Original Appalachian Artworks (OAA) was the manufacturer and license holder of Cabbage Patch Kids dolls. Granada Electronics imported and distributed Cabbage Patch Kids dolls to the United States that were made in Spain by Jesmar under a license from OAA. Jesmar’s license permitted manufacture and distribution of the dolls in Spain, the Canary Islands, Andorra, and Ceuta Melilla. Under the license, Jesmar agreed not to make, sell, or authorize any sale of the dolls outside its licensed territory and to sell only to those purchasers who agreed not to use or resell the licensed products outside the territory as well. Jesmar’s argument that Granada’s sales did not constitute “gray market” sales was that OAA’s dolls sold in the United States had English-language adoption papers, birth certificates, and instructions while Granada’s dolls came equipped with Spanish-language adoption papers, birth certificates, and instructions. In addition, Granada argued that the role of trademark law was to prevent an infringer from passing off its goods as being those of another. Such was not the case here. Are these sales prohibited? Explain.
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