Xyz Corp. v. U.S. & U.S. Customs & Border Prot.

• Citation: 253 F.Supp.3d 1257
• Decision Date: 17 July 2017
• Docket Number: Slip Op. 17-88 Court No. 17-00125.
• Parties: XYZ CORPORATION, Plaintiff, v. UNITED STATES and U.S. Customs & Border Protection, Defendants, and Duracell U.S. Operations, Inc., Defendant–Intervenor.
• Court: U.S. Court of International Trade

253 F.Supp.3d 1257

XYZ CORPORATION, Plaintiff,

v.UNITED STATES and U.S. Customs & Border Protection, Defendants,andDuracell U.S. Operations, Inc., Defendant–Intervenor.

Slip Op. 17-88 Court No. 17-00125.

United States Court of International Trade.

July 17, 2017

John M. Peterson, Russell A. Semmel, and Richard F. O'Neill, Neville Peterson LLP, of New York, NY, for Plaintiff XYZ Corporation.

Alexander J. Vanderweide, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, for Defendant the United States. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was Beth C. Brotman, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection, New York, NY.

OPINION AND ORDER

Choe–Groves, Judge:

This case involves the "Lever–Rule" restriction on imports of gray market goods, which are products bearing genuine trademarks identical to or substantially indistinguishable from those trademarks appearing on articles authorized by the United States trademark owner for importation or sale in the United States, that may create a likelihood of consumer confusion when the gray market goods and those bearing the authorized trademark are physically and materially different.

XYZ Corporation ("Plaintiff")¹ is a company engaged in the business of importing and distributing bulk-packaged gray market batteries bearing the "DURACELL" mark, a United States trademark currently owned by Duracell U.S. Operations, Inc. ("Duracell U.S."). See Compl. ¶ 6, May 19, 2017, ECF No. 2. Plaintiff brings this action seeking declaratory and injunctive relief from the decision of U.S. Customs and Border Protection ("Customs") to grant Lever–Rule protection to Duracell U.S., thereby restricting imports of gray market batteries bearing its trademark. See Summons, May 19, 2017, ECF No. 1; Compl.; see also U.S. Customs and Border Protection Grant of "Lever–Rule" Protection, 51 Cust. Bull. & Dec. No. 12 at 1 (Mar. 22, 2017). Plaintiff asserts that the grant of Lever–Rule protection was (1) null and void because Customs failed to observe notice and comment rulemaking requirements of the Administrative Procedure Act ("APA"), and (2) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law because Customs restricted the importation of merchandise that is not materially and physically different from batteries authorized by Duracell U.S. for importation or sale in the United States. See Compl. ¶¶ 31–54.

Before the court are two motions. First, Plaintiff requests the issuance of a preliminary injunction to enjoin Customs from enforcing the Lever–Rule restrictions against Plaintiff's goods during the pendency of this action. See Pl.'s Appl. Prelim. Inj., May 19, 2017, ECF No. 6 ("Pl.'s Appl. Prelim. Inj."); Pl.'s Mem. P. & A. Supp. Appl. Prelim. Inj., May 19, 2017, ECF No. 7 ("Pl.'s Mem. Supp. Appl. Prelim. Inj."). Plaintiff asserts that it is entitled to injunctive relief because it has shown that it will be immediately and irreparably injured if the status quo is not preserved throughout this action, there is a likelihood of success on the merits, granting the request is in the public's interest, and the balance of hardship favors Plaintiff. See Pl.'s Mem. Supp. Appl. Prelim. Inj. 11–24. The United States and Customs (collectively, "Defendant") argue that Plaintiff's application for a preliminary injunction must be denied because Plaintiff has failed to demonstrate that it is entitled to injunctive relief. See Defs.' Mem. Supp. Mot. Dismiss and Resp. Opp'n Pl.'s Appl. for Prelim. Inj. 22–31, June 7, 2017, ECF No. 33 ("Defs.' Mot. Dismiss and Resp. Pl.'s Appl. Prelim. Inj.").

Second, Defendant moves pursuant to USCIT Rule 12(b)(1) to dismiss this action for lack of jurisdiction, arguing that this action does not fall within any of the Court's specific grants of jurisdiction under 28 U.S.C. § 1581 (2012).² See Defs.' Mot. Dismiss and Resp. Pl.'s Appl. Prelim. Inj. 6–21. Plaintiff opposes Defendant's motion and asserts that the court possesses jurisdiction. See Pl.'s Mem. Opp'n Defs' Mot. Dismiss 4–13, June 12, 2017, ECF No. 36 ("Pl.'s Resp. Defs.' Mot. Dismiss").

For the reasons set forth below, the court denies both Defendant's motion to dismiss for lack of jurisdiction and Plaintiff's application for a preliminary injunction.

BACKGROUND

Generally, the law prohibits the importation of goods that infringe upon the rights of United States trademark owners. See, e.g., 15 U.S.C. § 1124 ;³ Section 526 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1526.⁴ Merchandise imported into the United States in violation of the trademark laws shall be subject to enforcement for violation of the customs laws. 19 U.S.C. § 1526(b). Customs has promulgated regulations to restrict the importation of certain gray market goods.⁵ See 19 C.F.R. § 133.23 (2012).⁶ Under the Lever–Rule,⁷ United States trademark owners have the ability to submit an application to Customs requesting restrictions on imports of gray market goods bearing a genuine trademark that are physically and materially different from the articles authorized by the United States trademark owner for importation or sale in the United States. See 19 C.F.R. §§ 133.2(e) (providing trademark owners with the ability to apply for Lever–Rule protection), 133.23(a)(3) (describing the goods that are restricted under the Lever–Rule). If Customs grants Lever–Rule protection to the trademark owner, the gray market goods shall be denied entry into the United States, detained for a minimum period of thirty days, and potentially subject to seizure and forfeiture proceedings. See 19 C.F.R. § 133.23(c)-(f).

On January 25, 2017, Customs issued a notice in the U.S. Customs Bulletin and Decisions publication that it received an application from Duracell U.S. seeking Lever–Rule protection "against importations of OEM bulk packaged batteries and foreign retail packaged batteries, intended for sale in countries outside the United States that bear the ‘DURACELL’ mark."See U.S. Customs and Border Protection Receipt of Application for "Lever–Rule" Protection, 51 Cust. Bull. & Dec. No. 4 at 1 (Jan. 25, 2017). The application submitted by Duracell U.S. was not publicly available and Customs did not seek input from the public. Customs announced on March 22, 2017 that it granted Duracell U.S. Lever–Rule protection because the subject "gray market Duracell battery products differ physically and materially from the Duracell battery products authorized for sale in the United States with respect to the following product characteristics: label warnings, consumer assistance information, product guarantees, and warranty coverage." See U.S. Customs and Border Protection Grant of "Lever–Rule" Protection, 51 Cust. Bull. & Dec. No. 12 at 1 (Mar. 22, 2017). Customs declared that the importation of such batteries was restricted and subject to seizure and forfeiture, unless certain labeling requirements have been satisfied.⁸ See id.

Thereafter, counsel for Plaintiff sent a letter to Customs requesting that it reconsider its grant of Lever–Rule protection to Duracell U.S. See Compl. Ex. C, May 19, 2017, ECF No. 3. The letter asserted that decisions granting Lever–Rule protection are the type of rules that must follow notice and comment rulemaking procedures as required by the APA. See id. The letter also claimed that Duracell U.S. was not entitled to Lever–Rule protection against bulk OEM batteries because these gray market products are not physically and materially different from batteries that are sold by Duracell U.S. See id. Counsel for Plaintiff requested that Customs withdraw its determination and solicit public comments regarding whether any Lever–Rule protection should be granted with respect to these gray market battery products. See id. Plaintiff alleges that Customs reviewed the letter and declined to reconsider its decision to grant Lever–Rule protection to Duracell U.S. See Compl. ¶ 29.

Plaintiff commenced this action on May 19, 2017 invoking jurisdiction under 28 U.S.C. § 1581(i) to obtain judicial review of Customs' decision to grant Duracell U.S. Lever–Rule protection. See Summons. On the same day, Plaintiff filed an application for a preliminary injunction seeking to enjoin Customs from enforcing the Lever–Rule restrictions against Plaintiff's imports of gray market Duracell batteries.⁹ See Pl.'s Appl. Prelim. Inj. Plaintiff submitted an affidavit from the president of XYZ Corporation to support its claim for injunctive relief. See Confidential Affirmation of John Doe, June 1, 2017, ECF No. 30 ("John Doe Affidavit").

Defendant filed a response objecting to the issuance of a preliminary injunction and moving to dismiss Plaintiff's action for lack of jurisdiction on June 7, 2017. See Defs.' Mot. Dismiss and Resp. Pl.'s Appl. Prelim. Inj. Defendant argues that this action must be dismissed because there is no basis for jurisdiction under 28 U.S.C. § 1581, Plaintiff does not have standing to bring this action, and the issues raised by Plaintiff are not ripe for judicial review. See Defs.' Mot. Dismiss and Resp. Pl.'s Appl. Prelim. Inj. 6–22. Defendant asserts that even if the court has jurisdiction over this action, Plaintiff has not established the necessary factors required to grant a preliminary injunction. See Defs.' Mot. and Resp. Pl.'s Appl. Prelim. Inj. 22–31. Plaintiff filed its response to Defendant's motion to dismiss on June 12, 2017, refuting Defendant's standing and ripeness arguments and maintaining that the court has jurisdiction pursuant to 28 U.S.C. § 1581(i)(4) because the action arises out of laws relating to the administration and enforcement of the exclusion of merchandise.¹⁰ See Pl.'s Resp. Defs.' Mot. Dismiss 4–13.

The court held a hearing with the Parties on June 14, 2017 regarding...