The AFTA™ Blog
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It’s 2018 and AFTA is expanding its reach, its advocacy and its voice to include the particular issues and concerns now facing Internet Sellers reselling branded goods on platforms such as Amazon and Ebay. Rights owners are fighting to control e-commerce as they have fought for the right to control downstream distribution for generations in the world of brick and mortar store fronts. AFTA has committed its resources to support its Internet Seller Members as they try to keep up with and prevail against an avalanche of Violation Notices, Suspended Accounts and Allegations of Infringement. For more information and to learn more about these e-commerce driven initiatives, please take a look at https://aftaus.com/afta-internet-sellers/
For more information or if you would like to become more involved in these efforts, please let us know by sending an email to email@example.com.
On May 30, 2017. the United States Supreme Court in Impression Products, Inc. v. Lexmark International, Inc. held that when a patent owner sells a patented product all U.S. patent rights are exhausted by that single legitimate sale. The U.S. patent owner cannot rely on U.S. patent law to stop unauthorized, downstream sales or resales of patented goods.
A copy of the 7-1 decision, authored by Justice John Roberts can be found here: lexmarkvimpressionsscopinion
Here is the brief background of the case:
Lexmark designs, manufactures, and sells toner cartridges throughout the World and owns U.S. patents covering components, parts and manner of use of those toners. Lexmark provided purchasers with 2 options for purchasing its patented cartridges: they could pay full price and own the cartridge outright or they could participate in the manufacturer’s “Return Program.” Participants in the Return Program paid a reduced purchase price for a cartridge fitted with a microchip preventing further use and signed a contract promising only to bring a used cartridge back to Lexmark.
Over time, Impression Products was able to remanufacture Lexmark’s used cartridges by circumventing the microchips and started its own refill/resale business of the used Lexmark cartridges.
Lexmark sued for patent infringement claiming that the exclusive rights to prevent unauthorized imports found in U.S. patent law prevented Impression Products from reselling imported patented cartridges first sold outside of the United States. The Federal Circuit agreed that the unauthorized resales of the patented toner cartridges by Impression Products violated Lexmark’s U.S. patent rights.
The U.S Supreme Court, however, held that U.S. patent law cannot be used to enforce resale limitations that may or may not be enforceable under contract law and that once an authorized sale occurs — no matter where or by whom — the U.S. patent owner has exhausted its monopoly rights under U.S. patent law.
Of note, similar to its rationale in the 2013 Kirstaeng ruling (kirstaengvwiley), the Court held that U.S patent owners cannot rely on U.S. patent law to restrict product resales with the hope of reaping greater profits. In his opinion, Justice Roberts held “”The patentee may not be able to command the same amount for its products abroad as it does in the United States, but the Patent Act does not guarantee a particular price.”
It may not be unreasonable to expect efforts to legislatively overturn this decision, particularly because U.S. patent laws are often relied upon to restrict unauthorized downstream sales of patented pharmaceuticals. AFTA™ will carefully monitor and advise its supporters of any legislative efforts to overturn this decision.
The Battles Continue. The Stakes Have Never Been Greater.
For Over 30 Years, AFTA™ Has Supported Your Businesses and Advocated On Behalf of Parallel Traders and Wholesalers in the Alternate Source Marketplace.
Through 4 Major Supreme Court Cases and Thousands of Pages of Legislation and Proposed Rulemaking, AFTA™ Has Been Your Voice.
Please send an email to firstname.lastname@example.org to learn how you can support the critical work done on your behalf by the American Free Trade Association.
- Do You Purchase Products From Suppliers You Have Promised to Keep Confidential?
- Do You Sell Products in Packaging that Discloses Quantity in Grams instead of Ounces?
- Do You Sell Products with Instructions in English and Spanish instead of English Only?
- Is CBP or FDA Asking For Information About Products that Only the Original Manufacturer Could Possibly Know?
- Are Your Shipments Being Routinely Stopped, Detained and Inspected by CBP, Causing You To Lose Money, Reputation and Customers?
Here is Just Some of What AFTA™ Has Done, and Continues To Do, For You
Submitted Briefs to the Supreme Court In Kmart v. Cartier, Quality King V. L’Anza, Omega v. Costco and Kirtsaeng v. Wiley.
Preserved and Enhanced the First Sale Protections Existing in U.S. Copyright and Trademark Law.
Trained CBP Officials Throughout the Country To Help Them Distinguish Between Counterfeit and Genuine Parallel Goods.
Fought Against Criminalization of Decoding.
Exempted Repackaging Goods from the Definition of Trafficking in Counterfeit Goods.
Implemented Regulations Authorizing CBP to Work with Importers First To Verify Product Authenticity Before Contacting Brand Owners.
Presented Workshop to Congressional Staffers on Issues Important to Your Business.
Supports Anti-Counterfeiting Tools and Enforcement Measures.
Routinely Meets with CBP and FDA Officials to Preserve Trade Secrets and The Ability to Enter Genuine Goods Without the Permission of the Rights Holder
Builds and Maintains Relationships with Legislators and Regulators.
Works Together with Coalitions and Consumer Groups to Protect Your Right to Resell.
Monitors Legislative and Judicial Developments and Trends.
Conducts Outreach and Grass Roots Campaigns.
Creates Legislative Solutions to Counter Ambiguous Court Decisions.
Developing a Known Importer Program for Parallel Traders.
Distributes Information to Educate and Alert Industry Members to Imminent Threats and Policy Making.
For more information about AFTA™, to make a contribution or to become a member, please contact AFTA™ directly at email@example.com
This year, Lee Sandler, Esq., on behalf of the American Free Trade Association (“AFTA™”) conducted a training webinar for Customs & Border Protection (“CBP”) personnel about parallel imports. AFTA™ was also pleased to host a congressional staff briefing in Washington , D.C. during which Lee Sandler, Fred Paliani and Lauren Perez similarly provided an overview of the secondary marketplace and the ongoing issues challenging our industry.
A copy of the CBP training webinar can be found here: aftacbppresenationmay2016 and a copy of the powerpoint presentation that accompanied AFTA™’s in-person congressional staff briefing can be found here: aftapresentationcongressionalbriefingjune272016
AFTA™ continues to be the leading voice for the domestic parallel marketplace and looks forward to broadening its visibility, advocacy and educational programs on behalf of all industry participants. If you are interested in learning more about the American Free Trade Association and the opportunities for Association members, please contact Lauren Perez directly at firstname.lastname@example.org or email@example.com.
On September 18, 2015, Customs and Border Protection (“CBP”) published its Final Rule for Disclosure of Information for Certain Intellectual Property Rights Enforced at the Border. The Rule finalizes and amends certain of the Interim Regulations for IPR disclosure published in April of 2012. A copy of the Final Rule can be found here: finalrulescbpiprdisclosure
Highlights of the Final Rule include:
*CBP can detain any merchandise for 30 days if the Agency suspects the goods may include a counterfeit trademark.
*The detention period of 30 days cannot be extended. Any goods not released after this 30 day period will be excluded from entry into the U.S.
Notice to Importer
*Within 5 days of the goods being detained, CBP will provide a written notice of detention to the importer, who will then have 7 days to convince CBP the goods are authentic. The notification from CBP will also advise the importer that the trademark owner may have already received certain limited information about the importation.
*Upon request, CBP will provide unredacted product images and/or samples to the importer at any time for the importer’s examination and/or testing.
Information Automatically Disclosed to Trademark Owner
*At any time after the goods are presented for entry and in all cases by no later than the date of the notice of detention, CBP will disclose the following information to the trademark owner: date of importation, port of entry, merchandise description, quantity, country of origin and/or redacted product images or samples.
Information that May Be Disclosed to Trademark Owner Prior to Seizure
*CBP may provide unredacted product samples and images to the trademark owner prior to seizure if the importer fails to prove product authenticity within 7 days after notification of detention. The trademark owner will be advised by CBP that the information provided may only be used to verify that the goods do not include a counterfeit mark. The importer will be notified that such a disclosure has been made.
*CBP can seize merchandise at any time (even if there has been no notice of detention and even during the 30 day period of detention) when/if it determines the goods include a counterfeit trademark.
*Upon seizure, CBP will disclose to the trademark owner information revealing the date of importation, port of entry, merchandise description, quantity, country of origin, name/address of manufacturer, name/address of exporter, and name/address of importer.
For further information about the Final Rule and how it may impact your import operations, please contact AFTA™ directly at firstname.lastname@example.org or toll-free at 1-844-3 -AFTAUS.
On June 19, 2015, Representative John Conyers (D-MI) made the following speech on the floor of the U.S. House of Representatives, insisting that anti-counterfeiting measures not impede lawful trade or unnecessarily increase the costs of doing business for lawful U.S. importers.
(Links to the referenced legislation and the 6/19/15 Congressional Record follow.)
“Mr. Speaker, although I oppose H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015, I rise in support of Section 302 of the bill because it wisely allows Customs and Border Protection (CBP) the flexibility to determine when there is a suspicion that goods are counterfeit. The section clarifies that CBP shall consult with Intellectual Property (IP) owners and preserves the flexibility of customs to first consult as appropriate with the importer. However, it does not direct CBP to modify in any particular way its procedures regarding notice to importers prior to determining whether there is a suspicion that their detained goods are possibly counterfeit. This should result in earlier and more accurate decisions by CBP and preserve the ability of lawful importers to protect their confidential information from disclosure.
I am aware of cases where importers of genuine material have suffered significant and real costs because of CBP suspicions that the material was counterfeit. These losses occurred because shipments that were detained or seized were ultimately determined to be genuine and released long after their arrival and expected delivery dates. For example, in one case, a company suffered delays and increased costs for over 17 shipments that were seized or intensively examined by CBP over a three-month period after which all of the goods were ultimately determined to be genuine and were released long after their arrival and expected delivery dates. In another case, a company reported one shipment was seized and another one was detained for more than 30 days before both of these shipments were found to be genuine and were released. As a result of these long delays, the importers in each of these cases suffered significant costs for storage, brokerage, legal fees, product damage, and losses in customer good will.
I thank Chairman RYAN as well as the other Ways & Means Committee members who remain as committed as I am to preventing counterfeit merchandise from crossing our borders. I look forward to working with them to ensure smooth implementation of this new policy.”
9th Circuit Confirms Award of Attorney’s Fees to Costco for Omega’s Misuse of Copyright to Stop Gray Market Sales of its Watches
Today, the 9th Circuit confirmed that Omega Corporation was guilty of copyright misuse and confirmed the Lower Court’s award of over $360,000 in attorneys fees to Costco Corporation. The opinion strongly reaffirms that gray market competition is a check against the expansion of copyrights and proliferation of rights holders’ monopolies attempting to control downstream product distribution.
Take a look at just some of the highlights from both the Majority and Concurring Opinions.
- Omega’s attempt to expand the scope of its statutory monopoly by misusing its copyright in the Globe Design…. eliminated price competition in the retail market for Omega watches and deprived consumers of the opportunity to purchase discounted gray market Omega watches from Costco.
- Omega misused its copyright by engraving the Globe Design on the underside of its watches, and attempting to use copyright law to eliminate intrabrand competition from Costco in the retail watch market
- The district court…. concluded that “[b]y affixing a barely perceptible copyrighted design to the back of some of its watches, Omega did not provide—and did not seek to provide—creative works to the general public.” Instead, “Omega sought to exert control over its watches, control which it believed it could not otherwise exert.” Thus, the court concluded, it should have been clear to Omega that copyright law neither condoned nor protected its actions, and the imposition of fees would thus further the purpose of the Copyright Act. This conclusion was not error.
- “Copyright misuse is a judicially crafted affirmative defense to copyright infringement” designed to combat the impermissible extension of a copyright’s limited monopoly… Its purpose is to prevent “holders of copyrights from leveraging their limited monopoly to allow them control of areas outside the monopoly.” Id. (internal quotation marks omitted)….
- Because unauthorized retailers, such as Costco, were selling gray market Omega watches in the United States below Omega’s suggested retail price, Omega attempted to maintain the price of its watches sold in the United States by inconspicuously engraving the copyrighted Globe Design on the underside of its Seamaster watches.
- Even drawing all reasonable inferences in Omega’s favor, there is no genuine dispute as to whether Omega sued Costco for copyright infringement at least in part to control the unauthorized importation and sale of Omega watches….
- Omega concedes that it designed and secured copyright protection for the Globe Design for the purpose of using copyright law to restrict the unauthorized sale of Omega watches in the United States.
- The Copyright Office granted Omega the exclusive right to control the importation and distribution of the Globe Design into the United States. It did not empower Omega to restrict competition from unauthorized retailers selling genuine, gray market Seamaster watches in the United States…
- Omega’s expansion of its copyrightlike monopoly eliminated competition from unauthorized watch retailers like Costco, thereby allowing Omega to control—through its exclusive distributor, Swatch U.S.A.—the retail pricing of Seamaster watches sold in the United States.
- If the copyright law allowed Omega to use its copyright to combat the importation and sale of all gray market watches that are stamped with the Globe Design, it would effectively grant Omega a copyright-like monopoly over the distribution and sale of Omega watches in the United States
- [Omega] eliminated price competition in the retail market for Omega watches and deprived consumers of the opportunity to purchase discounted gray market Omega
Additional information about this case can be found in earlier blog posts – just type “Costco” or “Omega” in the search box on the home page.
AFTA™ welcomes your thoughts, comments and feedback and looks forward to learning how you feel about this latest “finale” in the ongoing saga of Costco v. Omega. If you would like further details, documents or copies of earlier posts on this subject, please contact AFTA™ directly at email@example.com.
AFTA™ is working to maintain the confidentiality of your proprietary supply chain information
A businesses’ supply chains reflects its own creation of a proprietary network including different companies located throughout the World that produce, handle and/or distribute a specific product or products to a common end user. AFTA™ members have unique and confidential supply chains enabling U.S. consumers to purchase authentic, brand name, competitively priced merchandise at retail outlets of all genre and variety throughout the Country. These supply chains are proprietary trade secrets that protect a businesses’ ability to compete fairly and better level out a highly aggressive and competitive global marketplace.
Maintaining the confidentiality of U.S. businesses’ supply chain information is critical to the viability of a thriving, competitive domestic marketplace. However, within weeks of the new Congress, H.R. 236, the “Foreign Counterfeit Merchandise Prevention Act” was introduced by Congressman Ted Poe (R-TX). This bill mirrors one of the same name introduced but not passed during the last Congress and its primary purpose is to provide Customs and Border Protection (CBP) the authority to provide an importer’s proprietary supply chain information to unrelated brand owners having no ownership interests in or to the goods being entered.
A copy of H.R 236 as introduced on January 6, 2015 can be found here: H.R. 236
As a result of an Interim Rule issued in April 2012 and currently being practiced, if a shipment is detained at a U.S. port of entry because a Port Inspector suspects it may be include merchandise bearing a countefeit trademark, before providing a brand owner with any unredacted product samples that may include markings identifying the importer’s confidential supply chain partners, the Port Inspector must first give the importer 7 days to prove the merchandise is not counterfeit. H.R 236 eliminates any such need for CBP to consult with the importer before consulting with the rights owner, which necessarily threatens the confidential nature of an importer’s carefully developed, and proprietary, supply chain information.
AFTA™ continues to work to make sure its members’ confidential business information is protected. AFTA™ also remains committed to ensuring that the U.S.’ commitment to facilitate global trade does not unfairly favor the “wish lists” of multinational corporations at the risk of smaller businesses and to the detriment of U.S. consumers. To learn more about AFTA™’s efforts to protect the rights of importers and ensure a balanced, competitive, and fair domestic marketplace, please contact us directly at firstname.lastname@example.org.
2014 has been a good year for AFTA™ members. AFTA™ has successfully helped to ensure that the Kirtsaeng decision is not overturned and that international efforts to harmonize intellectual property regulations do not serve as barriers to global trade in genuine goods. 2015 promises new challenges and AFTA™’s Board of Directors remains committed to protecting and advocating on behalf of the unique interests and needs of its membership.
While the Kirtsaeng decision currently protects AFTA™ members’ ability to freely dispose of genuine, copyrighted goods regardless of place of first sale or manufacture, the copyright reform priorities of the 113th Congress promise to begin all over again in the 114th Congress with a renewed zeal. Rights holders are increasing efforts to control electronic downstream distribution of genuine, brand name merchandise and, as globalization efforts increase, wholesalers continue to be stymied in their efforts to distribute branded goods in Europe. Here, at home, CBP continues to explore new programs to better assess risk at the borders by attempting to distinguish between trusted traders and those with less secure supply chains posing particular issues for those engaged in secondary market transactions.
In 2015, AFTA™ looks forward to continuing its efforts with the Owners Rights Initiative and other associations committed to the unfettered global distribution of genuine products, together with associated parts, components and accessories. AFTA™ will be working to make sure Free Trade Agreements do not expand the abilities of rights holders to control downstream distribution, whether via electronic commerce or otherwise, and will continue to insist that the rights of consumers and secondary traders must be fairly balanced with those maintained by brand owners and manufacturers.
For more information about AFTA™ and to learn how you can access its exclusive repository of industry-related publications and reports, please contact us directly at email@example.com.
AFTA™’s Board of Directors wishes you very Happy Holidays and looks forward to working with you for continued successes in 2015.
Appropriate and Balanced Lever Rule (19cfr13323graymarketrestrictions) application is a priority issue for the American Free Trade Association (“AFTA™”) because the threshold of what constitutes a “material difference” sufficient to restrict lawful importation of genuine, branded goods is scaringly low. Today, AFTA™ is closing watching the progress of MorrocanOil, Inc.’s Lever Rule application which was published in the Customs Bulletin of June 11, 2014 (MoroccanOil Lever-Rule application_Customs Bulletin 6-11-2014).
As described in WagTheDog, “…courts have held that even “subtle differences” are enough to give rise to consumer confusion supporting a claim of trademark infringement. Material differences have been broadly interpreted to include: different warranties, Cabbage Patch dolls with Spanish language birth certificates and adoptions, different soap ingredients, TIC TACS with a different size and different calorie counts, chocolates with different shapes, quality control differences, packaging or labeling differences, or different advertising participation of marketing methods.” (page10 of WagTheDog)
Importantly, a Gray-Market Restricted Product (19cfr13323graymarketrestrictions) has been produced under or with authority of the U.S. trademark owner. It may be physically composed, in all respects, of the very same ingredients and the very same amount of those ingredients found in the same MorrocanOil® authorized for sale in the U.S. In fact, a Gray-Market Restricted Product could qualify as such if the only “physical and/or material” difference between it and the more expensive but authorized article is something as mundane as the label language, quality or color.
As noted above, CBP published notice that MoroccanOil, Inc. had applied for Lever Rule Protection in the Customs Bulletin of June 11, 2014 (MoroccanOil Lever-Rule application_Customs Bulletin 6-11-2014). It may be several months before CBP publishes its decision whether or not to grant Lever Rule protection to this particular trademark owner. AFTA™ is, however, monitoring this application (and others) closely and urges any importer, distributor or consumer with any questions or concerns to contact us directly at firstname.lastname@example.org.