790 F.2d 903 (D.C. Cir. 1986), 84-5890, Coalition to Preserve the Integrity of American Trademarks v. United States

Docket Nº:84-5890.
Citation:790 F.2d 903
Party Name:, 229 U.S.P.Q. [PG641 COALITION TO PRESERVE THE INTEGRITY OF AMERICAN TRADEMARKS, et al., Appellants, v. UNITED STATES of America, et al., Appellees.
Case Date:May 06, 1986
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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790 F.2d 903 (D.C. Cir. 1986)

, 229 U.S.P.Q. [PG641


et al., Appellants,


UNITED STATES of America, et al., Appellees.

No. 84-5890.

United States Court of Appeals, District of Columbia Circuit

May 6, 1986

Argued Jan. 22, 1986.

William H. Allen, with whom Eugene A. Ludwig, Scott D. Gilbert, Daniel A. Rowley and Elizabeth V. Foote, Washington, D.C., were on brief, for appellants.

David M. Cohen, Director, Commercial Litigation Branch, Civil Div., Dept. of Justice, with whom Richard K. Willard, Acting Asst. Atty. Gen. and Velta A. Melnbrencis, Dept. of Justice, Washington, D.C., were on brief, for appellee U.S.

Nathan Lewin, with whom Jamie S. Gorelick, Washington, D.C., was on brief, for appellee 47th Street Photo, Inc.

Robert E. Hebda, with whom Robert W. Steele, Washington, D.C., and James C. Tuttle, Troy, Mich., were on brief, for appellee K-Mart Corp.

Frank W. Gaines, Jr. and Robert L. Hoegle, New York City, were on brief, for

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amicus curiae Progress Trading Co., Inc., urging affirmance.

Bernard Fensterwald, III, Arlington, Va. and Robert Ullman, New York City, were on brief, for amicus curiae American Free Trade Ass'n, urging affirmance.

Before MIKVA, BORK and SILBERMAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

This case concerns the validity of regulations issued by the U.S. Customs Service permitting the importation of so-called "grey-market goods" in certain instances. These are goods manufactured abroad bearing legitimate foreign trademarks that are identical to American trademarks. This situation typically arises when a foreign producer creates an American subsidiary that then registers the American trademark. Both the foreign producer and its American subsidiary often wish distribution in the United States to be exclusively controlled by the American subsidiary. If, however, the price at which the American subsidiary sells the goods exceeds the price at which the goods are sold abroad, other importers have an obvious incentive to purchase the goods abroad (typically from a third-party who has legitimately purchased directly from the foreign producer) and resell them in the United States--perhaps without certain associated services or warranties--at a price below that charged by the American subsidiary. The same result can occur, however, if the American trademark owner is the parent and the goods are manufactured abroad by a foreign subsidiary.

The appellants are the Coalition to Preserve the Integrity of American Trademarks (COPIAT), a trade association of United States companies that own American trademarks, and two of its members, Cartier, Inc. and Charles of the Ritz Group Ltd. They urge that importation of goods bearing trademarks identical to their own is barred by two statutory provisions, Section 526 of the Tariff Act of 1930, 19 U.S.C. Sec. 1526 (1982), and Section 42 of the Lanham Trade-Mark Act of 1946, 15 U.S.C. Sec. 1124 (1982). Customs regulations implementing these statutes permit the importation of such goods, inter alia, if the American and foreign trademarks are owned by the same or affiliated entities or if the American trademark owner has authorized the foreign entity to use the trademark. 19 C.F.R. Sec. 133.21(c)(1)-(3) (1985). The individual corporate appellants and, apparently, many of COPIAT's other members fall within these categories of trademark owners exempted from protection against imports.

The appellants brought suit below against the Commissioner of Customs, the Secretary of the Treasury, and the United States, seeking a declaration that the regulations are invalid because inconsistent with the two statutes and an injunction prohibiting their enforcement and compelling enforcement of the express terms of the statutes. Two retailers who deal in grey-market goods, 47th Street Photo, Inc. and K-Mart Corporation, intervened as defendants. The district court initially determined that it had jurisdiction to adjudicate the claims presented, rejecting 47th Street Photo's argument that the United States Court of International Trade had exclusive jurisdiction over the action's subject matter. Coalition to Preserve the Integrity of American Trademarks v. United States, 598 F.Supp. 844, 847 (D.D.C.1984). On cross-motions for summary judgment and a motion to dismiss, the district court then upheld the Customs regulations, holding that they were a "sufficiently reasonable" interpretation of the governing statutes, "supported by legislative history, judicial decisions, legislative acquiescence, and the long-standing consistent policy of the Customs Service." Id. at 852.

The issues raised in this case are matters of first impression in this Circuit, and, moreover, have engendered considerable disagreement among the courts considering them to date. The district court's holding on the issue of its jurisdiction conflicts with

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that of the Federal Circuit in Vivitar Corp. v. United States, 761 F.2d 1552 (Fed.Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 791, 88 L.Ed.2d 769 (1986). Its views on the validity of the Customs regulations are in accord with those expressed in Olympus Corp. v. United States, 627 F.Supp. 911 (E.D.N.Y.1985), appeal docketed, No. 85-6282 (2d Cir.Sept. 27, 1985); Vivitar Corp. v. United States, 593 F.Supp. 420 (Ct. Int'l Trade 1984), aff'd on other grounds, 761 F.2d 1552 (Fed.Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 791, 88 L.Ed.2d 769 (1986); and Parfums Stern, Inc. v. Customs Serv., 575 F.Supp. 416 (S.D.Fla.1983), but in conflict with those expressed in Osawa & Co. v. B & H Photo, 589 F.Supp. 1163 (S.D.N.Y.1984) and Bell & Howell: Mamiya & Co. v. Masel Supply Co., 548 F.Supp. 1063 (E.D.N.Y.1982), vacated on other grounds, 719 F.2d 42 (2d Cir.1983). For the reasons stated herein, we conclude that the district court correctly held that it possessed jurisdiction over this action. We hold, however, that the district court erred in upholding the regulations, and that the appellants are entitled to a declaratory judgment that the regulations violate Section 526. Accordingly, we reverse the judgment of the district court.


At the outset, we are faced with a challenge to the jurisdiction of the district court and thus this court. 1 The issue is whether actions of this sort may properly be brought in federal district court or whether they must in all cases be initiated in the Court of International Trade, with appellate jurisdiction in the Federal Circuit. In a recent case, the Federal Circuit held that by virtue of a provision of the Customs Courts Act of 1980, 28 U.S.C. Sec. 1581 (1982), the Court of International Trade has exclusive jurisdiction over claims based upon Section 526. Vivitar Corp. v. United States, 761 F.2d 1552 (Fed.Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 791, 88 L.Ed.2d 769 (1986).

Absent that enactment there could be no doubt of the district court's power to adjudicate this action under the grant of general federal-question jurisdiction, 28 U.S.C. Sec. 1331 (1982), and under the grant of jurisdiction for actions "arising under any Act of Congress relating to patents, ... copyrights and trade-marks." 28 U.S.C. Sec. 1338(a) (1982). Jurisdiction over the Section 42 claim is also conferred by the Lanham Act's jurisdictional provision, 15 U.S.C. Sec. 1121 (1982). Because the Customs Courts Act did not create any new substantive law, but merely provided for exclusive jurisdiction over certain categories of cases in the Customs Court (the predecessor of the Court of International Trade), it follows that the Act divests the district courts of some of their preexisting jurisdiction. See Vivitar, 761 F.2d at 1559-60. Specifically, it would seem that the district courts are without jurisdiction over any of the cases enumerated in 28 U.S.C. Sec. 1581. 2

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The Federal Circuit in Vivitar held that two subsections of 28 U.S.C. Sec. 1581 apply to an American trademark owner's challenge to the Customs regulations in question. First, it maintained that the Court of International Trade has exclusive jurisdiction over such actions "as a corollary to protest jurisdiction under 28 U.S.C. Sec. 1581(a)." Vivitar, 761 F.2d at 1560. Under 28 U.S.C. Sec. 1581(a), the Court of International Trade has exclusive jurisdiction over challenges to Customs' denial of "protests" filed under Section 515 of the Tariff Act of 1930, 19 U.S.C. Sec. 1515 (1982). Protests are administrative complaints available to importers challenging certain actions by Customs, including "the exclusion of merchandise from entry or delivery under any provision of the customs laws." 19 U.S.C. Sec. 1514(a)(4) (1982). The case before the Vivitar court concerned an American trademark owner's challenge to Customs' decision not to exclude the merchandise in question, and there is no provision for administrative protests by such interested third-parties. Nevertheless, the Federal Circuit maintained that the case involved a subject matter that would have given rise to a protest (by the importer), if the goods had been excluded rather than admitted. 3 It then concluded that the case fell within 28 U.S.C. Sec. 1581(i)(4), which creates jurisdiction over actions against federal agencies arising under laws of the United States providing for "administration and enforcement with respect to the matters referred to in ... subsections (a)-(h) of this section." The court reasoned that a challenge to Customs regulations permitting importation of the goods at issue implicated "administration and enforcement" of the "matter"--i.e., a protestable subject matter--referred to in 28 U.S.C. Sec. 1581(a); it viewed 28 U.S.C. Sec. 1581(i)(4) as...

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