Counterfeit Trademarked Goods

1. 
   Tariff Act, § 1526
   
   1. 
      A “foreign manufactured good, bearing a valid United States trademark, that is imported without the consent of the United States trademark holder.” (K Mart)
      
      1. 
         Protection limited to U.S. citizens
         
   2. 
      Common Control Exception – U.S. customs allows gray market re-importation when foreign owners and US owner are the same or affiliated.
      
      1. 
         Only applies when
         
         1. 
            Goods are not physically or materially different OR
            
         2. 
            Goods bear conspicuous label that lets people know how different they are
            
   3. 
      Importation barred
      
      1. 
         Products manufactured abroad under U.S. license may be interdicted if companies not subject to common control. (K-Mart v. Cartier)
         
      2. 
         Domestic licensor of foreign-owned mark may prohibit importation of goods from foreign owner. (K-Mart)
         
   4. 
      Importation ok:
      
      1. 
         Domestic subsidiary/registrant of U.S. trademark gets competition from third-party’s purchase and importation of foreign manufactured goods. K-Mart
         
2. 
   Lanham Act § 42.
   
   1. 
      Prohibits importation of goods that copy or simulate a registered U.S. trademark.
      
   2. 
      Material difference required by some cts. in order to stop importation. Lever Bros. (Common control exception inapplicable when re-imported goods materially differ from the domestic goods; Lever)
      
3. 
   Customs regulations
   
   1. 
      Grey market goods may be imported when…
      
      1. 
         Goods are identical, or
         
      2. 
         Goods bear a conspicuous label states that “This product is not a product authorized by the United States trademark owner for importation and is physically and materially different from the authorized product.”
         
   2. 
      Customs required to seize and destroy violating products
      
4. 
   Copyright Act. § 103, 602.
   
   1. 
      Prohibits importation of copyrighted goods w/o copyright holder’s consent (§602(a)) UNLESS:
      
      1. 
         First Sale Doctrine – Lawful purchaser of copyrighted item can resell it without owner’s permission. (§109(a)) (L’Anza Research)
         
         1. 
            Open question: does this apply even if the first sale is outside the U.S.?
            
         2. 
            SC says first sale must be in US (Omega v. Costco)
            
            1. 
               IE Omega gets to control price of first US sale, effectively controls the price
               
   2. 
      Doctrine of Exhaustion – at some point, right of copyright holder to control distribution must come to an end
      
      1. 
         IE I can give my old t-shirt to my little brother
         
5. 
   Japan
   
   1. 
      Parallel importation legal when… (Parker Pen)
      
      1. 
         Mark indicated manufacturer, not distributor, as source of goods.
         
      2. 
         Pens were equal quality.
         
      3. 
         Domestic mfr. good will based on status as exclusive distributor.
         
      4. 
         Parallel importation promotes competition
         
      5. 
         Parallel importer did not benefit from domestic’s advertising.
         
6. 
   Europe
   
   1. 
      First sale rule: Trademark rights can prohibit gray market imports into the common market if the first Sale was in the EU. (Silhouette v. Hartlauer)
      
      1. 
         If first sale was outside, holder can bar importation?
         

1. 
   Members can stop importation of infringing goods. Art. 44.
   
2. 
   Covered Goods. Art. 51, FN 14
   
   1. 
      Counterfeit goods: “goods, including packaging, bearing without authorization a trademark which is identical to the trademark validly registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the rights of the owner of the trademark in question under the law of the country of importation;
      
   2. 
      Pirated copyright goods: Copies made without the consent of the right holder or person duly authorized by the right holder in the country of production and which are made directly or indirectly from an article where the making of that copy would have constituted an infringement of a copyright or a related right under the law of the country of importation.
      
3. 
   Damages – Articles 45-48
   

PracApp:

• 
  Why do companies want to discourage parallel imports?
  
  • 
    Hurts brand name if imported at a lower price (L’anza)
    
• 
  Generally, consumers want parallel imports, better prices for them
  
• 
  Current US law incentivizes companies to ship production oversees
  
• 
  Generally, you can prohibit undesired importation of goods bearing your mark
  
  • 
    Exceptions are if…
    
    • 
      The goods bear a mark valid in their country of origin OR
      
    • 
      The foreign manufacturer is affiliated with the US mark holder, and you cannot show
      
      • 
        Goods are materially different AND
        
      • 
        No mandated-form disclaimer on goods
        
• 
  How to protect against grey market imports on the front end:
  
  • 
    Direct control may be the most effective
    
    • 
      
      
    • 
      Put provisions in license preventing sub-licensing and sales in the united states
      
      • 
        Customs will enforce this
        
    • 
      if goods are different, can get them on deceptive practices
      
  • 
    More difficult with subsidiaries
    
    • 
      More control lets you make sure they are accountable to you, so you can punish them for competing with you
      
    • 
      However, if you don’t control them they may fall into common control exemption
      
      • 
        Then you have to argue materially different product, deceptive practices
        
      • 
        Good idea: you yourself require they sell a materially different product
        
• 
  How do you get customs to enforce your IP rights?
  
  • 
    Hand them the evidence to easily make a determination that the incoming product will be “confusing” for consumers
    
• 
  Big question: Does the rule of law exist for normal commercial cases
  
  • 
    Will they enforce clause that says “you cannot sub-assign your rights to produce, sell, be a subsidiary”?
    

Direct franchising – someone wants to use your brand

Wholly owned

Master license

1. 
   Branch v. Subsidiary
   
   1. 
      Control
      
      1. 
         Branch
         
         1. 
            Direct control
            
      2. 
         Subsidiary
         
         1. 
            Will still be able to make big decisions via controlling interest
            
         2. 
            However, can’t micromanage
            
            1. 
               If manager not performing, want to fire, have to work through board
               
               1. 
                  This might hurt the company
                  
   2. 
      Liability
      
      1. 
         Branch
         
         1. 
            Liable for all debts and actions
            
      2. 
         Subsidiary
         
         1. 
            Probably not on the hook for sub’s debts and judgments against them
            
   3. 
      Taxes
      
      1. 
         Less distinction between branch and subsidiary
         
   4. 
      Dividend and Profit repatriation
      
2. 
   Corporate forms
   
   1. 
      Europe in general
      
      1. 
         Businesses incorporated anywhere in Europe have standing in place of business (Uberseering BV v. Nordic Construction Company)
         
         1. 
            Essentially, corporate forms of all market nations are valid
            
         2. 
            Has created a race to the bottom? (UK laws most favorable)
            
      2. 
         Respect for foreign corporate forms does not prevent double taxation
         
   2. 
      German: AG v. GmbH
      
      1. 
         GmbH – like a private limited liability company (Most popular for U.S. subsidiaries)
         
         1. 
            Most popular form of company in Germany (150x more GmbH than AG)
            
         2. 
            Few statutory S/H protections.
            
         3. 
            Sh. not really traded.
            
      2. 
         AG – for large publicly traded corporations
         
         1. 
            Extensive statutory protection for S/H.
            
         2. 
            Most terms in articles of incorporation are statutorily defined.
            
         3. 
            About 20% of sh. traded on public market.
            
         4. 
            S/H meetings must be in Germany
            
      3. 
         Codetermination and Two-Tiered Management
         
         1. 
            Applies to companies with more than 500 workers
            
         2. 
            Management Board (Vorstand) and Supervisory Board (Aufsichtrat)
            
            1. 
               50% worker representation on supervisory board
               
   3. 
      Societas Europae
      
      1. 
         Formation
         
         1. 
            Merger of two or more existing public limited companies from at least 2 different EU Member States.
            
         2. 
            Through a holding company holding companies in two different member states.
            
         3. 
            By formation of a subsidiary of companies from 2 different member states.
            
         4. 
            By the transformation of a public limited company which has for at least two years had a subsidiary in another Member States.
            
      2. 
         Characteristics
         
         1. 
            Single registration allows business to operate in any member State without having to re-register.
            
            1. 
               S.E. still registers with national authority where it has its administrative head quarters.
               
         2. 
            Will still be taxed like any other company operating under that national authority.
            
         3. 
            Have to apply labor law of place where the majority of the workers lie
            
3. 
   Greenfields v. Acquisition
   
   1. 
      Greenfields (starting from scratch)
      
      1. 
         It will be significantly harder to deal with regulations, laws, way of doing business
         
         1. 
            May need government approval, bribes
            
   2. 
      State enterprise privatization
      
      1. 
         Great for jumping through bureaucracy
         
      2. 
         Downside is major loss of control, new set of regulations
         
   3. 
      Joint Venture
      
   4. 
      Acquisition
      
      1. 
         EU Merger Control Regulation
         
         1. 
            Commission jurisdiction:
            
            1. 
               when control is acquired through equity or contract. Includes companies created by through joint venture.
               
            2. 
               Community Dimension Mergers. Mergers occurring outside Europe are subject to Commission jurisdiction if they have worldwide revenues of €5B or EU revenues of €300M.
               
               1. 
                  May be different standard when 3 EU states involved?
                  
            3. 
               Extraterritorial Reach – Agreements made in EU even if businesses are outside are subject to EU law. Wood Pulp.
               
            4. 
               Time Limit – EU has 4 months to make determination.
               
            5. 
               Exceptions to jurisdiction:
               
               1. 
                  If 2/3s of activities take place in one Member, its laws apply.
                  
               2. 
                  Members can oppose mergers on security, preservation of media plurality, financial institution regulations and other legitimate interests.
                  
               3. 
                  Members can ask for Commission investigation of smaller mergers if they are likely to create dominant position in Member market.
                  
         2. 
            Substantive rules:
            
            1. 
               Commission must review mergers where competition “would be significantly impeded.”
               
            2. 
               Can consider factors such as “the interests of the intermediate and ultimate consumers, and the development of technical and economic progress.”
               
            3. 
               Joint ventures can also be subject to regulation if they meet the concentration thresholds.
               
4. 
   Incentives:
   
   1. 
      Nowadays, question is “which country offers best incentives?”
      
      1. 
         Used to be “which country is least restrictive?”
         
   2. 
      Most common incentives:
      
      1. 
         Providing land and infrastructure
         
         1. 
            Industrial park, roads, transportation
            

PracApp

• 
  What do countries want in the FDI context?
  
  • 
    For you to make things in their country and export
    
  • 
    Acquire new technology
    
  • 
    Acquire prestigious industries
    
  • 
    Sometimes (rarely) they will welcome better management/techniques
    
• 
  Best overall solution is to open up a dialogue and get good contacts
  
  • 
    Contacts in labor, suppliers, government
    
  • 
    It’s not what you know, it’s who you know
    
• 
  While it may be possible to avoid rules like codetermination if you try really hard (incorporate outside Germany, use series of smaller companies) this risks angering regulators by dodging the law
  
  • 
    May be worse strategy in the long run
    

1. 
   Currency Controls
   
   1. 
      Government controls the distribution of hard currency
      
      1. 
         Biggest priorities: energy, food, weapons, medicine/drugs
         
2. 
   Transfer Pricing
   
3. 
   Insolvency
   
   1. 
      Jurisdictional approaches
      
      1. 
         Territorial – proceedings must occur where property is located
         
         1. 
            More common globally
            
      2. 
         Universal – one proceeding that claimants must enter or forfeit
         
         1. 
            US approach
            
   2. 
      Lots of cooperation agreements exist in this area
      
      1. 
         Allows one court to be designated “master court” that other national courts defer to
         
   3. 
      General rule: national creditors can only go after national assets if the national subsidiary is incorporated separately
      
      1. 
         However, the corporate veil does occasionally get pierced
         
         1. 
            Leads to incorporating multiple times
            

PracApp:

• 
  How can you get money out of a country with strict price controls?
  
  • 
    Increase royalty payments from sub to parent
    
    • 
      May be challenged as transfer pricing
      
    • 
      Scrutinized by tax and customs for foreign and home country
      
    • 
      Might get international judgment against you allowing countries to sequester your property to enforce it
      
  • 
    Best option is to have a “light footprint”
    
    • 
      Lease land and equipment, pay for it with in-country profits
      
    • 
      When you need money, borrow from a local bank
      
    • 
      Reduces profit, but also greatly reduces risk
      
• 
  What price should a subsidiary charge a parent?
  
  • 
    Prices must be in line with normal market transactions
    
    • 
      However, information on this is sparse for global market
      

1. 
   Negotiation
   
   1. 
      Straightforward, party to party negotiation
      
   2. 
      Often preferable in order to maintain business/trust relationship
      
2. 
   Mediation
   
   1. 
      Essentially negotiation with a neutral party facilitating
      
      1. 
         Mediator has no/very little power to dictate outcome
         
   2. 
      Advantages
      
      1. 
         Mediator may be technically skilled in the relevant area
         
      2. 
         Willing to poke holes in the arguments of either party
         
   3. 
      Chinese approach – conciliator
      
      1. 
         Big difference is the power to suggest what a solution might be
         
      2. 
         Has the power to become an arbitrator, meaning he may later enforce his suggestion
         
3. 
   Arbitration
   
   1. 
      Arbitrator(s) will make a final decision that will bind the parties
      
   2. 
      Requires consent of the parties
      
      1. 
         Usually made ahead of time in contractual agreement
         
   3. 
      Procedures (generally):
      
      1. 
         Typically lacks discovery, motion practice, appeals process
         
      2. 
         Final decision may do no more than state what the arbitrator decided, without explanation
         
   4. 
      Litigation
      
      1. 
         Certain aspects change substantially in different court systems
         
         1. 
            Service of process
            
         2. 
            Discovery
            
      2. 
         Will foreign judgments be enforced? (see topic below)
         

PracApp:

• 
  Arbitration v. Litigation
  
  • 
    Arbitration is ideal for smaller, piecemeal issues
    
    • 
      Efficiently deal with issues without ruining business relationship
      
  • 
    When issues are fundamental, may want protections of due process
    
    • 
      Might depend on business size, familiarity with other party
      
  • 
    Trick is striking balance between smaller and larger issues that might come up
    

1. 
   Parties choice of forum is typically at their discretion
   
   1. 
      Contrast choice of law, which is usually set by statute
      
2. 
   United States
   
   1. 
      Parties to a contract may agree in advance to submit to the jurisdiction of a foreign court, and this provision will be enforced in the US (Bremen v. Zapata)
      
      1. 
         Based on the requirements of modern commerce
         
         1. 
            Give predictability to business (Carnival Cruise Lines)
            
      2. 
         Exceptions mentioned by court:
         
         1. 
            Fraud
            
         2. 
            Undue influence
            
         3. 
            Overweening bargaining power
            
         4. 
            Overreaching
            
         5. 
            Not inconvenience
            
            1. 
               Requires a “heavy burden of proof” (Carnival Cruise Lines)
               
      3. 
         However, ignores the fact that enforcing the forum essentially decides the case (professor)
         
   2. 
      New test: was forum selection clause “unreasonable” (Gertrude Oldendorff)
      
      1. 
         Risk of foreign misinterpretation of mandatory law (COGSA) by English court validated disregarding forum selection clause
         
3. 
   Europe
   
   1. 
      Brussells II (pg 443) – articles I and II
      
      1. 
         Art 23 – choice of parties will be enforced if…
         
         1. 
            In writing
            
         2. 
            In form they agreed to
            
         3. 
            In some other form typical for the situation
            
      2. 
         Does not apply to consumers, civil matters
         
4. 
   Hague Convention
   
   1. 
      Applicability
      
      1. 
         Business to business agreements
         
      2. 
         Does not apply to intellectual property rights disputes
         
         1. 
            However, these will not be a barrier to reaching other issues
            
   2. 
      Three basic rules
      
      1. 
         Court chosen by parties in exclusive agreement governs
         
      2. 
         Courts not chosen by parties do not have jurisdiction
         
      3. 
         A judgment resulting from valid choice of court agreement will be enforced by contracting states
         
   3. 
      Optional fourth rule:
      
      1. 
         Courts will recognize judgments of given by courts of other contracting states designated in a non-exclusive choice of court agreement
         
   4. 
      
      

1. 
   Choice of law is typically governed by statute (sometimes caselaw)
   
   1. 
      Each forum typically has its own choice of law rules
      
2. 
   United states
   
   1. 
      Mandatory law can be decided by a foreign court/arbitrator when not “unreasonable” (Firemen’s Fund)
      
      1. 
         Anti-trust law is reasonable (Firemen’s Fund, 9^th Cir, 1997)
         
      2. 
         COGSA is unreasonable (Gertrude Oldendorff SDNY 2002)
         
   2. 
      Foreign law must be pleaded and proven as a matter of fact before it can be applied
      
   3. 
      Forum non conveniens
      
      1. 
         Technically a choice of forum provision, but court considers whether an alternative forum will provide something approaching justice compared to US courts
         
   4. 
      Personal jurisdiction
      
      1. 
         Is Massachusetts rule, asserting PJ over anyone “doing business” in Massachusetts, constitutional?
         
         1. 
            Is purposeful availment of rule of law, business environment?
            

PracApp:

• 
  ALWAYS PUT CHOICE OF LAW AND FORUM IN YOUR AGREEMENTS
  
  • 
    These are usually enforced
    
  • 
    Certainty alone is a big bonus, even if not ideal forum or law
    

1. 
   United States
   
   1. 
      Federal Arbitration Act
      
      1. 
         Implementing legislation for New York Convention
         
      2. 
         Applies to commercial disputes
         
      3. 
         Arbitration clauses will be enforced
         
   2. 
      Basically any law can be arbitrated
      
      1. 
         Anti-trust, trademark law (Mitsubishi)
         
      2. 
         Includes arbitration in a foreign court (Firemen’s Fund see above)
         
   3. 
      Complying with or advancing US foreign/anti-terrorism policies is no cause for vacating an arbitral award (National Oil v. Libyan Sun)
      
2. 
   New York Convention
   
   1. 
      Art 5.1 – convention is mandatory law for the signatories
      
   2. 
      An arbitration award issued in any other state may generally be enforced in a contracting state
      
      1. 
         All we care about is the forum for the arbitration, NOT the parties themselves
         
      2. 
         Some states opt for the reciprocity reservation
         
         1. 
            IE they will only enforce awards issued by states which enforce theirs
            
   3. 
      Affirmative defenses (this list is exhaustive):
      
      1. 
         incapacity;
         
      2. 
         arbitration agreement itself is not valid under its governing law;
         
      3. 
         Inadequate opportunity to present defense
         
         1. 
            Arbitration implies relinquishing courtroom rights, including right to call witnesses (Parsons)
            
      4. 
         Arbitration in excess of jurisdiction
         
         1. 
            Does not sanction second-guessing of arbitrator’s interpretation of the terms submitted (Parsons)
            
      5. 
         Composition of arbitral tribunal not in accordance with either agreement or rules of the forum state
         
         1. 
            Usually arbitrators have to disclose conflicts of interest
            
         2. 
            However, once arbitrators approved, not appealable
            
      6. 
         award not yet binding or set aside by competent authority
         
         1. 
            a legal authority of the chosen forum state (ie a higher court of law) may throw out an award under any law of the forum
            
         2. 
            however, a court enforcing an arbitral award of another forum is limited to the affirmative defenses of the NY Convention (Spier v. Calzaturificio Tecnica)
            
      7. 
         subject matter not capable of resolution by arbitration
         
         1. 
            refers to categories of topics not capable of arbitration, not ad hoc determination (Parsons and Whittmore)
            
      8. 
         Contrary to "public policy"
         
         1. 
            test: where enforcement would violate “the forum state’s most basic notions of morality and justice”
            
         2. 
            Foreign policy and anti-terrorism policy are not “public policy” which justifies throwing out an arbitral award (National Oil v. Libyan Sun)
            
         3. 
            Improper application of interests rates to award may violate public policy (DC Georgia case)
            
      9. 
         Manifest disregard for the law (US only, interpreted in FAA)
         
         1. 
            Does NOT sanction review of arbitral decisions for mistake of fact or law (Parsons)
            

PracApp:

• 
  In international context, arbitrators often say nothing except “I’ve decided that x gets y”
  
  • 
    In these cases it is almost impossible to raise an affirmative defense because you have no basis for doing so
    
  • 
    Only when the arbitrator gives you more will it be worth challenging
    

1. 
   United States
   
   1. 
      Old regime was based on reciprocity
      
   2. 
      Matter is governed by state law
      
      1. 
         SC has said that we should recognize foreign judgments under comity
         
         1. 
            Only exception is when their system of justice is fundamentally inadequate
            
         2. 
            However, this is not binding under state courts
            
      2. 
         Federal courts hearing these matters will be deciding on the basis of state law (Erie)
         
      3. 
         States are all over the place on how they deal with this
         
         1. 
            Florida: negative reciprocity clause
            
            1. 
               Enforces judgments of a jurisdiction until there is evidence they don’t enforce ours
               
   3. 
      Uniform Enforcement of Foreign Judgments Act
      
      1. 
         States who pass it say that simply filing a foreign judgment with the court gives it the force of a domestic judgment
         
      2. 
         Any normal grounds for attacking the judgment are available
         
         1. 
            Until challenged by the defendant, judgment is enforced
            
2. 
   Foreign money-judgment recognition act (US law)
   
   1. 
      Standards for recognition and enforcement
      
   2. 
      Section 4: non-recognition
      
3. 
   Brussels II
   
   1. 
      EU states will enforce EU judgments
      

International Sale of Goods

• 
  CISG
  
• 
  UN SLoC Convention
  
• 
  UN Electronic Communications Contracts
  
• 
  Harter Act, COGSA (293)
  
• 
  E-SIGN (297)
  
• 
  Federal BoL Act (304)
  
• 
  UCC (319)
  
• 
  Rome I (436)
  
• 
  EU E-Commerce Directive (462)
  
• 
  EU Consumer Unfair Practices Directive (467)
  
• 
  EU Distance Selling Directive (476)
  

• 
  WTO TRIPS Agreement (92)
  

• 
  EU Regulation for Societeas Europea (453)
  

• 
  NY Convention
  
• 
  Convention on Service Abroad
  
• 
  Convention on taking of Evidence Abroad
  
• 
  Hague Choice of Court Agreements (2005)
  
• 
  EU foreign judgments (Brussels II) (443)
  
•