The AFTA™ Blog

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2014 and the 113th Congress Come to a Close…

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 afta@aftaus.com.

AFTA™’s Board of Directors wishes you very Happy Holidays and looks forward  to working with you for continued successes in 2015.

happyholidays

 

What Makes MoroccanOil® different from….MoroccanOil®?

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).  

 

Can you see any differences? Go to http://www.moroccanoil.com to learn more directly from the manufacturer.

Can you see any differences? Go to http://www.moroccanoil.com to learn more directly from the manufacturer.

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 afta@aftaus.com.

 

Fred Paliani, President of AFTA and General Counsel to Quality King, Sends Industry Members a Personal Letter

Alfred Paliani, President of the American Free Trade Association and General Counsel of Quality King Distributors , sent a personal letter today to Industry Members describing the current State of the Industry.

“On March 19, 2013, the Supreme Court decided in favor of Supap Kirtsaeng in Kirtsaeng v. Wiley confirming our right to import and resell copyrighted products.”  Nevertheless,  the letter warns, the Industry “…may shortly be facing a fierce, lengthy and expensive battle…” because of  congressional attention to copyright reform and renewed focus on the original 1998 Quality King decision as a result of Justice Kagan’s concurring opinion in Kirtsaeng. (click here for  Justice Kagan’s Concurring Opinion in Kirtsaeng).   The letter, signed personally by Mr. Paliani, describes additional AFTA initiatives and urges that Industry Members “…come together as an industry; there is simply no choice.”

If you would like to receive a complete copy of Mr. Paliani’s Letter or learn more about the American Free Trade Association , please send a request directly to afta@aftaus.com.

 

 

 

4th Circuit holds that an Altered Genuine Product is Not Counterfeit Pursuant to 18 U.SC. §2320

In U.S. v Cone, the 4th Circuit Court of Appeals held that the exceptions to the definition of a counterfeit trademark found in 18 U.S.C. §2320 prevent a finding of criminally trafficking in counterfeit goods if a genuine mark is applied to a genuine product…even if that product has been repackaged or “materially altered.”   A copy of the decision is available through the Resource Center located at https://aftaus.com/resources/.

As explained by the Court, “…criminal liability under § 2320 cannot be based on the alteration of a product to which a genuine mark was affixed and the mark itself has not been altered.”

  • “…a “counterfeit mark” is defined in § 2320(e)(1) as “a spurious mark.” That is, a trademark used in connection with goods or labels, “that is identical with, or substantially indistinguishable from, a [registered] mark . . . the use of which is likely to cause confusion, to cause mistake, or to deceive.”
  • Section 2320 also specifically  includes two provisions providing exceptions to a definition of what is included within the defition of a counterfeit mark and both address resale of authentic or genuine goods: (1) an “authorized use” exception and (2) a “repackaging,” or “gray goods,” exception.
  • The authorized use exception excludes from the definition of of a counterfeit mark “. . . any mark . . . used in connection with goods or services. . . of which the manufacturer or producer was, at the time of the manufacture or production in question, authorized to use the mark” by the trademark holder. § 2320(f)(1).
  • The second exception bars “a criminal cause of action . . . for the repackaging of genuine goods or services not intended to deceive or confuse.” § 2320(g).

Importantly, these 2 exceptions describing what is not a counterfeit product under the Criminal Code are not found in the definition of a counterfeit trademark under The U.S. Lanham Act (15 U.S.C. § 1051 et seq.,) which provides civil remedies against counterfeiting, infringing and unfair competition.

S 662 CBP Reauthorization Bill – Congress is again looking to expand CBP’s authority to disclose importer information to Rights Holders

On March 22, 2013, Senator Max Baucus of Montana, introduced the “‘Trade Facilitation and Trade Enforcement Reauthorization Act of 2013” (click here to see full text of bill as introduced S 662).  Among other provisions, the legislation seeks to further augment CBP’s authority to release an importer’s proprietary supply chain information to unrelated rights holders.

Importantly, under its current interim regulations implementing Section 8 of the NDAA( cbpinterimiprdisclosurerule), CBP already has authority to disclose this information to mark owners, but only AFTER the importer itself has first been provided an opportunity to satisfy any concerns about the product’s authenticity.  In this way, CBP is able to better ensure facilitation of lawful trade by simultaneously recognizing the need to protect against entry of counterfeit goods and the obligation to protect an importer’s  confidential supply chain information.

AFTA Supporters hope to see, at the very least, that S. 662 will be amended through committee to include these types of critical, necessary and fair importer protections.

 

 

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First Kirtsaeng…10 days later Redigi: Is It Time for Congress to Update U.S. Copyright Law?

On March 30, 2013, the U.S. District Court for the Southern District of New York decided that ReDigi, Inc. was guilty of copyright infringement because it facilitated sales of music lawfully purchased from iTunes (Capitol Records LLC v. ReDigi Inc, U.S. District Court, Southern District of New York, No. 12-00095).  10 days earlier, on March 19, 2013, the U.S. Supreme Court decided that Supap Kirtsaeng was not guilty of copyright infringement when he resold lawfully purchased textbooks on eBay (Kirtsaeng v. Wiley568 U. S. ____ (2013)).

In ReDigi, the Court held the first sale doctrine was inapplicable; in Kirtsaeng, the Court said it was.  Is it perhaps time, after over 30 years, for Congress to completely re-examine and update U.S. Copyright laws to more directly address emerging technologies and issues related specifically to digital transfers of property? Take a look at the following sentences included within Judge Sullivan’s written opinion in Redigi and let us know what you think:

  • The novel question presented in this action is whether a digital music file, lawfully made  and purchased, may be resold by its owner through ReDigi under the first sale doctrine. The Court determines that it cannot.
  • ReDigi asserts that its service, which involves the resale of digital music files lawfully purchased on iTunes, is protected by the first sale defense.The Court disagrees
  • In addition, the first sale doctrine does not protect ReDigi’s distribution of Capitol’s copyrighted works. This is because, as an unlawful reproduction, a digital music file sold on ReDigi is not “lawfully made under this title.”
  • Put another way, the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce.
  • Second, amendment of the Copyright Act in line with ReDigi’s proposal is a legislative prerogative that courts are unauthorized and ill suited to attempt.
  • Section 109(a) still protects a lawful owner’s sale of her “particular” phonorecord, be it a computer hard disk, iPod, or other memory device onto which the file was originally downloaded
  • the first sale doctrine was enacted in a world where the ease and speed of data transfer could not have been imagined. There are many reasons, some discussed herein, for why such physical limitations may be desirable. It is left to Congress, and not this Court, to deem them outmoded.
  • At base, ReDigi seeks judicial amendment of the Copyright Act to reach its desired policy outcome. However, “[s]ound policy, as well as history, supports [the Court’s] consistent deference to Congress when major technological innovations alter the market for copyrighted materials.  Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology.”
  • However, here, the Court cannot of its own accord condone the wholesale application of the first sale defense to the digital sphere, particularly when Congress itself has declined to take that step.

As these types of digital transactions become more and more a part of our economy, it may be time for Congress to take another look at and update U.S. Copyright law.    AFTA wants to learn what you think…..

American Consumers Win Big  with Supreme Court’s Decision  in  Kirtsaeng v. Wiley

On March 19, 2013, the Supreme Court issued its long-awaited decision in Kirtsaeng v. Wiley, confirming that owners of lawfully-made, copyrighted goods are able to sell, resell, import, distribute, lend or otherwise freely dispose of those products at their discretion, no matter where they were first produced.   Here is a copy of the opinion: supreme court opinion in kirtsaeng v wiley

In this particular case, the U.S. publisher, John Wiley & Sons, had sued Supak Kirtsaeng, an ebay reseller of used college textbooks manufactured overseas, alleging copyright infringement.  The First Sale Doctrine, Section 109(a) of the U.S. Copyright Act, provides owners of lawfully made copyrighted products the right to resell or otherwise do whatever it is they want to do with that product after purchase.  Wiley had tried to argue that this “first sale” protection only applies to owners of copyrighted goods originally manufactured in the United States.  The Court disagreed.

Quality King Distributors had won an earlier first sale decision before the Supreme Court in 1998 (Quality King v. L’Anza Research) in which the Court had determined that the First Sale Doctrine permitted re-importation of U.S. made goods.  Alfred Paliani, General Counsel of Quality King Distributors and President of the American Free Trade Association (“AFTA”) issued this statement immediately after publication of the Court’s decision:   “It has been a long fight for all of us at Quality King.  The first sale doctrine is the lifeblood of our business and industry.  For the past 100 years, it has been what enables wholesalers and retailers to bring genuine, brand-name goods to the American consumer at competitive prices.  We fought for its survival throughout the 1990’s and prevailed, culminating in the Supreme Court’s Quality King v. L’Anza decision.  Today, in Kirtsaeng, the Supreme Court has put the icing on the cake, confirming finally that once a copyrighted article is sold — no matter where it was manufactured– it belongs to its buyer who is free to re-sell it, lend it or even give it away without any interference from the copyright holder.”

And, Gilbert Lee Sandler, Esq., AFTA’s General Counsel offered the following commentary on the Supreme Court pronouncement:   “This is a great decision for the US economy and its consumers, students and readers.  The books in this case — and the watches and shampoos in earlier cases — are now freed from the high prices and restrictive distribution that would have been imposed on the US marketplace had the Court exempted foreign-made goods from the “first sale doctrine.” Now it is clear that goods made abroad and bearing a copyright can continue to be freely sold and imported into the US after their first, authorized sale.  Any other decision would have been shocking to our common sense.  US law should promote production in the US, not production abroad. Two years ago the Court could not decide whether the same rules should apply to goods made in the US and abroad, setting the stage for favoring goods made off shore as held by some lower courts..  That threat from the courts is now over.”

For more information about the case, the opinion or the American Free Trade Association, please visit www.aftaus.com or send an email directly to afta@aftaus.com

American Consumers Win Big with Today’s Supreme Court’s Decision in Kirtsaeng v. Wiley

This morning the Supreme Court issued its long-awaited decision in Kirtsaeng v. Wiley, confirming that owners of lawfully-made, copyrighted goods are able to sell, resell, import, distribute, lend or otherwise freely dispose of those products at their discretion, no matter where they were first produced.   Here is a copy of the opinion: supreme court opinion in kirtsaeng v wiley  

In this particular case, the U.S. publisher, John Wiley & Sons, had sued Supak Kirtsaeng, an ebay reseller of used college textbooks manufactured overseas, alleging copyright infringement.  The First Sale Doctrine, Section 109(a) of the U.S. Copyright Act, provides owners of lawfully made copyrighted products the right to resell or otherwise do whatever it is they want to do with that product after purchase.  Wiley had tried to argue that this “first sale” protection only applies to owners of copyrighted goods originally manufactured in the United States.  The Court disagreed.

Quality King Distributors had won an earlier first sale decision before the Supreme Court in 1998 (Quality King v. L’Anza Research) in which the Court had determined that the First Sale Doctrine permitted re-importation of U.S. made goods.  Alfred Paliani, General Counsel of Quality King Distributors and President of the American Free Trade Association (“AFTA”) issued this statement earlier today:   “It has been a long fight for all of us at Quality King.  The first sale doctrine is the lifeblood of our business and industry.  For the past 100 years, it has been what enables wholesalers and retailers to bring genuine, brand-name goods to the American consumer at competitive prices.  We fought for its survival throughout the 1990’s and prevailed, culminating in the Supreme Court’s Quality King v. L’Anza decision.  Today, in Kirtsaeng, the Supreme Court has put the icing on the cake, confirming finally that once a copyrighted article is sold — no matter where it was manufactured– it belongs to its buyer who is free to re-sell it, lend it or even give it away without any interference from the copyright holder.”

And, just a short while ago, Gilbert Lee Sandler, Esq., AFTA’s General Counsel offered the following commentary on today’s Supreme Court pronouncement:   “This is a great decision for the US economy and its consumers, students and readers.  The books in this case — and the watches and shampoos in earlier cases — are now freed from the high prices and restrictive distribution that would have been imposed on the US marketplace had the Court exempted foreign-made goods from the “first sale doctrine.” Now it is clear that goods made abroad and bearing a copyright can continue to be freely sold and imported into the US after their first, authorized sale.  Any other decision would have been shocking to our common sense.  US law should promote production in the US, not production abroad. Two years ago the Court could not decide whether the same rules should apply to goods made in the US and abroad, setting the stage for favoring goods made off shore as held by some lower courts..  That threat from the courts is now over.”

For more information about the case, the opinion or the American Free Trade Association, please visit www.aftaus.com or send an email directly to afta@aftaus.com

Supreme Court Rules in Favor of Kirtsaeng….FIRST SALE DOCTRINE APPLIES TO PRODUCTS LAWFULLY MANUFACTURED OVERSEAS

Supreme Court rules 6-3 that the first sale doctrine protects the right to resell products that were lawfully made overseas.  Here is a copy of the opinion: SC Opinion 2013 – Kirtsaeng v. Wiley

Stay tuned to this blog and keep monitoring the AFTA website for analysis of the opinion and next steps for AFTA and Industry Supporters.  If you have any questions about the case or its impact on your business, please send them to us directly at afta@aftaus.com

 

 

 

2 minute video by Techdirt (www.techdirt.com) exposes risks of Kirtsaeng v. Wiley

www.techdirt.com has posted a short, animated and entertaining video explaining  what could happen if the U.S. Supreme Court rules against eBay reseller Supak Kirtsaeng in the still-pending case Kirtsaeng v. Wiley.  You can watch the video by clicking here: Techdirt Video on First Sale.  The video is also featured at www.youvebeenowned.org, which is a consumer call-to-action website published by Demand Progress (www.demandprogress.org).

Kirtsaeng v. Wiley will determine whether or not you can resell products you own if the item or any part of it was manufactured outside of the United States.  For more information about the case and its possible impact on both businesses and consumers, type “first sale” in the search box and take a look.

If you would like to learn even more about the issue, become an AFTA Supporter at https://aftaus.com/supportafta/ and enjoy the variety of media and resources available through AFTA’s Industry Resource Center.

 

 

Copyright Misuse and Why It Matters

As a result of the relatively recent decision in Omega S.A. v. Costco Wholesale Corp. (E.D. Cal. Nov. 9. 2011), U.S. copyright law may not be the best bet for manufacturers hoping to stop parallel importers.

Copyright misuse is both a claim and a defense against a copyright owner trying to accomplish something contrary to public policy by intentionally expanding the exclusive rights provided under the U.S. Copyright Act.  In Omega, the watchmaker had relied upon its miniscule copyrighted design, engraved on the back of its watches, to prevent the unauthorized importation of those very same watches into the United States.  The District Court decided that Omega was guilty of  copyright misuse.  

Costco was granted summary judgement and was awarded nearly $397,000 in  attorneys’ fees.  Omega has appealed the lower court’s decision to the 9th Circuit and oral arguments are expected this summer.

If the Ninth Circuit affirms (and/or if other circuits agree)  that “copyright misuse” protects resellers of genuine goods from allegations of copyright infringement when the goods are not, in finished form, inherently copyrightable, then manufacturers of most useful articles (useful articles cannot be copyrighted in the United States) may need to rely on something other than U.S. copyright law to stop competitive parallel trade.