Amicus Curiae Brief — Vivitar Corp. v. United States

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Supreme Court, U.S.

SthbL Bae

9 199

No. 85-411 DEC

JOSEREEASPANIGL, JR.

CLERA

IN THE

Supreme Court of the United States

OCTOBER TERM, 1985

VIVITAR CORPORATION,

Petitioner,

UNITED STATES, et al.,

Respondents,

47TH STREET PHOTO, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

BRIEF OF AMICUS CURIAE K MART CORPORATION

IN OPPOSITION

ROBERT W. STEELE, P.C.*

ROBERT E. HEBDA

STEELE, SIMMONS &

FORNACIARI

Suite 850

2020 K Street, N.W.

Washington, D.C. 20006-1857

(202) 887-1779

JAMES C. TUTTLE

Assistant General Counsel

Antitrust & International

K MART CORPORATION

International Headquarters

3100 West Big Beaver Road

Troy, Michigan 48084

(313) 643-1688

Counsel for Amicus Curiae

K mart Corporation

December 9, 1985 * Counsel of Record

WILSON - EPes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED FOR REVIEW

Whether the United States Customs Service regulations

relating to the importation of genuine trademarked goods

manufactured overseas by or with the authority of a

United States trademark owner are reasonably related to

Section 526 of the Tariff Act of 1930.

PARTIES TO THE PROCEEDING BELOW

In addition to the parties listed in the Petition for a

Writ of Certiorari, K mart Corporation participated as

an amicus curiae.

TABLE OF CONTENTS

QUESTION PRESENTED FOR REVIEW ...................

PARTIES TO THE PROCEEDING BELOW ...............

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STATEMENT

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ARGUMENT ..

REASONS FOR DENYING THE WRIT ........0000000......

CONCLUSION

(ili)

Page

TABLE OF AUTHORITIES

Cases Page

A. Bourjois & Co. v. Katzel, 275 F. 539 (2d Cir.

1921), rev’d, 260 U.S. 689 (1923) ................2........ 8,9

American Trucking Ass’n v. United States, 344

Wii, SII a III css chnecunien ates deen bash Xaeetormncaaiece 8

Bob Jones University v. United States, 461 U.S.

eS. | Sees te TIT Ate er ee 10

Chevron, U.S.A. Inc. v. National Resources De-

fense Council, Inc., 104 S. Ct. 2778 (1984) --..... 10

Church of the Holy Trinity v. United States, 143

ie Gy ts Reema een. ar Tee Ree 10

Coalition to Preserve the Integrity of American

Trademarks v. United States, 598 F. Supp. 844

(D.D.C. 1984), appeal pending, No. 84-5890

CORRE GD scctches. te tid cccatha ct bk amaiaad aden 2, 3, 6, 10

El Greco Leather Products Co. v. Shoe World, Inc.,

599 F. Supp. 1380 (E.D.N.Y. 1984) .......00020022.. 3, 4

FPC v. Texaco, Inc., 377 U.S. 33 (1964) ......000000... 8

Mourning v. Family Publications Service, Inc.,

BER He We I wicdetckececendte lente nd crt beseniese 7,8

National Broadcasting Co. v. United States, 319

rahe “Me I i a oe 8

National Petroleum Refiners Association v. FTC,

482 F.2d 672 (D.C. Cir. 1973), cert. denied,

SE Te I TD rikcvicen seen tcasncntaamaibnciens 8

Olympus Corp. v. United States, CV-84-0920

(E.D.N.Y. Aug. 22, 1985), appeal pending, No.

Ge CN oe 2, 3, 10

Osawa & Co. v. B&H Photo, 589 F. Supp. 1163

POR a RE ee eens nee ee 10

Sedima, S.P.R.L. v. Imrex Co., 105 S. Ct. 3275

ROI ciated acacia ces ae eer eT Toa 10

Tex Mex Brick & Import Co. v. United States, 305

F. Supp. 927 (Cust. Ct. 1969), aff’d, 449 F.2d

RA a ED ei 7

United States v. 89 Bottles of “Eau De Joy”,

C-82-6541SC (N.D. Cal. Mar. 8, 1985)................ 3

United States v. Storer Broadcasting Co., 351 U.S.

EE RED paccaiebicenidaa a es 8

TABLE OF AUTHORITIES—Continued

Statutes Page

Administrative Procedure Act

i RE WD GUNN © oi grciiacsckspainsnnntsnnencentinianents 7

Tariff Act of 1930

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Regulations

Customs Service Regulation

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Rules

Supreme Court Rule 17.1 (c) .....................-..---.--....--. 3

NE TGS TAN BD oiniisivaciernccect cence 1

Miscellaneous

J. Atwood, Import Restrictions on Trademarked

Merchandise—The Role of the United States

Bureau of Customs, 59 Trade-Mark ‘Rep. 301

SI el cocllccenuialantabonatte

ew 2 SS. Wa. Caer Sie oes ees

35 Fed. Reg. 19,269 (Dec. 19, 1970)

$7 Fed. Has. 20,677 (Oct. 3, 1962) ...........................

62 Cong. Rec. S. 11,603 (daily ed. Aug. 19, 1922)...

62 Cong. Rec. S. 11,605 (daily ed. Aug. 19, 1922)...

OONINIHFD MH

IN THE

Supreme Court of the Uuited States

OCTOBER TERM, 1985

No. 85-411

VIVITAR CORPORATION,

Petitioner,

Vv.

UNITED STATES, et al.,

Respondents,

47TH STREET PHOTO, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

BRIEF OF AMICUS CURIAE K MART CORPORATION

IN OPPOSITION

To the extent required, amicus curiae K mart Corpora-

tion (“K mart’) incorporates by reference the “Opinions

Below,” “Jurisdiction,” and “Statutory and Regulatory

Provisions at Issue” sections of the Petition for a Writ of

Certiorari filed by Vivitar Corporation (‘Vivitar’).

STATEMENT

K mart submits this brief? in opposition to the Vivitar

Petition for a Writ of Certiorari and urges that this

1 This brief amicus curiae is filed with the written consent of the

parties pursuant to Supreme Court Rule 36.2.

Court not reexamine or modify the long-standing Federal

policy embodied in Customs Service Regulation 19 C.F.R.

§ 133.21. That regulation permits the importation of

trademarked goods manufactured abroad by or under

the authority of United States trademark owners such as

Vivitar. Such goods are frequently called “parallel im-

ports” or “gray market” goods.

INTEREST OF K MART

K mart is a Michigan corporation with its principal

place of business in Troy, Michigan. It is a mass mer-

chandiser which operates more than 2,000 discount de-

partment stores throughout the United States. K mart

offers consumers brand-name and private label mer-

chandise at substantial savings over the retail price sug-

gested by trademark owners and manufacturers such as

Vivitar.

In the regular course of its business, K mart pur-

chases substantial quantities of parallel imports. Since

the trademark owner generally sells or authorizes the sale

of such goods abroad at a much lower price than it sells

identical goods in the United States, such parallel im-

ports represent an important source of supply to dis-

counters such as K mart. K mart has a vital economic

interest in the continued viability of 19 C.F.R. § 133.21,

inasmuch as its important sources of supply will be

threatened with extinction if Vivitar’s position prevails.”

Multinational trademark owners such as Vivitar generally

refuse to sell their trademarked goods to discounters such

as K mart and also purport to forbid their licensees and

2K mart’s interest in preserving these sources has been recog-

nized in other major proceedings involving parallel imports where

K mart has intervened or participated as an amicus. See Coalition

To Preserve The Integrity of American Trademarks v. United

States, 598 F. Supp. 844 (D.D.C. 1984), appeal pending, No. 84-

5890 (D.C. Cir.) ; and Olympus Corp. v. United States, CV-84-0920

(E.D.N.Y. Aug. 22, 1985), appeal pending, No. 85-6282 (2d Cir.).

distributors from selling to discounters such as K mart—

all as a part of an effort to maintain artificially high

resale prices in the United States. Indeed, the change in

treatment of parallel imports sought by Vivitar threatens

the viability not only of K mart, but of thousands of other

retailers that depend upon the continued availability of

brand-name products at competitive prices. A decision

voiding the Customs Service Regulation at issue would

deprive such retailers of an important source of supply

which allows them to pursue their fundamental business

strategy of meeting consumer needs through competitive

pricing. If the regulation is declared void, American con-

sumers will pay higher prices, and the innovative dis-

count segment of the retail market place will be severely

injured.

ARGUMENT

This Court should not grant the petition for a writ of

certiorari. The decision of the Court of Appeals for the

Federal Circuit presents no “important question of fed-

eral law which has not been, but should be settled by this

Court.” Supreme Court Rule 17.1(c). The Court of Ap-

peals approved the Customs Service interpretation of Sec-

tion 526(a) of the Tariff Act of 1930, 19 U.S.C. § 1526.

Under both the Customs Service interpretation and the

Court of Appeals interpretation of Section 526(a), there

is no ban on parallel imports of genuine trademarked

goods which United States trademark owners have per-

mitted to be manufactured overseas.

In the past two years, a number of courts have sus-

tained the Customs Service interpretation of Section 526.

See Coalition To Preserve The Integrity Of American

Trademarks v. United States, 598 F. Supp. 844 (D.D.C.

1984), appeal pending, No. 85-5890 (D.C. Cir.) ; Olympus

Corp. v. United States, CV-84-0920 (E.D.N.Y. Aug. 22,

1985), appeal pending, No. 85-6282 (2d Cir.); United

States v. 89 Bottles of “Eau De Joy”, C-82-6541 SC (N.D.

Cal. Mar. 8, 1985); and El Greco Leather Products Co.

v. Shoe World, Inc., 599 F. Supp. 1880 (E.D.N.Y. 1984).

While the rationale of these district courts differs

semantically from that of the United States Court of Ap-

peals for the Federal Circuit, the net result is the same:

All of the courts have sustained the Customs Service in-

terpretation of Section 526.

A grant of certiorari to review a semantic difference

between the Customs Service and the Court of Appeals

interpretation of Section 526 would serve no useful pur-

pose. The question of whether a court of appeals has

authority to affirm a regulation on a different ground

than that advanced by the agency is peripheral to the

question of the permissibility of parallel imports under

Section 526. This Court’s consideration of the issue of

whether parallel imports are permissible under Section

526 is premature before the Courts of Appeals for the

District of Columbia and Second Circuits have completed

their consideration of pending appeals which raise the

Same issue.

The Tariff Act of 1930, as illuminated by its legisla-

tive history and five decades of consistent agency inter-

pretation, does not require the Customs Service to enforce

an arrangement wherein Vivitar and its foreign affiliates

and licensees divide up international markets to prevent

and impair price competition within the United States.

A reversal of the Court of Appeals holding would close

the American market to price competition and would re-

sult in the transfer of millions of dollars from American

consumers to foreign multinational enterprises, a result

antithetical to public policy.

REASONS FOR DENYING THE WRIT

1. Whether the Court of Appeals has properly affirmed

the Customs Service regulation on “a basis different than

that offered by the agency” is hardly a worthy issue for

consideration on certiorari. Pet. at 21.

The claimed disparity between the agency grounds for

allowing genuine trademarked goods to enter the United

States and those espoused by the Court of Appeals for

the Federal Circuit appears to be semantic rather than

substantive. While the Court of Appeals majority opin-

ion may well be criticized for its broad dicta,* the pivotal

point is that both the agency and the Court of Appeals

are in agreement that Section 526 of the Tariff Act of

1930 does not provide a basis for banning the importa-

tion of genuine trademarked merchandise. As Judge

Davis said in his concurring opinion below:

All that we hold in this case is that the Customs

regulation is now valid as a Customs enforcement

regulation.

761 F.2d at 1572; Pet. App. A, p. 100a.

2. Contrary to Vivitar’s contention, the holding of the

Court of Appeals is hardly “an invitation to administra-

tive lawlessness which should not be permitted by this

Court”. Pet. at 21.

The effect of the ruling is merely to approve a regula-

tion which has existed in one form or another for nearly

fifty years.* While the regulatory language has changed

8 Judge Davis concurred in the result, but criticized the majority

opinion for its broad dicta concerning the effect of the Customs

Service regulation in litigation between private parties. According

to Judge Davis, “it is needless and gratuitous for this court, in this

international trade case coming from the CIT, to indulge in lengthy

dicta bearing on the full scope of § 1526(a), obiter dicta which will

not bind any court in a private suit but which simply tends to

confuse the trademark bar.” 761 F.2d at 1572; Pet. App. A, p. 99a.

4In 1936, the following provision was added to the Customs

Service regulations:

However, merchandise manufactured or sold in a foreign coun-

try under a trade-mark or trade name, which trade-mark is

registered and recorded, or which trade name is recorded under

the trade-mark laws of the United States, shall not be deemed

for the purpose of these regulations to copy or simulate such

United States trade-mark or trade name if such foreign trade-

from time to time, “the policy of the Customs Service of

excluding from protection foreign-produced merchandise

bearing a genuine trademark has been long-standing and

consistent.” Coalition To Preserve The Integrity of

American Trademarks v. United States, 598 F. Supp. at

852.5

The preservation of the status quo hardly entails a

threat of “lawlessness” which warrants the grant of a

writ of certiorari. Moreover, Vivitar can hardly claim

to have been injured by the Court of Appeals decision,

since the court merely affirmed regulations which were in

effect at the time Vivitar chose to commit its manufac-

turing efforts to foreign subsidiaries and licensees.

3. Vivitar’s argument that the Customs Service has

never “claimed that it had the discretion to allow the

entry into the United States of imported merchandise

prohibited by the plain language of Section 526” appears

to be inaccurate. Pet. at 19.

While the language of the regulations adopted by the

Customs Service has differed slightly from time to time

during the past fifty years, the regulations have always

been to the effect that goods manufactured abroad under

the authority of the United States trademark owner

should not be barred from importation. There is nothing

mark or trade name are owned by the same person, partnership,

association, or corporation.

1 Fed. Reg. 1,725 (1936) (T.D. 48,587). Although the 1986 regula-

tion is the first to mention an exception from Section 526 protection

where the United States and foreign trademark holders were com-

monly owned, there is no evidence of a contrary Customs Service

practice prior to that date.

5 According to John F. Atwood, a Customs law specialist employed

by the Customs Service during the late 1960s, the Customs Service

has “always denied complete exclusionary protection to an American

trademark registrant when it knew the importer to be a subsidiary

or parent of the foreign user of the trademark.” See J. Atwood,

Import Restrictions on Trademarked Merchandise—The Role of the

United States Bureau of Customs, 59 Trade-Mark Rep. 301, 307

(1969).

in any of the regulatory language which would exclude

agency “discretion” as a basis for the current regula-

tion.

4. The statutory grant of authority to the Customs

Service provides the agency with broad discretion in

adopting regulations. |

The agency’s discretionary authority derives from the

general mandate to the Secretary of the Treasury in 19

U.S.C. § 66, which appears to date back to 1820 in sub-

stantially the same form, delegating to the Secretary of

the Treasury the power to prescribe the “rules and regu-

lations . . . as may be necessary for the proper execution

of the [Customs] law.” 19 U.S.C. § 66. With specific

regard to Chapter 4 of Title 19, i.e., the Tariff Act of

1930, “the Secretary of the Treasury is authorized to

make such rules and regulations as may be necessary to

carry out the provisions of this chapter.” 19 U.S.C.

§ 1624.° Such Treasury Department rules have been held

to have the force and effect of substantive law. Tex Mex

Brick & Import Co. v. United States, 305 F. Supp. 927

(Cust. Ct. 1969), aff'd, 449 F.2d 1398 (C.C.P.A. 1971)."

This Court has routinely upheld regulations promul-

gated pursuant to such general delegations of authority.

In Mourning v. Family Publications Service, Inc., 411

U.S. 356 (1973), the Supreme Court sustained the au-

thority of the Federal Reserve Board to promulgate rules

under the Truth-in-Lending Act. The Court emphasized:

®In promulgating 19 C.F.R. § 133.21, the Customs Service prop-

erly followed the rulemaking procedures required by the Adminis-

trative Procedure Act. 5 U.S.C. §701 et seg. On December 19,

1970, the Customs Service issued a Notice of Proposed Rulemaking

(35 Fed. Reg. 19,269) and on October 3, 1972, it published a Final

Notice (87 Fed. Reg. 20,677) adopting what is now 19 C.F.R.

§ 1338.21.

T It is this discretion which distinguishes the delegation of regula-

tory authority from the impoundment cases on which Vivita: relies,

where the legislature had appropriated precise funds for a specific

purpose.

Where the empowering provision of a statute states

simply that the agency may “make . . . such rules

and regulations as may be necessary to carry out

the provisions of this Act,’ we have held that the

validity of a regulation promulgated thereunder will

be sustained so long as it is “reasonably related to

the purposes of the enabling legislation.”

411 U.S. at 369 (citations omitted) (emphasis added).°

The day to day operations of agencies, pursuant to

such broad rule-making authority, do not pose such novel

issues as to warrant the grant of certiorari. Even when

agencies have made unusual use of such rulemaking

power, certiorari has been denied. For example, in Na-

tional Petroleum Refiners Association v. FTC, 482 F.2d

672 (D.C. Cir. 1978), cert. denied, 415 U.S. 951 (1974),

the United States Court of Appeals for the District of

Columbia Circuit affirmed the novel use of the Federal

Trade Commission rulemaking authority for promulgat-

ing rules with the effect of substantive law. Although

the FTC had never before claimed or exercised such

power, and although no court had ever before approved the

FTC claim of such power, this Court denied certiorari.

5. There can be no question that 19 C.F.R. § 133.21

is reasonably related to the purpose of the enabling legis-

lation.

As conceded by Vivitar:

The decision by the Court of Appeals in A. Bourjois

& Co., Inc. v. Katzel, 275 F. 589 (2d Cir. 1921),

rev'd, 260 U.S. 689 (1923), was the catalyst prompt-

ing the enactment of Section 526.

. 8 The Court has similarly upheld substantive regulations adopted

by other agencies in the exercise of their discretion pursuant to

delegations of authority of varying degrees of specificity. American

Trucking Ass'n v. United States, 344 U.S. 298, 312 (1953); FPC

v. Texaco, Inc., 377 U.S. 33 (1964) ; United States v. Storer Broad-

casting Co., 351 U.S. 192 (1956); National Broadcasting Co. v.

United States, 319 U.S. 190 (1948).

Pet. at 14 n. 4. In Katzel, the Second Circuit held that

a third-party purchaser from a European company

which had conveyed the entirety of its trademark rights

to an independent American company could nonetheless

continue to import trademarked goods into the United

States. The legislative history of Section 526 demon-

strates that in 1922 Congress wanted specifically to pro-

tect the contractual property rights of American citizens

who, as in Katzel, had purchased United States trade-

mark rights from independent foreign companies in

arm’s length transactions. Thus, the floor debate in the

Senate shows strong emphasis on “protecting the prop-

erty rights of American citizens who have purchased

foreign trademarks from foreigners’. See remarks of

Senator Sutherland, one of the sponsors of the bill, 62

Cong. Rec. S. 11,603 (daily ed. Aug. 19, 1922). And,

as another sponsor, Senator McCumber, stated, “if there

has been no transfer of trademark, that presents an

entirely different question.” 62 Cong. Rec. S. 11,605

(daily ed. Aug. 19, 1922). Obviously, Congress in-

tended to confine the exclusion of foreign goods to those

cases where a foreign manufacturer had sold its trade-

mark rights to an independent American corporation.

The regulation at issue clearly carries out this Congres-

sional intent.’

6. If certiorari is granted, a principal question on

review will be whether the regulation at issue is reason-

ably related to Section 526.

In determining such an issue the Court will normally

review the legislative history, as well as the language of

® While the majority opinion in the Federal Circuit found that

there were other purposes for the enactment of Section 526, the

court failed to cite any substantial purpose other than that enun-

ciated by the sponsors. Nevertheless, the Court of Appeals obvi-

ously held that the regulation at issue was “a reasonable exercise

of administratively initiated enforcement” of Section 526. 761 F.2d

at 1571. Pet. App. A, p. 90a.

the statute. There is nothing new or novel about the

review process which this Court follows in determining

whether a paritcular regulation has such a reasonable

relation to enabling legislation. The Court of Appeals

gave extensive consideration to the language and history

of the Act in reaching its conclusion. Under such cir-

cumstances, it appears unlikely that any major public

policy would be served by reviewing the completeness of

its evaluation process.

7. There is no conflict among the circuits as to the

validity of 19 C.F.R. § 133.21.

No court of appeals has held that Section 526 bars the

importation of genuine trademarked goods. The district

courts considering the subject have upheld the validity

of 19 C.F.R. § 133.21. Coalition to Preserve the Integrity

of American Trademarke v. United States, 598 F. Supp.

844 (D.D.C. 1984); Olympus Corp. v. United States,

CV-84-0920 (Aug. 22, 1985 E.D.N.Y.).*' The only dis-

parity between these decisions and the ruling of the Fed-

eral Circuit below lies in the fact that the Federal Cir-

cuit was a good deal more charitable to some of the

subsidiary arguments advanced by Vivitar than were

the district courts in other circuits. These district courts

held that the regulation in question was supported by

10 Bob Jones University v. United States, 461 U.S. 574 (1983);

Church of the Holy Trinity v. United States, 143 U.S. 457, 459

(1892) ; Chevron, U.S.A., Inc. v. National Resources Defense Coun-

cil, Inc., 104 S. Ct. 1778 (1984). See also Sedima, S.P.R.L. v. Imrex

Co., 105 S. Ct. 3275 (1985), where this Court gave heavy weight to

legislative history.

11 The decision in Osawa & Co. v. B&H Photo, 589 F. Supp. 1163

(S.D.N.Y. 1984), heavily relied upon by Vivitar, loses credibility by

virtue of the fact that the court did not attempt to address the

reasonableness of the Customs Service Regulation in light of the

legislative history of Section 526. The question of whether “Cus-

toms exceeded its authority” was one which the court felt “need

not be decided here.” 589 F. Supp. at 1177. Accordingly, the deci-

sion lacks persuasiveness.

the legislative history of the Act, by a consistent and long

standing administrative interpretation of the Act, and

by Congressional ratification. In short, these opinions

are even more adverse to Vivitar than the opinion of

the Court of Appeals of the Federal Circuit in this

case. A fortiori, there is no conflict in these opinions

which would warrant the grant of certiorari in the

instant case. Indeed, a grant of certiorari in the instant

case would appear to be premature, since no other court

of appeals has yet ruled on these issues.