June 11, 2012
Businesses employ all manner of legal strategies to protect their intellectual property rights, but some legal departments overlook the potent enforcement tools available at the border. The United States imports an enormous amount of goods from other countries, and pirated products naturally are part of that deluge. In-house counsel should understand how to enlist the federal government's help to stop infringing goods or, alternatively, to defend their companies' rights to import products against claims of infringement.
U.S. Customs and Border Protection (CBP) is the gatekeeper for products entering the United States, with enormous powers and vast resources at its disposal to keep out and confiscate infringing products. Counsel for holders of copyrights, trademarks and patents should enlist CBP to keep infringing products out of the country.
Counsel should record company trademarks and copyrights with CBP at https://apps.cbp.gov/e-recordations/. To do so, the company first must hold a copyright registered with the U.S. Copyright Office or a trademark registered with the U.S. Patent and Trademark Office. The registration fee to record registered rights with CBP is $190.
CBP also can exclude products that infringe patents, but patents cannot be recorded with CBP. Instead, counsel should seek an exclusion order from the U.S. International Trade Commission (USITC). Exclusion orders are called §337 orders, after §337 of the Tariff Act of 1930, now 19 U.S.C. §1337. CBP will enforce exclusion orders.
The USITC initiates a §337 investigation when a complaint is filed. The complaint must identify the parties who allegedly violated §337. After a full evidentiary hearing, an administrative law judge issues an initial determination, and eventually the USITC may issue an exclusion order barring the products at issue from entry into the United States, as well as a cease-and-desist order directing the violating parties to cease certain actions.
CBP has more than 300 ports of entry and thousands of officers trying to enforce a multitude of laws at the borders. A vigilant attorney should visit the relevant ports that infringers are likely to use and instruct examining officers what to look for.
But finding the relevant port is not always simple. Counsel for an importer can use one of the many online subscription services, such as PIERS and Import Genius, to reveal which ports competitors and suspected counterfeiters are using. The CBP website is useful. There, lawyers can find contact information for CBP's intellectual property rights help desk, plus port addresses and contact information.
In an Interim Rule published in the April 20 Federal Register, CBP?? made the startling admission that, "[d]ue to the development of sophisticated techniques of some counterfeiters and the highly technical nature of some imported goods, it has become increasingly difficult for CBP to determine whether some goods suspected of bearing counterfeit marks in fact bear counterfeit marks." This is CBP's plea for intellectual property rights holders' help to determine whether particular imported shipments are piratical. CBP is barred from revealing an importer's shipment information (deemed a trade secret) to other parties, including the holders of intellectual property rights. But CBP now will be able to share serial numbers, universal product codes and SKU numbers with intellectual property rights holders. By helping CBP inspect imported boxes and goods to determine whether a trademark is being violated, in-house counsel becomes an active partner in making sure fewer infringing products enter the country.
If CBP refuses to enforce a company's rights, even when counsel has properly recorded them and obtained an exclusion order from the USITC, counsel may need to consider filing suit against CBP to enforce the exclusion order from the USITC.
The Other Side
CBP's recordation procedure is designed to avoid the typical protracted legal battles over who controls intellectual property rights. While speedy exclusion and seizure are ideal if CBP is stopping truly infringing products, the expedited system is less advantageous if CBP or the purported rights holder errs. The facts and law in this area are complex. Not only is it possible that CBP could exclude goods that do not infringe on recorded intellectual property rights, but it is possible CBP did not follow proper procedure when excluding or seizing clearly infringing goods. Counsel may need to take action.
Counsel will know that there is a problem at the port when the importer receives a formal notice from CBP, perhaps a request for information or a notice of seizure or penalty. Sometimes, the notice is sent to an importer's customs broker.
Importers may challenge a penalty or seizure notice or an exclusion order through administrative procedures and, ultimately, through the courts. It is becoming increasingly common to invoke CBP's procedural protections to keep out infringing products while simultaneously seeking a court's injunctive relief. Parties sometimes rush to sue or to get before an administrative agency as leverage, even when the merits are dubious.
Companies may feel like walking away from a confrontation with CBP even when they are convinced they are not infringing upon anyone's intellectual property rights, thinking it all not worth their time and money. The problem is that the record is likely to haunt an importer in perpetuity. I know of no way to expunge CBP's records. If counsel's company has a record of infractions, CBP will detain and examine its shipments for weeks, disrupting the "just in time" business imperative under which most importers work.
A company may not even know that it is importing infringing goods and will only discover a problem when CBP flags a shipment or when CBP audits the company. A company can request an advisory opinion, known as a ruling, from CBP to find out if a particular good is infringing. In-house counsel may want to set up procedures to audit the company's supply chain periodically. An experienced eye should be able to detect the clear red flags and subtleties that indicate possible infringement issues.
Oscar Gonzalez is a principal in Gonzalez Rolon Valdespino & Rodriguez in Dallas. His practice focuses on business/ corporate litigation and transaction law, international trade law and nonprofit organization law.
Reprinted with permission from the June 11, 2012 edition of Texas Lawyer. © 2012 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.