Dentsply Sirona Inc. v. Net32, Inc.
3:20-cv-00200
W.D.N.C.Jan 11, 2018Background
- Dentsply, a long-established dental manufacturer, sells products in the U.S. through authorized dealers and alleges lower-priced "gray market" Dentsply products have been sold on Net32, an online dental marketplace.
- Net32 hosts vendor listings, does not inspect inventory, invoices and ships are handled by individual vendors, and requires vendors to sign listing agreements with certain FDA-related provisions.
- Dentsply identified multiple Dentsply-branded products sold on Net32 at discounted prices by unauthorized vendors; some products differed in packaging, quantity, codes, labeling, or support information from U.S.-authorized versions.
- Dentsply waited years before suing Net32 and only first raised specific differences in late correspondence and thereafter filed this action asserting contributory trademark infringement and unfair competition under the Lanham Act, seeking a preliminary injunction.
- The court held a preliminary injunction hearing, found disputed evidence that some goods may be "non-genuine," but focused on whether Net32 had the requisite knowledge of infringement and whether Dentsply showed irreparable harm.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether vendors selling Dentsply goods on Net32 are infringing via gray-market sales | Dentsply: many products on Net32 are materially different (packaging, codes, quantity, support), so goods are not "genuine." | Net32: differences are often minor or intended-for-abroad items; many purchases are lawful gray-market sales. | Court: Evidence could support some non-genuine findings, but not dispositive here; merits not established sufficiently for injunction. |
| Whether Net32 can be contributorily liable for vendors' alleged infringement | Dentsply: Net32 facilitates sales and should be liable if it knew or had reason to know vendors sold infringing/non-genuine goods. | Net32: as an online marketplace, general knowledge is insufficient; must have contemporaneous knowledge of specific infringing listings. | Court: Adopted Tiffany approach; Net32 lacked contemporaneous knowledge of which listings were materially infringing, so contributory liability not shown. |
| Appropriate knowledge standard for online marketplaces | Dentsply urged broader constructive knowledge or reason-to-know standard. | Net32 urged the Second Circuit standard requiring particularized, contemporary knowledge. | Court: Found Tiffany persuasive — general knowledge insufficient; plaintiff must show which listings were infringing and that Net32 knew. |
| Irreparable harm and effect of plaintiff's delay | Dentsply: sale of non-genuine goods harms reputation, goodwill, and control over product distribution. | Net32: Dentsply's records show little evidence of reputational harm; plaintiff delayed suit for years. | Court: Dentsply did not demonstrate imminent, probable irreparable harm and delay undercut the claim; injunction denied. |
Key Cases Cited
- Reilly v. City of Harrisburg, 858 F.3d 173 (3d Cir.) (preliminary injunction four-factor framework and gateway factors)
- Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844 (U.S.) (contributory trademark liability when supplier knows or has reason to know of direct infringement)
- Iberia Foods Corp. v. Romeo, 150 F.3d 298 (3d Cir.) (genuineness/material-difference test for gray-market goods)
- Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir.) (online marketplace liability requires contemporaneous knowledge of particular infringing listings)
- AT&T v. Winback and Conserve Program, Inc., 42 F.3d 1421 (3d Cir.) (contributory liability discussion)
- Groupe SEB USA, Inc. v. Euro-Pro Operating LLC, 774 F.3d 192 (3d Cir.) (harm to reputation and goodwill may constitute irreparable harm)