New York Business Lawyers

Customs–The Intellectual Property Angel at Our Nation’s Border for New York Businesses and Others

by / Wednesday, 16 June 2010 / Published in Featured, Startup & Corporate

New York Times Mobile Patent Lawsuit DiagramUpdate:  The below article discusses how US Customs can become a gatekeeper to ward of importation of goods that are deemed infringing of your own intellectual property.  In addition to the Customs Service protocol for blocking shipments of good, one can make a petition to the International Trade Commission (“ITC”) as the initial volley against an importing infringer.  However, this can become part of a more strategic IP war against a competitor as is the case with HTC’s recent counter-suit against Apple for certain Apple components from overseas alleging infringing HTC’s patent catalogue.  The point is that in the work of IP driven businesses with global footprints, Customs and the ITC are necessarily tools in the IP protection and business strategy toolbox.

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Most businesses know the value of intellectual property, trademarks, service marks, trade names, patents, copyrights and trade secrets (“IP”). However few understand the interplay between those rights and the United States Customs Service and Border Protection Department’s (“Customs”) role in enforcing those rights.

As we become increasingly a nation of importers, more goods are entering the US through our ports. And each time such goods are subject to inspection by Customs. With the world’s attention (even China’s) on the growing threat of counterfeit goods, Customs’ role in protecting IP rights cannot be overlooked.

In addition to the traditional registration route for copyrights and trademarks, IP owners can additionally “record” them with Customs. Recording IP with Customs, provides a variety of critical protection measures. For example, Customs is empowered to detain, seize and forfeit counterfeit, pirated and/or infringing merchandise. Secondly, Customs may slap the offending importers with civil fines. In addition, Customs is fairly aggressive in detaining potentially infringing goods. Indeed, Customs relies on a mere “reasonable suspicion” test in the case of trademarked goods. In other words, Customs can and will detain goods that it has a reasonable suspicion infringe a given trademark.

FEES AND APPLICATION PROCEDURE
The cost of Customs registration is compelling given its benefits. Prerequisites to recording with Customs typically involve registration of the right in question with the appropriate government IP office. Hence copyrights should either be registered with the United States Copyright Office or a recognized foreign copyright under the Berne Convention. Similarly, trademarks must be registered on the Principal Register of the United States Patent and Trademark Office (“USPTO”). As a side note, Supplemental Register marks cannot be recorded with Customs.

To record a federally registered trademark, service mark, or copyright with Customs, the owner obtains a certified copy of the registration, and submits them in duplicate upon request of Customs in conjunction with Customs’ online application. The application sets forth, among other things, the authorized users of the mark/copyright. The fee is reasonable (as of 12/1/2006 $190) and is charged per copyright and for each class of trademarked goods to be recorded. Hence for example, if a trademark is registered in four classes, the Customs recording fee will be $760. The protection afforded by recordation is effective on the date the application is approved. Registered trademarks that are recorded with Customs will remain in effect concurrently with the USPTO registration and must be renewed when the USTPO registration is renewed. Following such time a renewal can be filed with the appropriate fee. In contrast, registered copyrights recorded with Customs remain in effect for 20 years.

TYPICAL TRADEMARK RECORDATION INFORMATION REQUIRED:

(a) the name, complete business address, and citizenship of the trademark owner or owners (if a partnership, the citizenship of each partner; if an association or corporation the State, country, or other political jurisdiction within which it was organized, incorporated, or created);

(b) the places of manufacture of goods bearing the recorded trademark;

(c) the name and principal business address of each foreign person or business entity authorized or licensed to use the trademark and a statement as to the use authorized; and

(d) The identity of any parent or subsidiary company or other foreign company under common ownership or control which uses the trademark abroad.” 19 CFR § 133.2

TYPICAL COPYRIGHT RECORDATION INFORMATION REQUIRED:

(a) the name and complete address of the copyright owner or owners;

(b) if the applicant is a person claiming actual or potential injury by reason of actual or contemplated importations of copies or phonorecords of the eligible work, a statement setting forth the circumstances of such actual or potential injury;

(c) the country of manufacture of genuine copies or phonorecords of the protected work;

(d) the name and principal address of any foreign person or business entity authorized or licensed to use the protected work, and a statement as to the exclusive rights authorized;

(e) the foreign title of the work, if different from the U.S. title; and

(f) in the case of an application to record a copyright in a sound recording, a statement setting forth the name(s) of the performing artist(s), and any other identifying names appearing on the surface of reproduction of the sound recording, or its label or container. 19 CFR §133.32

TRADE NAMES
For those without them, registration is not a fundamental requirement to record trade names with Customs. Unregistered Trade names can be recorded with Customs under limited circumstances. The process is similar to recording a registered trademark or copyright, but is beyond the cope of this article.

CONCLUSION
Recording IP with Customs should be handled with care. Applications must be sufficiently detailed to avoid missteps and confusion that could result in Customs seizing the owner’s own goods, or allowing counterfeit goods to pass. Worse still, goods that are earmarked for an owner’s licensees and distributors may get caught in the fray resulting in damaged goodwill and contractual breaches.

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3 Responses to “Customs–The Intellectual Property Angel at Our Nation’s Border for New York Businesses and Others”

  1. bates58 says :

    The information in this blog is an excellent breakdown of the laws and regulations concerning the proper procedure of registering with the United States Patent and Trademark Office and their relationship to the Customs officials that enforce them. However, if the U.S. Customs is our “Angel” at the border, than that angel’s halo is held firmly in place by the horns that support it.
    Our copyright and trademark laws are being grossly infringed upon to the tune of billions of dollars by Chinese imports alone, not to mention the vastly growing number of imports from the rest of the world. Everything from knock off fashions to music albums to Hollywood blockbusters are being introduced to this country through all of our major ports. These are just three basic examples of the most popular items that can be found on New York’s Canal Street in China Town. Although Customs officials cannot personally check every freight container that comes off a ship, there must be some crackdown on the huge amount of counterfeit goods coming in from all over the world. If the Customs laws that are in place have no teeth or are not enforced at all, companies shipping goods into the country will have no fear dealing in goods protected by Intellect Property rights.
    As discussed, the fee is nominal for registering with the Trademark and Patent Office and spells out not only who can use the copyright, but it also creates a record by which agents can regulate the movement of trademarked/copyrighted materials. Careful consideration should be used when registering such trade names to avoid seizure of protected materials and to prevent an enormous loss of revenue due to the importation of counterfeit/pirated goods.
    In a Congressional committee meeting by the House Small Business Subcommittee on Tax, Agriculture and Technology on July 20, 2006, Jeb Bradley gave chilling testimony as to the incredible growth of trade with China and the extensive intellectual property violations noted in the seizures of Chinese imports. The statement, “According to the United States Patent and Trademark Office, China is the largest single source of seizures of infringing products by United States Customs– roughly $62.5 million, or 66% of total goods seized, in fiscal year 2003,” shows the overwhelming percentage of Chinese violations. Despite this high number the United States has only, “threatened to impose $1.5 billion in trade sanctions against China if it failed to strengthen its IPR laws.” Threatening is not the answer, registration of copyrights and trademarks and the enforcement of those registrations are the keys. The committee goes on to say that due to improper enforcement, “IP counterfeiting and piracy in China cost United States copyright firms $2.3 billion in lost sales in 2005.”
    The intellectual property rights must be enforced to maintain the efficacy among creators. They should be free of the fear of major loss in revenue due to counterfeiting and lax Customs policies. Exporters should understand the registration process and know that sanctions will be levied if they do not take an active role in limiting pirated materials being produced and shipped. Lastly, Customs officials should truly be our “Angels at the Border,” as they are our last line of defense in the dissemination of these materials.

    Karl Bates

  2. Kaiser says :

    Karl– I completely agree with you. I think there is a double standard in the IP component of export control as well as in antidumping and CVD’s. I also think that there is a lacking sense of urgency on the government’s part to educate small business peopls about the value of IP rights to them in general.

    With the current mood on the Hill changing, you might see a more small manufacturer job concious approach to IP enforcement as opposed to the big service and corporate identity emphasis that has many irked.

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