Yamaha Corp. of America v. U.S.

• Decision Date: 16 July 1992
• Docket Number: No. 90-5318,90-5318
• Citation: 961 F.2d 245
• Parties: , 295 U.S.App.D.C. 158, 22 U.S.P.Q.2d 1417 YAMAHA CORPORATION OF AMERICA, Appellant, v. UNITED STATES of America, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 245

961 F.2d 245

14 ITRD 1282, 295 U.S.App.D.C. 158,

22 U.S.P.Q.2d 1417

YAMAHA CORPORATION OF AMERICA, Appellant, v. UNITED STATES of America, et al.

No. 90-5318.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 28, 1992.

Decided April 14, 1992.

Rehearing Denied July 16, 1992.

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

Robert E. Wagner, with whom Linda A. Kuczma and James J. Jagoda, Chicago, Ill., were on the brief, for appellant. William T. Bullinger, Washington, D.C., also entered an appearance for appellant.

Daniel J. Standish, 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 appellees.

Before WALD, SENTELLE, and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

Appellant Yamaha Corporation of America ("Yamaha-America") appeals from two orders of the district court dismissing its complaint against appellees the United States of America, the Secretary of the Treasury ("Secretary"), and the Commissioner of Customs. Appellant challenged the legality of certain regulations of the United States Customs Service ("Customs") that permit Customs to deny a "genuine goods" exclusion order to the holder of a U.S. trademark that is also a wholly owned subsidiary of the foreign-trademark holder. The district court concluded that appellant was precluded from relitigating the issue that the regulations are invalid under the Tariff Act of 1930, 19 U.S.C. §§ 1202-1677k (1988) ("Tariff Act") and under the Trademark Act of 1946, 15 U.S.C. §§ 1051-1127 (1988) ("Lanham Act"), because these identical issues had already been litigated and resolved by the district court of the Central District of California in a different case. The district court below also dismissed appellant's claims that its rights under certain treaties guaranteeing non-discriminatory "national treatment" to foreign corporations had been violated.

Because we conclude that the district court properly determined that the doctrine of issue preclusion prevents appellant from relitigating its claims under the Tariff and Lanham Acts and that appellant has no cause of action under the treaties, we affirm.

I. BACKGROUND

Yamaha-America is a California corporation. It is a wholly owned subsidiary of Yamaha Corporation, a Japanese company ("Yamaha-Japan"). Since 1960, Yamaha-America has been the exclusive authorized U.S. distributor of "Yamaha" brand music and sound equipment products manufactured by Yamaha-Japan. Yamaha-America is the registered owner by assignment from Yamaha-Japan of 18 separate U.S. trademarks.

Yamaha-America claims to have been unlawfully injured by so-called "gray-market," or parallel, imports. Gray-market goods are foreign-manufactured products bearing a valid U.S. trademark that are imported without the consent of the American trademark holder. ¹ Gray-market goods are distinguished from counterfeit goods in that the use of the United States trademark is authorized by the holder of the foreign trademark.

A. The ABC Litigation

In December 1986, Yamaha-America filed an action in the Central District of California seeking damages and injunctive relief against ABC International Traders Corporation ("ABC"), for trademark infringement and unfair competition under the Lanham Act and the laws of California. ABC is a corporation engaged in the importation, distribution, sale, and warranty of various goods including genuine Yamaha brand electronic sound equipment. ² In November 1987, Yamaha amended its complaint to include claims under section 526 of the Tariff Act, 19 U.S.C. § 1526 (1988) ("section 526"), and section 42 of the Lanham Act, 15 U.S.C. § 1124 (1988) ("section 42"). In its five-count amended complaint, Yamaha-America alleged the following:

Count I--ABC has violated section 32(a) of the Lanham Act, 15 U.S.C. § 1114(a) (1988), by advertising and selling products made by Yamaha-Japan and bearing marks identical to marks owned by Yamaha-America in such a way that their use is likely to cause customer confusion or mistake and to deceive the public.

Count II--ABC has violated section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1988), by falsely representing or creating the impression that Yamaha-America is associated or affiliated with ABC and that it warrants the quality or guarantees repair of such products.

Count III--ABC has violated California law by intentionally promoting its products so as to confuse and deceive and unlawfully to exploit and appropriate the valuable property rights and good will of Yamaha-America.

Count IV--ABC has violated California law by using Yamaha-America's marks without authorization in such a way that it is likely to injure Yamaha-America's reputation and to dilute the distinctiveness of Yamaha-America's trademarks.

Count V--ABC has violated section 526 of the Tariff Act and section 42 of the Lanham Act by unlawfully importing and dealing in goods bearing the trademarks owned by Yamaha-America without its consent.

ABC counterclaimed against both Yamaha-America and Yamaha-Japan, alleging violations of the Clayton Act, 15 U.S.C. § 13 (1988), the Wilson Tariff Act, 15 U.S.C. § 8 (1988), and the Sherman Act, 15 U.S.C. §§ 1-2 (1988). ABC also alleged violations of California law, including interference with business relations, defamation, and unfair competition.

1. The District Court's Decision

On November 9, 1987, Judge Lew of the Central District of California granted ABC's motion for partial summary judgment as to Counts I and II. He made the following conclusions of law:

4. There is and can be no likelihood of confusion, or confusion as to source, origin or sponsorship, between [Yamaha-Japan]-manufactured goods sold by [Yamaha-America] and [Yamaha-Japan]-manufactured goods sold by ABC, which bear trademarks identical to the assigned trademarks.

5. As a matter of law there is and can be no violation of Lanham Act Sections 32 or 43(a) by ABC ... by virtue of the acts of ABC in importing and selling "YAMAHA" brand goods manufactured by [Yamaha-Japan].

Statement of Uncontroverted Facts and Conclusions of Law (dated Oct. 19, 1987) (citations omitted) (incorporated by reference in Judge Lew's oral ruling granting summary judgment as to Counts I and II (Nov. 9, 1987).

On December 23, 1988, Judge Lew granted ABC's motion for summary judgment as to the remaining counts of Yamaha-America's Amended Complaint. See Yamaha Corp. of Am. v. ABC Int'l Traders Corp., 703 F.Supp. 1398 (C.D.Cal.1988), aff'd in part, rev'd in part on other grounds, 1991 WL 144474, 1991 U.S.App. LEXIS 17882 (9th Cir. July 30, 1991) [940 F.2d 1537 (table) ], cert. denied, --- U.S. ----, 112 S.Ct. 1177, 117 L.Ed.2d 422 (1992). As to Count III, Judge Lew concluded that Yamaha-America failed to sustain its burden of documenting a genuine issue of fact concerning customer confusion under California's unfair competition law. Id. at 1402. As to Count IV, Judge Lew concluded that no legally recognizable injury to reputation or dilution of the trademark "can possibly come to Yamaha-America if ABC limits its activities to the sale of genuine Yamaha products." Id. ³

a. Count V--Tariff Act

It is Judge Lew's treatment of Count V that is most relevant to the question of issue preclusion in this case. Yamaha-America alleged in Count V that ABC's importation of genuine Yamaha products violated its rights under the Tariff Act and the Lanham Act. The relevant portion of section 526 of the Tariff Act provides that

it shall be unlawful to import in 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 ... unless written consent of the owner of such trademark is produced at the time of making entry.

19 U.S.C. § 1526(a) (1988). Judge Lew recognized that the protection provided by section 526 "has been consistently interpreted by U.S. Customs for more than fifty years not to be available to American subsidiaries of foreign corporations." ABC, 703 F.Supp. at 1403. ⁴ After quoting directly from 19 C.F.R. § 133.21(c)(2) (the "Regulation"), Judge Lew added that the Supreme Court had recently upheld the Regulation in K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 108 S.Ct. 1811, 100 L.Ed.2d 313 (1988), as a permissible interpretation of section 526. ABC, 703 F.Supp. at 1403.

Yamaha-America had argued to the ABC court that it had rights under section 526 to seek damages and an injunction against a private gray-market importer even if Customs would not have issued a genuine-goods exclusion order under the Regulation. In other words, Yamaha-America had argued that the Regulation does not define the full scope of the protection provided by section 526; even if the Regulation is valid, ABC's actions violated Yamaha-America's rights under section 526. See Transcript of Oral Argument (D.C.Cir. filed Mar. 11, 1992) ("Transcript") at 31 (discussing argument made to ABC court and on appeal to Ninth Circuit). Judge Lew rejected Yamaha-America's argument, however, declining "to interpret § 526 any differently than does the Customs Service." ABC, 703 F.Supp. at 1403. He added that

even if this Court were to review the statute de novo, it would conclude that Yamaha is not entitled to relief under § 526. To allow Yamaha-America and firms like it such protection would allow any foreign manufacturer to use a wholly owned American subsidiary as a means to secure the help of American tariff law in enforcing worldwide price discrimination. This can not be seen to have been the intent of Congress in passing § 526.

Id. Judge Lew's grant of summary judgment to ABC on Yamaha-America's Tariff Act claim was clearly based on two reasons: First, the Regulation--which the Supreme Court recognized to be a reasonable ...