From earth moving equipment to shampoo to semi-conductors, virtually every industry is affected by the rise of gray markets. Known also as parallel imports, gray market goods are products that are intended for foreign sale and use, but instead are imported and sold—without the distributor’s consent—inside the United States. Estimates of the size of gray markets vary, but according to a 2003 KPMG report, gray market products are worth $40 billion in sales and represent more than $5 billion of lost profits.

Legal challenges against gray markets, however, remain difficult. Despite federal restrictions on parallel imports, it is difficult to prove that goods meet the “materially different” requirement under the law.
Earlier this year, the firm’s Aaron H. Stanton and Fredric A. Mendelsohn won a judgment—on behalf of Hyundai Construction Equipment USA—against an illegal importer of construction vehicles under the Lanham Act. This victory under the Lanham Act was Hyundai Construction’s first-ever successful gray market legal challenge and opens the door for further action against other unscrupulous importers.

Stanton was invited to present at a recent national meeting of the Alliance of Gray Market and Counterfeit Abatement (AGMA) in Sunnyvale, California at the corporate headquarters of Juniper Networks. AGMA is a coalition of prominent technology companies including Hewlett Packard, Cisco, Dolby, Sun Microsystems, IBM, Hitachi and Nortel. The alliance is one of the largest and most influential brand protection and anti-gray market organizations in the world.

“The sale and distribution of gray market goods can be destructive to any industry,” says Stanton. “Our approach under the Lanham Act, as opposed to the International Trade Commission, and success was of particular interest to the AGMA members,” who for the most part use the International Trade Commission, as opposed to the Lanham Act, to fight gray market importers.

Other speakers at the conference included Marla Briscoe, Brand Protection Manager at Hewlett Packard; Marc Brandon, Director of Brand Protection at Symantec; and Lorne Morris, Director of Compliance at Juniper Networks.

Aaron H. Stanton may be reached at 312/840-7078 or astanton@burkelaw.com. Fredric A. Mendelsohn may be reached at 312/840-7004 or fmendelsohn@burkelaw.com.