International Trade and IPR: Trademarks, Copyrights, and Patents

Table of Contents

Intellectual Property and United States Customs

1. Trademarks and U.S. Customs

Trademarks are defined in U.S. law as a word, name, symbol, device, color, or combination thereof used to identify and distinguish goods from those manufactured or sold by others and to indicate the origin and source of goods, even if said source is unknown. In U.S. practice, trademarks are established by using the trademark; registration is not require but is available at both the federal and state levels through, respectively, the U.S. Patent and Trademark Office (USPTO) and the equivalent state level agencies. Federal trademark registrations correspond to a specific class (or specific classes) of goods and/or services and are renewable every 10 years. One need only think of trademarks like Apple, Microsoft, or Bluetooth to appreciate their centrality to a corporation’s identity, goodwill, and success.

Trademarks are one of the easiest forms of intellectual property rights (IPR) to create. There is no need, in relative terms, to develop a sophisticated patent or pen a magnum opus. They are, by the same token, one of the easiest forms of IPR to steal, infringe, counterfeit, fake, or otherwise knock off. This reality characterizes both domestic and foreign commerce.

The international trade dimension of the preceding observation is borne out in statistics maintained by the federal government’s interagency National Intellectual Property Rights Coordination Center. Fueled by the advent of new technologies and the labor arbitrage-/market access-driven offshoring dynamics of the past decades (and, more recently, the rise of de minimis scale e-commerce), the MSRP value of intellectual property rights (IPR) theft has, per U.S. Customs and Border Protection (CBP) enforcement data, risen from $1.2B in 2017 to $3.3B in 2021. This 175% gain – approximately 90% of which derives from high-volume, low-value international mail and express shipments – has been concentrated primarily in a small set of countries (China, Hong Kong, Turkey, Vietnam, Singapore, and South Korea) and a specific set of products (handbags, watches, apparel, jewelry, consumer electronics, sporting goods, and pharmaceuticals). This theft is problematic insofar as it undercuts public health and safety, jeopardizes consumer well-being, reduces economic prosperity, dilutes brand integrity and goodwill, disincentivizes innovation, and weakens national security. It should not, in light of the foregoing, come as any surprise that CBP has identified IPR protection and enforcement as a “Priority Trade Issue.”

A. Trademark Infringement and Custom Enforcement Actions

Using a combination of recordation tools, interagency risk assessment techniques, e-allegations, whistleblower reports, audits, public-private collaborative operations, and data analytics, CBP works to roll back the tide of IPR theft by targeting the following levels of trademark infringement:

1. Counterfeit

The first level of infringement recognized by CBP involves goods bearing counterfeit marks. A counterfeit mark is defined by 15 USC 1127 as a spurious mark which is identical with or substantially indistinguishable from a federally registered and recorded trademark. These are never considered genuine due to the fact that violative marks are attached to merchandise without the consent of the legitimate right holder. An example in this regard would involve the use of the words “Ray-Ban” in connection with a line of optical products, without the authorization of the Ray-Ban trademark owner (Luxottica Group S.p.A.)

Merchandise which CBP has a “reasonable suspicion” of bearing a counterfeit mark will be detained (or, if already released, made the subject of a redelivery order). During the detention period, an importer will have the opportunity to request images of the allegedly infringing mark and present information establishing that it is not counterfeit. The trademark owner will simultaneously receive information (including, under specified circumstances, samples) concerning the merchandise or, if applicable, its retail packaging. The engagement of an attorney at this juncture is crucial given the short period of time CBP officials have under the regulations for making determinations. Should an importer fail to either respond to CBP’s Notice of Detention or furnish information that is sufficient to establish the non-counterfeit nature of the mark, CBP will disclose the information set forth in 19 CFR 133.21(d) to the right holder.

Merchandise bearing counterfeits of a federally registered trademark that has been recorded with CBP will, concomitant with the foregoing, be seized and, absent a right holder’s timely written consent (i.e., authorizing the importation or, as the case may be, exportation), forfeited. Following forfeiture, CBP can either destroy the violative goods or, assuming certain circumstances are met (including, for example, the obliteration of the counterfeit mark), use, donate, or sell the forfeited goods.

Merchandise bearing counterfeits of a federally registered trademark that has not been recorded with CBP will, on the other hand, receive a diminished level of protection. Under this specific circumstance, CBP can, where “administratively feasible and appropriate,” seize the merchandise in accordance with the laws that prohibit the intentional trafficking of counterfeit goods and services.

In the event that merchandise bearing counterfeit marks is seized and forfeited (following the perfection of the forfeiture), CBP can, under either of the aforementioned circumstances, issue a civil penalty. Determinations regarding the amount of a penalty are tied to an importer’s prior violation history, the value of the merchandise (as if it had been genuine, based on the MSRP value of genuine merchandise at the time of the seizure), and the discretion of the fines, penalties, and forfeitures officer (who has leeway to deviate from the published guidelines that inform such analyses, as discussed in greater detail, below).

2. Confusingly Similar

The second level of infringement recognized by CBP entails goods bearing confusingly similar trademarks or trade names. This level can involve special cases, for example, those involving replicas, models, toys, etc. A confusingly similar mark or trade name is so similar to a genuine, recorded mark or trade name that it is likely to cause confusion in the public mind as to the source of ownership. This kind/level of infringement is also referred to as “copying” or “simulating.” The use of the words “Ray Bane” or “Ray Van” on sunglasses might, as an example in this connection, be deemed to be confusingly similar to the genuine trademark Ray-Ban.

Merchandise suspected of bearing a mark that copies or simulates a recorded mark or trade name will be detained (or, if already released, made the subject of a redelivery order). The issuance of a detention notice opens a 30-day period of time during which an importer can request images of the allegedly simulating mark, remove/obliterate the objectionable mark as a precondition to release, or otherwise satisfy one of the circumstances set forth at 19 CFR 133.22(c). It also triggers an obligation on the part of CBP to disclose the information specified at 19 CFR 133.25 to the right holder. Importers who satisfy one of the circumstances laid out in 19 CFR 133.22(c) will have their merchandise released. Those who do not, on the other hand, will have their merchandise seized and possibly forfeited. The seizure of merchandise bearing a confusingly similar mark or trade name does not, contrary to the case with counterfeit marks, obligate CBP to disclose additional information to a right holder.

Last, and in what constitutes a further contrast with CBP practice involving counterfeit marks, merchandise bearing a confusingly similar mark or trade name that is registered with the USPTO but not recorded with CBP is subject to neither detention nor seizure. The differential enforcement treatment accorded recorded and unrecorded marks underscores the importance of recording marks with CBP.

3. Grey Market Goods

The third and final level of trademark infringement recognized by CBP focuses on what are referred to as “grey market” articles, “parallel imports,” or “diverted goods.” This kind of infringement involves foreign manufactured goods bearing a genuine trademark or trade name identical with or substantially indistinguishable from one owned and recorded by a U.S. citizen or corporation that is imported without the authorization of the right holder. Grey market goods are, in other words, genuine products bearing a mark of trade name that has been applied with the approval of the right owner for use in a country other than the United States.

An example of a grey market goods scenario, taken from one of the seminal cases on the subject, consists of Perugina chocolates made in Venezuela. These chocolates were made under license from Société des Produits Nestlé, S.A. (Nestlé S.P.N.), rightful owner of the Perugina trademark in the United States. However, the importation of these Venezuelan-made chocolates into the United States was not authorized by Nestlé S.P.N, which preferred to sell Italian-made products in the U.S market. As a U.S. appeal court put it, this turned “an otherwise ‘genuine’ product into a ‘counterfeit’ one.”

Trademarks and trade names that have been recorded with CBP will be accorded grey market protection provided (i) the U.S. and foreign intellectual property rights are not owned by the same person/entity and (ii) the U.S. and foreign right holders are neither a parent or subsidiary of one another nor subject to common ownership/control. An exception to the second element (i.e., no parent/subsidiary relationship or common ownership/control) may, via the Lever-rule, apply to genuine goods produced by a related foreign entity that are, absent notice to the consumer, physically and materially different from those authorized for importation into and commercialization within the U.S. All claims for Lever-rule protection must be particularly described and supported by competent evidence.

Imported merchandise bearing trademarks and trade names which are, by virtue of their prior recordation with CBP, entitled to grey market protection will, absent the establishment of an exemption under 19 CFR 133.23(e), be detained (or ordered redelivered, if already released) and made subject to potential seizure and forfeiture. In contrast to the foregoing, unrecorded trademarks and trade names are not entitled to grey market protection.

B. Customs Enforcement Relief and Trademarks

Assuming the gravity of a trademark infringement does not rise to the level of a criminal referral, both remission and mitigation/cancelation relief is, on a case-by-case basis, available. The authority for this relief is found at 19 USC 1618 and 19 CFR 171.

1. Remedies Following Seizure

A trademark-based seizure presents an importer with a choice of procedural pathways for proceeding. These include: (i) requesting administrative forfeiture proceedings; (ii) filing a claim and cost bond and requesting referral of the matter to the U.S. Department of Justice (for subsequent judicial action); (iii) submitting an offer in compromise to the port director (with an eye to reaching a settlement); and (iv) filing a petition for administrative relief with the fines, penalties, and forfeitures officer at the port of seizure. Petitions seeking relief from a seizure typically advance claims regarding the distinctive and non-infringing characteristics of the merchandise, the attainment of right holder consent or authorization, the availability of an exemption, and/or the controlling nature of an importer’s interest in the IPR. The fines, penalties, and forfeitures officer’s relief decision will be taken with reference to the parameters set forth in CBP’s published guidelines and is not subject to administrative protest.

2. Mitigation/Cancelation of Penalties

Importers can seek relief from any civil fine issued by CBP subsequent to the perfection of a forfeiture by filing a petition for the mitigation or cancelation of the penalty. In reviewing such petitions, the port-based fines, penalties, and forfeitures officer will, consistent with the aforementioned guidelines, evaluate an importer’s prior violation history in relation to a number of mitigating and aggravating factors.

Mitigating factors include:

Lack of knowledge regarding the counterfeit nature of the trademark
Prior good record of the importer
Lack of importer experience
Evidence of cooperation
Evidence of corrective action
Demonstrated inability to pay

Aggravating factors, by way of contrast, include:

Occurrence of more than two prior seizures/forfeitures
Criminal violation associated with the importation
Submission of falsified documentation or other deceptive practices

Where relief is granted under a petition for remission and/or mitigation, fines, penalties, and forfeitures officers routinely require importers to satisfy all costs incurred in connection with a seizure (demurrage, storage, etc.) and sign off on a hold harmless agreement. Penalty-focused petition decisions are not, in their final form, subject to administrative protest.

C. Best Practices for Managing Trademarks in International Trade

There are several measures right holders and importers can take to, respectively, protect their intellectual property rights and avoid unwanted scrutiny.

1. Right Holders and Trademarks

The most important measure right holders can and should take (outside of registering with the U.S. PTO) is recording their IPR with CBP’s Intellectual Property Rights Recordation system (IPRR). Unlike the USPTO, which will only allow the registration of trademarks, right holders can record both trademarks and trade names with CBP. The process is simple, quick, and inexpensive ($190 per International Class of Goods (IC), per trademark registration). The act of recording has the beneficial effect of putting CBP on alert for inbound products with infringing marks. It also serves as an efficient means of ensuring CBP has up-to-date point of contact information. This can be used to expeditiously communicate with right holders if/when imported merchandise is detained on the basis of CBP having a reasonable suspicion of trademark infringement. In the event the presence of infringing marks on imported merchandise is confirmed, recordation opens the door, as is evident from the table set forth above, to enforcement options not otherwise available to merchandise bearing marks that are not recorded with CBP.

Right holders can enhance the effectiveness of the protection CBP recordation offers by subsequently reaching out to field operations officers at all logistically relevant U.S. ports of entry with an eye to educating them on the distinctive characteristics of recorded trademarks and trade names. Sharing a product information guide or giving a product information webinar in this way enables CBP to better monitor imports and, if appropriate, take action to prevent the entry of violative articles.

Finally, right holders can maximize the protection of their IPR by actively exercising oversight over both the virtual and the brick/mortar marketplaces in which their goods are produced and/or commercialized. If/when this sort of vigilance results in the detection of violative merchandise, right holders will consequently be well-positioned to deploy the administrative and/or judicial tools available for shutting down the infringement (through, for example, the filing of an e-Allegation to CBP, the submission of an IPR theft report to the National Intellectual Property Rights Coordination Center, the initiation of invalidation proceedings, the pursuit of a cease-and-desist order, etc.).

The foregoing right holder-oriented best trademark practice measures can be summarized as follows:

Register (or, as the case may be, maintain/renew) trademarks with USPTO
Record trademarks and trade names with CBP’s IPRR
Educate CBP field operations officers at all logistically relevant U.S. ports of entry on the distinctive characteristics and attributes of recorded trademarks and trade names
Proactively monitor marketplaces in which trademark sensitive merchandise is produced and commercialized
Take timely administrative or judicial action against IPR violations

It is worth noticing that the measures suggested above track, almost exactly, the recommendations we make when it comes to protecting trademarks in China (or other countries for that matter).

2. Importers and Trademarks

There are, similarly, several measures importers can take to avoid unwanted CBP or right holder scrutiny. For example, importers can, prior to engaging in an importation, clear the intellectual property rights associated with the merchandise to be shipped by searching, free of charge, CBP’s Intellectual Property Rights Search system (IPRS). The realization of this step facilitates, on a pre-importation basis, the identification of previously unknown intellectual property rights that have been recorded for protective purposes with CBP, thereby allowing importers to timely secure the consent or authorization of a right holder and, by extension, avoid downstream compliance problems.

Where an importer obtains the consent or authorization to import merchandise bearing the mark of a right holder, the risk of an improper detention/seizure can be minimized by proactively providing advance notification of this fact to CBP officials at all logistically relevant U.S. ports of entry. This action avoids potentially disruptive and costly downstream surprises at the same time it builds trust between importers and CBP. Be sure, though, that you are getting authorization from the right party. For instance, a China supplier might have a license to use a trademark owned by a European company within China, but not in the United States.

The final best practice measure an importer can take for the purpose of minimizing IPR-related compliance risk involves obtaining, also on a pre-importation basis, written assurances from foreign suppliers and producers that the parts and components which go into the merchandise they will export do not infringe the intellectual property rights of third parties.

The foregoing importer-oriented best trademark practice measures can be summarized as follows:

Clear the intellectual property rights associated with inbound merchandise on CBP’s IPRS system
Secure all necessary right holder consents or authorizations in advance of entering merchandise
Provide CBP field operations officers with pre-importation notice of the forthcoming entry of merchandise for which the consent/authorization of a right holder has been previously secured
Insert provisions into relevant transaction documents, such as purchase orders or manufacturing agreements with suppliers in China (or elsewhere), forbidding the use of parts or components that violate the intellectual property rights of third parties in merchandise produced abroad for subsequent importation into the United States

D. Trademark and Trade Conclusion

Navigating trademark issues in the international trade environment can, as this blogpost highlights, be tricky and complex. This is especially the case for small- and medium- sized entities that lack the legal spend resources of larger corporations. Understanding the concepts and following the best practice tips laid out in this blogpost will go a long way to ensuring that right holders protect their hard-earned intangible assets and importers avoid the delay and expense that can be triggered by non-compliance with the trade-related dimensions of U.S. trademark law.

Copyrights and U.S. Customs

Copyrights protect original works of authorship against unauthorized copying. Original works of authorship include literary, dramatic, musical, artistic, pictorial, graphic, sculptural, and architectural works, motion pictures and other audio-visual works, and sound recordings. In the U.S., copyright protection attaches the moment a work is fixed in any tangible medium of expression. Ideas not anchored in a tangible medium of expression are ineligible to receive copyright protection. Once established and while valid, copyrights insulate right holders against the unlawful copying of a protected work in any medium. For individuals, copyright protection runs for the life of the author plus 70 years. Made for hire or anonymous works are, on the other hand, entitled to a term of copyright protection that lasts 95 years from first publication or 120 years from the date of creation, whichever expires first. Upon the expiration of a copyright’s term of protection, the work enters the “public domain” and may be freely used by anyone.

Copyright piracy – i.e., the unauthorized and unlawful copying of a protected work – is a significant problem the world over. It is, on a commercial enterprise scale, dominated by organized crime syndicates, though terrorist groups have also been known to engage in piracy as a means of raising funds. While syndicate networks span the globe, the lion’s share of their copyright piracy activity is centered in China, Southeast Asia, and Russia. On a more pedestrian level, the widespread availability of devices, apps, and platforms for making, procuring, or distributing unauthorized copies of protected works makes it possible for almost anybody, with only the slightest bit of effort, to engage in or unwittingly facilitate copyright piracy. These dynamics are problematic in that they can deprive right holders of the fruits of their labor, discourage creativity, hinder the realization of derivative works, destroy jobs, increase production and distribution costs, create cybersecurity risks, and undermine national security.

A. Infringement Levels and Enforcement Actions

The above described reality, considered in conjunction with the fact that copyright piracy frequently involves the movement of merchandise through legitimate import-export channels, has resulted in U.S. Customs and Border Protection (CBP) making copyright protection and enforcement a “Priority Trade Issue.” To this end, CBP, working in concert with the National Intellectual Property Rights Coordination Center, uses a combination of recordation tools, interagency risk assessment techniques, e-allegations, whistleblower reports, audits, public-private collaborative operations, and data analytics to reduce the flow of piratical articles. The focus of these efforts centers on the following two forms of copyright infringement:

B. Clearly Piratical

The first form of copyright infringement recognized by CBP involves works that are “clearly piratical.” Clearly piratical copies are, per Customs Directives, those for which there exists an overwhelming and substantial similarity between the copyrighted elements of the protected work and an imported item. These similarities are clear cut and leave no doubt that one work was based on the other. Determinations as to what constitutes a clearly piratical article may be based on the comparative characteristics of the protected and imported items, CBP rulings, or, in certain cases, the decisions of U.S. courts.

Clearly piratical copies of works which are registered with the U.S. Copyright Office (USCO) and recorded with CBP are subject to detention, seizure, and forfeiture (with subsequent notice to the copyright holder). A diminished degree of enforcement certainty attaches, by way of contrast, to works which are USCO-registered but not recorded with CBP. While clearly piratical copies that violate 17 USC 506 will, regardless of the underlying work’s recordation status with CBP, be subject to seizure and forfeiture, CBP’s willingness to undertake enforcement measures against clearly piratical works in other contexts will be a function of whether the agency thinks such action is administratively feasible and appropriate. The superior level of enforcement provided in support of recorded works underscores the benefit of recording USCO registered copyrights with CBP.

C. Possibly Piratical

The second form of copyright infringement recognized by CBP focuses on works which are “possibly piratical.” Merchandise will, in this connection, be deemed possibly piratical if CBP forms a “reasonable suspicion” that imported articles are violative of a recorded copyright.

Owing to CBP’s lack of certainty in this circumstance, possibly piratical merchandise is detained in a way that provides potentially interested parties an opportunity to assert and defend their interests. Importers who engage and are able to demonstrate the absence of infringement will have their goods released by CBP. Importers who are unable to demonstrate the non-infringing nature of the works they are attempting to enter may, alternatively, have their goods seized and made subject to forfeiture by CBP.

Contrary to the foregoing, CBP does not take enforcement action against possibly piratical copies of an unrecorded work. Notwithstanding this fact, right holders who do not go through the administrative recordation process always have the option of protecting their copyrighted works pursuant to the obtainment of a court-ordered injunction that CBP will, in turn, enforce against possibly piratical merchandise. As was the case, above, the fundamental take away is that recording provides right holders with a significantly enhanced quality of protection against copyright piracy.

D. Enforcement Relief

Assuming the gravity of a copyright infringement does not rise to the level of a criminal referral, both remission and mitigation/cancellation relief is available. The authority for this relief is found at 19 USC 1618 and 19 CFR 171.

E. Remedies Following Seizure

A copyright-based seizure presents an importer with a choice of procedural pathways. These include: (i) requesting administrative forfeiture proceedings; (ii) filing a claim and cost bond and requesting referral of the matter to the U.S. Department of Justice (for subsequent judicial action); (iii) submitting an offer in compromise to the port director (with an eye to reaching a settlement); and (iv) filing a petition for administrative relief with the fines, penalties, and forfeitures officer (FPFO) at the port of seizure. Petitions seeking relief from a seizure typically advance claims regarding the distinctive and non-infringing characteristics of the merchandise, the attainment of right holder consent, the availability of an exemption (not for private gain, public domain, qualifying use, etc.), and/or the controlling nature of an importer’s interest in the IPR. The FPFO’s relief decision will be taken with refence to the parameters set forth in CBP’s published guidelines and is not subject to administrative protest.

F. Mitigation/Cancelation of Penalties

Importers can seek relief from CBP-issued penalties by filing a petition for their mitigation or cancelation. In reviewing such petitions, the FPFO will, consistent with published penalty guidelines, evaluate an importer’s prior violation history in relation to a number of mitigating and aggravating factors.

Mitigating factors include:

Prior good record of the importer
Lack of importer experience
Evidence of extraordinary cooperation
Evidence of remedial action

Aggravating factors, by way of contrast, include:

Criminal conviction relating to the subject transaction
Repetitive violations of the same import restriction involved in the penalty
Multiple violations within the same transaction
Circumstances suggesting an intentional importation contrary to law
Pattern of importer disregard for its responsibilities under U.S. laws and regulations

Where relief is granted under a petition for the mitigation of a penalty, FPFOs routinely require importers to satisfy all costs incurred in connection with a seizure (demurrage, storage, etc.) and sign off on a hold harmless agreement. Penalty-focused petition decisions are not, in their final form, subject to administrative protest.

G. Best Practice Tips for Managing Copyrights in the U.S. Customs Regulatory Environment

There are several measures right holders and importers can take to protect their intellectual property rights and avoid unwanted scrutiny.

H. Right Holders

The most important measure available to right holders (outside of registering with the USCO) is recording their IPR with CBP’s Intellectual Property Rights Recordation system (IPRR). The process is simple, quick, and inexpensive ($190 per copyright registration). The act of recording has the beneficial effect of putting CBP on alert for inbound products with infringing copyrights. It also serves as an efficient means of ensuring CBP has up-to-date point of contact information. This can be used to expeditiously communicate with right holders if/when imported merchandise is detained. In the event piratical copies are detected, recordation opens the door to enforcement options not otherwise available to works whose copyrights have not been recorded with CBP.

Right holders can enhance the protection CBP recordation offers by subsequently reaching out to field operations officers at all logistically relevant U.S. ports of entry for the purpose of educating them on the distinguishing characteristics of protected works. Sharing a product information guide or giving a product information webinar can, in this vein, enable CBP to better monitor imports and, if appropriate, take action to prevent the entry of violative articles.

Finally, right holders can maximize the protection of their IPR by actively exercising oversight over both the digital and physical marketplaces in which their goods are produced and/or commercialized. If/when this sort of vigilance results in the detection of violative merchandise, right holders will consequently be well-positioned to deploy the administrative and/or judicial tools available for shutting down the infringement (through, for example, the filing of an e-Allegation to CBP, the submission of an IPR theft report to the National Intellectual Property Rights Coordination Center, the obtainment of a court-ordered injunction, etc.).

The foregoing right holder-oriented best copyright practice measures can be summarized as follows:

Register copyrights with the USCO
Record copyrights with CBP’s IPRR
Educate CBP field operations officers at all logistically relevant U.S. ports of entry on the distinctive characteristics and attributes of the protected and recorded work
Proactively monitor marketplaces in which the protected work is produced and commercialized
Take timely administrative or judicial action against IPR violations

I. Importers

There are, alternatively, several measures importers can take to avoid unwanted CBP or right holder scrutiny. For example, importers can, prior to engaging in an importation, clear the intellectual property rights associated with the merchandise to be shipped by searching, free of charge, CBP’s Intellectual Property Rights Search system (IPRS). The realization of this step facilitates, on a pre-importation basis, the identification of previously unknown intellectual property rights that have been recorded for protective purposes with CBP, thereby allowing importers to timely secure the consent of a right holder and, by extension, avoid downstream compliance problems.

Where an importer obtains right holder consent to import an otherwise protected work, the risk of an improper detention/seizure can be minimized by proactively providing advance notification of this fact to CBP officials at all logistically relevant U.S. ports of entry. This action avoids potentially disruptive and costly downstream surprises, builds trust between importers and CBP, and facilitates legitimate trade.

The final best practice measure an importer can take to minimize IPR-related customs compliance risk involves obtaining, also on a pre-importation basis, written assurances from foreign suppliers and producers that the merchandise they will export does not infringe the intellectual property rights of third parties.

The foregoing importer-oriented best copyright practice measures can be summarized as follows:

Clear the intellectual property rights associated with inbound merchandise on CBP’s IPRS system
Secure all necessary right holder authorizations in advance of entering merchandise
Provide CBP field operations officers with pre-importation notice of the forthcoming entry of merchandise for which the authorization of a right holder has been previously secured
Insert provisions into relevant transaction documents (contract manufacturing agreements, for example) forbidding piratical works in merchandise produced abroad for subsequent importation into the United States

K. Copyright and Trade Conclusion

Navigating copyright issues in international trade can, as this blogpost highlights, be tricky and complex. This is especially the case for small- and medium- sized entities that lack the legal spend resources of larger corporations. Understanding the concepts and following the best practice tips laid out in this piece will go a long way to ensuring that right holders protect their hard-earned intangible assets and importers avoid the delay and expense that can be triggered by non-compliance with the laws and regulations that apply to IPR in the U.S. Customs regulatory environment.

Patents and U.S. Customs

The final topic in this multipart blogpost series exploring the linkages between international trade and intellectual property involves patents. Though there are relatively few studies which attempt to estimate the impact of patent theft (a phenomenon that is sometimes referred to as “efficient infringement”), indirect insight into the scope of the problem can be gleaned from the fact that court-based infringement actions in the United States alone have, between 1996 and 2008, resulted in the awarding of over $4 billion in damages. Viewed against this backdrop, the protection and enforcement of patent rights is, not surprisingly, a priority trade issue for CBP.

A. Protecting and Enforcing Patents in U.S. Trade

The administrative protection and enforcement of patent rights in the U.S. trade environment is accomplished through the combined efforts of the United States International Trade Commission (ITC) and U.S. Customs and Border Protection (CBP). The key points that characterize this joint approach are best understood with reference to the two discrete stages involved:

Stage 1: Creating a Foundation for Enforcement

During the first stage, the ITC, an independent, bipartisan body based in Washington, DC, receives (or initiates), reviews, investigates, and issues determinations with respect to complaints regarding the importation of articles that infringe valid and enforceable design or utility patents. In carrying out this work, administrative law judges (ALJs) conduct trial-like proceedings that culminate in the making of an initial determination (ID). These Administrative Procedures Act-rooted proceedings are fast (the ITC’s caseload is commonly referred to the “rocket docket”) and economical (compared to the cost of pursuing a civil infringement action in court). Should it be determined that the rights of a patent holder have been infringed and, further, assuming there is no settlement by way of agreement or consent order, the ITC can, depending on the circumstances and relief requested, issue: (i) a general or limited exclusion order; (ii) a seizure order; (iii) a cease-and-desist order; and/or (iv) a penalty. Parties who are dissatisfied with an ITC determination/order can appeal the matter to the U.S. Court of Appeals for the Federal Circuit.

Stage 2: Taking Enforcement Action

In the second stage, the responsibility for protecting and enforcing patents in the context of international trade shifts to CBP. If, following the passage of 60 days, the ITC’s findings/actions have not been disapproved by the USTR, the Commission’s orders will become final and fully enforceable. This means, in effect, ending the review period practice of allowing entry of otherwise excludable articles under a single-entry bond, denying entry (in a way that allows for export) to articles coming within an exclusion order, or, in cases where there has been a prior attempt at importation, seizing the merchandise. No mitigation relief is available in connection with CBP’s seizure of articles found to be within the scope of an ITC order.

As for the other forms of patent protection noted above, i.e., cease-and-desist orders and the penalties that can result from their violation, it is important to recognize that CBP does not play a role in the enforcement of these matters. The enforcement of these remedies remains within the purview of the ITC.

CBP does not, in general terms, maintain as high a level of enforcement activity for patents as it does for trademarks and copyrights. This observation is borne out in statistics which show the agency has, over the past 5 years, enforced an annual average of 123 exclusion orders and carried out an annual average of 169 seizures (with a corresponding annual average MSRP of $4,134,173). The diminished size of these figures relative to volumes and values associated with trademarks and copyrights suggests that IPRs do not, when it comes to CBP protection and enforcement, receive the same prioritization and resources.

B. Tips for Managing Patents in the U.S. Customs Regulatory Environment

There are several measures right holders and importers can take to protect their intellectual property rights and avoid unwanted scrutiny in the international trade arena.

C. Right Holders

Absent having the ability to record patents, as is the case for trademarks and copyrights, with CBP’s IPRR system, the best proactive measure a right holder can take to counter trade-related infringement entails monitoring industry competitors and preemptively seeking out evidence of unlawful use.

In the event infringement is detected, the most important reactive measure a patent holder can pursue involves filing a complaint under Section 337 of the Tariff Act of 1930. As laid out above, this measure, where successful, puts CBP on the alert for infringing products, facilitates subsequent CBP exclusions and seizures, and, on the ITC side, opens the door to penalty-backed cease-and-desist orders. While the most common complainants in 337 actions are large corporations with deep pockets, the ITC’s Trade Remedy Assistance Office (TRAO) is available to help smaller- and medium-sized entities (SMEs) on a free of charge basis. This resource ensures that SMEs are able to protect patents against trade-related infringement in much the same way as their larger counterparts.

The final measure right holders can take to protect patents in the U.S. trade environment consists of offering to meet with CBP field officers at all logistically relevant ports with an eye to providing guidance on the distinctive characteristics and attributes that attach to a particular patent. This information can, when provided, enhance CBP’s monitoring and enforcement capabilities.

D. Importers

Importers can, for their part, avoid unwanted scrutiny from right holders and/or CBP by adopting and implementing the following best practices.

The first involves clearing trade-sensitive patent rights. Though there is no searchable and centralized database similar to that maintained by CBP for trademarks and copyrights (i.e., the IPRS portal), importers should, in advance of entering merchandise, screen the ITC’s lists of current investigations and outstanding orders. This will provide an importer with useful insight into whether the merchandise they seek to import is or could become the subject of a patent-driven enforcement action.

Should an importer come across information that gives it pause, the second best practice involves accessing the ITC’s EDIS portal for the purpose of digging down on the issue. Importers can register for an EDIS account here.

If the foregoing measure does not adequately resolve an importer’s doubt, the final best practice entails asking CBP to issue a ruling that clarifies whether merchandise to be imported comes within the scope of an ITC order. Ruling requests can be prepared and submitted here. A favorable ruling provides importers with transactional certainty by ensuring that merchandise conforming to the facts and circumstances set forth in an underlying request will, upon entry, be treated in a way that is consistent with the conclusion it reaches.

E. Patents and Trade Conclusion

Navigating patent issues in international trade can, as this blogpost highlights, be tricky and complex. This is especially the case for small- and medium- sized entities that lack the legal spend resources of larger corporations. Understanding the concepts and following the best practice tips laid out in this piece will go a long way to ensuring that right holders protect their hard-earned intangible assets and importers avoid the delay and expense that can be triggered by non-compliance with the laws and regulations that apply to IPR in the U.S. Customs regulatory environment.