El Greco Leather Prods. Co. v. Shoe World, Inc.

El Greco Leather Prods. Co. v. Shoe World, Inc.

Opinion

 [***1016]   [*393]  PRATT, Circuit Judge:

This appeal presents an issue under § 32 of the Lanham Act, 15 U.S.C. § 1114, specifically, whether goods manufactured by agreement with the holder of a trademark, but distributed without authorization of the holder, may be considered "genuine" for purposes of trademark protection. Because we conclude that such goods cannot [**2]  be considered genuine, we reverse.

BACKGROUND 

On March 17, 1983, Solemio, a Brazilian shoe factory, contracted with El Greco Leather Products Company, Inc. to manufacture 25,000 pairs of shoes bearing El Greco's trademark, CANDIE'S. Solemio was to ship the shoes no later than June 15, 1983, in seven lots, A through G, each consisting of approximately 3600 pairs. Upon each shipment, El Greco was to pay Solemio $7.10 per pair, through a letter of credit. El Greco's agent in Brazil, Sapatus Assessoria e Lancomentos Ltd. ("Sapatus"), was to inspect the shoes before shipment in order to assure that they met El Greco's specifications and quality standards. Payment under the letter of credit could not be made without a certificate of inspection signed by Sapatus on behalf of El Greco, declaring that the merchandise had been "approved for shipment in accordance with buyer's delivery and quality specifications."

 [*394]  It soon became apparent that El Greco was not satisfied with Solemio's performance. Whether due to inferior quality or production delays, El Greco eventually cancelled its order for the last two lots, F and G, and transferred those orders to another factory.  [**3]  The official reason given by El Greco was production delays which had made it impossible for Solemio to deliver by the June 15th deadline; but it is unclear whether these delays were, in turn, caused by quality-control problems or simply an inability to produce the required output by the required date. In either case, no certificate of inspection was ever issued for the shoes Solemio manufactured for lots F and G.

Despite the cancellation, the shoes that were to be shipped as lots F and G were apparently manufactured by Solemio. The district court found that they had in fact been completed, at least in substantial part, at the time El Greco cancelled its order, and that El Greco did not specifically instruct Solemio on how to dispose of the shoes.

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