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U.S. Customs and Border Patrol: Helping to Protect Trademark Owners

November 19, 2010


Imitation may be the sincerest form of flattery, but it isn’t very welcome among Trademark owners.  At its most basic, the purpose of a trademark is to provide the customer with an easy way to identify the origin of goods and services in the marketplace, so that the customer may make informed decisions when purchasing one company’s goods or services over those of the competition.  Manufacturers rely on the goodwill they have garnered over time to entice customers to purchase new products, based on the premise that the quality of previously purchased goods and services will be indicative of the level of quality of those presently available.  Unfortunately, knock-off artists and counterfeiters also seek to trade upon this goodwill.  So what is a business to do?  Of primary importance is registration of the mark with the United States Patent and Trademark Office (USPTO), as this puts the public on notice of the mark itself and identifies the rightful owner (i.e. the person or company from which the goods or services bearing the market originated).  However, mere registration will not deter all infringers, and thus a secondary consideration should be the registration of the mark with United States Customs and Border Patrol (CBP).

While mention of CBP may call to mind images of illegally imported Cuban cigars or memories of long lines at the airport, it should also be firmly entrenched in the mind of a trademark owner that CBP can be a powerful ally in the fight against trademark infringement.  Indeed, CBP can serve as the eyes and ears of the mark owner.  They work to protect the goodwill associated with the mark, while at the same time allowing the owner to go about the business of providing the high-caliber goods and services which garnered the goodwill in the first place.

Registration with CBP is only available for marks which have already been granted a federal registration number from the USPTO.  CBP currently offers an online “Intellectual Property Rights e-Recordation” process, in which the cost of registration is $190 per International Class, per registered mark.

As part of the CBP registration process, an owner of the registered trademark may be asked to provide information regarding “gray market” goods.  These are goods which bear a registered trademark, applied with the consent of the mark owner, but which are not meant for importation into the United States.  The issue here is that trademark protection is only provided on a country-by-country basis, and identical marks can be registered in several countries, whether by the same individual or by completely separate parties.  As such, the federal registration of a US trademark means nothing to a company solely doing business abroad.  This is because U.S. laws are not binding on entities outside the U.S., just as foreign laws are not binding here in the US.  However, protection is afforded to the owner of the US trademark (or mark) once the foreign entity attempts to do business in the US.  Take, for example, the situation of a US company that has protected the mark abroad and licensed the use of that mark to an English company for products being sold in the UK.  The foreign-registered mark may be legally applied by the English licensee to goods destined for the UK market, but should the licensee attempt to export those goods to the US, they will be considered “gray market,” and subject to CBP detention proceedings.  The opposite situation, where a US entity licenses the registered mark of a foreign entity, may also give rise to the detention goods, when they are exported by the foreign country in contravention of the license.

As for the specific protections offered and the processes involved, CBP inspection of goods is most easily understood when the infringing goods are classified into those which are “confusingly similar” and those which are clearly counterfeit.  Confusingly similar marks as those which, while they are not identical to the registered mark, are close enough in sounds or appearance as to cause confusion to the customer with regards to the source or origin of the goods – that is to say, the customer is caused to erroneously believe that the two marks are related, and may impute goodwill from the registered mark to the confusingly similar mark.  By contrast, counterfeit goods bear a mark identical to, or substantially indistinguishable from, a federally registered trademark.

Confusingly Similar Marks

CBP inspection of confusingly similar marks is a two-stage process: detention followed by seizure.  If, at the time of presentation to the CBP officer, a “reasonable suspicion” that the imported goods bear marks which violate federally registered trademarks can be articulated, the goods may be detained immediately.  If, however, the officer is uncertain that a reasonable suspicion exists, the goods may be temporarily held for up to five days, during which time the goods will undergo further examination to determine if they meet this basic investigatory requirement.  At this point, CBP may contact the mark owner to make general inquiries about the mark: requesting a description of the mark, a list of items on which it is used, etc.  However, this contact is discretionary, and thus CBP may opt not to contact the mark owner at all. Once a reasonable suspicion has been established (whether immediately, or within the five-day time period), the goods will be officially “detained.”  CBP will notify the importer (not the mark owner) of the detainment.

The importer then has 30 days to (1) remove the objectionable mark, (2) establish that the goods were imported with the mark owner’s approval, or (3) obtain the mark owner’s consent for importation of the goods.  There is also an exemption for an individual carrying only one item bearing the infringing mark on their person.  If the importer fails to make use of one of the three exemptions outlined above, the goods will be seized and forfeiture proceedings will be instituted.  Although regulations call for notice to be provided to a mark owner during the detainment phase (19 C.F.R. §133.25), common practice is that the mark owner will not be notified of the presence of the infringing marks until the seizure phase.  At this point, the mark owner will be provided with the following information: (1) the date of importation, (2) the port of entry, (3) a description of the merchandise, (4) the quantity involved, and (5) the country of origin of the merchandise.

Counterfeit Marks

CBP inspection of marks which are clearly counterfeit (i.e. identical to or substantially indistinguishable from a registered trademark) has no “detention of possibly infringing goods” phase – the goods are instead seized instantly.  Within thirty days of seizure, CBP will contact the mark owner and provide the following information: (1) the date of importation, (2) the port of entry, (3) a description of the merchandise, (4) the quantity involved, (5) the name and address of the manufacturer, (6) the country of origin of the merchandise, (7) the name and address of the exporter, and (8) the name and address of the importer.

It is clear that in cases where the goods are counterfeit, CBP provides significantly more information to the mark owner, and does so much sooner than in the case of confusingly similar marks.  It should be noted, however, that “seized” articles are not instantly “forfeited.”  Upon seizure, the goods bearing marks are considered “subject to forfeiture.”  The mark owner may provide written instructions for the disposition of the goods, including but not limited to: importation without restriction, importation after obliteration of the mark, exportation of the goods, or other “appropriate disposition” in accordance with the law.  If no written consent is received from the mark owner within 30 days of notification, the forfeiture is considered “perfected.”  At this point, goods bearing confusingly similar marks will have the mark removed or obliterated, and then will be disposed of in accordance with the law.  In the case of counterfeit goods, upon perfection of forfeiture, the goods will be destroyed unless otherwise authorized by the mark owner.  Further, civil fines may be imposed on any party who directs, assists (financially or otherwise), or aids and abets the importation of counterfeit merchandise.  For the first seizure, the fine will be the manufacturer’s suggested retail price of genuine merchandise.  For each subsequent seizure, the fine may be increased to an amount equivalent to twice the manufacturer’s suggested retail price of genuine merchandise.

For those who doubt the benefits of registration, the numbers speak for themselves.  According to CBP’s own report (available at www.cpg.gov), 14,841 seizures took place during Fiscal Year 2009.  Of these, 10,288 seizures were of goods originating from China.  The Chinese seizures accounted for 79% of the gross domestic value of all seized items ($204M of $260M).  With respect to the actual items seized, the top commodities were footwear, consumer electronics, handbags, and apparel.

As such, it is clear that, beyond the simple act of registering a trademark with the USPTO, businesses should also contemplate the registration of that mark with CBP.  By registering with CBP, mark owners can take a proactive step in deterring the importation of goods which bear trademarks either identical to, or confusingly similar to, marks which are federally registered in the U.S.