In Forschner Group, Inc. v. Arrow Trading Co., the Court of Appeals for the Second Circuit held that the term "Swiss Army knife" is not geographically descriptive of high quality, multi-function knives made in Switzerland. Thus, it does not constitute false advertising for a competitor to use the term "Swiss Army knife" to describe a low quality imitation made in China.

The plaintiff, Forschner Group, is the United States distributor for one of the two Swiss companies which manufacture and supply to the Swiss Armed Forces the distinctive, red, multi-function pocket knives known throughout the world as "Swiss Army knives". Neither Swiss manufacturer has ever attempted to obtain trademark protection for the term "Swiss Army" for knives. However, when the defendant, Arrow Trading Co., began importing from China inferior quality pocket knives bearing the words "Swiss Army" embossed on a similar red handle, Forschner brought suit for false advertising and unfair competition.

Relying on the results of the plaintiff's survey which showed that over a third of the respondents believed "Swiss Army knives" were manufactured in Switzerland and were of high quality, the district court concluded that Arrow's description of its inferior, Chinese-made knives as "Swiss Army knives" constituted false designations of geographic origin and of high quality.

In vacating and remanding the lower court ruling, the appellate court pointed out that the term "Swiss Army knife" does not explicitly indicate geographic origin, as would be the case if the term at issue were "Swiss knife". Thus, the court held that, while the term "Swiss Army knife" "evokes" a geographic association, "[t]he phrase Swiss Army knife cannot fairly be read to say 'made in Switzerland' so as to be geographically descriptive." Therefore, the defendant's use of the term for an imitation knife made in China is not geographically deceptive. Moreover, because the term "Swiss Army knife" does not designate exclusively Swiss manufacture, no misdescription as to "Swiss quality" was possible.

The court, however, refused to enter judgment in favor of the defendant. Rather, the court noted that, even if the term "Swiss Army knife" is generic for a particular type of multi-function knife, the defendant was still obliged to use the term in a manner which did not mislead consumers into believing that the defendant's product was manufactured by its Swiss competitors. The court therefore remanded the case for a factual determination as to whether the defendant had sufficiently distinguished its product so as to avoid such consumer confusion.