Wednesday, October 14, 2009

Can the CIT Review What Customs Reviews?

This is a tricky question that was answered in Funai Electric Co. v. United States.

The underlying issue has to do with a determination by the International Trade Commission that certain imported digital televisions infringed a U.S. patent. As a result, the ITC issued an exclusion order requiring Customs and Border Protection to prohibit entry of the infringing televisions. This all happens under 19 U.S.C. sec. 1337 in what is called a 337 case.

Following the exclusion order, some of the infringers developed a work-around to produce what they believed to be non-infringing televisions. They then went to Customs to get a ruling confirming the admissibility of the new televisions. Customs provided the ruling. Seeing the value of their exclusion order evaporate, the patent holder went to the Court of International Trade seeking a declaratory judgment or other relief holding that Customs has no authority to determine the scope of an ITC exclusion order. Rather, that task should fall to the ITC. The defendant (that is the importer of the re-engineered televisions) moved to dismiss the case for lack of subject-matter jurisdiction.

The Court reviewed the somewhat checkered past of cases considering the jurisdiction of the CIT to hear cases similar to this. If the Court has jurisdiction, it would be via the statute giving it jurisdiction to grant declaratory relief or under the Court's so-called residual jurisdiction.

On declaratory judgment, 28 USC 1581(h), the Court provided little analysis other than to followed a prior case, Eaton Corp., finding no jurisdiction under 1581(h). Further, the Court found no case in which a similarly situated plaintiff had secured (h) jurisdiction.

Regarding residual jurisdiction under 28 USC 1581(i), the court noted the absence of an issue involving (1) revenue from imports or tonnage or (2) tariffs, duties, fees, or other taxes on imports. That knocked out 1581(i)(1) and 1581(i)(2). Because no embargo or quantitative restriction is involved, 1581(i)(3) does not provide jurisdiction. Note that the Supreme Court has said the exclusion of merchandise infringing intellectual property rights does not count as an embargo or quantitative restriction. Lastly, the broad grant of jurisdiction under (i)(4) is linked to the administration and enforcement of the items subject to review under (i)(1) through (i)(3), that (i)(4) did not provide jurisdiction either.

Plaintiff's last resort was an appeal to the general, but non-statutory, authority of the Court of International Trade to resolve civil actions arising out of federal laws regulating import transactions. While that is manifestly true, it is also somewhat aspirational. As the Court of Appeals for the Federal Circuit has re-affirmed, the CIT's actual jurisdiction is determined by actual statutes and cannot be expanded by judicial decision. Consequently, the lack of a statutory basis on which the Court may assume jurisdiction dooms the plaintiff's efforts.

The Court clearly wanted to hear the case. Early on in the discussion of the jurisdiction provision, Senior Judge Aquilino states explicitly, "the undersigned has not doubted the intent of its framers than an action like this be subject to the jurisdiction of the Court of International Trade." In the end, though, he was compelled to leave changing the law to, what he characterized as, "higher authority."

Where does that leave us? Well, the CBP ruling is still valid because it can't be reviewed. Should CBP have issued it to start with? That question will have to wait for word from either the Federal Circuit or a district court somewhere that might have jurisdiction.


Anonymous said...


CBP messed up. Back when I was still working and we had situations like this occur, the prospective importer of a "work around" to an ITC exclusion order was told to take its case to the ITC for a ruling. Customs would refuse to consider the matter, as jurisdiction was properly with the ITC. Whoever issued the ruling should be reprimanded!

Customs retiree (and glad of it!)

Anonymous said...

Seems to me the CIT should recuse itself from qualifying itself on whether or not it has jurisdiction (just wanted to use the word recuse.) Given the standards by which authorities operate, asking an agency to qualify itself it asking for problems. In fact, I believe CBP did exactly that by issuing a ruling it should not have, as your earlier commenter noted. Therefore, it would seem to be more appropriate (note that appropriate and what is reality are not the same) that the CIT decided on whether or not CBP had the authority to issue the ruling, but that the Federal Circuit decided on whether the CIT had jurisdiction otherwise. Of course, as a lowly Customs broker, I am hardly qualified in such affairs, so these are just my knee-jerk thoughts on it. Aside from that, bravo to the defendant and their legal crew for successfully working the system (bending the framework as a boss once told me!)

Keep up the great work Larry!

Anonymous said...

Larry -

Further on my earlier comment:

When I was still with Customs, the position was that in the Intellectual Property area trademarks and copyrights were comparably uncomplicated and could be enforced by Customs on its own authority, thus the Customs recordation system for these types of work. When it came to patents, however, their potential complexity was such as to be beyond the range of Customs' expertise, thus the Sec. 337 process via the ITC.

Even with copyrights, Customs screwed up at times. An example:
the owner of the copyright on a catalog of metal figurines recorded the copyright of that PUBLICATION with Customs, and then expected Customs to enforce the copyright against importations of FIGURINES displayed in the catalog.
In this case, if memory serves, Customs (correctly) refused to enforce the PUBLICATION copyright against the FIGURINES. However, certain firms (like Disney) have gotten away with recording a "Character Book" with Customs and then demanding that any depiction of any character in the book, in any medium, be seized as violating the copyright of the "Character Book."

At the then recordation fee of $90 a pop, Customs copyright and trademark protection is indeed the best IPR protection bargain in town, but when some slickster attempts to get copyright protection for a plethora of products based on the recordation of the copyright of a PUBLICATION, all I can politely call that person is a cheapskate.

In the present case, I wonder if the ITC was ever even consulted. I know that the ITC has been very reluctant to approve "work arounds" to items subject to Sec. 337 exclusion orders, but the ITC has done so when appropriate, though they always took their time about it and studied every angle, as would be the proper thing to do.

The same Customs retiree (and still glad of it)

Anonymous said...

Very interesting comments by Customs retiree!

I have dealt with numerous companies using the IPRR recording process and seeking 337 exclusion orders. The common question these folks raise is - does Customs treat an IPRR recordation any differently than an ITC general exclusion order (section 337)? In the case of patents, the answer is obvious. As far as trademarks and copyrights, I would be interested in knowing Customs retiree's views.

Hypothetically, from the standpoint of a former Customs agent, does Customs do more to enforce a general exclusion order than it does to preclude import of goods bearing marks recorded with the IPRR? For example, say there is a company trying to stop the importation of counterfeit/infringing versions of goods bearing its trademarks. Is recording the mark sufficient or would it be wise to also file a 337 action seeking a general exclusion order? I know that the 337 action is very costly and takes time, but is there a greater benefit to obtaining the general exclusion order over recording from the standpoint of those enforcing at Customs? Just wondering if doing both is a case of belt and suspenders!

Thanks in advance for any unique insights you could offer!