TMK-1 RR:IT:IP 469076
John M. Peterson, Esq.
Neville, Peterson & Williams
80 Broad Street
New York, NY 10004
RE: Gray market protection; Xerox®
Dear Mr. Peterson:
This is in reply to your letters dated February 10, 2000, and March 22, 2001, in which you requested a ruling on behalf of your client, Xerox Corporation (“Xerox”), as to whether certain Xerox® trademarks are eligible for gray market protection.
FACTS:
The ruling request concerns three trademarks owned by Xerox Corporation for the word mark Xerox®. All three are registered with the U.S. Patent and Trademark Office (PTO) and recorded with Customs. The trademarks at issue are: PTO registration no. 576,118, recorded as TMK 98-00109; PTO registration no. 1,662,340, recorded as TMK 98-00110; and PTO registration no. 1,000,990, recorded as TMK 98-00111. Registration no. 576,118 is registered for goods of international class 001; the other two registrations are registered for goods of international class 009.
Imported merchandise bearing the above-referenced trademarks is manufactured abroad pursuant to license between Xerox and a Japanese corporation, Fuji Xerox Limited (“Fuji Xerox”), a joint venture formed by Xerox and Fuji Photo Film Co., Ltd. (“Fuji”). In your original submission, you stated that 50% of the voting shares of Fuji Xerox were owned 50% by Xerox Ltd. (a wholly-owned European subsidiary of Xerox), and 50% by Fuji, a company that has no affiliation with Xerox.
However, in your letter of March 22, 2001, you advised that the ownership structure of Fuji Xerox had changed, and that the percentage of shares owned by Xerox Ltd. Europe will fall to 25%, while that held by Fuji will increase to 75%. In addition, Fuji will select nine of the twelve-member Board of Directors, while Xerox Ltd. will select three. Since Fuji Xerox’s by-laws require that there be a simple majority in order to take action, you submit that Xerox cannot exercise control over Fuji Xerox’s action through the three Directors that it selects. In view of the above, you submit that Fuji Xerox is not under common ownership or control with Xerox and that, consequently, the Xerox trademarks referenced above are eligible for gray market protection.
Xerox has licensed Fuji Xerox to use the trademarks in Japan, South Korea, Singapore, Malaysia, Thailand, Australia, New Zealand and certain other Asian countries, with the exception of India and China. Fuji Xerox is not authorized to sell goods bearing the marks outside its assigned territory.
Xerox or its subsidiaries own numerous foreign registrations for the Xerox® trademark in international classes 001 and 009. For example, Xerox owns registrations for the mark in Canada, Japan and the U.K.
ISSUE:
The issue presented is whether goods bearing the Xerox® trademark that are manufactured by Fuji Xerox Limited and its subsidiaries are eligible for gray market protection.
LAW AND ANALYSIS:
Gray market protection is afforded pursuant to section 526 of the Tariff Act of 1930, as amended (the “Act”) (19 U.S.C. § 1526(a)), which states:
[e]xcept as provided in subsection (d) of this section, it shall be unlawful to import into the United States any merchandise of foreign manufacture, if such merchandise, or the label, sign, print, package, wrapper, or receptacle, bears a trademark owned by a citizen of, or by a corporation or association created or organized within, the United States, and registered in the Patent and Trademark Office by a person domiciled in the United States, under the provisions of sections 81 to 109 of Title 15, and if a copy of the certificate of registration of such trademark is filed with the Secretary of the Treasury in a manner provided in section 106 of said Title 15, unless written consent of the owner of such trademark is produced at the time of making entry.
Customs implementation of section 526 is set forth in section 133.23(a), Customs Regulations, which provides, in pertinent part as follows:
Restricted gray market articles defined. “Restricted gray market articles” are foreign-made articles bearing a genuine trademark or trade name identical with or substantially indistinguishable from one owned and recorded by a citizen of the United States or a corporation or association created or organized within the United States and imported without the authorization of the U.S. owner. “Restricted gray market goods” include goods bearing a genuine trademark or trade name which is:
(1) Independent licensee. Applied by a licensee (including a manufacturer) independent of the U.S. owner, or
(2) Foreign owner. Applied under the authority of a foreign trademark owner or trade name owner other than the U.S. owner, a parent or subsidiary of the U.S. owner, or a party otherwise subject to common ownership or control with the U.S. owner (see §§ 133.2(d) and 133.12(d) of this part), from whom the U.S. owner acquired the domestic title, or to whom the U.S. owner sold the foreign title(s) . . . .
19 C.F.R. § 133.23(a) (2001). Customs has interpreted section 133.23(a) to mean, inter alia, that where the U.S. owner of a registered and recorded trademark owns the trademark in any foreign country, or where a parent, subsidiary or a party otherwise subject to common ownership or control with the U.S. owner of a registered and recorded trademark owns the trademark in any foreign country, the recorded trademark is not entitled to gray market protection from Customs. HQ 469561, dated July 25, 2000. This interpretation reflects Customs’ longstanding position in respect of gray protection under section 526 of the Tariff Act of 1930, as amended, and the corresponding provisions of the Customs Regulations. Indeed, as described below, this position has been reflected in the Customs Regulations for over fifty years, and the U.S. Supreme Court has upheld the pertinent regulatory provisions.
In 1936, the Customs Regulations were first amended to deny gray market protection where the foreign trademark and the U.S. trademark “are owned by the same person, partnership, association or corporation.” T.D. 48537, 70 Treas. Dec. 336-337. In 1953, the “related company” exception to gray market protection was introduced and incorporated into the Customs Regulations. T.D. 53399, 88 Treas. Dec. 376.
The related company exception was subsequently deleted from the Regulations in 1959. However, the exception was reintroduced by Bureau letter dated November 25, 1968, wherein Customs stated:
[t]he trademark or trade name on imported foreign-produced merchandise shall not be deemed to copy or simulate a registered trademark or trade name if the foreign producer is the parent or subsidiary of the American owner or the firms are under a common control. Further, if a foreign producer has been authorized by the American owner to produce and sell goods abroad bearing the recorded trademark or trade name, merchandise so produced and sold is deemed admissible.
T.D. 69-12(2), 3 Cust. Bull. 17 (1969). In 1972, this position was codified in the Customs Regulations, which were amended once again to exempt trademarks from gray market protection where “the foreign and domestic trademark or trade name owners are parent and subsidiary companies or are otherwise subject to common ownership or control.” Treas. Dec. 72-266, 19 C.F.R. § 133.21(c)(2) (1972). Under these amended regulations, gray protection did not extend to situations where the foreign and U.S. trademark were owned by the same person or business entity, nor where the foreign and domestic trademark owners were parent and subsidiary or otherwise subject to common ownership or control. 19 C.F.R. § 133.21(c)(1)-(2).
The same person and common ownership or control exceptions to gray market protection were upheld by the U.S. Supreme Court in K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 108 S. Ct. 1811 (1988). The Court stated:
We hold that the Customs Service regulation is consistent with § 526 insofar as it exempts from the importation ban goods that are manufactured abroad by the “same person” who hold the United States trademark, 19 CFR § 133.21(c)(1) (1987), or by a person who is “subject to common . . . control” with the United States trademark holder, § 133.21(c)(2).
Id., 486 U.S. at 294, 108 S. Ct. at 1819. However, the authorized use exception, set forth in 19 C.F.R. § 133.23(c)(3), which provided that “the articles of foreign manufacture bear a recorded trademark or a trade name applied under the authorization of the U.S. owner,” was found to be inconsistent with section 526 of the Act. Accordingly, part 133 of the Customs Regulations was amended in 1990 to eliminate the authorized use exception. T.D. 53399, supra.
Part 133 of the Customs Regulations was again revised in 1999, at which time they assumed their current form. As noted above, restricted gray market articles are currently defined, in pertinent part, as follows:
Restricted gray market articles defined. “Restricted gray market articles” are foreign-made articles bearing a genuine trademark or trade name identical with or substantially indistinguishable from one owned and recorded by a citizen of the United States or a corporation or association created or organized within the United States and imported without the authorization of the U.S. owner. “Restricted gray market goods” include goods bearing a genuine trademark or trade name which is:
(1) Independent licensee. Applied by a licensee (including a manufacturer) independent of the U.S. owner, or
(2) Foreign owner. Applied under the authority of a foreign trademark owner or trade name owner other than the U.S. owner, a parent or subsidiary of the U.S. owner, or a party otherwise subject to common ownership or control with the U.S. owner (see §§ 133.2(d) and 133.12(d) of this part), from whom the U.S. owner acquired the domestic title, or to whom the U.S. owner sold the foreign title(s) . . . .
19 C.F.R. § 133.23(a) (2001); T.D. 99-21, 33:10 Cust. B. & Dec. 7 (February 19, 1999).
Notwithstanding the 1999 revisions, which were undertaken primarily to give effect to the decision in Lever Bros. V. United States, 981 F.2d 1330 (D.C. Cir. 1993), the Customs Service does not interpret the section 133.23 of the Regulations to support the approach you advocate. Customs’ interpretation of section 133.23(a)(2) is that where the U.S. trademark owner owns the subject trademark in any foreign country, or where a parent or subsidiary of the trademark owner, or party otherwise subject to common ownership or control with the trademark owner owns the subject trademark in any foreign country, the subject trademark is not eligible for gray market protection.
The fact that a foreign trademark owner, in this instance, Fuji Xerox, who uses a trademark in a limited geographic area, is neither a parent or subsidiary of the U.S. trademark owner, nor under common ownership or control with the U.S. trademark owner, does not entitle the mark to gray market protection where, for example, as is the case here, the U.S. trademark owner owns foreign registrations for the mark.
HOLDING:
The three Xerox® trademarks at issue are not eligible for gray market protection given that Xerox owns the marks abroad.
Sincerely,
Joanne Roman Stump, Chief
Intellectual Property Rights Branch