Details of CIT Ruling that IP in its Purview, Seizure Notice Not a Bar

The Court of International Trade has ruled in CBB Group, Inc., v. U.S., that its consideration of cases involving "deemed exclusions" and its ability to order relief, if warranted, is not precluded by CBP's issuance of a Seizure Notice (as it was issued after the case was brought to court) or by the prospect that adjudication of claims will involve the application of copyright law.

(See ITT’s Online Archives or 06/30/11 news, 11063024, for BP summary announcing this decision.)

CBP Held Copyright Infringing Goods Which Became "Deemed Exclusions"

CBB Group Inc. is an importer of toys and other consumer goods and in September 2010, imported 785 cartons of plush toys. CBP released 211 cartons and refused to release 574 cartons, which CBP determined contained pirated merchandise that infringed a registered copyright. While CBB Group submitted the merchandise for examination on September 7, 2010, CBP failed to reach an admissibility decision within the subsequent 30 days, and a “deemed exclusion” occurred in October 2010.

CBB Filed Protest Which Was "Deemed Denied," CBP then Issued Seizure Notice

CBB Group timely filed a protest of the deemed exclusion on November 19, 2010. CBP took no action within 30 days of the protest, and it was “deemed denied” on December 20, 2010. CBB Group then commenced action at the CIT on December 21, 2010.¹

CBP issued CBB Group a Seizure Notice on January 11, 2011, stating that CBP had seized the merchandise on December 21, 2010, and subsequently issued a document purporting to be a denial of CBB Group's protest. In response to the Seizure Notice, CBB Group elected judicial rather than administrative forfeiture proceedings.

CBP Argued CIT Lacked Jurisdiction over IP Issues and Seizures

CBP argued that because CBB Group’s merchandise had been seized, the underlying dispute in this action would require a determination upon the law covering intellectual property and copyright protection, and counterfeit goods. CBP claimed that such issues are not international trade law issues and, therefore, cannot be decided by the CIT.

CBP also argued that the CIT does not have jurisdiction over seizures due to: (i) 28 USC 1356, which states that only a district court has jurisdiction to review the seizure of merchandise; (ii) the Tariff Act (19 USC 1595a(c)(2)(C)), which states that merchandise may be seized and forfeited if it is merchandise or packaging in which copyright violations are involved; and (iii) the Copyright Act of 1976 (17 USC 602(a)(1)), which provides that importation, without the authority of the copyright owner, of copies of a work that have been acquired outside the U.S. is an infringement of the copyright owner’s exclusive right to distribute such copies and that any such articles are subject to seizure and forfeiture under the customs laws.

CBP also cited 19 CFR 133.42(c), under which a port director has authority to seize any imported article which he determines is an infringing copy of a copyrighted work protected by CBP.

Also Claimed Case Should be Dismissed as CIT Unable to Order Effective Relief

CBP stated that the only relief CBB Group could obtain on its challenge to the deemed protest denial was the release of the merchandise from a deemed exclusion. However, CBP states such an action would be ineffective because, even though the CIT has jurisdiction over protests of most deemed exclusions, release of the merchandise could only be secured through a challenge to the seizure, over which the CIT lacks jurisdiction. Therefore, CBP stated CBB Group's claims should be dismissed.

CIT Rules it Has Jurisdiction, Says CBP's Motion to Dismiss Must Be Denied

The CIT concluded that it has subject matter jurisdiction over this action and that its ability to order relief, if warranted, is precluded neither by the issuance of the Seizure Notice nor by the prospect that adjudication of CBB Group's claim will involve the application of copyright law. The CIT therefore states that CBP's motion to dismiss CBB Group's claim must be denied.

CBP Admissibility Decisions Aren't Binding if Made After Judicial Review Started

The CIT states that only it, and not CBP, is empowered² to reach definitive findings of fact and conclusions of law on the admissibility of the merchandise and fashion a remedy if CBB Group prevails. Therefore, the determination of admissibility and the determination of whether the merchandise is piratical are the same determination, and CBP is not free to usurp the CIT's power to make and effectuate that determination.

The CIT also found that a determination of admissibility that CBP reaches after the jurisdiction of the CIT has attached to a plaintiff’s cause of action contesting a deemed exclusion cannot be binding on the CIT, for otherwise, CBP's determination would be permitted to usurp the CIT's judicial power and prevent the CIT from fulfilling its judicial responsibility.

CBP’s Decisions also Do Not Relieve CIT of Its Duty to Grant Relief

Additionally, the CIT stated that the fact that CBP's admissibility decision was reached after judicial review had begun does not obviate the need for CBP to show good cause as to as to why an admissibility decision had not been made prior to the time the importer commenced suit and does not relieve the CIT of the duty to grant the appropriate relief, including, possibly, an order to release the merchandise, if that showing is not made.

Rules Issues of Copyright Cannot Defeat Jurisdiction or Preclude a Remedy

The CIT held the issues of copyright law presented in this case cannot defeat jurisdiction or preclude a remedy. The CIT stated that CBP cited no binding authority under which the CIT could not decide this dispute on the merits, and nothing in sections 514, 515, or 499 of the Tariff Act contain the restriction on the CIT's powers that CBP supposed to exist. Moreover, the CIT stated that its power to decide questions of intellectual property law has been implicitly recognized by the Court of Appeals for the Federal Circuit (CAFC), which has upheld, in at least one instance, a CIT decision regarding questions of patent law.

The CIT ordered that CBP shall take no action affecting the status or disposition of CBB Group's subject merchandise and that CBP shall take no action to affect the nature or scope of any remedy that may be ordered in this case, without the CIT's approval.

¹According to 19 USC 1499(c)(5), a protest may be filed to contest a deemed exclusion of merchandise when CBP fails to make a final determination with respect to the admissibility of detained merchandise within 30 days after the merchandise has been presented for customs examination, or such longer period if specifically authorized by law. CBP is deemed to have denied such a protest under section 515 when it takes no action within 30 days of the date the protest is filed.

²The CIT states that section 1499(c)(5) requires that in a judicial proceeding challenging a deemed exclusion where CBP does not show by a preponderance of the evidence that an admissibility determination has not been reached for good cause, the court shall grant the appropriate relief, which may include, but is not limited to, an order to cancel the detention and release the merchandise.

(Slip Op. 11-75, dated 06/27/11)