532 718 FEDERAL REPORTER, 2d SERIES there was the use of the name "Amazonas" as opposed to "Amazon" on shoe heels and soles. While Customs found that these two marks were similar enough to cause confusion, it could not be seriously contended that the average consumer would have found them substantially indistinguishable. Similarly, in In re Bulova Watch Co., (C.S.D. 80-77, 14 Cus.Bull. No. 30, July 23, 1980), which involved the use of the name “Bolivia" as opposed to "Bulova", Customs found an infringement. Once again, however, it is unlikely that an average purchas er would have found the marks on the two watches to be substantially indistinguishable. These cases demonstrate that Judge Broderick's interpretation of the statutory scheme does retain the distinction that Congress created. While the two standards may converge in certain applications, that possibility is hardly a sufficient justification for construing § 1526(e) in a manner that would undermine its principal objective of severely punishing counterfeiting activities. B. The Registered Mark as It Appears on Actual Merchandise or as It Appears on the Registration Certificate? [9] Customs next argues that Judge Broderick misconstrued the statutory scheme by comparing the designs on the Grand Jewels bracelets with the Rolex crown as it appears on actual merchandise. Customs emphasizes that § 1526(e) requires it to protect only a "registered" mark and contends that Rolex must bear the risk of deviating from that mark. Further, Customs submits that Judge Broderick's interpretation of § 1526(e) would create additional administrative burdens which Congress deliberately declined to impose upon Customs when it required in § 1526(e) that Customs contact the trademark holder only after it determined that a counterfeit mark had been used. We are not persuaded by these arguments. To begin with, the "deviation" that serves as the factual predicate for Customs' position is slight and inconsequential. Whenever a two-dimensional paper facsimi le of a mark like the Rolex crown is compared with the three-dimensional mark fabricated on actual merchandise, some differences will be detectable. To allow such differences to undercut the protection Congress intended to grant the trademark owner would be absurd. Cf. Ilco Corp. v. Ideal (C.C.P.A.1976) (a mark may be modified in. Security Hardware Corp., 527 F.2d 1221 such a fashion as to retain its trademark impact and symbolize a single and continuing commercial impression; a change which does not alter the distinctive characteristics of a mark represents a continuity of trademark rights). Furthermore, the narrow construction of § 1526(e) urged by. Customs is inconsistent with the commercial realities of the counterfeit trademark trade. It seems safe to assume that counterfeiters copy actual merchandise, not registration certificates. In this case, for example, the designs on the Grand Jewels bracelets more closely resemble the Rolex mark as it appears on actual merchandise than they do the registered Rolex mark. Thus, just as the protected mark on actual merchandise is unlikely to be identical with the two-dimensional facsimile of the mark recorded on the registration certificate, so, too, an infringing mark would be unlikely to be substantially indistinguishable from that facsimile. As a result, if Customs' exclusive focus on the registered mark were to prevail, infringing merchandise with three-dimensional marks Given the punitive and deterrent purposes could rarely, if ever, be deemed counterfeit. underlying § 1526(e), we cannot acquiesce in so narrow an interpretation. Nor do we see much merit to Customs' concern with the administrative burdens that Judge Broderick's interpretation of the statute would impose. If Customs' experience in this case is any indication, there will be no problem at all obtaining samples of the trademark owner's actual merchandise for purposes of comparison. We see no reason why a trademark owner would not eagerly cooperate with Customs in this regard, and even if the owner failed to do so after receiving notice of the seizure, Customs could still make its determination based on the mark as registered.. STATEN ISLAND RAPID TRANSIT OP. AUTH. v. LC.C. C. "Counterfeit" or "Colorable Imitation"? V. Conclusion For all these reasons we must conclude that Customs' interpretation and application of § 1526(e) in this case was “arbitrary, capricious, and otherwise not in accordance with law" under 5 U.S.C. § 706(2)(A). We are, of course, sensitive to the deference to be given an agency administering a statute, particularly “when the administrative practice at stake ‘involves a contemporaneous construction of a statute by [those] charged with the responsibility of setting its- machinery in motion, of making the parts work efficiently and smoothly while they are yet untried and new.'' Connecticut Fund for the Environment v. EPA, 672 F.2d 998, 1010 (2d Cir.1982) (quoting Power Reactor Development Co. v. International Union of Electrical, Radio & Machine Workers, 367 U.S. 396, 408, 81 S.Ct. 1529, 1535, 6 L.Ed.2d 924 (1961)). That deference, however, is unwarranted when the administering agency's interpretation would cripple a statutory scheme in its inception. Customs' position in this case, if accepted, would have just that effect. Its standing argument would preclude an aggrieved trademark owner from seeking judicial review at all. And its substantive claims would minimize the chances of any merchandise being declared counterfeit. We hold that Rolex had standing and the district court had jurisdiction to review Customs' final determination that the crown on the accused bracelets was not a 533 "counterfeit". We further hold that Judge Broderick correctly interpreted § 1526(e) to require in this case (1) that the "counterfeit" question be determined by comparing the accused mark on the imported bracelets with the protected mark on Rolex's own merchandise, and (2) that the comparison be made from the perspective of an average purchaser rather than an expert. Finally, we hold that Judge Broderick properly determined that the Grand Jewels bracelets were counterfeits under § 1526(e). Affirmed. KEY NUMBER SYSTEM Mr. HUGHES. The willful intent. Mr. MOSSINGHOFF. The willfulness. So, with those three elements we think there are fairly heavy safeguards built into the bill. Those safeguards, however tight they are, would get at the egregious forms of counterfeiting that we collected in our preparations for presenting this matter to the Cabinet Council on Commerce and Trade. Mr. HUGHES. What are your estimates of the extent of the problem of trademark counterfeiting? How much money are we talking about? Mr. MOSSINGHOFF. They are awfully difficult to arrive at, Mr. Chairman. I was pleased to participate this fall in an informational hearing held by the International Trade Commission in an attempt to get at harder data than we have. Some of the data we have on counterfeit is hard. From the phono-record area they talk about half a billion dollars, for example. In the fashion industry, the estimates of a New York Times article-and we haven't verified that-are that in the fashion industry alone profits from counterfeiting amount to maybe a half a billion dollars. The generally accepted figure is billions of dollars, but I haven't seen anything crisper than that. Mr. HUGHES. We have no specific data? Mr. MOSSINGHOFF. I hope that with the results of the ITC hearing that we will have better data, but it clearly is a matter-when Mr. Kirk and I presented this to the Cabinet Council, we had in our hand counterfeit aircraft engine bolts, which should scare some people. Each of them looked like they would be perfectly able to hold an engine on. One obviously was because it was the real thing. The other, who knows? Mr. Kirk came back from his travels with any number of examples of Cross pens and things like that, Cartier watches, which are absolutely clearly knockoffs of the real thing. Mr. HUGHES. Would you limit the terms of the criminal violation to those instances where there is a risk of human life or safety, or would you treat it within the confines of the bill calling for different criminal penalties? In other words, would you restrict the bill to those instances where there is a direct risk or indirect risk to human life or safety, or would you distinguish those instances that include all instances where counterfeit trademarks were involved within the purview of the criminal statute and just deal with it separately insofar as invoking different sanctions, different criminal penalties? Mr. MOSSINGHOFF. I guess my preference, Mr. Chairman, would be to make it simple. That would be to apply it across the board. I think politically, it absolutely is clear that you get a lot more political attention when you talk about counterfeit aircraft engine bolts than when you talk about counterfeit Jordache jeans, for example. It seems to me that it is difficult. Maybe that bounds the situation but, for example, based on my experience at NASA, we had some counterfeit semi-conductor parts. It is hard to say whether those involve public health or safety. If they are involved in the space shuttle, they clearly do involve national prestige and public health and safety. If they are in your stereo set, they could just cause your stereo set to break. I think there is such a huge gray area, depending on the use of the goods, that it would be extremely difficult to try to define that gray area. I am persuaded by the Department of Justice view. I know very little about their budget and their resources, but I am persuaded by the fact that if you had these criminal sanctions on the book, that alone would act-with one or two highly visible prosecutions that alone would tend to drive people out of this, would be my opinion. Clearly the Lanham Act itself, since you are dealing in many cases with people that operate out of lofts and who can fold up their tents and steal away in a matter of 24 hours, the Lanham Act has not proven to be an effective deterrent. Mr. HUGHES. Thank you very much. The gentleman from Michigan. Mr. SAWYER. I am sure you heard me outline a problem with the Ford Motor Co. parts. Do you have a view as to whether that would be within the purview of a counterfeit mark or not? Mr. MOSSINGHOFF. I think it would. As I understand the situation that you have outlined, the situation would be that someone, hoping to get a release or purchase order from General Motors, or Ford, in this case, made 1,000 parts and then it turns out that whatever contractual relationships they had with Ford, Ford only bought 500 of those parts and they decided to sell the other 500. I would say those would be counterfeit marks. Even though the quality is actually identical, as you point out, I think it would clearly fall within the ambit of the bill. I would think that it would be incumbent upon the manufacturer to somehow obliterate, file off or somehow remove the Fomoco mark. A very good friend of mine is a trademark counsel for BristolMyers. He lectures at American University, where I teach. He has a delightful lecture that he puts on with slides. He called me one day and said he couldn't come down to teach the class that night, as we agreed, because he and his private investigator were on the heels of someone who was selling counterfeit Ban deodorant in New York City. I said, "How did you know it was counterfeit?" He said, "It is easy because they use better paper in their labels." So, the quality in some cases-you may get better paper in your labels. I don't know how the deodorant itself was. I would answer your question yes, the Fomoco parts would be covered. I don't think parallel imports, the issue raised I think by the chairman or you about someone buying a product abroad from the manufacturer and importing it through a nonauthorized-I don't believe that should be covered by the bill. It clearly would not be covered by the anticounterfeiting code that we are suggesting in GATT. Mr. SAWYER. Do you have any preference between the use of the mark on counterfeit goods or services? They are kind of saying the same thing but they are going about it backward. Mr. MOSSINGHOFF. We believe that the bill would be improved by referring to counterfeit goods or services and then defining that as goods or services which use a spurious mark identical to or substantially indistinguishable from the genuine mark. We think that would be an improvement. Mr. SAWYER. When you say that no one has the ownership of a mark in gross, by that I presume that you mean that if I for some peculiar reason took a fancy to the General Electric label and thought it was very decorative, that I could put it on my car and General Motors couldn't make any objection to it, or display it in my living room or something of that type, or could they stop me from doing that? Mr. MOSSINGHOFF. I would want to think more before I answered that. There is a situation, for example, of Cadillac cat food. That is generally held not to be the use of the word "Cadillac" on cat food does not infringe the General Motors very famous trademark "Cadillac." Mr. SAWYER. But they prevented it in the case of Cadillac Boat Co., though. Mr. MOSSINGHOFF. Yes, because of the test under the Lanham Act, which is confusing similarity. The judgment in that case was that there was sufficient similarity between modes of transportation that there would be some thought or some confusion in the minds of consumers. Mr. SAWYER. Well, it was the use of that funny seal. Cadillac Boat Company was located in Cadillac, MI. So, the use of the term "Cadillac' I presume was perfectly all right in connection with their boat, but they used a seal on it that was very similar to that gadget that Cadillac has on the front of their car. If there is doubt-let's say I am not even selling anything with it. I am just taken with it and I get a copy of it and make a copy of it and hang it in my den as a decorative thing, would they have any right to any control over that kind of thing? Mr. MOSSINGHOFF. In general I would say no, but there are cases the National Football League is a classic example of where their team emblems, if put on hats or something like that clearly would and I think if put on a pen, the good would actually be the pen. It would be the mark on the pen or the mark on a seal. I think that would be the good. The law is that there is no right to a trademark in gross, but it is hard to imagine how the mark would appear in tangible form and not be on something which would be a good and then the question would be a question of confusing similarity. Mr. SAWYER. That is what is kind of confusing me when you said no one owns one in gross. I didn't know quite what you meant. I know in the NFL, for example, if you just put it on a button it probably is some kind of an infringement. Mr. MOSSINGHOFF. I think so, but the good would be the button in that case. Mr. SAWYER. Is that an infringement of a copyright or a trademark? Mr. MOSSINGHOFF. Trademark; perhaps both, but trademark. I yield back. Mr. HUGHES. To follow up on that, suppose a real estate broker with the same name as Cadillac decides as part of his promotion that he is going to use the Cadillac emblem. Would that violate the existing law? |