Bourdeau Bros. v. International Trade Com'n

• Decision Date: 30 March 2006
• Docket Number: No. 04-1588.,04-1588.
• Citation: 444 F.3d 1317
• Parties: BOURDEAU BROS., INC., Sunova Implement Co., and Ok Enterprises, Appellants, v. INTERNATIONAL TRADE COMMISSION, Appellee, and Deere & Company, Intervenor.
• Court: U.S. Court of Appeals — Federal Circuit

444 F.3d 1317

BOURDEAU BROS., INC., Sunova Implement Co., and Ok Enterprises, Appellants, v. INTERNATIONAL TRADE COMMISSION, Appellee, and Deere & Company, Intervenor.

No. 04-1588.

United States Court of Appeals, Federal Circuit.

March 30, 2006.

COPYRIGHT MATERIAL OMITTED

David P. Miranda, Heslin Rothenberg Farley & Mesiti P.C., of Albany, New York, argued for appellants. With him on the brief were Nicholas Mesiti and Brett M. Hutton. Of counsel was William A. Zeitler, Sullivan & Worcester, of Washington, DC.

Wayne W. Herrington, Attorney, United States International Trade Commission, of Washington, DC, argued for appellee. On the brief were James M. Lyons, General Counsel, Andrea C. Casson, Acting Assistant General Counsel for Litigation, and Clara Kuehn, Attorney.

Bassam N. Ibrahim, Buchanan Ingersoll, P.C, of Alexandria, Virginia, argued for intervenor. With him on the brief was S. Lloyd Smith. Of counsel was Goutam Patnaik, Burns, Doane, Swecker & Mathis, L.L.P., of Alexandria, Virginia.

Before SCHALL, Circuit Judge, CLEVENGER, Senior Circuit Judge, DYK, Circuit Judge.

CLEVENGER, Senior Circuit Judge.

Appellants Bourdeau Bros., Inc. (Bourdeau), Sunova Implement Co. (Sunova), and OK Enterprises (OK), (collectively, appellants) appeal the decision of the United States International Trade Commission (ITC) affirming the Initial Determination and Recommended Remedy Determination (Initial Determination) of Administrative Law Judge Luckern (ALJ) that the importation of certain Deere European version forage harvesters infringed one or more of Deere's federally registered trademarks, Certain Agric. Vehicles & Components Thereof, Inv. No. 337-TA-487 (Jan. 13, 2004) (Initial Determination), and granting a general exclusion order covering those forage harvesters as well as cease and desist orders against Bourdeau, OK, and other respondents, Certain Agric. Vehicles & Components Thereof, Inv. No. 337-TA-487 (Int'l Trade Comm'n Sept. 24, 2004) (ITC Remedy Determination). We vacate and remand.

I

On January 8, 2003, Intervenor Deere & Co. (Deere) filed a complaint with the ITC alleging violations of 19 U.S.C. § 1337 (section 1337) by the importation into the United States, and sale in the United States, of certain used agricultural vehicles that infringed United States Registered Trademark Nos. 1,503,576, 1,502,103, 1,254,339, and 91,860 (the Deere trademarks). In particular, Deere alleged that Deere forage harvesters that had been manufactured solely for sale in Europe (the European version forage harvesters) were being imported into the United States. Deere argued that the European version forage harvesters were materially different from the forage harvesters manufactured and authorized for sale in the United States (the North American version forage harvesters). Thus, Deere claimed that the European version forage harvesters constituted "gray market goods" such that they infringed Deere's trademarks. The ITC commenced an investigation on February 7, 2003. On January 13, 2004, the ALJ issued his Initial Determination in which he found that appellants' importation of used Deere European version forage harvesters violated section 1337. The ALJ recommended that the ITC issue a general exclusion order covering the infringing Deere forage harvesters and cease and desist orders against Bourdeau, OK, and other non-appellant respondents. Appellants filed a Petition for Review on January 23, 2004, and on March 30, 2004, the ITC issued a notice indicating that it had decided not to review the Initial Determination. On May 14, 2004, after analyzing the proposed remedy and the effect of any remedial orders on the public interest, the ITC followed the ALJ's recommendation and issued both the general exclusion order and the cease and desist orders. Appellants timely filed a notice of appeal. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(6).

II

We review the factual findings of the Commission under the substantial evidence standard. SKF USA, Inc. v. Int'l Trade Comm'n, 423 F.3d 1307, 1312 (Fed. Cir.2005); see 19 U.S.C. § 1337(c) (2000); 5 U.S.C. § 706(2)(E) (2000). Thus, we will not overturn the ITC's factual findings if they are supported by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. SKF, 423 F.3d at 1312 (quoting Finnigan Corp. v. Int'l Trade Comm'n, 180 F.3d 1354, 1362 (Fed.Cir.1999)). However, we review legal conclusions of the ITC de novo. Id. (citing 5 U.S.C. § 706(2)(A) (2000); Checkpoint Sys. v. U.S. Int'l Trade Comm'n, 54 F.3d 756, 760 (Fed.Cir.1995)).

III

Section 1337(a)(1)(c) forbids "[t]he importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that infringe a valid and enforceable United States trademark registered under the Trademark Act of 1946." Thus, section 1337 grants the ITC the power to prevent the importation of goods that, if sold in the United States, would violate one of the provisions of the federal trademark statute, the Lanham Act.

Many of the goods that are forbidden from importation under section 1337 are what are referred to as "gray market goods": products that were "produced by the owner of the United States trademark or with its consent, but not authorized for sale in the United States." Gamut Trading Co. v. U.S. Int'l Trade Comm'n, 200 F.3d 775, 777 (Fed.Cir.1999). The rationale behind preventing importation of these goods is that the public associates a trademark with goods having certain characteristics. Id. at 778-79. To the extent that foreign goods bearing a trademark have different characteristics than those trademarked goods authorized for sale in the United States, the public is likely to become confused or deceived as to which characteristics are properly associated with the trademark, thereby possibly eroding the goodwill of the trademark holder in the United States. Id. at 779 Thus, gray market theory recognizes both the territorial boundaries of trademarks and a trademark owner's right to control the qualities or characteristics associated with a trademark in a certain territorial region. As such, the basic question in gray market cases "is not whether the mark was validly affixed" to the goods, "but whether there are differences between the foreign and domestic product and if so whether the differences are material." Id. We have applied "a low threshold of materiality, requiring no more than showing that consumers would be likely to consider the differences between the foreign and domestic products to be significant when purchasing the product." Id.

However, even though the threshold of materiality is low, "a plaintiff in a gray market trademark infringement case must establish that all or substantially all of its sales are accompanied by the asserted material difference in order to show that its goods are materially different." SKF, 423 F.3d at 1315 (emphasis added). As we noted in SKF, the sale by a trademark owner of the very same goods that he claims are gray market goods is inconsistent with a claim that consumers will be confused by those alleged gray market goods. Id. "To permit recovery by a trademark owner when less than `substantially all' of its goods bear the material difference ... would allow the owner itself to contribute to the confusion by consumers that it accuses gray market importers of creating." Id. That is, a trademark owner has the right to determine the set of characteristics that are associated with his trademark in the United States; however, a trademark owner cannot authorize the sale of trademarked goods with a set of characteristics and at the same time claim that the set of characteristics should not be associated with the trademark.

This case involves the importation and sale of used forage harvesters manufactured by Deere. Deere sells 5000 and 6000 series forage harvesters in both the United States and Europe through a network of authorized dealers and distributors. The 5000 series is manufactured exclusively in the United States, regardless of the market for which it is destined, while the 6000 series is manufactured exclusively in Germany. Both the 5000 and 6000 series forage harvesters fit generally into two categories: the North American version forage harvesters, which are manufactured for sale in the United States and North America, and the European version forage harvesters, which are manufactured for sale in Europe. Although the North American and European version forage harvesters are sold under the same series numbers, they have certain differences, including labeling differences and differences in certain safety features, discussed at greater length below.

Appellants are involved in the importation into the United States and the resale of used European version forage harvesters of both the 5000 and 6000 series. The ITC determined that the European versions of these forage harvesters are materially different from their North American counterparts and that the importation and sale of these forage harvesters violates section 1337.

IV

As a threshold matter, appellants argue that, because the 5000 series forage harvesters are manufactured in the United States, they are not "gray market goods" and thus that importation and sale of these forage harvesters cannot violate section 1337. Appellants point to the Supreme Court's decision K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 108 S.Ct. 1811, 100 L.Ed.2d 313 (1987), in which the Court, while addressing whether certain Customs regulations were consistent with 19 U.S.C § 1526, discussed the meaning of the term "gray market goods." The Court noted that a gray market good is "a foreign-manufactured good, bearing a valid United States trademark, that is imported without the consent of the United States trademark holder." K Mart, 486 U.S. at 285, 108 S.Ct. 1811. Although the Court did not purport to exclusively define...