Customs Entry Process

Law Offices of George R. Tuttle, P.C.

Presentation on CBP Enforcement of Infringing Trademarks

Presented March 14, 2013 By Stephen S. Spraitzar Law Offices of George R. Tuttle One Embarcadero Center, Suite 730 San Francisco, California 94111 Phone (415) 288-0427 Fax (415) 986-0908 Email: [email protected] Web: www.tuttlelaw.com

 Very high priority of U.S. Government

 Many federal agencies involved

 Counterfeit products are major focus

 Customs very active in this area

 U.S. Patent and Trademark Office (PTO)

 U.S. Custom and Immigration Enforcement (ICE)-Homeland Security Investigations (“HSI”) . HSI leads the National Intellectual Property Rights Coordination Center in Virginia (“IPR Center”) . IPR Center coordinates its efforts with DOJ’s Task Force on Intellectual Property . IPR Center uses the expertise of its 21-member government agencies to share information, develop initiatives, coordinate enforcement actions and conduct investigations related to IP theft. . Also coordinates with other countries on IP enforcement

Among other government agencies involved in IP protection are:

 U.S. Customs and Border Protection (CBP)

 U.S. Department of Justice (has an IPR Task Force on Intellectual Property)

 U.S. International Trade Commission (ITC)

 U.S. Trade Representative (just negotiated agreement with Russia on IP protection and enforcement).

 Trademarks

 Copyrights

 Patents

 Trade Names

 Trade Dress

 Criminal prosecution

 Civil District Court litigation

 State court litigation

 Customs Enforcement

 Detention/Seizure

 Possible penalties

 Re-delivery of infringing merchandise

FY 2012 Seizures - MSRP Value 2% 1% 2% (as published by Customs) 3% 3%

Handbags/Wallets 7% Watches/Jewelry Wearing Appeal/Accessories Consumer Electronic/Parts 40% Footw e ar 8% Pharmaceuricals/Personal Care Digital Media Computers/Accessories Labels/Tags 8% Toys All Other Commodities

FY 2012 Seizures - MSRP Value 14% (as published by Customs)

China 1% 1% Hong Kong

India 12% Singapore

All Other Countries

72%

Domestic Percent China Value Of Total* Handbags/Wallets $ 446,531,105 49% Wearing Apparel/Accessories $ 97,155,512 11% Footwear $ 93,996,598 10% Watches/Jewelry $ 91,302,124 10% Consumer Electronics $ 71,530,088 8% Pharmaceuticals/Personal Care $ 46,859,252 5% Computers/Accessories $ 18,302,486 2% Toys $ 10,483,057 1% Optical Media $ 8,958,800 1% Labels/Tags $ 7,314,674 1% All other Commodities $ 13,772,988 2%

Total FY 2012 Domestic Value $ 906,206,683 Number of Seizures 10,528

 December 2012: Customs conducts Operation Holiday Hoax to snare counterfeit imports at LAX.

 PTIs: Trade issues which are highly scrutinized by Customs based upon a strategically layered risk management approach.

 Why PTIs? They involve issues that can cause significant revenue loss, hurt the U.S. economy, or threaten the health and safety.

 PTIs include agriculture programs, antidumping and countervailing duties, import safety, IP rights, penalties, revenue, textiles, and trade agreements.

Trademark: Under U.S. law [15 U.S.C. § 1127], a trademark is

 any word, name, symbol, device, color or combination thereof

 used to identify or distinguish goods from those manufactured or sold by others, and

 Used to indicate the origin and source of the goods.

Thus, trademarks are supposed to be “source identifiers” to let the consumer know who produced the merchandise and not so much what the merchandise is.

Nike “Swoosh” is an example of a trademark. People know that a product that has this mark is made by Nike or by an authorized licensee:

 A certification mark is

 any word, name, symbol, or device, or any combination thereof –

 (1) used by a person other than its owner, or

 (2) which its owner has a bona fide intention to permit a person other than the owner to use in commerce and files an application to register

on the principal register established by this chapter, to certify regional or other origin, material, mode of manufacture, quality, accuracy, or other characteristics of such person’s goods or services or that the work or labor on the goods or services was performed by members of a union or other organization. (15 U.S.C. § 1127)

 Underwriter Laboratory’s certification marks:

These symbols let the consumer know that the product was certified by UL.

 Registration: Trademarks can be registered with the U.S. Patent and Trademark Office (PTO).

 What does “registered” mean?

 Registration relates to the official act of filing a trademark with the PTO

 Trademark protection can potentially last forever in the U.S., as

long as:

 trademark is continually used, and

 all post-registration maintenance and/or renewal documents with the PTO are timely filed

 Customs is authorized to detain, exclude and seize merchandise that infringes registered trademarks

 Penalties can also be assessed for some infringing shipments

 Customs will enforce only if trademarks are registered with the PTO

 Recordation refers to “recording” (filing) a registered trademark with U.S. Customs’ IPR Branch in order to protect against infringing imports

 Specific procedures have been established by Customs for recording trademarks

 Customs gives greater protection to recorded trademarks

Confusingly Similar Trademarks (one step down from counterfeit):

 If trademark is recorded with Customs and suspected mark is found to be confusingly similar, Customs can seize the

infringing shipment.

 If not recorded, Customs’ policy is not to seize.

 Recordation can be done online at

 https://apps.cbp.gov/e-recordations/

 Information needed:  Certified copy of certificate of registration

 Samples/photos of trademark/copyright

 Information about legitimate users

 Information about suspect infringers

 Gray market request, if applicable

 $190 fee

 Note: Cannot record patents with Customs

Customs’ Intellectual Property Rights Search (IPRS) website:

 http://iprs.cbp.gov/

 Allows search of recorded trademarks

 Provides specifics about a recorded trademark.

If Customs suspects that there is an alleged violation of a trademark, Customs first characterizes the nature of the offense as a:

 Counterfeit Trademark

 Confusingly Similar Trademark, or

 Restricted Gray Market Goods

Note: Customs is not obligated to initiate an enforcement action in every case of suspected infringement.

The category of the offense will determine:

 What action Customs will or may take

 Options and avenues of relief for the importer

 Potential penalties

The Lanham Trademark Act (15 U.S.C. § 1127) defines “counterfeit” as a spurious mark which is identical with, or substantially indistinguishable from, a registered mark...(see also 19 CFR 133.21).

“Spurious:” 2. “outwardly similar or corresponding to something without having its genuine qualities.” Merriam Webster Dictionary

“Likelihood of confusion” test:

 Whether ordinarily prudent consumers would likely be confused as to the source or sponsorship of goods based upon the mark which appears on them

 Not all consumers must be confused

 Just appreciable number of ordinarily prudent consumers are likely to be confused

Customs uses the following factors to compare the genuine mark with the suspect mark to determine if there is a likelihood of confusion:

 Strength of the mark

 Similarity of the marks

 Proximity of the marks

 Actual Confusion

 Sophistication of the Buyers

 Similarity of the Goods

Customs Headquarters ruling HQ H155739 dated April 21, 2011:

 Imported Merchandise: Cotton Cordell Banana Pepper fishing lure

 Found to be a counterfeit of a trademarked fishing lure called a “Reef Runner Little Riper-Hot Tamale”

Counterfeit

Cotton Cordell’s Banana Pepper (top) Reef Runner Little Riper- Hot Tamale (bottom) Genuine Mark

Why was the Banana Pepper runner counterfeit?

 PTO registration described mark as a “fishing lure having curved back and belly regions that taper at the aft end.”

 Banana Pepper fishing lure determined to be identical to or substantially indistinguishable from the Reef Runner marks

 Banana Pepper lure curves throughout the back and belly regions, and tapers at the aft end, in ways that appear to be substantially indistinguishable from the shape of genuine Reef Runner mark.

 If found to be counterfeit, Customs will seize

 Penalties authorized by 19 U.S.C. §1526(f)

 Applies to counterfeit goods

 Penalty is in addition to seizure and forfeiture

 Issuance of penalty must be preceded by a forfeiture

 First offense: 1x Manufacturer’s Suggested Retail Price (MSRP)

 Second and subsequent offenses: Not more than 2x MSRP

 Confusingly similar trademarks--one notch below counterfeit trademarks.

 Defined in 15 U.S.C. § 1124

 Pertains to merchandise that copies or simulates a registered

trademark

 Does not have to be an identical or substantially indistinguishable mark

 Resembles the recorded mark in such a way that it causes confusion to the public

 Causes public to associate it with the genuine mark (see 19 C.F.R. § 133.22)

Customs Headquarters ruling HQ 474458 dated October 30, 2003:

Imported Merchandise: Aero shoe with a suspect mark

Genuine Mark: Asics Tiger registered trademark

 Asics’ genuine trademark  Aero shoe (with suspect mark)

 Asics shoe with trademark

Stripes on the Aero shoe were found to be confusingly similar because:

 Although alike in many aspects, stripes on the Aero differed from stripes on the Asics shoe

 Both sets of stripes exhibit a similar pattern

 Horizontal double stripes on Aero start from a different point

Customs Headquarters Ruling HQ 475061 dated January 22, 2004:

 Imported merchandise: Tozai clock radio

 Genuine mark: trapezoidal shape on Bose’s sound products

Bose Radio with genuine Suspect Tozai Radio mark as used in Commerce

Tozai clock radio held to be confusingly similar. Why?

 Bose trademark has configuration of a radio enclosure

 The Tozai product--also has a configuration of a radio

 Though not exact, both radios have trapezoidal shapes

 Shape of the Tozai radio very similar to the configuration of the Bose trademark

 Impression created by the marks is essentially the same

 Bose configuration is a strong mark. A likelihood of confusion is evident

 No specific statutory authority for issuing penalties for confusingly similar merchandise

 Potential penalty under 19 USC § 1595a

 General seizure statute

 Merchandise introduced “contrary to law”

 Penalty: Up to 1x value of imported merchandise

 Restricted “Gray Market” Merchandise (“Parallel Imports”) defined in 19 CFR §133.23 as:

 Foreign-manufactured goods bearing a genuine trademark or trade name

 Identical with, or substantially indistinguishable from, a mark owned and recorded by a citizen of the U.S. or a corporation or association created or organized within the U.S.

 Goods that are imported into the U.S. without the authorization of the U.S. trademark owner

 Counterfeit Goods: No authorization from license holder to use the trademark

 Gray market goods: foreign manufacturer is authorized to apply the trademark to the class of goods.

 Trademark owners often don’t want parallel imports coming into the U.S.

 Typical Gray Market Situations

Often, gray market goods are made for export to another foreign country but are either diverted or exported to the U.S. Gray market goods might have the following identifiers:

 Instructions or warranty written in a language other than English language;

 No US manufacturer's warranty;

 Be sold at a price different from the genuine article;

 May have different formulations or physical characteristics

 Enforcement by Customs:

 Trademark must be recorded with Customs to receive gray

market protection

 Customs will not exclude gray market goods, if

 U.S. and foreign trademarks are owned by the same person, or

 The trademarks are owned by related corporations or parties subject to “common ownership or control.” 19 CRF §133.21 (c) (1-2).

 Customs’ procedures for restricted gray market goods:

 Goods are initially detained by Customs

 Customs makes determination on whether they can be restricted

 During 30-day detention period, importer is permitted to seek release of the articles

 Conditions that may be met for release include:

 Mark is removed or obliterated

 The trademark owner gives permission for release

 Seizure: Goods will be seized if release cannot be obtained within the 30-day detention period. [19 C.F.R. § 133.23(f)]

 The “Lever Rule:” an exception to where the trademark owner cannot restrict the importation of the gray market goods

 In certain cases, the goods may be refused entry into the United States when is it established that they are “physically and materially” different from goods produced by the U.S. market under authority by the U.S. trademark owner.

 Lever Rule applies even in affiliate exception cases.

 Lever Rule gray market goods will be permitted into the commerce of the U.S. if certain labeling requirements are met in 19 CFR § 133.23(b)

 Trademark owner must apply for Lever rule protection. Customs will not do it on its own.

 Customs audits are sometimes used to:

 Review possible trademark infringement issues

 May occur during general audits of the importer

 Audits may occur after a detention or seizure notice is issued

 Customs is establishing about 10 CEE’s throughout the U.S.

 Each CEE focuses on a specific industry

 The CEE will serve as a single point for processing entries of

participating importers (even though filed at various ports)

 Four CEE’s are currently open and active:

 Detroit: automotive & aerospace

 Los Angeles: electronics

 Houston: petroleum, natural gas and minerals

 New York: pharmaceuticals, health and chemicals

 Six CEE’s are scheduled to become active by the end of FY 2013 (September 30, 2013):

 Miami: agriculture & prepared products

 San Francisco: apparel, footwear & textiles

 Chicago: base metals

 Atlanta: consumer products & mass merchandising (the big-box stores)

 Buffalo: industrial & manufacturing materials

 Laredo: machinery

 Activities of CEE’s will include:

 Reviewing import documents

 Performing audits

 Responding to questions from importers

 Enhancing enforcement efforts—including IPR issues.

 Eligibility for participation in a CEE: must be either C-TPAT member,

in Importer Self-Assessment (ISA) program, or be invited by Customs

 CEE’s will marshal Customs’ resources for that industry

 Trademark enforcement will be a part of CEE’s activities

 Detentions (19 CFR §133.25)

 Held for examination by Customs

 Customs reviews shipment to determine if infringing

 Detention is not a seizure

 Not a prerequisite to a seizure of counterfeit goods

 Suspected counterfeit merchandise: may first be detained prior to seizure

 Detentions required for confusingly similar and gray market goods (19 CFR §133.22 and 19 CFR §133.23)

 Detentions are handled by Customs import specialists – not FP&F

 Customs’ decision to detain:

 Must be done within 5 days of presentation for examination

 Issuance of Notice of Detention

 Prior to detention: Customs may consult with trademark owner

 After detention: Customs shall disclose to the trademark owner:

 Date of importation

 Port of Entry

 Description of merchandise

 Quantity

 Country of origin

 Federal Register Notice Volume 77, Number 79 (Tuesday, April 24, 2012)

 Allows Customs to give additional information to the license holder to assist Customs in determining whether the article bears a counterfeit mark

 Information can be in the form of a photograph, sample of the goods, and retail packaging

 Information can include serial numbers, UPCs, and SKUs appearing on the imported article

 During Detention Period:

 Customs will consult with trademark owner

 Importer can present info to Customs

 Customs can provide samples to trademark owner

 If not released within 30 days, goods deemed “excluded” (19 U.S.C. §1499)

 For confusingly similar or gray market goods, if no release within 30 day detention period, goods shall be seized

 Exclusion: is a Customs decision not to allow the merchandise into the U.S.

 Seizure: Customs is taking possession of the imported merchandise with the aim of forfeiting the goods (taking away the ownership of the goods from the importer and transferring it to the Government)

 Exclusion of merchandise is protestable [19 USC § 1514(a)(4)].

 To file a protest, must wait for

 Decision from Customs on detention, or

 Expiration of 30-day period if no decision

 Application for further review

 Accelerated review provided for protests filed against exclusion [19 CFR § 174.21(6)]

 Customs has 30 days to decide

 If no decision made within 30 days, protest is deemed denied

 March 1, 2013 : Merchandise Presented For Examination

 March 5, 2013 : Notice of Detention Issued

 April 4, 2013 : 30–day period passes – no notification from Customs

 April 4, 2013 : Goods deemed excluded

 April 11, 2013: Protest and AFR filed

 May 11, 2013: Protest deemed denied if no decision from Customs

 Denied protest can be contested in the U.S. Court of International Trade

 Was detention made within 5 day period?

 Why is it being detained?

 Is suspected merchandise counterfeit or confusingly similar?

 Can prove that it is not counterfeit?

 If alleged to be counterfeit, can you show that it is confusingly similar instead?

 Is trademark recorded?

 Will trademark owner grant permission to release?

 If confusingly similar, can get permission from the trademark owner to obliterate mark or to export the goods?

 License issues

 Consider filing a protest

 If released, Customs can ask the importer to re-deliver infringing goods

 Failure to return goods: liquidated damages

 Liquidated damages : up to 3x invoice price for restricted merchandise

 [Re-delivery authority : 19 CFR 141.13(d)]

 Was notice of redelivery issued more than 30 days after the release or conditional release period?

 Was redelivery notice issued after liquidation?

 Can you get permission of trademark owner?

 Licensing issues

 Can category be reduced from counterfeit to confusingly similar?

 Petition for relief on liquidated damage assessment

 Petition for relief if merchandise is seized

 Issued by the Fines, Penalties & Forfeiture Office

 Detention and/or exclusion not a prerequisite to a seizure

 If suspected work is counterfeit, Customs will seize

 If confusingly similar, Customs may seize (depending upon whether the mark is recorded)

 Seizure Notice is Issued to Importer

 Specific as to articles seized

 Basis for seizure

 Trademark Owner is Notified

 Certain information is provided by Customs

 Samples can be provided to trademark owner

 Administrative Options are Specified In Seizure Notice

 1) Importer can take no action

 2) Petition for Relief

 3) Request for Forfeiture

 4) Submit an offer in compromise

 Note: Seizures Cannot be Protested

1) Importer takes no action

 Customs will begin forfeiture proceedings

 Government to acquire ownership of the goods

 Doesn’t eliminate possible penalty under 19 U.S.C. §1526 (f)

 Penalty, if any, may be assessed several months after abandonment

 2) Petition for relief

 Filed within 30 days from date seizure is issued

 Extensions can be obtained

 Confirm extensions in writing

 Include grounds, if any, to rescind the seizure and obtain release

 Include mitigating factors to reduce possible penalty

 Potential long delay in getting decision

 3) Request for Forfeiture

 Can request that forfeiture proceedings be instituted

 However, can ask FP&F for referral to U.S. Attorney’s Office through local Customs counsel

 May be possible to negotiate release, depending upon the facts

 Is the mark actually counterfeit?

 If alleged to be counterfeit, can reduce to confusingly similar?

 Can obtain consent of trademark owner?

 Review sampling performed by Customs

 Licensing issues

 First sale rule

 Fair Use

 Consider requesting forfeiture and negotiating with U.S. Attorney or

local Customs counsel

Presentation on CBP Enforcement of Infringing Trademarks

Presented by

Stephen S. Spraitzar George R. Tuttle Law Offices One Embarcadero Center, Suite 730 San Francisco, California 94111 Phone: (415) 288-0427 Fax: (415) 986-0908 Email: [email protected] Web: www.tuttlelaw.com