CIT Says Lever-Rule Trademark Protections Are Rulings Challengeable at Trade Court
CBP determinations to restrict imports of gray market goods under the Lever-Rule may be considered customs rulings challengeable at the Court of International Trade, CIT said in a decision released July 21 (here). The court found it has jurisdiction to hear a case brought by "XYZ Corporation," an anonymous importer of gray market Duracell batteries, against Lever-Rule protection recently granted by CBP to Duracell.
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According to the CIT decision, XYZ was importing gray market Duracell batteries for decades before CBP in March published its final Lever-Rule notice in the Customs Bulletin (see 1703220014). Under the Lever-Rule, U.S. trademark holders may apply for restrictions against unauthorized imports that bear their trademark as long as the goods are "physically and materially different from the articles authorized by the United States trademark owner for importation or sale in the United States."
XYZ filed suit, arguing CBP's determination was invalid because the agency did not allow for notice and comment on the Lever-Rule application. XYZ also said the gray market batteries it imports are not "physically and materially different" from U.S.-market Duracell batteries, requesting an injunction from CIT blocking the Lever-Rule restrictions until the case is decided. The government, on the other hand, said CIT should dismiss the case because Lever-Rule determinations are not reviewable by the Court of International Trade under the court's jurisdiction provisions in 28 USC 1581.
The trade court found the Lever-Rule determination is reviewable as a customs "ruling" under 28 USC 1581(h), it said. "Customs has defined a ruling as 'a written statement issued by the Headquarters Office or the appropriate office of Customs as provided in this part that interprets and applies the provisions of the Customs and related laws to a specific set of facts,'" CIT said, quoting the customs regulations. "The court finds that Customs’ decision falls squarely within the regulatory definition of a ruling and constitutes the type of ruling within the scope" of CIT's jurisdiction.
CIT also found XYZ satisfied other requirements for CIT review of customs rulings, including irreparable harm. The company has already had a shipment refused entry, and has others on the way. XYZ has "lost approximately six customers (approximately 40% of its total customers), has lost revenue, has had several contracts cancelled, has suffered injury to his business reputation, has suffered injury to his goodwill with long-standing customers, and has lost the confidence of his customers," it said.
However, though it allowed the case to proceed, CIT declined to issue an injunction stopping CBP from enforcing the Lever-Rule protections while the court considers the case. In CIT challenges of rulings under 28 USC 1581(h), the court may only "grant declarative relief," and cannot issue injunctions, the court said.
(XYZ Corporation v. U.S., Slip Op. 17-88, CIT #17-00125, dated 07/17/17, public version 07/21/17, Judge Choe-Groves)
(Attorneys: John Peterson of Neville Peterson for plaintiff XYZ Corporation; Alexander Vanderweide for defendant U.S. government)