Lever Bros. Co. v. U.S.

• Decision Date: 15 January 1993
• Docket Number: No. 92-5185,92-5185
• Citation: 981 F.2d 1330
• Parties: , 299 U.S.App.D.C. 128, 61 USLW 2446, 25 U.S.P.Q.2d 1579 LEVER BROTHERS COMPANY, Appellee, v. UNITED STATES of America, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1330

981 F.2d 1330

15 ITRD 1065, 299 U.S.App.D.C. 128,

61 USLW 2446,

25 U.S.P.Q.2d 1579

LEVER BROTHERS COMPANY, Appellee, v. UNITED STATES of America, et al., Appellants.

No. 92-5185.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 27, 1992.

Decided Jan. 15, 1993.

Appeal from the United States District Court for the District of Columbia.

Daniel J. Standish, Asst. U.S. Atty., with whom Jay B. Stephens, U.S. Atty., and John D. Bates and R. Craig Lawrence, Asst. U.S. Atty., Washington, DC, were on the brief, for appellants.

Lynne Darcy, New York City, with whom William K. Wells, Washington, DC, was on the brief, for appellee.

Diane Heiman, Washington, DC, was on the brief for amicus curiae Nat. Consumers League.

William H. Allen, Eugene A. Ludwig, and Curtis A. Bradley, Washington, DC, were on the brief for amicus curiae Coalition to Preserve the Integrity of American Trademarks.

Elliot Bredhoff, Washington, DC, was on the brief for amicus curiae Oil, Chemical and Atomic Workers Intern. Union, AFL-CIO.

Stephen Kurzman, Washington, DC, was on the brief for amicus curiae American Free Trade Ass'n.

Richard Kelly, New York City, was on the brief for amicus curiae National Ass'n of Catalog Showroom Merchandisers.

Robert W. Steele and Cheryl M. Browning, Washington, DC, were on the brief for amicus curiae Kmart Corp.

Before MIKVA, Chief Judge, and SENTELLE and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

The District Court entered a judgment invalidating the "affiliate exception" of 19 C.F.R. § 133.21(c)(2) (1988) as inconsistent with the statutory mandate of the Lanham Act of 1946, 15 U.S.C. § 1124 (1988), prohibiting importation of goods which copy or simulate the mark of a domestic manufacturer, and issued a nationwide injunction barring enforcement of the regulation with respect to any foreign goods bearing a valid United States trademark but materially and physically differing from the United States version of the goods. The United States ¹ appeals. We conclude that the District Court, obedient to our limited remand in a prior decision in this same cause, properly determined that the regulation is inconsistent with the statute. However, because we conclude that the remedy the District Court provided is overbroad, we vacate the judgment and remand for entry of an injunction against allowing the importation of the foreign-produced Lever Brothers brand products at issue in this case.

I. BACKGROUND ²

Lever Brothers Company ("Lever US" or "Lever"), an American company, and its British affiliate, Lever Brothers Limited ("Lever UK"), both manufacture deodorant soap under the "Shield" trademark and hand dishwashing liquid under the "Sunlight" trademark. The trademarks are registered in each country. The products have evidently been formulated differently to suit local tastes and circumstances. The U.S. version lathers more, the soaps smell different, the colorants used in American "Shield" have been certified by the FDA whereas the colorants in British "Shield" have not, and the U.S. version contains a bacteriostat that enhances the deodorant properties of the soap. The British version of "Sunlight" dishwashing soap produces less suds, and the American version is formulated to work best in the "soft water" available in most American cities, whereas the British version is designed for "hard water" common in Britain.

The packaging of the U.S. and U.K. products is also somewhat different. The British "Shield" logo is written in script form and is packaged in foil wrapping and contains a wave motif, whereas the American "Shield" logo is written in block form, does not come in foil wrapping and contains a grid pattern. There is small print on the packages indicating where they were manufactured. The British "Sunlight" comes in a cylindrical bottle labeled "Sunlight Washing Up Liquid." The American "Sunlight" comes in a yellow, hour-glass-shaped bottle labeled "Sunlight Dishwashing Liquid."

Lever asserts that the unauthorized influx of these foreign products has created substantial consumer confusion and deception in the United States about the nature and origin of this merchandise, and that it has received numerous consumer complaints from American consumers who unknowingly bought the British products and were disappointed.

Lever argues that the importation of the British products was in violation of section 42 of the Lanham Act, 15 U.S.C. § 1124 which provides that with the exception of goods imported for personal use:

[N]o article of imported merchandise which shall copy or simulate the name of the [sic] any domestic manufacture, or manufacturer ... or which shall copy or simulate a trademark registered in accordance with the provisions of this chapter ... shall be admitted to entry at any customhouse of the United States.

Id. The United States Customs Service ("Customs"), however, was allowing importation of the British goods under the "affiliate exception" created by 19 C.F.R. § 133.21(c)(2), which provides that foreign goods bearing United States trademarks are not forbidden when "[t]he foreign and domestic trademark or tradename owners are parent and subsidiary companies or are otherwise subject to common ownership or control." ³

In Lever I, we concluded that "the natural, virtually inevitable reading of section 42 is that it bars foreign goods bearing a trademark identical to the valid U.S. trademark but physically different," without regard to affiliation between the producing firms or the genuine character of the trademark abroad. 877 F.2d 101, 111 (D.C.Cir.1989). In so concluding, we applied the teachings of Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Under the Chevron analysis, if Congress has clearly expressed an intent on a matter, we give that intent full effect (Step One of Chevron ). If there is any ambiguity, we accept Customs' interpretation, provided only that it is reasonable (Step Two of Chevron ). See Lever I, 877 F.2d at 105 (citing Chevron, 467 U.S. at 842-43, 104 S.Ct. at 2781). The Lever I panel found the present controversy to survive barely Chevron Step One and "provisional[ly]" concluded that the affiliate exception is inconsistent with section 42 with respect to physically different goods. ⁴ The "provisional" qualifier on our determination of the invalidity of the exception was a very limited one. Noting that "neither party has briefed the legislative history nor administrative practice in any detail," we adopted the apparently controlling reading of section 42 only "tentatively" and remanded the case to the District Court to allow the parties to "join issue on those points." Lever I, 877 F.2d at 111. The panel in Lever I thus created a very small window of opportunity for the government to establish that the affiliate exception regulation was consistent with section 42 of the Lanham Act. At that time we said, "[s]ubject to some persuasive evidence running against our tentative conclusion, we must say that Lever's probability of success on its legal argument is quite high." Id.

Our task today is clearly circumscribed. Under the "law of the case" doctrine, any determination as to an issue in the case which has previously been determined is ordinarily binding upon us. We explained the reasons for this in Laffey v. Northwest Airlines, Inc., 642 F.2d 578 (D.C.Cir.1980):

An appellate court also is normally bound by the law of the case it established on a prior appeal, and for a very sound reason. If justice is to be served, there must at some point be an end to litigation; on that account, the power to recall mandates should be exercised sparingly. To warrant divergence from the law of the case, a court must not only be convinced that its earlier decision was erroneous; it must also be satisfied that adherence to the law of the case will work a grave injustice.

Id. at 585 (footnotes omitted). Because no reason exists in this case to avoid application of the general rule, we are bound by this Court's prior determinations concerning the application of the Chevron doctrine.

After reviewing the submissions of the parties, the District Court found that Customs' administrative practice was "at best inconsistent" and, in any event, had "never addressed the specific question of physically different goods that bear identical trademarks." Lever Bros. Co. v. United States, 796 F.Supp. 1, 5 (D.D.C.1992). The District Court concluded that "section 42 ... prohibits the importation of foreign goods that ... are physically different, regardless of the validity of the foreign trademark or the existence of an affiliation between the U.S. and foreign markholders." Id. The court accordingly concluded that "[n]either the legislative history of the statute nor the administrative practice of the Customs Service clearly contradicts the plain meaning of section 42" and granted summary judgment against the government. Id. at 13.

By way of remedy, the District Court enjoined Customs "from enforcing 19 C.F.R. § 133.21(c)(2) as to foreign goods that bear a trademark identical to a valid United States trademark but which are materially, physically different." Lever Bros. Co., 796 F.Supp. at 6.

II. ANALYSIS

Here the specific question at Step Two of Chevron is whether the intended prohibition of section 42 admits of an exception for materially different goods manufactured by foreign affiliates. We apply a very limited Step Two Chevron analysis, see Chevron, 467 U.S. at 842-43, 104 S.Ct. at 2781, because we previously concluded that the intent of Congress is virtually plain. Lever I, 877 F.2d at 104-05. The government bears a heavy burden in attempting to overcome the apparent meaning of the statute. In Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982), the Supreme Court held that when Congress's "will has been expressed in reasonably...