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ANTICOUNTERFEITING EXPERTISE
4/01
The International Chamber of Commerce recently announced that its Counterfeiting Intelligence Bureau has published an online directory of specialists who combat counterfeiting and fraud around the world, see www.iccwbo.org.

BOOMING BUSINESS FOR CUSTOMS - IMPORT AND EXPORT?
04/99

Over the last few years, Customs' law enforcement efforts have received quite a bit of press. However, in the commercial arena, one of the fastest growing areas of enforcement has to do with intellectual property rights - trademarks, copyrights and patents. Customs has limited jurisdiction regarding patents, being able to bar their importation only once the International Trade Commission has ordered a particular product banned. Trademarks and copyrights, however, are an altogether different matter.

Until about three (3) years ago, whenever someone from Customs spoke publically about the agency's intellectual property rights enforcement efforts, I.B.M. was identified as its biggest customer. Now its biggest customer appears to be Underwriters Laboratories (UL). There are so many products being imported which bear the UL sticker but do not comply with UL standards that millions of dollars of goods are seized yearly for this violation alone.

19 Code of Federal Regulations Part 133 contains the trademark and copyright regulations but, in a nutshell, the most important fact for an importer to remember is just because it is legal for the vendor to sell the product in his home country does not make it legal to import that same good into the U.S. For example, a U.S. company has laptop computers made in Taiwan. The supplier buys, for example, I.B.M. or Intel chips in Taiwan which become part of the finished computer. Also visible on one of the function keys is the Microsoft Windows® logo. As described, that computer will not be allowed into the U.S. unless the chip maker and Microsoft agree.

While the computer parts were legal to sell and install into the finished computer in Taiwan, the Taiwan supplier does not have the legal right to authorize their importation into the U.S. For entry into the U.S., the chip maker (I.B.M. or Intel) must give its written permission. The problem with the Windows® logo is somewhat different. Microsoft owns the trademark. Therefore, it is the only entity which may permit its importation. Many will respond that the purpose of placing the logo on the key is to make clear that the keyboard is Windows® compatible. Even given that fact, many within Customs have relied upon the trademark rule which allows a company to sell products which are compatible with someone else's goods only if that compatibility is clearly stated, e.g. for use with Microsoft Windows® operating systems.

The compatibility statement is a particular problem, as well, with parts and accessories for cellular telephones. How many of us have bought a brand-name cellular telephone and then bought batteries and carrying cases from other sources? The next time you do so, look carefully at the packaging. It should clearly state "For Use with Nokia Model ......" The same statement is required whether the brand is Motorola, Ericcson, Qualcomm or any other maker. What many leather case importers are running into is their case only mentions the actual telephone maker, e.g. Motorola. As a result, those cases are not allowed importation until an additional label is added stating "For Use with Motorola." One way around this problem is for the importer to blister pack the individual cases with the compatibility statement appearing as part of the blister packaging. However, even to use this option and blister pack in the U.S. (to save transportation and handling costs) requires the original cases or their immediate outer individual plastic bags to contain the required statement.

If goods are clearly counterfeit, they are subject to seizure and destruction. If goods are legitimately trademarked goods but imported by someone other than the trademark holder, they may nonetheless be considered counterfeit unless the trademark holder gives written consent. Written consent is required even if the intention is to simply return the goods to origin for credit once Customs has instituted a seizure case.

One of the most controversial areas for Customs deals with grey market goods, the importation of legitimate goods outside the mark holder's usual distribution channels. The leading case involves efforts by Lever Brothers Company (Lever) [Lever Bros. Co. v. U.S., 981 F. 2d 1330 (D.C. Cir (1993)] to have the importation of certain products barred. Lever U.S. and its British affiliate both manufactured deodorant soap bearing the mark "Shield" and hand dishwashing liquid bearing the mark "Sunlight." There were formula differences between the British version and the one made in the U.S. geared to local tastes and circumstances. There were also differences in packaging. Lever sought exclusion of the British made products imported by an unrelated third party on the grounds of consumer confusion and deception (the basis required to invoke trademark restriction) relying on section 42 of the Lanham Act, 15 U.S.C. §1124 (the basic U.S. trademark law). Customs was allowing the British products to be imported under what was called the "affiliate exception" created by 19 C.F.R. § 133.21(c)(2) which allowed the importation of foreign goods bearing U.S. marks when "the foreign and domestic [mark] owners are parent and subsidiary companies or are otherwise subject to common ownership or control." The Lever court went through a lengthy analysis of U.S. trademark law and its history, in the end finding that the mark itself was not the issue but the imported products were. The British products were "physically different foreign goods bearing a trademark identical to a valid U.S. trademark, regardless of the trademark's genuine character abroad or affiliation between the producing firms." As a result, the shipments were barred from importation.

Since that decision in 1993, there have been made changes to the way in which Customs enforces trademark and copyright law, primarily the result of changes in U.S. law. For example, the Anticounterfeiting Consumer Protection Act of 1996 (ACPA) confirmed for Customs that counterfeit goods are to be destroyed in every instance. It also allowed Customs to impose new fines. For a first offense, the fine may be as large as the value of the seized goods measured by the manufacturer's suggested retail price for genuine articles. For subsequence seizures of the same counterfeit goods, the fine may be as much as twice the value of the seized goods. Mark holders, however, were not happy because the new law did not require Customs to disclose the identity of those importing their counterfeited goods.

This problem was cured in the Federal Register, Vol. 63, No. 48, Pages 11996 - 1200 dated March 12, 1998 when Customs published rules confirming the right of the agency to release importer and manufacturer contact information along with other details previously thought to be confidential such as the date of importation, port of entry, and quantity and description of the seized goods. Also confirmed in these regulations is the authority of the agency to provide samples to the mark's holder for use in examination, testing or pursuit of a related private civil remedy for infringement in both the trademark and copyright context.

In the same Vol. 63 but at No. 58, Customs finally changed its regulations to comply with the Lever decision. Prior to Lever, 19 C.F.R. § 133.21(c) provided an exception for gray market goods simply if the unauthorized imported article was marked with a genuine trademark and the relevant inter-company relationship existed, i.e., affiliation or same owner. The Lever court added another level of analysis by comparing the unauthorized imported article with goods authorized by the trademark owner. As a result, under Lever there is now a distinction made between imported goods which are "identical" to goods authorized by the mark's holder and imported articles which are "physically and materially different" from goods authorized by the mark holder. If the goods are physically and materially different, the affiliate exception does not apply and Customs' protection may still be afforded under what is now referred to as "Lever-rule protection."

In the second Federal Register announcement mentioned above, Customs proposed to make its regulations consistent with Lever to protect against consumer confusion as to the source or sponsorship of imported goods notwithstanding that they are (1) produced by the owner of the U.S. mark, (2) a parent or subsidiary of the mark's owner, or (3) a party subject to common ownership or control with the U.S. mark owner - when the goods bear a mark identical to, or substantially indistinguishable from, a U.S. registered trademark and are found to be physically and materially different from goods authorized by the U.S. trademark owner. In reaching a decision about differences, Customs agreed to consider composition, formulation, product construction, structure, composite product components, performance and operational characteristics, differences between the authorized and gray market products resulting from legal or regulatory requirements, certification, etc. and other characteristics which can be "described with particularity."

Customs has also provided that the prohibition will not apply where the imported article also bears a label informing the U.S. ultimate purchaser of the product's gray market identity. 19 C.F.R. § 133.23(3)(b) provide a sort of disclaimer notification which is to state: "[t]his product is not the product authorized by the United States trademark owner for importation and is physically and materially different." If these words appear on a label in close proximity to the legitimate trademark, the goods will be allowed importation. Additional language designed to dispel consumer confusion is also allowed.

Another important Federal Register announcement appeared in Vol. 63, No. 186, Pages 51296-51297 dated September 25, 1998 and confirms the fines which may be imposed. It allows Customs to make a determination that the counterfeit seized goods are not unsafe or a hazard to health and with the mark holder's consent and following obliteration of the mark, those seized goods may be delivered to a federal, state or local government agency which has established a need for it; gifted to a charitable institution which has established need; or sold at a public auction so long as 90 days have passed since forfeiture.

While this article discusses Customs' efforts in the context of trademarks, the same basic rules apply to copyrights. Absent the holder's permission, copyrighted goods may not be imported into the U.S. While such a result may not be surprising, what has surprised many is Customs' efforts to control trade enforcement marked and copyrighted goods being exported from the U.S. 18 U.S.C. § 2320 prohibits trafficking in counterfeit goods. If an company attempts to export for example Disney products, it had better be able to prove the goods were actually made by Disney or one of its licensees. If not, the export shipment will be seized by Customs. It should also be kept in mind that if the problem is egregious enough, Customs has the legal authority to refer cases for criminal prosecution. Also because Customs now has the authority to turn over to the mark's holder information about those buying and selling its goods, importers and exporters can expect to find themselves the brunt of many more civil lawsuits, a fact which could prove to be particularly problematic as some of these laws allow the mark holder to collect treble damages under the right circumstances!

Originally published in the U.S. Customs House Guide, 2000 Edition.

Some of the Rules for Release of Proprietary Information under U.S. Law
04/00

As a general proposition, any individual or entity providing information to the Government does not want that information shared with anyone, especially competitors. Therefore, U.S. law generally provides that personal, confidential and/or proprietary information shall not be disclosed to anyone. There are severe penalties for Government officials who improperly disclose information. Even though in most cases the information is exempt, there are circumstances where U.S. law allows disclosure.

I. The Freedom of Information Act and the Privacy Act.

The primary purpose of the Privacy Act, 5 U.S.C. § 552a, is to forbid public disclosure of personal and/or confidential information. Lovell v. Alderte, C.A.5 (Ga. 1980) 630 F.2d 428; DePlanche v. Califano (D.C.Mich. 1982) 549 F.Supp. 685. However, the Act does not prohibit the disclosure of all such information. Instead § 552a(b)(2) specifically allows the disclosure of information where providing it is required by the Freedom of Information Act (FOIA), 5 U.S.C. § 552, et seq. FOIA provides the statutory authority allowing the public to access many types of information in the possession of the Government and its agencies. Courts have found it was the intent of Congress that the Privacy Act not be used as a barrier to FOIA. Greentree v. U.S. Customs (C.A.D.C. 1982) 674 F.2d 74, 218 U.S.App. D.C. 231. As such, the Privacy Act permits, indeed, requires disclosure of information if that information must be disclosed under the terms of FOIA. Federal Labor Relations Authority v. U.S. Department of Veterans Affairs (C.A. 21992), 958 F.2d 503.

Disclosure under FOIA is not required if the information falls within a recognized exemption. FOIA itself contains nine (9) exemptions or categories of information which are not subject to disclosure:

1. National security - records authorized by Executive Order to be kept secret for national defense or foreign policy purposes and which are, in fact, properly classified pursuant to Executive Order;

2. Information relating solely to the internal personnel rules and practices of a government agency;

3. Information which is specifically exempted from disclosure by statutes (other than § 552b) provided the statute requires that matters be withheld from the public in such a manner as to leave no discretion on the issue, or establishes particular criteria for withholding or refers to particular types of matters to be withheld;

4. Trade secrets and commercial or financial information obtained from a person and privileged or confidential;

5. Inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with another agency;

6. Personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy;

7. Law enforcement records - records compiled for law enforcement purposes are not subject to disclosure if they could reasonably be expected to interfere with enforcement proceedings, would prevent a fair adjudication, could reasonably lead to an unwarranted invasion of personal privacy, could reasonably be expected to disclose the identity of a confidential source, would disclose law enforcement techniques or guidelines or could reasonably endanger someone.

8. Records prepared by agencies regulating financial institutions; and

9. Geological and geophysical information and data, including maps, concerning wells.

FOIA, 5 U.S.C. § 552(b).

With regard to material exempt from disclosure by other statutes, 5 U.S.C. § 552(b)(3), information exempt under the Privacy Act is also exempt from disclosure under FOIA. See, Painter v. Federal Bureau of Investigation, C.A.5 (GA) 1980, 615 F.2d 689 (material exempt from disclosure under the provisions of § 552a were matters "specifically exempted from disclosure by other statute" as provided by FOIA, 5 U.S.C. § 552(b)(3)).

Because both the Privacy Act and FOIA permit access to information, any requester is entitled to the cumulative total of information under both statutes. Clarkson v. IRS, C.A.11 (GA) 1982, 678 F.2d 1368. Interestingly, if a person is entitled to information under both the FOIA and Privacy Act, the government agency processing the request must prove the information is exempt from disclosure under both statutes in order to legally withhold it. Savada v. U.S. Department of Defense, D.D.C.1991, 755 F.Supp. 6.

The Trade Secrets Exemption.

One major area of concern for commercial parties providing information to the Government is protecting their proprietary and confidential information from disclosure to third parties. F.O.I.A. addresses this concern and specifically states an exemption which prohibits the disclosure of certain types of commercial information, see 5 U.S.C. § 552(b)(4), also called the "trade secrets" exemption. Under this exemption, the government may withhold "trade secrets and commercial or financial information obtained from a person and privileged or confidential".

The term "commercial or financial information" encompasses a wide range of information and, therefore, is generally inclusive of a broad category of data and materials. However, there is no universally accepted definition of a "trade secret;" Black's Law Dictionary (a leading legal treatise) defines a trade secret as:

... protected from misappropriation, [a trade secret] may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives [a] person an opportunity to obtain an advantage over competitors who do not know or use it; or, it may be a formula or chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers.

Deluxe Black's Law Dictionary, p. 1494 (6th ed. 1990) (emphasis added). As such, the term trade secret commonly denotes information of a commercially sensitive and/or proprietary nature. Notably, information which provides one company an advantage over its competitors, such as customer lists, pricing details, and customer preferences, is included within the commonly accepted definition of a trade secret, provided of course the company takes steps to treat the information as confidential, see further comments which follow.

Even if the information is deemed to be a trade secret because it is commercial or financial in nature, it must also be "privileged or confidential" in order to qualify for nondisclosure under the exemption. Again, there is no universally accepted definition of on what constitutes "privileged or confidential" information. It may be argued that a "trade secret" is, by definition, privileged or confidential. After all, in lay persons' terms, a "secret" is by definition intended to be privileged and/or confidential. The lay person's definition, however, is quite different from the judicial interpretation of the term. The United States Court of Appeals for the 9th Circuit (Western United States) held that information is "confidential" if disclosure is "likely to impair the Government's ability to obtain necessary information in the future or to cause substantial harm to the competitive position of the person from whom the information was obtained." Frazee v. U.S. Forest Service, 97 F.3d 367 (9th Cir. 1996).

It appears Japanese Customs is reluctant to disclose information under the new Information Access Bill claiming that to do so would violate privacy laws. The question then is how are the F.O.I.A. and Privacy Act reconciled by the U.S. Government? In responding, we will illustrate from the import/export context.

The provisions of F.O.I.A. and the Privacy Act are not mutually exclusive. F.O.I.A. does not mandate full disclosure of all types of information. Rather, its exemptions set forth specific categories of information which are prohibited from disclosure. Everything else must be disclosed. As previously noted, U.S. courts have determined it is Congress' intent that disclosure should be allowed if possible subject only to the limitations of F.O.I.A.. Greentree v. U.S. Customs, 674 F.2d 74 (C.A.D.C. 1982). Therefore, it is possible to comply with disclosure under F.O.I.A. without violating the Privacy Act. This conclusion does not, however, mean that the issue has a fixed result. In the United States, as with many other issues, the area of what must be disclosed versus what must be kept confidential remains fertile ground for litigation.

By way of example, suppose a company has been the subject of a penalty case imposed by U.S. Customs. One typical step that company will take is to file a FOIA request seeking a copy of all the materials on which Customs relied in bringing and prosecuting its case. Typically Customs turns over the requested material but often claims exemptions for certain of its records. Exemption claims could typically arise for:

1) Memoranda written by one person within Customs advising those processing the case as to the consequence of specific facts or legal standards; 2) Witness statements are typically either outright withheld on privacy grounds or substantially redacted; 3) Customs agents (the law enforcement arm) will typically decline to make copies of their reports available if there are on-going investigations or unique techniques were employed in obtaining the information relied up; and/or 4) If the case involves laws enforced by U.S. Customs on behalf of another federal agency, the information provided by that other agency is often withheld from disclosure.

If the requester believes Customs has improperly withheld information, he may appeal to Customs Headquarters which will independently review the situation. If the requester is still dissatisfied once Customs Headquarters has made a decision, he may sue the Government in federal court seeking the disclosure of additional information. One example of a person who did so successfully was John Lennon, but it took years before the files maintained about him by the Federal Bureau of Investigation were finally turned over. Even then, certain information was found by the courts to be exempt.

II. Release of Manifest Information

In the context of intellectual property rights, governments in the last few years have come to a greater appreciation of the importance and monetary value of trademarks, copyrights, patents, trade secrets and the like. Holders of those rights have aggressively sought more and more information from governments regarding those who infringe on their rights. Therefore, the obvious question is what types of information are legitimately available to owners of the intellectual property rights under U.S. law about infringers? In an earlier article, we discussed recent changes in U.S. law dealing specifically with intellectual property rights in the import arena, see CIPIC Journal, Volume 84. We incorporate those comments here as well.

In addition, U.S. law allows the routine disclosure of certain vessel manifest and statistical information. 19 C.F.R. § 103.31(a) specifically permits accredited representatives of the press, newspapers, magazines, and trade journals to examine vessel manifests and summary statistical reports about imports and exports and copy that data subject to the following rules:

(1) Information from outward manifests: only the name and address of the shipper, general character of the cargo, number of packages and weight, name of vessel or carrier, port of exit, port of destination, and country of destination may be copied and published. However, if the Secretary of the Treasury makes a finding that the disclosure of the information would pose a threat of personal injury or property damage, the information may not be disclosed;

(2) Commercial or financial information, such as the names of consignees, and marks and numbers shall not be copied from outward manifests or any other papers; (Apparently this provision permits their examination, but not copying).

(3) All information appearing on the cargo declaration (Customs Form 1302) of the inward vessel manifest may be copied or published. However, again if the Secretary of the Treasury makes a finding that the disclosure of the information would pose a threat of personal injury or property damage, the information may not be disclosed;

19 C.F.R. § 103.31(a)(1)-(3). All copies and notations from inward or outward manifests must, however, be submitted to a Customs officer for examination. 19 C.F.R. § 103.31(b).

19 C.F.R. § 103.31(c) prohibits the general public from examining vessel manifests. Nonetheless, the same statutory provision permits importers, exporters, and their duly authorized brokers, attorneys, or agents to examine manifests with respect to any consignment of goods in which they have a proper and legal interest as a principal or agent. However, the right to examine information is limited to those shipments in which the viewing party has a legitimate interest.

What does a company do if it does not want its manifest information disclosed? § 103.31(d)(1) and (2) allow importers and consignees to request confidential treatment of their names and addresses on the inward manifest, as well as the marks and numbers which might lead to their identity. The certification or request for confidentiality may also include a request for confidential treatment for all shippers. Interestingly, each certification is valid only for a period of two (2) years and then must be renewed.

§ 103.31(d)(3) provides that any person who abuses the privilege of examining inward or outward manifests shall be denied access to such papers.

19 C.F.R. § 103.32 pertains to information regarding seizures and penalties. The general rule is that Customs may not disclose facts concerning seizures, investigations, and other pending cases until its actions are completed. Upon completion, the identity of the violator, the law violated, and the amount of the penalty may be disclosed to the public by the appropriate Customs port director. Public disclosure of any other information, whether the case is open or closed, is permitted only in accordance with the provisions of 19 C.F.R. § 103.5 (discussed below).

19 C.F.R. § 103.33 deals with the release of information to foreign agencies. Customs may exchange information and documents with foreign customs or law enforcement agencies so long as the Commissioner of Customs reasonably believes the exchange is necessary to ensure compliance, administer or enforce multilateral or bilateral agreements, assist in investigative, judicial, and/or quasi-judicial proceedings, and necessary to any similar action which is undertaken by foreign customs or law enforcement agency, or in relation to a proceeding in a foreign country. However, the information may not be provided to any foreign customs or law enforcement agency that has violated any assurances of confidentiality as required under this section. Id.

Finally, 19 C.F.R. § 103.34 imposes sanctions for the improper disclosure of confidential information. Customs personnel who improperly disclose information are subject to dismissal from the U.S. Customs Service, suspension, or other disciplinary action. Moreover, this section provides for criminal prosecution where the information is disclosed for valuable consideration such as a bribe.

19 C.F.R. § 103.5 sets forth the process by which records and information may be obtained from Customs. Notably, § 103.5 specifically states that the U.S. Customs Service is required by F.O.I.A. (5 U.S.C. § 552(a)(3)) to make the requested records promptly available to the requester upon receipt of a request for reasonably described records. Id.

§ 103.12 states that the disclosure requirements of FOIA do not apply to U.S. Customs records which relate to, in pertinent part:

(a) Matters kept secret pursuant to Executive Order;

(b) Certain internal rules and procedures;

(c) Matters exempt from disclosure by statute;

(d) Privileged or confidential information; i.e., ("Trade secrets and commercial or financial information obtained from any person which is privileged or confidential.")

(e) Certain inter-agency or intra-agency correspondence;

(f) Material involving personal privacy;

(g) Certain investigatory records;

(h) Certain pending criminal investigations; and

(i) Certain informant records.

19 C.F.R. § 103.12(a)-(i) (emphasis added). As such, the Customs regulations mirror FOIA itself in detailing the allowable exemptions.

In the context of types of information subject to release, it is important to remember that some of it is highly sensitive, such as shipper names and addresses. However, the most sensitive information remains confidential. For example, the shipper and the supplier may not be the same entity. Even if they are, Customs is precluded from providing pricing or value information. Also exempt are shipment details. Obviously the number of packages and a general description of the shipment are on a given manifest. However, exactly what is shipped or in what quantities may not be disclosed. Further, if the marks and numbers on a shipment could be used to identify the shipper/supplier or importer/consignee, it may be exempt from disclosure upon request. In other words, by allowing the release of generic shipment information but at the same time providing the interested parties at both ends of the transaction the opportunity to keep information about their identities confidential, the U.S. is seeking to balance the right of the public to information about the movement of goods in and out of the country with the right of business to protect its most proprietary details.

Originally published by the Customs Intellectual Property Information Center/Japan Tariff Association in mid 1999.

ITC ALJ IMPOSES $2.32 MILLION PENALTY
10/99

ITC ALJ IMPOSES $2.32 MILLION PENALTY
8/99

The ongoing saga of Kubota Tractor's attempts to protect its trademark against the efforts of Gamut Trading and Gamut Imports continues. The latest action is the finding of an administrative law judge that the two Gamut companies and certain officers and/or directors are liable for a $2.32 million fine for violating a cease and desist order. For more details check our web site.

ITC TAKES ACTION REGARDING TRADEMARK INFRINGEMENT
7/99

In a carefully watched landmark case, the ITC has asked for public comment regarding its proposal to impose a $562,000 penalty on Gamut Trading Co. in its trademark dispute with Kubota Tractor. Kubota claims that Gamut is infringing on its trademark by importing legitimate Kubota tractors which were not intended for sale in the U.S. market. Kubota's reasoning is that the tractors being imported by Gamut are specially designed for use in markets where the needs and uses for Kubota's tractors are different than what is required for the U.S. market.

Gamut was the subject of an ITC cease and desist order. Kubota complained that Gamut violated that order so it is possible the ITC's proposed action is really more a finding that Gamut should pay for failing to follow the agency's lawful order than it is a comment about what the ITC might do if faced with a pure trademark dispute.

TRADEMARKS AND EXPORTS
7/99

In a further expansion of its jurisdiction over U.S. exports, the Customs Service has begun examining export shipments to determine whether or not they involve counterfeit goods. If the exporter is not able to prove that he is entitled to trade in goods bearing a given trademark and that those goods are legitimately made by the trademark holder or his authorized licensee, Customs appears intent on seizing those goods relying for authority on 18 U.S.C. § 2320. While a criminal statute, this law allows the imposition of fines or jail time for those intentionally "trafficking," attempting to "traffic," and "knowingly using a counterfeit mark or in connection with such goods or services." Possession or title to goods bearing counterfeit marks will undoubtedly be enough for the agency to act.

A mark is obviously counterfeit if it is reproduced without the holder's permission. However, if a mark is legitimate but sold outside the usual distribution channels, it is also considered counterfeit. In other words, the well-established grey market trading of many types of goods may be at risk.

TRADEMARK PROBLEMS HEAT-UP
12/98

More and more American companies are using intellectual property rights [copyrights, patents and trademarks] to bar the importation of goods they consider infringing. One of the more interesting cases involved Kubota Corp. of Japan. It has obtained an order from the U.S. International Trade Commission (ITC) barring the importation of its tractors by Gamut Trading Co. Kubota was the first company to successfully petition the ITC to issue an order instructing U.S. Customs to bar the unauthorized importation of genuine goods.

Kubota does not allege that Gamut imports counterfeit tractors. Rather its argument revolves around Gamut’s importation of genuine Kubota tractors which happen to be made for the Japanese market. Kubota claims those tractors are less stable than the ones authorized for the U.S.

An ITC administrative law judge is expected to try the case in February and recommend by April whether fines should be imposed on Gamut.

CUSTOMS UPDATES THE HANDLING OF IPR ISSUES
12/98

For information about recent changes in how U.S. Customs enforces the law regarding goods protected by a trademark or copyright visit the What's Hot section of our web site for the latest details in an article specially written for the Japan Tariff Association.

An article prepared specially for Japan?s Customs Intellectual Property Information Center in December 1998

A BRIEF SUMMARY OF THE INTELLECTUAL PROPERTY RIGHTS ENFORCED BY UNITED STATES CUSTOMS

U.S. Customs (Customs) enforces the laws on behalf of over forty (40) other federal agencies, including the U.S. Patent & Trademark Office (USPTO). Customs has limited power to bar the importation of goods subject to a patent, being allowed to do so only if the International Trade Commission (a separate federal agency) has issued an order excluding all goods which infringe a given patent. Its powers are much broader when dealing with goods subject to a trademark or copyright.

The rules regarding Customs enforcement of a trademark are located at 19 Code of Federal Regulations (C.F.R.) §§ 133.1-133.25, inclusive. The copyright rules are located at 19 C.F.R. §§ l33.31- 33.46 inclusive. It should be noted, however, that Customs will enforce a copyright or trademark whether or not it has been recorded with that agency so long as it has been recorded with the USPTO. Customs' position is to import goods infringing on another company's mark (as used herein mark means a trademark and/or a    copyright) is trafficking in counterfeit goods, a violation of 18 U.S.C. §    2320. As a result, the primary benefit of recording a mark with Customs is the ability of the holder to limit who may import his mark. Otherwise, grey market goods may be imported so long as the importer is, upon inquiry, able to satisfy Customs as to the authenticity of his goods.

Intellectual property rights have become a higher priority for Customs as industry and government have grown more aware of the scope and consequence of counterfeited goods. Customs' primary enforcement weapon is its seizure authority. If a shipment is suspected of infringing a mark, Customs may choose to give the  importer an opportunity to prove it is not (called a detention). However, often the situation warrants outright seizure. If the goods are clearly counterfeit, seizure is immediately imposed.    Customs employs detentions when it is unclear as to the facts of a given transaction.

One of the biggest problem areas for Customs is the situation of grey market goods, the importation of legitimate goods by a party other than the mark's holder. The leading case in this area involves the efforts of Lever Brothers Company (Lever) [[Lever Bros. Co. V. U.S., 981 F. 2d 1330 (D.C. Cir (1993)] to have Customs bar the importation of certain goods. Lever U.S. and its British affiliate both manufactured deodorant soap bearing the mark  "Shield" and hand dishwashing liquid bearing the mark "Sunlight." There were formula differences between the British version and the one made in the U.S. having to do with local tastes and circumstances. There were also differences in packaging. Lever sought exclusion of the British made products imported by an unrelated third party on the grounds of consumer confusion and  deception (the basis required to invoke trademark restriction)  relying on section 42 of the Lanham Act, 15 U.S.C. § 1124 (the basic U.S. trademark law). Customs was allowing the British products to be imported under what was called the "affi1iate exception" created by 19 C.F.R. § 133.21(c)(2). The affiliate exception allows the importation of foreign goods bearing U.S. marks when "the foreign and domestic [mark] owners are parent and subsidiary companies or are otherwise subject to common ownership or control." The Lever court went through a lengthy analysis of U.S. trademark law and its history, in the end finding that the mark itself was not the issue but rather the imported products themselves. The British products were "physically different foreign goods bearing a trademark identical to a valid U.S. trademark, regardless of the trademark's genuine character abroad or affiliation between the producing firms." As a result, Lever succeeded and the shipments were barred from importation.

Since that decision in 1993, there have been made changes to the way in which Customs enforces trademark and copyright law. These changes are primarily the result of changes in U.S. law. For example, about two years ago, the Anticounterfeiting Consumer Protection Act of 1996 (ACPA) was passed. For Customs it confirmed that counterfeit goods are to be destroyed in every instance.  It also allowed the agency to impose new fines. For a first offense, the fine may be as large as the value of the seized goods measured by the manufacturer's suggested retail price for genuine articles. For subsequent seizures of the same counterfeit goods, the fine may be as much as twice the value of the seized goods. Mark holders were, however, not happy because the new law did not require Customs to disclose the identity of those importing the seized goods.

This oversight was cured when Customs updated its regulations. In the Federal Register, Vol. 63, No. 48, Pages 11996 - 12000 dated March 12, 1998, Customs published as final certain rules confirming the right of the agency to release importer and manufacturer contact information along with other details previously thought to be confidential such as the date of importation, port of entry, and quantity and description of the seized goods. Also confirmed in these new regulations is the authority of the agency to provide samples to the mark's holder for his use in examination, testing or pursuit of a related private civil remedy for infringement in both the trademark and copyright context.

In the same Vol. 63 but at No. 58, Customs finally sought to bring its regulations in accord with the Lever decision. Prior to Lever, as noted above, 19 C.F.R. § 133.21(c) provided an exception for gray market goods simply if the unauthorized imported article was marked with a genuine trademark and the relevant inter-company relationship existed, i.e., affiliation or same owner. The Lever court added another level of analysis by comparing the unauthorized imported article with goods authorized by the trademark owner. As a result, under Lever there is now a distinction made between imported goods which are "identical" to goods authorized by the mark's holder and imported articles which are "physically and materially different" from goods authorized by the mark holder. If the goods are physically and materially different, the exception does not apply and Customs? protection may still be afforded under what is now referred to as the "Lever-rule protection."

In the second Federal Register announcement, Customs proposes to make its regulations consistent with Lever to protect against   consumer confusion as to the source or sponsorship of imported  goods notwithstanding that they are (1) produced by the owner of the U.S. mark, (2) a parent or subsidiary of the mark's owner, or (3) a party subject to common ownership or control with the U.S. mark owner - when the goods bear a mark identical to, or  substantially indistinguishable from, a U.S. registered trademark and are found to be physically and materially different from goods authorized by the U.S. trademark owner. In reaching a decision  about differences, Customs agrees to consider composition,   formulation, product construction, structure, composite product components, performance and operational characteristics, differences between the authorized and gray market products resulting from legal or regulatory requirements, certification, etc. and other characteristics which can be "described with  particularity."

Interestingly, Customs position is that the prohibition will not apply where the imported article also bears a label informing the ultimate purchaser in the U.S. of the gray market identity of the product. At 19 C.F.R. § 133.25(3) (b), the potential seizure for infringement may be overcome if the merchandise (or its packaging) bears a conspicuous, permanent and legible label which states: [t]his product is not the product authorized by the United States trademark owner for importation and is physically and materially different." So long as these magic words appear on a label in close proximity to the legitimate trademark, the goods will be allowed importation. Additional language designed to dispel consumer confusion is also allowed.

A more recent Federal Register announcement appears in Vol. 63, No. 186, Pages 51296-51297 dated September 25, 1998. Described as adopting the final rules to implement ACPA, this announcement confirms the fines which may be imposed. It allows Customs to make a determination that the counterfeit seized goods are not unsafe or a hazard to health and with the mark holder's consent and following obliteration of the mark, those seized goods may be delivered to a federal, state or local government agency which has established a need for it; gifted to a charitable institution which has established need; or sold at a public auction so long as 90 days have passed since forfeiture.

With these recent regulatory changes, Customs has become much more vigorous in its enforcement of trademarks and copyrights, a task which has the potential to overwhelm the agency which continues to do its best with static staffing and budgeting.

GLOBAL TECHNOLOGY AGREEMENTS

During the World Trade Organization ministerial meeting in Singapore earlier this month, participating countries were able to reach agreement on the terms of an Information Technology Agreement which is designed to eliminate duties by the year 2000 on global information technology products such as semiconductors, telecommunications equipment and computers (hardware and software). For the agreement to formally take effect, 90% of the countries participating will have to ratify it.

Separately late last week, an information age copyright pact was also signed. It will bolster protection against software piracy. Music recordings were covered in a separate agreement. For both these agreements, as well, ratification by the individual countries' governing bodies is required for entry into effect. A third topic was the extension of copyright protection to information contained in Internet databases but it was so controversial that the issue had to be tabled for future consideration. The dispute is over how to distinguish temporary copies (which result when browsing a web page) from those which are permanent as the result of a data download. 

Copyright © 1999-2002 S.K. Ross & Assoc., P.C. The materials provided herewith are for informational purposes only and do not constitute legal advice. As the materials on this web site are generally time sensitive, for the most up-to-date information on a given topic you should be sure to contact us for more details.