Rite Aid, Genovese selling diverted Paul Mitchell items, lawsuit charges.

RITE AID FOUND SELLING DIVERTED PAUL MITCHELL ITEMS WITH TAMPERED BATCH CODES, Jean Paul Mitchell Systems charges in a July 9 lawsuit filed in Long Island federal court. The suit, which also names Port Washington, N.Y.-based RockBottom Stores and Genovese (Melville, New York) alleges that the three drug store chains "possessed and sold" diverted Paul Mitchell hair care products with batch codes and security codes that had been "removed, defaced, covered, altered, destroyed, scratched out, obliterated or otherwise tampered with" and "stamped with new, forged" codes.

Beverly Hills-based Jean Paul Mitchell Systems is charging the chains with trademark infringement of the Paul Mitchell mark, as well as "false description or representation" of products and "tortuous interference with contract," according to the suit. The company is asking the court for a temporary restraining order prohibiting the drug stores from selling the diverted product, as well as preliminary and permanent injunctive relief.

The "physical `chiseling' away or chemical remov[al]" of batch and security codes renders the hair care products "untraceable," Jean Paul Mitchell Systems maintains, which could potentially create problems for the company and consumers alike. For example, the firm explains that it would not be able to track its products in the event of a mandatory or voluntary product recall, litigation or in the case of identifying stolen or counterfeit items.

Batch and security codes also contain pertinent information relating to each Paul Mitchell hair care product. Batch codes, visibly stamped on the bottom of each container, contains details on the formulation, the amount of each ingredient in the product and the manufacturing process, Jean Paul Mitchell Systems notes. Removal of batch codes, which also include expiration dates, could result in the sale of "over-aged" product, the firm adds. Invisible security codes also fixed on the container are used to determine which distributor within the Jean Paul Mitchell Systems network received the item, the company says.

Tampering with Paul Mitchell packaging also compromises the "physical integrity" of the containers, the company maintains. In certain cases, scraping or scratching off the codes can create leaks in the bottles, which "expose the product to the air and external contamination," the suit states. This could create a "substantial risk" that the product is "no longer genuine," the company notes. In addition, altering the bottles reduces the "exterior appearance and attractiveness" of the outer container.

The New York case is one of five product diversion lawsuits John Paul Mitchell Systems is filing against national drug store retailers. The suits mark the first time the company has launched litigation against vendors after discovering forged batch codes on its products, the company said.

In addition to the Rite Aid, Genovese and RockBottom suit, Jean Paul Mitchell Systems also filed litigation against ShopKo in Wisconsin and Happy Harry's in Delaware on July 9. The firm intends to file two additional suits against the Revco and Meijer chains. The five lawsuits are "essentially" identical, with slightly different provisions due to contrasting state statutes, the company said.

According to the New York suit, the sale of diverted product through drug store chains "confuses and misleads" the public into "believing erroneously" that the stores are authorized to sell Paul Mitchell items. In addition, consumers are led to believe that the products are marketed under the same quality control standards, including "transportation, storage, rotation, freshness and replacement guidelines," as sanctioned sales. Such criteria "ensure optimum efficacy, color, fragrance and consumer safety," Jean Paul Mitchell Systems notes.

In addition, unsanctioned vendors are not trained to provide the "professional consultation" involved in selling Paul Mitchell products, the company maintains. Authorized salespersons direct consumers to products that will provide "optimum results" for individual hair needs. This, coupled with the inability for unauthorized chains to properly "monitor and control" Paul Mitchell items, "deprives JPMS of the right to control the quality of products sold to consumers" and "may irreparably damage the valuable goodwill and reputation" of the company, the suit declares.

Furthermore, Jean Paul Mitchell Systems contends that due to the drug chains' "reckless regard of facts known to them," the purchase of diverted Paul Mitchell products "violated or interfered with...contracts with its authorized distributors and their vendors." Each authorized distributor is under a contractual agreement with Jean Paul Mitchell Systems, under which the sale of any Paul Mitchell product to unsanctioned vendors is prohibited.

In most cases, a salon representative or authorized distributor discovers the tampered container and sends the product back to Jean Paul Mitchell Systems. Customers can identify the diverted product by the code; on authentic Paul Mitchell packaging the batch code features a "B" at the front of the code, followed by a series of numbers. The serial codes on diverted products contain "meaningless" digits, the company noted. In addition, illegitimate codes are often printed in different colors and fonts, Jean Paul Mitchell Systems said.

Litigation is one avenue Jean Paul Mitchell Systems has taken to prevent unauthorized retailers from selling diverted product. In the past, the company has also written "cease and desist" letters to unsanctioned chains. In an attempt to alert consumers to the issue of diverted goods, Paul Mitchell packaging features the warning "We cannot guarantee the authenticity of this product if sold by any supermarket, drugstore or unauthorized retailers. Guaranteed only when sold by a professional hair stylist."