Federal Court Orders Trademark Holder to Allow Imports of Allegedly Counterfeit Water Bottles

A New York federal court recently ordered S’well Bottle to allow an importer to bring in water bottles that S’well alleges infringe its trademarks. ETS Express faces irreparable injury from CBP’s detention of its shipments in search of the allegedly counterfeit water bottles, and it’s unclear whether S’well’s trademarks are even enforceable, the Southern New York U.S. District Court said in a decision issued Oct. 10. The court also denied S’well’s request that ETS post a bond for future entries of the water bottles.

CBP had seized more than $12 million worth of ETS water bottles at the Port of Charleston over the past summer, finding ETS “was unable to provide requested paperwork demonstrating that the manufacturer of the goods was authorized to use a unique bottle shape which is a style patented and trademarked by the S’Well Bottle Company,” the agency said in a recent press release (see 1710100042). S’well had registered the trademark with CBP, which then “unilaterally determined” that the ETS water bottles were counterfeit.

The district court found those seizures caused ETS irreparable harm, particularly because “CBP has been initially detaining all of ETS’s imports – not just those that are allegedly infringing – so the shipments can be searched for Force Bottles.” The delays have resulted in canceled orders and reputational harm, the court said. The court also held that ETS has a fair chance to prevail in the case. The trademarks may be too generic to enforce, given that similarly shaped bottles are made by 46 other bottle manufacturers. The two companies also have “very different customer bases,” with S’well selling to consumers and ETS selling to businesses that give away the bottles in promotions.

Having satisfied the necessary requirements, the court issued a preliminary injunction ordering S’well to consent to the release of all of ETS’s detained and seized water bottles, as well as any future importations. It also denied S’well’s request for a bond requirement, finding “no evidence that ETS will be unable to pay damages should S’well succeed on its claims.” Despite S'well's arguments to the contrary, the court said it was the right venue for the case because, while the Court of International Trade has jurisdiction over the exclusion of goods, federal district courts can have jurisdiction over seizures.

The seizures were a “wholly egregious act,” said Sharon Eyal, CEO of ETS, according to a blog post by the Advertising Specialty Institute, a trade association for promotional product distributors. It is particularly curious that CBP issued a release “boasting of the seizure” of $12 million in counterfeit water bottles, when S’well “never claimed ETS’ bottles were counterfeit,” Eyal said, according to ASI.

According to an update to its press release by CBP, the release of the shipments follows normal procedures for judicial review of held shipments. "A federal judge determined that the shipments of bottles should be released," CBP said. "CBP officers work across the country to protect the American economy by ensuring that trademarked designs are not being used illegally. Suspected infringements on intellectual property rights result in those shipments being held for further inspection, and some are released after completion of administrative or judicial processes, as was the case with these shipments," it said.

S'well said the court's order stems from the broad nature of the detentions, and the company still expects to prevail in the case. "The court permitted release of ETS's shipments because, in the words of the court order, Customs had been 'detaining all of ETS's imports -- not just those that are allegedly Infringing,'" said Mara Gassman of Ballard Spahr, who represents S'well in the case. "The court is allowing just 'another few months of imports from ETS' while S'well Bottle's case against ETS proceeds to conclusion. S'well is continuing to prosecute its claims against ETS's infringements and is confident in the ultimate outcome," Gassman said.

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