U.S. Customs and Border Patrol (“CBP”) officials have the authority to seize goods they suspect are infringing on registered trademarks, copyrights or patents. Infringing goods seizures are an often overlooked tool to prevent both counterfeit and grey market goods. U.S. Customs seizures of infringing goods, however, should follow a specific set of procedures – procedures that are not well understood by many importers and, it would seem, by some customs officials.
The process begins with an owner recording a registered trademark, copyright or patent. The recorded works are placed into an electronic database used for reference. In the event that a US Customs official suspects the importation of infringing goods – which federal regulations refer to as piratical – they have the authority to detain the import as piratical goods. While U.S. Customs seizures generally involve only infringing goods for which a trademark, copyright or patent has been recorded, the agency clearly detain any clearly piratical goods, recorded or not. 19 U.S.C. § 1595a (c)(2)(C); 17 U.S.C. §§ 602; 501.
Procedures for Seizures of Infringing Goods
U.S. Customs regulations provide a very specific procedure to be followed in the event that there is a suspicion of the importation of infringing goods. 19 C.F.R. §133.43. Unfortunately for some importers, the local officials may not understand or care to follow the regulations and instead detain the goods under US Customs general detention authority. We have seen this occur where the importer must protest the seizure to have the goods released.
U.S. Customs regulations provide for the detention of an import if there is a suspicion that an import infringes the copyright, trademark or patent. After seizure of the suspected infringing goods, the agency is required to notify the importer, who then has 30 days in which to file a statement denying that the goods are “piratical” and that “the detention of the article will result in a material depreciation of its value, or a loss or damage to him.” 19 C.F.R. §133.43(a). If the importer does not make such a denial with 30 days, the piratical goods are subject to seizure or forfeiture.
Bond Requirement in Customs Detention
If the importer denies that the allegedly infringing goods are piratical, then U.S. Customs must notify the copyright owner, deliver a sample of the goods, give notice that the goods will be released within 30 days unless the copyright holder files a demand for the exclusion and, significantly, a bond to cover any resulting losses the importer might suffer if the goods are not infringing.
If the copyright owner follows these procedures by filing a bond and a written demand for exclusion, both parties then have an additional 30 days for discovery and submission of legal briefs. The burden of proof is on the party claiming that importation contains piratical goods.
U.S. Customs Determination of Piratical Goods
Once the time to submit briefs has passed, the files are given to the office of the Commissioner of Customs to determine whether there was any infringement. The regulations do not specify a time limit for the commissioner’s determination. The copyright holder may also choose to go to district court in search of an order enjoining the importation of the article in lieu of the aforementioned procedure. 17 U.S.C. §501.
Protest of U.S. Customs Detention
There are two ways that the parties can dispute an adverse decision or the failure to follow the procedures outlined in the statute. As a general rule, U.S. Customs regulations provide for the protest of adverse decisions within the agency. A protest is an application for relief, often relatively informal in nature, that seeks to reverse a decision of the agency.
A significant issue is the requirement in the regulations that a party seeking to prevent the importation of allegedly piratical goods is required to demand exclusion and to post bond. The bond requirement provides an important protection for importers, which may have goods detained for months and incur market losses and storage costs.
If Customs seizes allegedly piratical goods but relies on its general authority to detain imported goods for inspection, then a protest to compel compliance with the regulations – or, in some cases, a lawsuit in the International Court of Trade – may be required. If a protest is filed, a demand that it be decided in 30 days should be included to prevent additional storage costs.
Our experience has been that Customs officials, who detained the allegedly piratical goods, will simply accelerate the investigation and then seize the goods that it has detained, releasing any that are not piratical in the eyes of the inspectors, rather than complying with the administrative procedure specified in the code.
The U.S. Customs seizure creates its own set of procedural rules and moves the case out of the administrative realm and into the federal courts.