Salman Ejaz agreed in 2007 to stop hawking Bose Corp. products intended for sale in the United States on the "gray market" in the European Union. So he turned to reselling Bose items through eBay in Australia, and that landed his attorneys before the U.S. Court of Appeals for the First Circuit on Thursday.

They were there to appeal a finding by U.S. District Judge Denise Casper in Boston on Bose’s trademark claim against Ejaz, an individual eBay reseller. Casper also upheld a clause in a disputed contract between the parties that would entitle Bose to $350,000, based on liquidated damages of $50,000 per item Ejaz sold in violation of the 2007 agreement.

Bose claims Ejaz's sales of its U.S.-trademarked products in Australia—which are different than the products the company sells there—confuses consumers and erodes its goodwill. Ejaz's brief argues that services like eBay help consumers put price pressure on companies like Bose.

Ejaz’s attorneys asked a panel that included Chief Judge Sandra Lynch and judges William Kayatta Jr. and Juan Torruella to reconsider Casper’s summary judgment for Bose on the trademark issue on the ground that there are disputed facts. Specifically, whether there are material differences between the trademarked U.S. goods and those sold overseas—and whether those differences would likely cause customer confusion.

Bose’s opening brief relied on a 1992 First Circuit precedent regarding the gray market, Societe Des Produits Nestle S.A. v. Casa Helvetia Inc., which held that "the scope of protection turns on the degree of difference between the product[s]."

Bose claimed the differences between its U.S. and Australian products sold under the same trademarks causes confusion in the marketplace as a matter of law.

Lynch asked Bose’s lawyer Jeffrey Patterson, a partner at Nelson Mullins Riley & Scarborough of Columbia, S.C., why the company didn’t simply submit an affidavit that the Bose equipment sold in Australia is different than that sold in the United States. Bose’s reliance on deposition testimony by a Bose technical trainer who lacked personal knowledge created evidentiary problems, she said.

Patterson argued that Ejaz had admitted that the products’ DVD region coding and voltage were different.

Ejaz’s lawyer Emily Smith-Lee of Boston’s Smith Lee Nebenzahl insisted that "the Nestle case makes it clear that whether there is a material difference is a case-specific inquiry."

Following the oral argument, Smith-Lee said that much of the case law about gray goods is based on suits by companies against eBay merchants who lack legal representation.

"I’m not sure this idea of buying legitimate products in the U.S. and selling them somewhere else is a Lanham Act violation. I don’t think that proposition has been fully tested by the courts," she said.

The 2007 agreement follwed the dispute between the parties about Ejaz's European resales. Ejaz claimed he didn’t examine the final settlement agreement Bose sent him, which barred him from reselling U.S. Bose products anywhere in the world. That settlement contained a separate signature page.

Sheri Qualters can be contacted at squalters@alm.com.