Challenge Checklist.
[ ] Format the matrix as Exhibit A to a declaration on the day you create it — numbered rows, photographs attached as lettered tabs.
- Why. Judges read the table and skim the brief. Expert and witness selection generally is collected in the Evidence and Expert Witness Toolkit, and the confusion factors the matrix ultimately feeds are in Trademark Infringement: Proving Likelihood of Confusion.

Northlade. Nine rows. Five physical: 100V versus 120V adapter, Celsius-only versus dual-scale display, Japanese-only quick-start card, no FCC Part 15 statement, and a JP serial prefix the U.S. firmware server rejects. Four non-physical: void three-year warranty, no U.S. calibration entitlement, no toll-free support number, no enrollment in the recall registry. Survey deferred to the merits.

Phase 4 — Audit your own U.S. sales before you accuse anyone

[ ] Run these eight queries against the client's ERP, order-management, and channel systems for the preceding 36 months, and get a written answer to each in a memo signed by someone in operations: duty-free and travel-retail sales at U.S. airports, seaports, and border crossings; military exchange and diplomatic sales inside the United States; direct-to-consumer orders with U.S. delivery addresses fulfilled from a foreign warehouse; employee-store, sample, press, and influencer shipments of foreign-spec units; unharmonized SKUs inherited in an acquisition; legacy U.S. inventory predating the specification change you are relying on; B2B, OEM, and private-label sales of the foreign configuration; and warranty service actually provided on foreign-serial units, by count and by year.
- Why. The Federal and Ninth Circuits require the owner to show that all or substantially all of its authorized U.S. goods carry the asserted difference. If you sell both versions here, the difference is not what your mark means in this market.
- Authority. Bourdeau Bros., Inc. v. Int'l Trade Comm'n, 444 F.3d 1317, 1323-24 (Fed. Cir. 2006); SKF USA Inc. v. U.S. Int'l Trade Comm'n, 423 F.3d 1307, 1313 (Fed. Cir. 2005); Hokto Kinoko Co. v. Concord Farms, Inc., 738 F.3d 1085, 1095 (9th Cir. 2013).
[ ] Express the result as a percentage of U.S. units and write the number down. If more than a trivial share of your U.S. sales are the foreign configuration, the materiality count is in trouble everywhere and dead in the Federal and Ninth Circuits.
[ ] Count warranty claims honored on foreign-serial units, by year, and get the raw export rather than a summary.
- Trap. This is the bullet that kills warranty theories. If customer service quietly honored 300 foreign-serial claims because arguing was more expensive, your warranty row has become a waiver argument. Courts split on whether occasional grace surrenders the right. Compare Maui Jim, 459 F. Supp. 3d at 1086, with Swatch S.A. v. New City, Inc., 454 F. Supp. 2d 1245, 1251 (S.D. Fla. 2006).
[ ] If the numbers are bad, fix the policy in writing, train the desk, log every denial from that date, and wait two quarters before you sue.
[ ] Reconcile the audit against the differences you intend to plead, and strike any row the audit contradicts.
- Why. Every row you strike now is a cross-examination you do not sit through later.

The cautionary example. Solvent & Sage, a Denver skincare company, built its case on a UV filter missing from the European formulation — and the defendant produced invoices showing roughly 4,000 units of that same European formulation sold through Solvent & Sage's own Miami and Newark duty-free program over eighteen months. The case ended on a document the plaintiff could have pulled for free in week one.

Northlade. Clean on duty-free and exchanges. Not clean on warranty: 61 foreign-serial claims honored over three years, mostly in year one. Written policy issued 15 April; every denial logged from that date; counsel leads with the physical rows.

Phase 5 — Document the quality-control program

[ ] Assemble the seven-document set and nothing less: the SOP with version history; inspection and test logs showing sampling rate and actual sample counts; deviation, non-conformance, and CAPA records; training records tying named employees to the SOP version in force; internal and third-party audit reports; recall and field-action records; and cold-chain, expiry-pull, or transport-condition data for time- or temperature-sensitive goods.
- Why. The elements are legitimate, substantial, and non-pretextual procedures; actual adherence by the owner; and diminution of the mark's value from the defendant's sales. Element two is documentary or it does not exist.
- Authority. Warner-Lambert Co. v. Northside Dev. Corp., 86 F.3d 3, 6 (2d Cir. 1996); accord Coty Inc. v. Cosmopolitan Cosmetics Inc., 432 F. Supp. 3d 345, 350 (S.D.N.Y. 2020).
[ ] Include the failures. Deviation reports where the company caught a problem and fixed it prove a live system.
[ ] Sit the quality director down and cross-examine her from your own SOP for one hour before you plead anything. Ask what the sampling rate is supposed to be, then show her the log.
- Trap. If the answer is "we do it when we can," you have Iberia Foods Corp. v. Romeo, 150 F.3d 298, 304-06 (3d Cir. 1998), where a visual carton check and occasional spot samples were held not to be a system whose evasion made goods non-genuine. If the SOP describes a procedure abandoned two years ago, you have Polymer Technology Corp. v. Mimran, 37 F.3d 74, 78-81 (2d Cir. 1994).
[ ] Document the traceability and recall capability separately from product quality — what the codes do, which recalls used them, how long execution took.
- Why. Element three does not require proof that the gray goods are worse. Destroying the owner's ability to trace, recall, and authenticate is itself harm to the mark. Zino Davidoff, 571 F.3d at 244-46.
[ ] Map each SOP to a consumer-facing benefit in one sentence, and put that sentence in the declaration.
[ ] Decide whether to plead quality-control evasion as a separate theory or as a species of materiality, and plead both if the circuit is unsettled.
- Why. The framing allocates the burden. Warner-Lambert makes you prove adherence; pure materiality does not.
[ ] Reuse the file. The records that satisfy Warner-Lambert are the records that keep a licensed mark from going naked — see Naked Licensing and the Trademark License Quality Control Checklist.

Northlade. Every U.S. unit is calibrated at final assembly against a NIST-traceable reference and the result is written to the serial number; U.S. service centers re-verify on any warranty return. JP units calibrate to a JCSS reference and never enter the U.S. serial database, so no Northlade U.S. center can re-verify one. Documented, non-pretextual, consumer-facing. Pleaded.

Phase 6 — Record with CBP and apply for Lever-rule protection

[ ] Confirm the mark sits on the Principal Register. Supplemental Register and common-law marks cannot be recorded.
- Authority. 19 C.F.R. § 133.1(a).
[ ] Confirm the U.S. registration is owned by a U.S. citizen or a U.S.-organized entity. If it sits with a foreign parent, open an assignment project now.
- Why. Section 526 is unavailable to a foreign-owned U.S. registration, full stop. 19 U.S.C. § 1526(a).
- Authority. 15 U.S.C. § 1060; record the assignment under 37 C.F.R. § 3.25 (USPTO recordation fee under 37 C.F.R. § 2.6(b)(6): $40 for the first property, $25 for each additional property in the same document). See Trademarks in the Deal, Assignments vs. Licenses, the Trademark Assignment Agreement — Template, and the Trademark Assignment Recordal Checklist.
[ ] Record the registration through CBP's Intellectual Property Rights e-Recordation system. Fee: $190 per class. Supply owner name, address, and citizenship, the certified registration, countries where genuine goods are manufactured, and the names of authorized users, licensees, subsidiaries, and importers.
- Authority. 19 C.F.R. §§ 133.1-133.3; fee at 19 C.F.R. § 133.3(b).
[ ] Docket the recordation renewal. Recordation runs concurrently with the registration term; renewal costs $80 per class and the application is due not later than three months after expiration of the current registration period.
- Authority. 19 C.F.R. §§ 133.4, 133.7.
[ ] Read your identification of goods against the actual product and the actual shipment description, and widen it in the next filing if it is narrow.
- Trap. CBP enforces to the four corners of the identification. A registration for "cosmetics" does nothing when the container holds dietary supplements. TMEP § 1402.01; see The Nice Classification System and Drafting an Identification of Goods and Services.
[ ] Write a Product Identification Training Guide: owner and contact details, recordation number, photographs and descriptions of authorized goods, packaging samples, manufacturing locations, bar code and serial formats, the ports where authorized product normally enters, authorized importers, images of suspect goods, and known infringers. Then offer two port webinars a year.
- Why. "Authorized U.S. units carry a serial beginning US; units beginning JP, EU, or AU are not authorized for U.S. entry" is a sentence a port officer can act on in four seconds.
[ ] File the Lever-rule application under 19 C.F.R. § 133.2(e), stating the basis with particularity and supporting it with competent evidence across the five categories CBP evaluates: composition (including chemical composition); formulation, construction, structure, or composite components; performance and operational characteristics; differences arising from legal or regulatory requirements or certification; and other distinguishing factors likely to cause consumer deception.
- Trap. Physical differences only. A warranty-and-service case has no Lever remedy, however strong it is in court.
[ ] Write the publication summary assuming your diverter will read it, because CBP publishes grants in the Customs Bulletin.
[ ] Plan for the labeling outcome before you file. Goods must be admitted if the importer affixes a conspicuous, legible label designed to remain on the product until first retail sale, in close proximity to the mark in its most prominent location, reading: "This product is not a product authorized by the United States trademark owner for importation and is physically and materially different from the authorized product."
- Authority. 19 C.F.R. § 133.23(b). Lever is a labeling remedy, not an exclusion remedy. Most diverters will not label because the legend destroys the product at retail; a sophisticated one will, and lawfully. Keep the court case alive.
[ ] Calendar the detention clock so you can respond when a shipment stops: restricted gray market articles are detained 30 days from presentation for CBP examination to let the importer establish an exception, extendable for good cause, with seizure and forfeiture if the goods are not released.
- Authority. 19 C.F.R. §§ 133.23(d), (f), 133.25. Within 30 days of detention CBP discloses to the recordant the date of importation, port of entry, description of the merchandise, quantity, and country of origin — the best free discovery in this practice. The full border playbook is in Stopping Counterfeits at the Border, the Anticounterfeiting Program Checklist, and the Anticounterfeiting and Border Enforcement Toolkit.

Northlade. Recorded in nine days; PITG delivered with a serial-prefix rule and two webinars scheduled. Lever application filed 2 June with four physical differences and seven exhibits; decision expected within a year. Counsel assumes the labeling outcome and litigates in parallel.

Phase 7 — Trace the supply chain

[ ] Match serial and lot codes on the purchased units to your shipment records first. This is a five-minute answer if you serialized and a six-month investigation if you did not.
[ ] Buy commercial bill-of-lading data built on CBP manifest records: consignee, shipper, port, container count, dates.
- Trap. Coverage is incomplete and shippers can request confidentiality. Treat a miss as a data gap, not as proof of innocence.
[ ] File an e-Allegation with CBP with shipment specifics. It costs nothing and occasionally produces a detention.
[ ] Reconcile the suspected distributor's purchase orders against its forecasts and its territory sell-through for the preceding four quarters.
- Why. Over-ordering against forecast is the signature of diversion and the fact that makes the contract claim easy.
[ ] Once suit is filed, serve Rule 45 subpoenas on the marketplace, the freight forwarder, the customs broker, and the payment processor.
- Why. The broker's entry summary, CBP Form 7501, names the importer of record, the manufacturer, the value, and the entry date. It is the most useful single document in the case.
[ ] Budget six to twelve months for anything offshore, and consider whether a U.S.-affiliated entity gives you a shortcut.
- Authority. The Hague Evidence Convention is not the exclusive route to foreign discovery. Société Nationale Industrielle Aérospatiale v. U.S. Dist. Court, 482 U.S. 522, 538-40 (1987).
[ ] Choose the defendant set deliberately: the diverter has culpability and upstream information but often no assets; the retailer has assets, jurisdiction, and downstream pricing data. The usual answer is both, in one complaint, in the retailer's home district.
- Trap. Suing the platform rather than the seller rarely works. Contributory liability runs through Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 854 (1982), and courts have declined to find it on generalized knowledge, Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93, 106-07 (2d Cir. 2010). Brand-registry programs do more work: Online Brand Protection Toolkit.
[ ] Do not remove or obscure codes on your own returns or refurbished stock, and tell your returns vendor the same.
- Trap. A brand that strips its own lot codes has destroyed the Zino Davidoff theory and handed the defendant a "you do it too" exhibit.

Northlade. Serial prefixes and the shipment log point to one Kanto purchase order — 5,000 units in November against an 1,800-unit forecast. Import data shows 4,200 entering Long Beach consigned to Basalt Sourcing LLC, a Nevada entity with a registered-agent address and no website. Basalt sold to ChefKit.

Phase 8 — Remediate the contracts and the product

[ ] Engineer at least three of these into the U.S. configuration and document each in a signed product specification: a U.S.-only serial prefix tied to a shipment record; a registration-linked warranty granted and denied at the serial level; a regulatory or labeling element required here and absent abroad; a support entitlement (calibration, updates, parts) that runs to the serial rather than the buyer; and one physical difference a port officer can see in four seconds.
[ ] Specify the code system so it will carry a traceability theory: unique per unit, recorded against shipment, customer, and date, human- and machine-readable, capable of driving a recall, documented in an SOP that states its purpose, and hard to remove without visible damage.
- Why. Removal then becomes the actionable act, independent of whether the individual unit is any worse. Zino Davidoff, 571 F.3d at 244-46.
[ ] Redraft the distribution agreement with seven clauses: territory and approved channels; downstream flow-down and no transshipment; code integrity; records, audit, and inspection; a liquidated diversion charge; forecast discipline with an over-order refusal right; and a cooperation covenant requiring the distributor to trace any unit you identify by code.
- Why. You cannot control resale. You can control what your mark means here and who owes you a contract remedy when it leaks. Model language is in Fighting or Defending Parallel Imports; the licensing analogues are in Drafting a Trademark License That Survives, How to Draft a Trademark License Agreement, and the Trademark License Agreement — Template.
[ ] Write the procompetitive justifications into a recital: preventing free riding on dealers' service investment, protecting the quality-control system, supporting warranty and recall infrastructure.
- Authority. Vertical non-price restraints are judged under the rule of reason. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 57-59 (1977).
[ ] Keep price out of every anti-diversion clause, and say so in the clause.
- Authority. Minimum resale price maintenance is judged under the rule of reason federally, Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 899 (2007), but remains per se unlawful under some state regimes, so a national program cannot rely on Leegin alone. If the client wants price discipline, use a unilateral announced policy under United States v. Colgate & Co., 250 U.S. 300, 307 (1919) — and remember that agreement can be inferred from conduct, Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764 (1984). A Colgate policy dies in the follow-up email.
[ ] Run the Robinson-Patman check on any domestic two-tier price. International two-tier pricing is generally outside the Act; charging authorized U.S. dealers less than unauthorized U.S. buyers is squarely inside it.
- Authority. 15 U.S.C. § 13(a); competitive injury requires that favored and disfavored purchasers actually compete, Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 176-78 (2006); functional discounts must reasonably reflect the costs of functions actually performed, Texaco Inc. v. Hasbrouck, 496 U.S. 543, 561-62 (1990); promotional allowances must be offered on proportionally equal terms, 15 U.S.C. § 13(e).
[ ] Check the warranty program against warranty law, not only trademark law.
- Authority. The Magnuson-Moss Warranty Act bars conditioning written-warranty coverage on use of a branded article or service absent a waiver or no charge, 15 U.S.C. § 2302(c). And a warranty voided solely because the seller was unauthorized may not be a material difference where state law forbids that discrimination. Bel Canto Design, Ltd. v. MSS Hifi, Inc., 837 F. Supp. 2d 208, 228 (S.D.N.Y. 2011).
[ ] Stand up detection: marketplace and price monitoring, quarterly test purchases, and new-listing alerts on model numbers rather than the brand name alone. See Trademark Watch Services and the Brand Enforcement Toolkit.

Practice tip. Have antitrust counsel read the distribution agreement, the dealer policy, and the enforcement plan in one sitting. The clauses are usually fine in isolation and dangerous in combination.

Northlade. Serial prefixes and calibration entitlement already exist; the redraft adds the forecast true-up and the diversion charge that would have stopped a 5,000-unit order against an 1,800-unit forecast.

Phase 9 — Demand, and settle if you can

[ ] Send three paragraphs and an attachment: the registration and recordation numbers; the specific goods and specific differences, with two pages of the matrix attached; and the four things you want — cessation of sale, an accounting of units purchased and sold, identification of every supplier with invoices, and document preservation.
- Why. Two pages of a comparison table persuade a reseller's counsel faster than four pages of adjectives. Start from the Trademark Cease-and-Desist Letter — Template and strip its escalation language; the mechanics are in Sending an Effective Cease-and-Desist Letter.
[ ] Include an explicit classification sentence stating that you do not contend the units are counterfeit, that they were made by the brand owner, and that the objection is to their foreign specification.
- Why. It costs nothing and removes the defendant's best story before it is told.
[ ] Offer a path: a buy-back of remaining inventory at the reseller's cost in exchange for source identification and a standstill. It resolves a startling number of these matters for less than the cost of a motion.
[ ] Say nothing about criminal referral, treble damages, or statutory damages.
[ ] Do not repeat an accusation to a marketplace that you could not prove in court.
- Trap. Telling a platform that genuine goods are counterfeit is a false statement about the reseller's product and can support its own Lanham Act claim, on top of the declaratory judgment exposure from Phase 1.
[ ] Calendar the response date, the escalation date, and the date you will re-purchase to prove continued sales.

Northlade. Letters to ChefKit and Basalt on 6 May with a two-page extract of the matrix and the classification sentence. ChefKit's counsel calls in nine days.

Phase 10 — Sue and move for a preliminary injunction

[ ] Plead the counts that fit the facts: infringement of a registered mark, 15 U.S.C. § 1114; false designation of origin, 15 U.S.C. § 1125(a)(1)(A); false advertising where the seller claims authorization, warranty coverage, or "U.S. version," 15 U.S.C. § 1125(a)(1)(B); unlawful importation under 19 U.S.C. § 1526(a) with a private action under § 1526(c) where ownership and affiliation permit; state unfair and deceptive practices; tortious interference against the party that induced the distributor's breach; and breach of contract against the distributor. Jurisdiction under 28 U.S.C. § 1338(a) and 15 U.S.C. § 1121.
[ ] Plead specifically how consumers are likely to be confused, and plead facts supporting each first sale exception you rely on. A conclusory complaint in a genuine-goods case invites a motion.
[ ] Check the registration-notice question before you plead a damages theory.
- Authority. Absent actual notice of the registration, a plaintiff that has not displayed ® or the statutory legend may be barred from recovering profits and damages. 15 U.S.C. § 1111. The Phase 2 packaging photographs answer this.
[ ] Assemble six declarations: brand operations authenticating the matrix; quality on procedures and adherence; engineering or chemistry on the physical differences; the investigator on purchases and chain of custody; customer service on warranty denials and the complaint record; and the survey expert if you have one. See the Preliminary Injunction Motion Checklist for Trademark Cases and Moving for a TRO or Preliminary Injunction in a Trademark Case.
[ ] Draft the proposed order product-specific and difference-specific — "any NL-7 unit bearing a serial prefix other than US, or lacking the FCC Part 15 statement" — and bind officers, agents, employees, and persons in active concert under Fed. R. Civ. P. 65(d)(2), naming the individuals.
- Trap. "Enjoined from selling Northlade products" will not be signed and should not be. And an unnamed principal re-forms as a new LLC in a week.
[ ] Do the Rule 65(c) bond math before you move.
- Why. A wrongly enjoined importer's damages are trivially computable from its own invoices, which makes the bond in a gray market case a real number — sometimes larger than the recovery you are chasing. Fed. R. Civ. P. 65(c).
[ ] Rely on the statutory presumption, and prove up likelihood of success anyway.
- Authority. The Trademark Modernization Act restored a rebuttable presumption of irreparable harm on a finding of likely success. 15 U.S.C. § 1116(a); cf. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Doctrine in Preliminary Injunctions in Trademark Cases.
[ ] Build the damages model around the defendant's gross revenue on the diverted units and make the defendant prove its costs.
- Authority. 15 U.S.C. § 1117(a); willfulness is not a precondition to disgorging profits, Romag Fasteners, Inc. v. Fossil, Inc., 590 U.S. 212, 218 (2020), though it still drives the equities. See Proving Trademark Damages and Disgorging Profits, the Trademark Monetary Recovery Checklist, and What a Trademark Win Is Worth.
[ ] Calendar Fed. R. Civ. P. 4(m) service, the Rule 16(b) scheduling order, and the Rule 26(f) conference the day the complaint is filed. Litigation mechanics generally: Trademark Litigation Toolkit; forum choice: Federal Court vs. TTAB.

Northlade. Basalt and ChefKit as co-defendants in D. Mass.; separate ICC arbitration against Kanto. ChefKit settles in six weeks with a consent injunction and full source identification. Basalt defaults. Kanto pays the diversion charge and loses the territory.

Phase 11 — If you are the reseller

[ ] Produce the invoices and name your source in your first substantive response.
- Why. An authorized first sale to you or your supplier is the whole defense, and once it is established the legality of every later sale is irrelevant to trademark law — even a sale that breached someone's distribution contract. McDonald's Corp. v. Shop at Home, Inc., 82 F. Supp. 2d 801, 812-13 (M.D. Tenn. 2000); Sebastian Int'l, Inc. v. Longs Drug Stores Corp., 53 F.3d 1073, 1076 (9th Cir. 1995).
[ ] Audit and strip every claim of authorization this week — site header, listing title, ad copy, keyword ad extensions, email templates, packing inserts.
- Trap. Merely stocking and selling a genuine product is not a representation of authorization, Matrix, 988 F.2d at 593. Saying "Authorized Dealer" or promising a manufacturer warranty you cannot deliver is independently actionable no matter how genuine the goods are. Australian Gold, 436 F.3d at 1241. See Descriptive and Nominative Fair Use, Raising a Trademark Fair Use Defense, and Running a Keyword and Paid-Search Trademark Program.
[ ] Serve the Bourdeau Bros. request on day one: all documents concerning U.S. sales, by any channel, of the foreign configuration — duty-free, travel retail, military exchange, employee, sample, and cross-border e-commerce.
[ ] Serve the Iberia Foods request alongside it: SOPs with version history for every quality-control procedure alleged, plus three years of inspection, deviation, and audit records.
[ ] Put a durable disclosure on the package and, where possible, on the article: that the item is imported and not the U.S. model, the specific differences, that no manufacturer warranty applies, and that you are an independent reseller, not affiliated with or endorsed by the brand.
- Why. Nestle makes the confusion presumption rebuttable, 982 F.2d at 644, and disclosure is the rebuttal — but a disclaimer buried in a listing never reaches the post-sale audience, which is why courts discount it.
[ ] Keep the foreign invoice, export documents, entry summary, and payment record for every lot, indexed to the serial ranges received.
[ ] Evaluate counterclaims proportionately. A declaratory judgment action lets you pick the forum if the demand overreached, 28 U.S.C. § 2201, and fees are available to prevailing defendants in exceptional cases, 15 U.S.C. § 1117(a). A weak antitrust counterclaim converts a manageable case into a two-year project. See Responding to a Cease-and-Desist Letter and the Trademark Defenses Toolkit.

Common Mistakes

Calling gray goods counterfeit. It creates declaratory judgment exposure in a forum you did not choose, supplies a false-statement theory if you repeated it to a marketplace, and follows you into the fee analysis under 15 U.S.C. § 1117(a).
Skipping the Phase 4 self-audit. It is free, it takes two weeks, and it is the only step that can tell you the case does not exist. Solvent & Sage learned it from a document request.
Pleading a quality-control theory nobody follows. Polymer Technology and Iberia Foods exist to be read to your own witness. A written SOP that no one obeys is worse than no SOP.
Alleging price as a material difference. It is the reason gray goods exist and it has never carried a case.
Assuming CBP recordation stops gray goods. Recordation buys officer visibility and seizure disclosures. Exclusion of genuine foreign-market goods requires Section 526 (unavailable against affiliates) or a granted Lever application (physical differences only, and the importer can label its way in).
Filing a Lever application on non-physical differences. Warranty, service, and code differences are strong in court and inert at the port. 19 C.F.R. § 133.2(e).
Recording a mark whose identification of goods does not cover the shipment. Officers enforce the identification, not the brand. TMEP § 1402.01.
Suing only the thin-LLC diverter. Get the consent injunction and the source identification, then spend the money upstream. An affidavit naming the distributor is worth more than an uncollectible judgment.
A proposed order that enjoins "sales of Northlade products." Overbroad orders do not get signed. Name the serial prefix and the missing regulatory legend.
Forgetting the Rule 65(c) bond. The importer's damages come straight off its invoices, and the number can exceed your recovery.
Letting the client's ® practice lapse. Without notice or actual knowledge, 15 U.S.C. § 1111 can bar profits and damages entirely.
Sitting on the problem. The Lanham Act has no statute of limitations, so courts borrow an analogous state period for laches — and years of visible, unchallenged gray sales are the first thing a defendant will chart.

Deadlines at a Glance

| Clock | Length | Runs from | Authority | |---|---|---|---| | CBP notice of detention to the importer | Within 5 days of the decision to detain | The detention decision | 19 C.F.R. § 133.25 | | Detention of restricted gray market articles | 30 days, extendable for good cause | Presentation for CBP examination | 19 C.F.R. §§ 133.23(d), 133.25 | | CBP disclosure to the recordant (import date, port, description, quantity, country of origin) | Within 30 days | Detention | 19 C.F.R. § 133.25 | | Seizure and forfeiture if the goods are not released | On expiry of the detention period | End of detention | 19 C.F.R. § 133.23(f) | | CBP recordation term | Concurrent with the USPTO registration term | Recordation | 19 C.F.R. § 133.4 | | Recordation renewal application ($80 per class) | Not later than 3 months after expiration | Expiration of the current registration period | 19 C.F.R. § 133.7 | | Lever-rule application to published decision | 4-14 months (practical, not a rule) | Filing under § 133.2(e) | 19 C.F.R. § 133.2(e) | | TRO issued without notice | Expires in 14 days unless extended for good cause or by consent | Entry of the order | Fed. R. Civ. P. 65(b)(2) | | Service of the summons and complaint | 90 days | Filing | Fed. R. Civ. P. 4(m) | | Rule 16(b) scheduling order | Earlier of 90 days after service on any defendant or 60 days after any defendant appears | Service or appearance | Fed. R. Civ. P. 16(b)(2) | | Rule 26(f) conference | At least 21 days before the scheduling conference or order is due | The Rule 16(b) date | Fed. R. Civ. P. 26(f)(1) | | Responses to interrogatories and document requests | 30 days | Service | Fed. R. Civ. P. 33(b)(2), 34(b)(2)(A) | | Section 337 investigation to target date | 16-18 months (practical) | Institution | 19 U.S.C. § 1337 |