Monday, November 30, 2009

Gibson Guitars Raided Under Lacey Act

Just when I thought there was nothing new to blog about . . . .

According to news reports, the Gibson Guitar company has been raided by federal agents of the Fish and Wildlife Service enforcing the Lacey Act amendments. The underlying investigation appears to be focused on imports of rosewood from Madagascar. Under the Lacey Act, importers of many products that are or include plant materials are required complete a declaration identifing the botanical genus and species being imported and to certify that the plant materials were harvested and exported legally.

From a corporate compliance stand point, that can be difficult because the direct supplier often will not know the origin or legal status of the wood it purchased. This requires that importers set up a system a tracking the plant material back to it's origin. It is not unlike NAFTA tracing for automotive companies.

Tuesday, November 17, 2009

Seventh Circuit on ITAR

Sometimes it takes a while for things to actually hit the front of my brain. Such is the case with a June 2009 decision of the Seventh Circuit Court of Appeals involving an appeal from a criminal conviction under ITAR. In the spirit of "better late than never," here is a summary of U.S. v. Pulungan (No. 08-3000, decided Jun. 15, 2009).

Mr. Pulungan tried to export some riflescopes to Indonesia. Believing there to be an arms embargo on Indonesia, he planned conceal the actual destination by transshipping via Saudi Arabia. In reality, the embargo had been lifted in 2005, two years before the attempted export. The scopes, however, are arguably controlled by the International Traffic in Arms Regulations as riflescopes "manufactured to military specifications." Importantly, the law provides that the designation "in regulation" of items as defense articles is not subject to judicial review. As a result, the district court instructed the jury to accept the State Department's designation of the rifle scopes as being manufactured to military specifications even though the responsible witness was not able to explain what those specifications entail. He was found guilty by a jury of trying to export without a license and sentenced to 48 months in prison.

Enter the appellate lawyers.

The first issue was whether the designation of the 'scopes as manufactured to military specifications was "in regulation" and, therefore, beyond judicial review. The Seventh Circuit recognized that it would not be possible for the government to list every single 'scope made to military specs and that a narrative description was an efficient way to draft the regulation. However, the Court also stated that the designation of the specific 'scopes at issue in this case was not in the regulations. It was known to the manufacturer (presumably via a commodity jurisdiction decision) and to other industry "insiders" but there is no evidence the status of these specific 'scopes was known to the defendant.

Unlike a regulation, which is published for the world to see, a commodity jurisdiction decision is essentially private. The State Department, according to the Court, cannot be permitted to regulate (actually criminalize) behavior based on a document kept secret in a file. Thus, the Court held that in a case such as this, the government is required to prove, not just assert, that the products are covered by the regulation. In this case, that means the government needed to prove that the 'scopes were manufactured to military specs.

The second issue had to do with whether the defendant knew that the 'scopes were defense articles. That knowledge is a legal requirement for conviction. But, as was discussed above, the defendant did not know that the 'scopes had been designated as defense articles. On this front, there are some bad facts for Mr. Pulungan. First, he apparently viewed and printed web pages stating that limit the countries available for shipment of the 'scopes. Second, he was apparently willing to pay above market prices for the 'scopes. Third, he lied to associates about how many 'scopes he was buying and where they were to be sent. Lastly, he had written notes wrongly indicating that munitions shipments to Indonesia were barred. Taken together, the United States argued, these facts indicate knowledge by the defendant that something illegal was going on.

In a very forcefully worded section of the opinion, the Court said that the retail web sites might have had numerous reasons for declining to sell outside the U.S. including possibly exclusive distribution territories. As a result, Mr. Pulungan cannot be said to have known that the merchandise could not be legally exported without a license. As an aside, it is interesting to note that the examples the Court used might not be as clear as the Court believes. USB flash memory produced outside the U.S. is, contrary to the Court's statement, subject to U.S. export control laws once imported to the U.S. even if it is not a defense article. Similarly, the limitation on the export of orange flavored milk chocolate may have to do with dairy quota systems. Nevertheless, the legal conclusion was that the defendant did not have knowledge of the requirement for a license to export the 'scopes.

On the second point, the Court refused to hold that the knowing effort to violate a non-existent arms embargo transferred to the attempted unlicensed export. In the end, though, it did not matter because the U.S. was unable to prove that the defendant knew the 'scopes were manufactured to military specs.

Where does this leave the Department of State and, more specifically, the Directorate of Defense Trade Controls? The Court very clearly offered on alternative: make publicly available the list of items found to fall within a certain USML category. In other words, list the results of commodity jurisdiction decisions. That would result in something similar to Customs and Border Protection's online rulings database. Not only would exporters see the specific items found to be defense articles, but the rationale would be visible. That would make internal corporate commodity jurisdiction determinations more reliable. Of course, for policy reasons, the government may not want the specific details available. Still, providing the list would be a useful first step.

Tuesday, November 10, 2009

Trademark Lawyer FOIA Suit

Here is an interesting footnote to my recent post on Customs and Border Protection's enforcement of intellectual property rights.

First, I received an e-mail from some well-respected customs lawyers expressing concerns over Customs' enforcement. The concerns included the timing of infringement decisions and, surprisingly, the fact that Customs' has seized legitimate merchandise bearing registered a trademark on the theory that the registered trademark infringed another registered trademark. That sounds like CBP has stepped into the Patent and Trademark Office's territory.

Another interesting point is this post by Seattle Trademark Lawyer Michael Atkins. According to the post, another Seattle trademark lawyer has filed a suit under the Freedom of Information Act seeking the release of all seizure notices relating to counterfeit merchandise. From the post, it is not clear whether the suit goes so far as to seek records of detentions and Notices to Redeliver. Either way, it is also not clear what has triggered the plaintiff's interest. It is hard to say whether the plaintiff thinks CBP is being too tough or not tough enough, or has some other interest entirely.

Maybe the suit is trying to get identifying information on specific importers. That possibility, by the way, relates directly to the District Court's decision to uphold Customs denial of the request on the grounds that releasing the information would release competitively sensitive information. That triggers exception 4 to the FOIA. Apparently, an appeal has been filed.

Sunday, November 08, 2009

Off Topic: I hate musicals . . . usually.

It has been a while since I have done a purely off-topic post. For purposes of efficiency and recognizing that most visitors to this blog are looking for specific and useful information, I have avoided the "whatever strikes my fancy" kind of post. Facebook has also given me a more appropriate outlet for those topics. That said, I am moved to write about an episode of Batman: The Brave and the Bold.

I am not a fan of classic American musical theater. I would rather do just about anything than sit through another production of Oklahoma!, Camelot, or Bye Bye Birdie. On the other hand, I have enjoyed more modern musicals including Rent, and Les Miserables. The stage production of Tommy was one of the best musicals I have seen.

That is background. The next piece of background is that I read comic books, or "comics" as we in the know say. Specifically, I read a couple series on the DC side of things (although I am dabbling in Marvel's effort to bring Captain America back from the dead). In the DC Universe ("DCU"), I read a couple of the Batman titles including the new Batman Detective, which features Batwoman Kate Kane at the moment, and the new Batman and Robin series, which tells the story of a new Batman and new Robin trying to figure out how to make their way in the wake of Bruce Wayne's apparent death. I say "apparent" because Bruce seems to have been transported to the distant past and, as a general principle, these things are rarely permanent in comics. Just look at Captain America. I'm hopeful J'onn J'onzz (AKA Martian Manhunter) gets the same treatment.

The other series I read is the Justice League of America and the related title Cry for Justice. These titles seem to be a mess and I am not sure why I keep reading. Everyone knows that the best incarnations of the JLA consisted need the Big Three: Batman, Superman, and Wonderwoman. Into that mix, you need other A-list characters such as a Flash, Green Arrow, a Green Lantern, and one or two other well known characters such as Black Canary, Zatanna, Ray Palmer's Atom, or Hawkgirl. Aquaman is the best known character with the least utility so he is, sadly, disposable in this context.

The current incarnation of the JLA, though, is a collection of B-listers including Plastic Man, Dr. Light, Vixen, and Red Tornado. Also, there is a lot of angst going on as the League debates its future and its mission. While that is going on, Green Lantern and Green Arrow are off with Supergirl, Atom, and odd characters like Gongorilla, proactively hunting for the bad guys, which is a change from their usual reactive process. That change in mission has lead to some interesting "ripped from the headlines" questions about, for example, the value and morality of torture. If Ray Palmer goes up your nose, into your sinus cavity, and then starts to grow until you confess your plans, is that torture? I think the writers need to regroup and ask whether they can address the same interesting and thought-provoking issues with the better-known characters.

So, back to musicals.

Last night, my eight-year-old and I caught up on some TV episodes of Batman: The Brave and the Bold. Generally, I don't like this series. Although it is full of good team-ups, it is more in the style of the camp 1960's TV show than the gritty Dark Knight I like to read. But, it can be witty and it does dive very deeply into the DCU. I preferred the cartoon series The Batman, which had a more serious tone.

One of the episodes we watched last night was Mayhem of the Music Meister. I was dubious from the start because I am not aware of any established character known as the Music Meister. Further, I noticed additional credits at the beginning for music and lyrics. What's going on here, I wondered.

What it turned out to be was a fully-realized musical episode. The show opens with a scene involving the villains Black Manta, Gorilla Grod, and Clock King trying to steal a communications satellite while Black Canary, Aquaman, and Green Arrow try to stop them. For reasons that are not immediately clear, the heroes and villains begin to sing their taunts at one another. Eventually, it is discovered that they are all under the mind control of Music Meister, expertly voiced by Neil Patrick Harris.

The singing evolves into a fully choreographed and orchestral piece with hints of West Side Story. From then on, there is little spoken dialog. Also, a romantic subplot develops with Music Meister longing after Black Canary (well voiced by Grey DeLisle), who is longing for Batman. This is more involved than it seems as fans know she ends up married to Green Arrow (a fact foreshadowed in the conclusion of the episode). The show includes the expected elements of a blockbuster musical including a large chorus of Bat villains singing from Arkham Asylum, that Batman "drives them Bats." That is followed by a Black Canary/Music Meister duet that could have been lifted from Beauty and the Beast. After she and Batman are captured, Music Meister puts them in one of thoseRube Goldberg deathtraps to the tune of a punk-ish tune including the lyrics "Acid steaming, lasers beaming, bones crushing, deathtrap." The show ends with a the calculated "blockbuster " song and plot climax.

Throughout all of this, Batman has worked to save the day without singing. He has, however, offered a number of funny quips including that Music Meister's show has been cancelled due to "criminal intent and bad reviews." In the end, though, Batman too has to sing, with the help of his utility belt. Cue the final reprise of Canary's love song to Batman and the timely arrival of Green Arrow.

All in all, the music and writing is top notch. It perfectly walks the line between the cartoony world of TV superheroes and a send up of over-the-top Broadway musicals. In a lot of ways, it reminded me of the very entertaining Spamalot, which strikes something of the same balance.

It seems this was a bit of a surprise success for Warner Bros. It has now released the soundtrack, which is available in the Zune Marketplace and Amazon. It's probably in iTunes as well.

See for yourself via Daily Motion:

Saturday, November 07, 2009

Cruising to Prison

I'm only posting this link because I know there continues to be interest in the policy questions surrounding Customs and Border Protection warrantless searches of electronic storage devices such as laptops and phones.

This guy was pulled from the customs line following a cruise. He was already a convicted sex offender. That, no doubt, accounts for the heightened scrutiny. When CBP reviewed the contents of his computer, it found child pornography. As a result, the passenger is now headed to prison for 15 years.

The article makes the usual references to civil libertarian concerns and possible statutory changes. The problem with the cases is that the defendants are so unsympathetic. Who in Congress will stand up for the rights of perverts and terrorists to be free from border searches. The problem, of course, goes much deeper because it is not just perverts and pornographers who might be searched. It is everyone and that means privileged medical records, attorney-client communications, ill-conceived love letters, and other sensitive documents. Customs has issued new guidelines on the searches, and there are some safety measures in place. Still, there is enough here to make everyone feel a little queasy.

Friday, November 06, 2009

New IPR Bond

Customs and Border Protection has established a new continuous bond category for intellectual property rights holders to use to secure the release of samples of allegedly infringing merchandise. This will simplify the process of getting samples for analysis for companies that often work with CBP to interdict counterfeits or infringing merchandise. Rights holders can also use a single transaction bond, if they prefer.

Here is the notice from Customs, which includes an contact number for more information.

While we are talking IPR, Customs has also finally republished the Informed Compliance Publication on CBP Enforcement of Intellectual Property Rights. All this activity is probably evidence of Customs' continuing focus on IPR enforcement.

Here is a nagging question I have. Does anyone in Customs represent the innocent legitimate importer in enforcement policy. The reason I ask is that I have seen clients with legitimate, non-infringing merchandise suffer very serious expense and delays trying to secure the release of merchandise. I understand that the the rights holders a legally entitled to protection and I am also very aware of the economic contribution intangible property makes to the U.S. economy. We should not allow free riders and criminals to hijack a brand. But, the innocent party that buys legitimate merchandise through parallel, unauthorized channels can rarely produce a chain of documentation back to the authorized producer. Neither the producer nor the rights holder has any interest, under the current system, in facilitating that importation. So the importer is stuck.

For now, the solution for the importer is to make sure the purchase agreement is contingent upon release of the merchandise and includes an indemnification for losses due to defending infringement claims, CBP penalties, storage expenses, etc. Of course, the guy selling NFL jerseys from a truck in Tijuana or shampoo from a card table in Red Square in Moscow is unlikely to agree to those terms.

Wednesday, November 04, 2009

No Transfer in License Revocation Case

The Court of International Trade has once again dashed the hopes of Arthur Schick to regain his customhouse broker’s license without re-applying for a license from scratch.

I previously reported on Mr. Schick’s plight. He had his license summarily revoked after failing, due to illness, to file his triennial status report as required by 19 U.S.C. 1641(g). Mr. Schick’s lawyers made a valiant effort, raising a number of arguments that Customs and Border Protection improperly revoked the license without a hearing and, therefore, the revocation is invalid. These arguments were based upon the customs regulations, the Administrative Procedure Act, and the Fifth and Eighth Amendments to the Constitution. The latter arguments were based on the premise that the lack of a hearing violated Mr. Schick’s due process rights and that the revocation was an excessive punishment.

In the first opinion from the Court of International Trade, the Court dismissed the case finding that it had no jurisdiction to review the decision. On appeal, the Federal Circuit agreed that the Court of International Trade lacked subject matter jurisdiction. Nevertheless, the Federal Circuit remanded and suggested that the CIT should consider transferring the case to a court that does have jurisdiction. Plaintiff has suggested that the District Court for the District of Columbia would be the correct venue.

This possible solution, however, ran into another obstacle. Considering the motion to transfer, the CIT began with the premise that transfers are only appropriate where the transfer serves the interest of justice. Consequently, the Court looked at the merits of the underlying claim challenging the revocation. That did not go well for Mr. Schick.

Basically, the Court held that there is no right to a hearing when a broker’s license is revoked for failure to file the triennial report. Revocation is essentially automatic. Because Customs had no discretion on whether to revoke the license, the CIT found that the lack of a hearing did not violate any of Mr. Schick’s rights under the regulations, the Administrative Procedure Act, or the Constitution. Further, Mr. Schick admitted in his complaint seeking relief that he had failed to file the report, thereby admitting that the license was properly revoked.

Because none of Mr. Schick’s arguments had merit, none would result in the restoration of his license or even a hearing on the issue. Consequently, according to the Court of International Trade, justice would not be served by transferring the case to another Court. The Court, therefore , denied the motion and dismissed the case.