Appeals Court Remands Gray Market Decision to ITC Again
The Court of Appeals for the Federal Circuit (CAFC) vacated an International Trade Commission (ITC) decision that denied John Deere & Company an exclusion order against imports of European models of its harvesters, and ordered the agency to define what “all or substantially all” means in determining whether Deere’s U.S. sales are mainly of U.S. made products and thus qualify for an ITC exclusion order against unauthorized imports.
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ITC Investigation of Parallel Imports from Europe Began in 2003
Deere alleged in February 2003 that dealers, both independent and official, had infringed its trademarks by importing and selling Deere’s European-version harvesters in the U.S., violating 19 USC 1337(a)(1)(C), which forbids importation of products “produced by the owner of the United States trademark or with its consent, but not authorized for sale in the United States.” The ITC found that Deere’s trademark had been infringed, and issued a general exclusion order in 2004 prohibiting importation of European-versions of Deere harvesters.
Appeals Court Previously Upheld ITC, but Called for “Substantially all” Test
The CAFC in 2006 upheld the ITC in part, finding the exclusion order was justified because “material differences” between the North American and European versions of Deere harvesters would cause consumer confusion. But the court also required that Deere show that “substantially all” of its harvesters sold in the U.S. with its authorization were North American and not European versions, since otherwise a trademark owner could gain exclusions even if it had itself sold a mix of product versions.
ITC Found U.S. Sales Were Not Substantially All North American Models
The ITC’s administrative law judge determined in December 2006 that substantially all of Deere’s U.S. sales were of North American version harvesters, but the Commission reversed this ruling in August 2008, finding that dealers had “apparent authority” to sell foreign version harvesters, that Deere had acceded to the importations, and that of the foreign-made units sold in the U.S., enough were sold with the company’s authorization for the trademark to void the “substantially all” hurdle.
Faulting ITC Calculations, Court Issues 2nd Remand on “Substantially All” Test
In its new decision the CAFC agreed that Deere had authorized some, but not all, U.S. sales of European units, and noted that the company had litigated 9 years in attempting to limit them. Most importantly, the court found the ITC “misapplied the ‘all or substantially all’ test” by comparing authorized to unauthorized imports, rather than authorized imports to total U.S. sales. In a new remand, the court instructed the ITC to determine whether Deere lost the right to exclude foreign models by authorizing over 3% of its U.S. sales to be of foreign-made units, or whether, on the contrary, 96.6 to 96.9% of U.S. sales being U.S.-made amounts to “substantially all,” such that Deere deserves an exclusion order against unauthorized imports of its foreign-made trademark products. The court allowed that the benchmark will vary in different industries, and noted that it was over 4% in another litigated case.