Lever Bros. Co. v. U.S.

Decision Date09 June 1989
Docket NumberNo. 87-5051,87-5051
Citation877 F.2d 101
Parties, 278 U.S.App.D.C. 166, 58 USLW 2010, 11 U.S.P.Q.2d 1117 LEVER BROTHERS CO., Appellant, v. UNITED STATES of America, et al.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (Civil Action No. 86-03151).

Lynne Darcy, New York City, with whom David M. Malone, Washington, D.C., was on the brief, for appellant.

Linda Halpern, Asst. U.S. Atty., with whom Jay B. Stephens, U.S. Atty., John D. Bates and R. Craig Lawrence, Asst. U.S. Attys., Washington, D.C., were on the brief, for appellee.

Joseph E. diGenova, U.S. Atty., * and Royce C. Lamberth, Asst. U.S. Atty., * Washington, D.C., also entered appearances for appellee.

Before WALD, Chief Judge, and WILLIAMS and D.H. GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge WILLIAMS.

STEPHEN F. WILLIAMS, Circuit Judge:

Two affiliated corporations, one operating in the United States and one in the United Kingdom, use the same words, Shield and Sunlight, as trademarks for products that differ materially in the two countries. The products differ because the manufacturers have adjusted them to the countries' differing tastes and conditions. Third parties have directly or indirectly acquired the UK Shield and Sunlight products and imported them to the United States over the objection of the US affiliate, the domestic markholder. Two principles of trademark law--acceptance of manufacturers' interest in signalling the character of their products and consumers' interest in trusting those signals, and the recognition that trademarks may be regional--point toward prohibiting these importations. Deference to the views of the agency entrusted with enforcement of the statute points the other way. The matter ultimately turns, however, on the interpretation of Sec. 42 of the Lanham Act of 1946, 15 U.S.C. Sec. 1124 (1982), and we remand to the district court for it to complete that interpretation with the benefit of any further light that Sec. 42's legislative history and any related administrative practice may disclose.

Lever Brothers Company is a domestic corporation which we shall refer to as either Lever or Lever US. Lever Brothers Ltd. is an English corporation, affiliated with Lever US through the latter's corporate grandparent, 1 and here referred to as Lever UK. Both Lever US and Lever UK manufacture a deodorant soap under a Shield trademark and a liquid dishwashing detergent under a Sunlight trademark.

The Shield logo on the wrapper of the two different products is virtually identical and the only difference in the appearance of each wrapper lies in fine print revealing the country of origin and, on the US version, the ingredients. 2 Compare Joint Appendix ["J.A."] 296-300. But US Shield contains a higher concentration of coconut soap and fatty acids, and thus more readily generates lather. Hockey Affidavit, J.A. 214. The manufacturing choice evidently arises in part out of the British preference for baths, which permit time for lather to develop, as opposed to a US preference for showers. Id. at 215. Moreover, Britons interested in a soap's lathering properties turn to "beauty and cosmetic" soaps rather than to deodorant soaps. Id. at 214. Further, US Shield contains an agent that inhibits growth of bacteria; Lever accounts for this difference in terms of some mix of "differing consumer preferences, climatic conditions and regulatory standards." Id. at 213. Finally, the two bars contain differing perfume formulas and colorants. Id. at 216.

The two versions of Sunlight use the same word in similar lettering. Their external appearances differ more than the two Shields, however. The UK product comes in a cylindrical drum rather than the flattened hourglass shape employed by the US version. Compare J.A. at 302 with id. at 304. The UK version carries the designation, "washing up liquid" rather than the US's "dishwashing liquid," and it displays at the top a royal emblem, along with the legend "By Appointment to Her Majesty the Queen." The contents of the packages differ materially. UK Sunlight is designed for water with a higher mineral content than is generally found in the United States, and therefore does not perform as well as US Sunlight in the "soft water" typical of US metropolitan areas. J.A. 217.

Consumers are apparently capable of detecting the differences between the contents of the UK and US products--once they start using them. In support of its request for a preliminary injunction, Lever US submitted letters it received from consumers expressing their rage or disappointment with what they had believed, at the time of purchase, to be a discounted version of the familiar US product. See J.A. 197-210. Lever argues that these letters evidence consumer confusion, imperiling its reputation for quality.

Third parties import UK Shield and UK Sunlight without authorization by Lever US or, so far as appears, by Lever UK. 3 Despite requests by Lever US, the Customs Service will not halt the importation. It declines to do so only because the trademarks are used abroad by an affiliate of Lever US.

Lever rests its claim that Customs is bound to seize such imports on Sec. 42 of the Lanham Act of 1946, which provides that

no article of imported merchandise which shall copy or simulate the name of the [sic] any domestic manufacturer, or manufacturer, or trader, ... or which shall copy or simulate a trademark registered in accordance with the provisions of this chapter or shall bear a name or mark calculated to induce the public to believe that the article is manufactured in the United States, or that is manufactured in any foreign country or locality other than the country or locality in which it is in fact manufactured, shall be admitted to entry at any customhouse of the United States....

15 U.S.C. Sec. 1124 (1982) (emphasis added). At its core, Lever's contention is that where affiliated domestic and foreign firms produce goods bearing the same trademark, but different in physical content, the foreign products "copy or simulate" the domestic trademark, so that Sec. 42 forbids their importation, notwithstanding the fact of affiliation.

The Customs Service rests on a regulation whose substance evidently dates back to 1936. See K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 108 S.Ct. 1811, 1827, 100 L.Ed.2d 313 (1988) (Brennan, J., concurring in part and dissenting in part). While its regulations call as a general matter for seizure of foreign-made articles bearing a trademark identical with one owned and recorded by a US corporation, see 19 C.F.R. Sec. 133.21(b) (1988), they make a number of exceptions:

(c) Restrictions not applicable. The restrictions set forth in paragraphs (a) and (b) of this section do not apply to imported articles when:

(1) Both the foreign and the U.S. trademark or trade name are owned by the same person or business entity;

(2) The foreign and domestic trademark or trade name owners are parent and subsidiary companies or are otherwise subject to common ownership or control (see Secs. 133.2(d) and 133.12(d));

(3) The articles of foreign manufacture bear a recorded trademark or trade name applied under authorization of the U.S. owner. 4

(4) The objectionable mark is removed or obliterated prior to importation ...

(5) The merchandise is imported by the recordant of the trademark or trade name or his designate;

(6) The recordant gives written consent ...

(7) ... the personal exemption is claimed

* * *

19 C.F.R. Sec. 133.21(c) (1988). The critical clause for our purposes is subsection (c)(2), the affiliate exception. 5

In the Customs Service's view, as embodied in the affiliate exception, goods are genuine--and thus neither copy nor simulate a domestic trademarked good--when they bear trademarks valid in their country of origin and the foreign manufacturer is affiliated with the domestic trademark holder. Where the affiliation between producers exists, Customs regards as irrelevant both physical differences in the products and the domestic markholder's non-consent to importation.

Lever sought a preliminary injunction against the Customs Service's continued application of the affiliate exception on the ground that it violated Sec. 42 of the Lanham Act. The district court essentially agreed with the Customs Service's interpretation of Sec. 42. Regarding the law as clear, the court denied the request without reaching the other issues that govern an application for a preliminary injunction--the balance of hardships among the parties and the public interest. Lever Brothers Co. v. United States, 652 F.Supp. 403, 406-07 (D.D.C.1987); cf. Wisconsin Gas Co. v. FERC, 758 F.2d 669, 673-74 (D.C.Cir.1985) (per curiam) (listing issues to be considered before granting preliminary injunction). Lever US filed a timely appeal. 6

Review of the Customs Service's regulation comes to us in an unusual posture. The Service is charged with implementation of Sec. 42 of the Lanham Act, and accordingly we owe its interpretation deference. If we find, using "traditional tools of statutory construction," that Congress clearly expressed an intent on the matter, of course we give that intent effect; otherwise we must accept the Customs Service's interpretation if reasonable. See Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984); NLRB v. United Food & Commercial Workers Union, Local 23, 484 U.S. 112, 123, 108 S.Ct. 413, 421, 98 L.Ed.2d 429 (1987). But as the substance of the disputed regulation considerably antedates the Administrative Procedure Act, 5 U.S.C. Secs. 551 et seq., the Service appears not to have supported it with the "concise general statement of [the rule's] basis and purpose" required by Sec. 553(c). Thus, despite the stricture of SEC v. Chenery Corp., 318 U.S. 80, 94, 63 S.Ct....

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