The U.S. subsidiary of a Japanese mushroom producer was entitled to a permanent injunction barring a California food importer from selling the Japanese producer's mushroom products in the United States under a family of trademarks referred to collectively as the "Hokto Marks," the federal district court in Los Angeles has ruled. Since June 28, 2010, the subsidiary had been the owner of the U.S. rights in the Hokto Marks by virtue of an assignment from the Japanese producer, and it was the exclusive U.S. licensee of the marks from August 2008 to June 28, 2010.

The mushrooms imported by the subsidiary for the U.S. market were grown under special conditions not normally used by the producer; specifically, the growing media was changed to meet the United States Certified Organic standards. The producer and subsidiary had developed special packaging for the subsidiary's use in the United States, with English language text, including a label stating that the mushrooms were "Certified Organic."

The importer obtained the producer's mushrooms in Japan from a third-party company which had obtained them from another company that purchased them from the producer for resale in Japan. The importer then sold the mushrooms in the United States, under the Hokto Marks.

This conduct was likely to result in consumer confusion because the goods sold by the importer --which constituted "gray market" goods --were materially different from the products sold by the subsidiary, the court said. The differences in growing conditions and packaging constituted material differences, such that the goods sold by the importer were not "genuine," for purposes of the likelihood of confusion analysis. The mushrooms sold by the importer were only "genuine goods" in Japan; the mushrooms sold by the subsidiary were the "genuine goods" in the United States. There were also differences in warranty and consumer support offered by the parties, as well as quality control efforts during transportation and storage, between packaged mushrooms sold by the importer and the mushrooms sold by the subsidiary in the United States.

The importer's conduct was causing irreparable injury to the subsidiary that could not be adequately compensated by monetary damages, in the court's view. The balance of hardships weighed in favor of the subsidiary because the importer was free to purchase mushrooms from one of the subsidiary's distributors.

Hokto Kinoko Co., CD Cal., ¶61,859.