Olympus Corp. v. U.S.

• Decision Date: 09 June 1986
• Docket Number: No. 733,D,733
• Citation: 792 F.2d 315
• Parties: , 55 USLW 2021, 230 U.S.P.Q. 123 OLYMPUS CORPORATION, Plaintiff-Appellant, v. UNITED STATES, et al., Defendants-Appellees, K Mart Corporation, Intervenor-Appellee, 47th Street Photo, Inc., Intervenor-Appellee. ocket 85-6282.
• Court: U.S. Court of Appeals — Second Circuit

Page 315

792 F.2d 315

7 ITRD 2425, 55 USLW 2021, 230 U.S.P.Q. 123

OLYMPUS CORPORATION, Plaintiff-Appellant, v. UNITED STATES, et al., Defendants-Appellees, K Mart Corporation, Intervenor-Appellee, 47th Street Photo, Inc., Intervenor-Appellee.

No. 733, Docket 85-6282.

United States Court of Appeals, Second Circuit.

Argued Jan. 28, 1986.

Decided June 9, 1986.

Max F. Schutzman, New York City (Whitman & Ransom, John M. Hadlock, New York City, of counsel), for plaintiff-appellant.

David M. Cohen, Washington, D.C. (Richard K. Willard, Asst. Atty. Gen., Velta A. Melnbrencis, Civ. Div., Dept. of Justice, Alfonso Robles, U.S. Customs Service, Washington, D.C., of counsel), for defendants-appellees.

Robert W. Steele, Washington, D.C. (Robert E. Hebda, Steele, Simmons & Fornaciari, Washington, D.C., James C. Tuttle, Asst. Gen. Counsel, K mart Corporation, Troy, MI, of counsel), for intervenor-appellee K mart Corp.

Nathan Lewin, Washington, D.C. (Jamie S. Gorelick, Rory K. Little, Miller, Cassidy, Larroca & Lewin, Washington, D.C., of counsel), for intervenor-appellee 47th Street Photo, Inc.

Before OAKES, WINTER and PRATT, Circuit Judges.

OAKES, Circuit Judge:

After extended but unsuccessful trade association efforts to secure change of United States Customs Service regulations permitting parallel importation of "gray market" goods, an American subsidiary of a foreign manufacturer of trademarked goods seeks declaratory and injunctive relief declaring those Customs regulations invalid. Such relief was also sought but denied by the Court of International Trade ("CIT") in Vivitar Corp. v. United States, 593 F.Supp. 420 (Ct.Int'l Trade 1984), aff'd, 761 F.2d 1552 (Fed.Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 791, 88 L.Ed.2d 769 (1986) ("Vivitar"), but was granted by the United States Court of Appeals for the District of Columbia Circuit in Coalition to Preserve the Integrity of American Trademarks v. United States, 790 F.2d 903 (D.C.Cir.1986) ("COPIAT "), reversing 598 F.Supp. 844 (D.D.C.1984). The United States District Court for the Eastern District of New York, Charles P. Sifton, Judge, in an opinion published at 627 F.Supp. 911 (E.D.N.Y.1985), agreed with the district court in COPIAT and the CIT in Vivitar that the regulations were not contrary to the statute in question, section 526 of the Tariff Act of 1922, ch. 356, 42 Stat. 858, 975, reenacted without significant change in the Tariff Act of 1930, ch. 497, Sec. 526, 46 Stat. 590, 741 (codified as amended at 19 U.S.C. Sec. 1526 (1982)) ("Section 526"). On appeal intervenor-appellee 47th Street Photo urges that the district court had no subject matter jurisdiction on the basis that the CIT has exclusive jurisdiction over the Tariff Act claim. We find, however, that the district court properly asserted jurisdiction over the dispute. We agree with the district court that the Customs regulation is valid. And we affirm the district court's holding that appellant failed to state a claim under section 42 of the Lanham Act, 15 U.S.C. Sec. 1124 (1982).

Background

Olympus Corporation ("Olympus") is a New York wholly-owned subsidiary of Olympus Optical Company, Ltd. ("Olympus Optical"), a Japanese corporation that manufactures Olympus-brand products, including cameras, lenses, flash units, and filters. Olympus is the exclusive distributor of Olympus Optical's Japanese-manufactured goods in the United States, and it owns the rights in this country to the Olympus trademark. 47th Street Photo, Inc., is a New York City retailer of electronic equipment, including Olympus Optical products. Some of those Olympus Optical goods are purchased abroad, evidently at prices that permit 47th Street Photo to offer the goods for resale in its stores at discount prices. The goods bear the Olympus mark. K mart Corporation is a national retailer operating more than 2,000 stores, and is a potential customer for such gray market Olympus-brand equipment. It deals substantially in other gray market goods. Gray market goods, such as the Olympus-brand goods that 47th Street Photo sells, and K mart may potentially sell, are goods that are manufactured abroad, are legally purchased abroad from authorized distributors, and are then imported by persons other than the trademark holder and without the markholder's permission. Gray market goods are thus imported "parallel" to goods imported by or with the permission of the markholder.

Section 526(a) makes it "unlawful to import into the United States any merchandise of foreign manufacture if such merchandise ... bears a trademark owned by a citizen of, or by a corporation or association created or organized within, the United States," provided that the trademark is properly registered, as the Olympus trademark was here, "unless written consent of the owner of such trademark is produced at the time of making entry." 19 U.S.C. Sec. 1526(a) (1982). Section 526(b) subjects any such merchandise to seizure and forfeiture for violation of the customs laws. Section 526(c) provides that any person dealing in such merchandise may be enjoined from doing so or may be required to export or destroy the merchandise or remove or obliterate the trademark; it also subjects the dealer to the same liability for damages and profits as for wrongful use of a trademark.

The applicable Customs regulation excepts from Customs seizure under section 526 imported articles bearing a trademark identical to the one held by a United States citizen or corporation when "[t]he foreign and domestic trademark or trade name owners are parent and subsidiary companies or are otherwise subject to common ownership or control." 19 C.F.R. Sec. 133.21(c)(2) (1985). The effect of this regulation is to allow third parties to import trademarked goods without the permission of the American markholder where that markholder is either a parent or subsidiary of, or is held in common ownership with, a foreign manufacturer.

The American Association of Exporters and Importers, acting through a trademark group, the chairman of which is the vice president in charge of product importation of Olympus, sought to have the Customs Service and the Treasury Department eliminate from the regulations the exemption under section 133.21(c)(2). As a letter dated June 8, 1984, makes clear, however, "[b]ecause of the legislative and litigative history and longstanding Customs practice on this matter, the Treasury Department has declined to change this practice by a mere regulatory change." Letter from John M. Walker, Jr., Assistant Secretary (Enforcement and Operations), Department of the Treasury, to Senator Paul S. Sarbanes. Having failed in its efforts to obtain regulatory reform, Olympus began this litigation.

Discussion

I. JURISDICTION

In Vivitar Corp. v. United States, 585 F.Supp. 1419 (Ct. Int'l Trade 1984), aff'd, 761 F.2d 1552 (Fed.Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 791, 88 L.Ed.2d 769 (1986), Judge Restani held that the CIT had exclusive jurisdiction over a suit addressing the same issue raised here because the cause of action arises out of the laws of international trade, that jurisdiction being based on 28 U.S.C. Sec. 1581(i)(3) and (4) (1982). The D.C. Circuit in COPIAT, 790 F.2d 903, 905-907 (D.C.Cir.1986), and the district court in this case, No. CV-84-0920 (E.D.N.Y. Nov. 15, 1984) (unpublished order), rejected the claim that jurisdiction over this matter belongs exclusively in the CIT. The Court of Appeals for the Federal Circuit, however, affirmed the CIT's holding that an action for a declaratory judgment that 19 C.F.R. Sec. 133.21 was invalid falls within the exclusive jurisdiction of the CIT either under 28 U.S.C. Sec. 1581(i)(4) as relating to the administration and enforcement of the so-called "protest" jurisdiction in 28 U.S.C. Sec. 1581(a), or under 28 U.S.C. Sec. 1581(i)(3) as a civil action against the United States arising out of laws providing for an embargo or quantitative restriction on goods, and the administration and enforcement thereof, 28 U.S.C. Sec. 1581(i)(4), 761 F.2d at 1560. We disagree.

Congress has granted the CIT exclusive jurisdiction over actions specified in 28 U.S.C. Sec. 1581(a)-(h), and provided in 28 U.S.C. Sec. 1581(i) for a residual grant of exclusive jurisdiction. See generally Amerine, Jurisdiction of the Court of International Trade: One Year After the Customs Courts Act of 1980, 29 Fed.B.News & J. 43 (1982). Under section 1581(i)(4) jurisdiction is conferred over any civil action "that arises out of any law of the United States providing for ... administration and enforcement with respect to the matters referred to in ... subsections (a)-(h)" of section 1581. Section 1581(a) refers to review of the denial of protests under 19 U.S.C. Sec. 1515. However, section 1514, which outlines the circumstances under which a protest may be made, makes no provision for a protest where the Customs Service refuses to exclude merchandise; it permits the filing of a protest only when exclusion of merchandise takes place under a provision of the customs law. 19 U.S.C. Sec. 1514(a)(4) (1982 & Supp. II 1984). Here, the goods have not been excluded and a markholder challenging their importation therefore can file no protest. See Vivitar, 585 F.Supp. at 1424 ("19 U.S.C. Sec. 1514 makes it clear that a decision not to exclude merchandise is not protestable.").

Judge Restani, however, found that section 1581(i)(4) gave the CIT jurisdiction of the substantive matter that may be the subject of a protest where the protest remedy is inappropriate or unavailable. Id. at 1425. Although section 1581(i) was intended as a broad grant of jurisdiction to the CIT, see H.R.Rep. No. 1235, 96th Cong., 2d Sess. 47 ("House Report"), reprinted in 1980 U.S.Code Cong. & Ad.News 3729, 3759, this action does not arise out of the "administration and enforcement" of protests simply because it tangentially relates to the protest procedure. We think that section 1581(i)(4) properly...