The United States Customs and Border Protection (“CBP”), a division of the U.S. Department of Homeland Security, has increasingly heightened its focus on goods imported into the U.S. that infringe copyrighted works and trademarks. CBP, an administrative agency with law enforcement powers, has the authority to carry out searches, seizures, and arrests, and additionally, the authority to make substantive determinations regarding infringement of trademarks and copyrights, pursuant to the Tariff Act of 1930, the Lanham Act of 1946, the Copyright Act of 1976, and the Digital Millennium Copyright Act of 1998. Specifically, the CBP monitors U.S. points of entry (all 317 of them), and seize goods that are counterfeit copyrighted works and/or trademarks. If the importer or manufacturer of the goods cannot prove it has a license to copy the works or use the trademark, the goods are detained and denied entry in the U.S. The possibility of having the goods released from the CBP is burdensome, costly, and prolonged. The following information is helpful in understanding the process and potential penalties and remedies for seizures of copyrighted works and/or trademarks.
A. Registering a Trademark with U.S. Customs and Border Patrol
Assuming a party has already applied to register its trademark or copyright with the U.S. Patent and Trademark Office or the U.S. Copyright Office, they would then be permitted to apply to record the resulting registrations with CBP, who maintains a recordation system for marks/works registered with the aforementioned agencies. This recordation database includes information regarding all recorded marks, including images of these marks. CBP officers can access the recordation database at every official point of entry into the U.S.
In applying for recordation, parties are provided access to an electronic fling with the CBP. The recordation fee for copyrights is $190, and the same for trademarks per International Class of goods. Additionally, a separate application is required for each subsequent recordation sought. Applicants may also need to supply various other documents to the CBP during the process upon request to avoid detention of shipments of genuine goods. To search for recordation information, by mark or owner, see http://www.cbp.gov/xp/cgov/trade/automated/modernization/.
Notably, recordation with the CBP is not mandatory, but it is highly encouraged, as the CBP is authorized to seize merchandise bearing a mark that is counterfeit of a federally registered trademark that is not recorded with CBP.
B. Actions Leading to the Seizure of Goods
CBP recognizes three levels of infringement in its enforcement of trademarks: counterfeit marks; copying or simulating marks; and restricted gray market goods. Additionally, CBP is vested with the authority to detain and/or seize “piratical” copies of protected copyrighted works. “Piratical” copies are those that are identical or substantially similar to copies of a registered copyrighted works, which are produced and imported without authorization of the copyright owner.
(1) Trademarks
A counterfeit mark is defined as “a spurious mark that is identical with, or substantially indistinguishable from, a federally registered and recorded trademark.” Merchandise bearing “counterfeit” marks of a federally registered trademark recorded with CBP will be seized and forfeiture proceedings instituted. Following seizure and, absent the true trademark owner’s written consent concerning the importation of merchandise, the merchandise will be forfeited for violating the laws of customs. Additionally, after forfeiture, CBP destroys the merchandise. Moreover, CBP is authorized to impose a civil fine against anyone who aids in the importation of merchandise (in any way) bearing a counterfeit mark that is seized.
Next, a copying or simulating mark that so closely resembles an already recorded mark or name so as to likely cause the public to associate or confuse the copying or simulating mark with the recorded mark or name is subject to detention and possible seizure. In such a scenario, these merchandises are denied entry and detained for 30 days from the day CBP begins its examination. During that time, the importer will be permitted to establish that the “objectionable mark is removed or obliterated as a condition to entry in such a manner as to be illegible and incapable of being reconstituted,” or “the recordant gives written consent to importation of the merchandise.” If the importer has not obtained release of the merchandise within the 30-day detention period, the merchandise shall be seized and forfeiture proceedings instituted. In the event of forfeiture, CBP shall destroy the merchandise.
A third scenario where CBP is authorized to act is the importation of gray market goods. These are genuine products bearing a trademark that has been applied with the approval of the right owner for use in a country other than the U.S. Only trademarks and names that have been previously recorded within the CBP database are afforded gray market protection, which is a status determined at the time of recordation. This type of protection is provided where the U.S. and foreign trademarks are not owed by the same person, and the U.S. and foreign trademark owners are not a parent or subsidiary, or otherwise subject to common ownership or control. If a trademark receives gray market protection, goods from abroad bearing the protected mark or name will be detained, and thus also subject to seizure and forfeiture.
Lastly, CBP is authorized to seize merchandise appearing to bear marks that fall into any one of the aforementioned categories and is not recorded with CBP.
(2) Copyrights
CBP focuses its enforcement of copyrights on works that have been recorded with the agency. Moreover, CBP regulations provide for the possibility of border enforcement action where the suspect work is: “clearly piratical or possibly piratical of the protected work.” In the first scenario, where a federally registered copyright has not been recorded with CBP, and agency personnel determine that the merchandise is clearly piratical, that merchandise is subject to seizure.
In the second scenario, where a work is “possibly piratical,” and the CBP has “reasonable suspicion” that imported merchandise is piratical of copyrighted works recorded with CBP. In this type of situation, the possibly piratical copies would be detained and the process outlined in 19 CFR § 133.43 is to be followed. Specifically, if port personnel have reason to believe that a merchandise may be an infringing copy of a recorded copyrighted work, the CBP will withhold delivery of the merchandise, notify the importer of the action, and inform the importer that if the facts so warrant, the importer may file a statement denying that the article is in fact an infringing copy. In the absence of a statement, the imported articles are considered to be infringing copies and are subject to seizure and forfeiture.
However, if the importer does supply a statement denying infringement, then the CBP may disclose to the copyright owner the following information prior to issuing a detention notice: (1) date of importation, (2) port of entry, (3) description of merchandise, (4) quantity, and (5) country of origin. Additionally, any time after presentation of the merchandise for CBP examination, but prior to seizure, CBP may provide a sample to the copyright owner for examination or testing to determine a work’s legitimacy or illegality. However, if merchandise is determined piratical at the start, it will be seized and forfeited.
(3) Personal Use Exemption
However, applicable in both trademark and copyright scenarios, importers may be granted an exemption by CBP. This would allow the importation of “one article of each type … bearing a counterfeit, confusingly similar or restricted gray market trademark,” so long as the good is for personal use and not for sale. Contingent on a legitimacy/legality determination from CBP, this exemption may be granted not more than once every 30 days. An example of an individual permitted to retain one article of each type of article is provided by CBP as follows: “[A]n arriving person who has three purses, whether each bears a different infringing trademark, or whether all three bear the same infringing trademark, is permitted only one purse. If the article imported under the personal exemption provision is sold within one year after the date of importation, the article or its value is subject to forfeiture.”
C. Remedies Available to the Importer of the Seized Goods
First, CBP must issue a notice of seizure to the importer and any other entity with a valid interest in the detained merchandise. The notice must contain specific information about what was seized and identify the legal justifications for the seizure. Additionally, the notice must provide the relief options available to the importer. Specifically, following a seizure of merchandise, an importer has the following options:
(a) Request administrative forfeiture proceedings as provided under 19 U.S.C. §607 and 19 CFR §162.45;
(b) File a claim and cost bond requesting that CBP immediately refer the case to the U.S. Attorney for court action;
(c) File a petition for administrative relief with the Port Director of CBP pursuant to 19 U.S.C. §1618 and 19 CFR §171.11; or
(d) Tender an offer in compromise to the Commissioner of Customs through the Fines, Penalties, and Forfeitures at the port of seizure pursuant to 19 U.S.C. §1617 and 19 CFR §161.5.
However, while these remedies are available and possible, there are also penalties an importer may be subject to. Specifically, CBP is authorized to impose a civil fine where seizure of goods occurs because merchandise bears counterfeit marks. For the first seizure, the fine is no more than the domestic value the merchandise would have had if it were genuine, which is based upon the manufacturer’s suggested retail price at the time of seizure. For any second and subsequent violations, the fine is capped at no more than twice the value of the merchandise.
D. Damages/Remedies Available to the True Trademark Owner
Section 337 of the Tariff Act grants intellectual property right holders the right to seek relief from the U.S. International Trade Commission (ITC), for the importation of goods that infringe a trademark, patent, or copyright. To initiate a “Section 337 action,” intellectual property rights owners must file a complaint with the ITC to allege unfair acts in the importation of infringing goods into the U.S. Notably, the statute expressly allows trademark and copyright owners to seek relief. Specifically, the remedies available are as follows:
(1) General or limited exclusion orders issued by the ITC barring the importation of infringing goods into the U.S., which are the enforcement actions taken by the CBP at the port of entries;
(2) Cease and desist orders issued by the ITC to specific U.S. persons to prohibit the use or purchase of such infringing goods from abroad;
(3) Monetary damages are not available in a Section 337 proceeding, although the intellectual property owner can seek such monetary relief by filing a suit in federal district court;
(4) Civil forfeiture is authorized if the owner or importer of the infringing goods previously attempted to import the goods into the U.S.; and
(5) Anyone who violates an order of the ITC must pay to the U.S. a civil penalty for each day on which an importation of goods, or their sale, occurs in violation of the order.
The amount of the civil penalty is no more than the greater of $100,000 or twice the domestic value of the goods entered or sold in violation of the ITC’s order. To recover the civil penalty, the ITC may bring a civil action in the U.S. District Court or in the district in which the violation occurred.
If you need help in enforcing your trademark or copyright rights with the US Customs and Border Patrol, or if your goods have been seized, contact Revision Legal today at 855-473-8474.