JAZZ PHOTO CORPORATION, Plaintiff,

v. UNI TED STATE S,

Defend ant. Slip Op. 04-146 UNITED STATES COURT OF INTERNATIONAL TRADE

Court No. 04-00494 Before: Judge Timothy C. Stanceu PUBLIC V

ERSION

[Judgment g

ranted f or plainti ff in par

t and for defenda nt in part] Decided: November 17, 2004 Neville P eterson LLP

( Joh n M. Pet ers on, Geo rge W. Th omp son , C urt is W. Knauss, Ma ria E. Celis

and Catherine Chess Chen ) for plaintiff. Peter D. Keisler , Assistant Attorney Gene ral, David M. Cohen , Director, Patricia M. McCarthy , Assistant Director, Stefan Sha ibani and David S. Silverbrand , Trial Attorneys, Commercial L itigation Branch, Civil Division, United States Department of Justice; Beth Brotman and Paul Pizzeck, United States Customs and Border Protection, Department of Ho meland Se curity, of coun sel, for defenda nt. Stroock &

Stroock &

Lavan LLP

( Matthew W. Siegal

and Lawrence Rosenthal) and Adduci, Mastriani & Schaum berg, L.L.P. ( Harvey Fox and Will E

. Leonard ) for amicus curiae , Fuji Photo Film Co., Ltd.

OPINION STANCEU, Judge: Plaintiff Jazz Photo Corporation (“ Jazz”) is an i mporter o f “lens- fitted fi lm packag es” (“L

FFPs”) , more co mmonly

known as “ disposabl e camer as,” “si ngle use cameras,” or “one-time use ca meras.” In this case, Jazz contests the denial byCourt No. 04-00494 Page 2

1 Fuji has been granted amicus curiae statu s in t his p roceed ing. U.S. Customs

and Bor der Prote ction (“ Customs”)of its admi nistrativ e protes t, in which it challenged decisions made by Customs on September 24 and 26, 2004, to exclude from entry two shipments of Jazz’s LF FPs that were entered at the Port of Los Angeles/Long Beach on August 26 and 27, 2004, respe ctively. Customs acted on its conclusion that Jazz had failed to prove its imported cameras were outside the scope of a g eneral exclusion order issued in 1999 by the U.S. I nternational Trade Commission (“ITC”) under Section 337 of the Tariff Act of 1930, as amende d, 19 U.S.C. § 1337 (2000) (“Section 337”). See In the Matter of Certain Lens-Fitted Film Packages , USITC I nv. No. 337-T

A-406, Pub . No. 3219 (1999). T he I TC’s ge

neral exclusion or

der appl ies to LFFPs produced a

nd imported by 26 parties, including Jazz, who participated as respondents in Section 337 proceedings initiated by Fuji Photo Film Co., Ltd. (“Fuji”), the holde r of var ious pate nts used in

manufacturing L

FFPs. 1 In those proceeding s and an enforc ement pr

oceedin g condu cted ea rlier thi s ye ar, the I

TC deter mined tha t disposab le

camera s imported

by Ja zz infring ed paten

ts held by Fuji. All of the Jazz cameras at issue are “reloaded” ca meras (also known as “refurbished” cameras), i.e. , the cameras init ially were ma nufactu red by Fuji or one of its licensees (Kodak, Concord, or Konica) and, a fter being used by

consumers and collected following photo proc essing, were fi tted with new film a

nd, in some

instance s, new fla sh batteries. Jazz obtained the reloaded cameras from Poly tech Enterprise Limited (“Polytech”) , which processed the subject cameras a t its facility in China. That processing, the nature of which is one of the issues in c ontention in this case, consisted ofCourt No. 04-00494 Page 3

various o peratio ns which, in addition to film and

battery replac ement, we

re requ ired to produce a functional and marketable ca mera. The processing included re pair to the camera case to exclude light following the f ilm reloading operation, repackag ing, and relabeling under Jazz’s trademark. Also at issue in this case are the c ircumstances under which spe

nt disposa

ble came ras, know n in the tra

de as “shells,” we

re colle cted for

use in Polytech’s reloading

operations. Under Section 337, Customs is charged with enforcing the ITC’s gene

ral exclusion order wit

h respec t to importe d disposab le came ras off ered for admission into the United States. To demonstrate that the cameras in the two entries at ba r are entitled to admission under the IT C’s general exc lusion ord er, Jazz must e stablish that the she lls used by Poly

tech to produce the reloaded camer as resulted from disposable cameras that had unde rgone a patent-exhaustin

g “fir st sale” i

n the Unite d States. T o be “patentexhausting,” the sale in the United States must be made under the authority of Fuji or one of its lice nsees. Jazz a

lso must dem

onstrate that the processi

ng Poly tech per formed to reload the cameras was a “pe rmissible repair” of the original camer a as opposed to a “prohibited reconstruction.” Both of these require ments stem from the decision of the U.S. Court of Appeals for the Federal Circuit in Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d 1094 (Fed. Cir. 2001), cert. denied, 536 U.S. 950 (2002). There, the Court of Appeals, in reviewing the underly ing general exclusion order, reve rsed the ITC’s judgment of patent infringement reg arding LF FPs for which the patent rights were exhausted by first sale in the United States, and tha t were permissibly re

paired. Id. at 1110.Court No. 04-00494 Page 4

2 By the time Customs excluded the mercha ndise, plaintiff already

had commenced an action in this court, Court No. 04-00442, claiming jurisdiction under 28 U.S.C . § 158 1(I) and

seek ing e xpedited r

elie f. Th at action a

ddre ssed six ent riesof Jazz disposable cameras, including the two at issue herein. Af ter Customs, on September 29, 2004, denied plaintiff’s protest of the decision to exclude those two entries, plaintiff initiated this case, filing its complaint on October 4, 2004. Pursuant to the expedited trial schedule, the parties conducted an acc elerated discovery process, during which defendant took depo sitions of t

he two wit

nesses w ho testifi ed at tria

l. The court exercises jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a) (2000). T he court set an expe dited tria

l schedul e with the

consent o f both par

ties. 2 At a four-day bench trial held October 12-14 and October 18, 2004, pla intiff produced evidence establishing permissible repair for a ll of the cameras in the two entries. Plaintiff produced evidence sufficient to establish “first sale” for only some of the subjec t

camera s, as iden

tified fu rther in t his opinion . Defen

dant Unite d States pr

esented no case in chief and instead relied principally on its cross-examination of the two witnesses called by Jazz at trial, and on its interpretation of the “first sale” requirement as addressed by

the Court of Appeals for the Federal Circuit, to support its contention that Jazz failed to meet its burden of proof as to any ca mera offered for admission. The court concludes, based on the recor d made in these proceedings, that only the aforem entioned

camera s for whic

h plaintif f produc ed evide

nce suff icient to e stablish “first sale” in the United States qualify for admission, and only to the extent that the court has identified those specific cameras as ca pable of being segregated from the remaining cameras in the two shipments. The court concludes that those remaining cameras are required to be exported or otherwise disposed of accor ding to applicable customs laws.Court No. 04-00494 Page 5

I. B ACKGROUND This litig ation did not arise i n isolation . Its r

oots are in other proceed

ings in which Fuji claimed that Jazz’s business activities involving single use cameras infringe d its patent rights. In the 1999 Section 337 action mentioned above, F uji charged that 27 respondents, including Jazz, were infringing fifteen of Fuji’s patents. The ITC found infring ement on t

he part o f 26 resp ondents, i ncluding Jazz, and on June

2, 1999 issu

ed its General Exclusion Order and Order to Cease a nd Desist (“Exclusion Order”) that, inter alia , prohibit

ed the imp ortation i

nto the Un

ited State s of “Cer

tain L ens-Fit

ted Film Packages.” The Court of Appeals for the Federal Circuit stay

ed the Exclusion Order pending appeal. See Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d at 1098. The Court of Appeals affirmed the Commission’s orders; however, it provided for one exception to the Exclusion Order, holding that “[t]he [ITC’s] judgment of patent infringement is reversed with respect to LFFPs for which the pate nt right was exhausted by first sale in the United States, and tha t were permissibly re

paired.” Id. at 1110. In addressing the

questions of first sale and permissible repair, the Court of Appeals for the F ederal

Circuit sta

ted the g eneral

rule tha t “paten ted artic les when

sold ‘become the priva te individu

al prope rty of the pur

chaser s, and ar

e no long er spec ifically protected by the

patent laws.’” Id. at 1102 (quoting Mitchell v. Hawley , 83 U.S. (16 Wall) 544, 548 (1872)). “The purchaser of a patented article has the rights of any owner of personal property, including the right to use it, repair it, modify it, discard it, or resell it, subject only to overriding conditions of the sale.” Id. The Court then addressedCourt No. 04-00494 Page 6

two specific questions arising from the application of this ge neral principle of patent law to the single use ca

meras imp orted by

Jazz. First, i

t addres sed what

“repai r” of a s ingle

use came ra is per missible un

der the p atent law s. Second , it define d what ty pe of sal e is “patent-exhausting,” i.e. , the Court resolved the issue of the ty pe of sale needed for the purchaser to obtain the full scope of rights, including the right to repair as well as the right to use and resell, that will attach only when an article no longer has pate nt protection. The Court of Appeals analy zed in detail the distinction patent law draws between “permiss ible rep air” an

d “prohib ited rec onstruct

ion.” The Court spec ified tha

t an eightstep proc ess under

taken by Jazz would qua

lify for per missible r epair, a s follows: (1) removing the cardboard c over; (2) opening the body of the shell (usually by

cutting at least one weld); (3) replacing the w inding wheel or modify

ing the film cartridge to be inserted; (4) resetting the film counter; (5) re placing the battery

in a camera equipped with a fla sh; (6) wi

nding ne w film out o f a cann

ister onto a spool or

into a roll ; (7) resealing the camera

body using tape

and/or glue; and (8) apply ing a new cardboard

cover. Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d at 1101. Regar ding the “first sa le” issue , the Cour

t of Appe als for the Fede

ral Circ uit, settling a previo usly open que stion of pa

tent law, held that [t]o invoke th e protection of the first sal e doctri

ne, the a uthorized first sal e must have occurred under the United States patent. Our de cision applies only to L FFPs for which the United States patent rights have be en exhausted by f irst sale in the Unit

ed States . Impo

rted L FFPs of s olely foreign provenance ar

e not immunized from infringement of United States patents by th e nature

of their r efurbishment. Id. at 1105 (citation and parenthetical omitted).Court No. 04-00494 Page 7 While Jazz’s appeal of the ITC Exclusion Order was pending, Fuji filed a se cond action with the ITC seeking “ institution of a formal enforcement proceeding to e nforce the exclusion and cease and desist orders, which [were] issued on June 2, 1999, impos[ition of] civil penalties, and impos[ition of] such other remedies and sanctions as are appropriate aga

inst Jazz and several other entities.” ITC Enforcement Initial Determination , USITC I

nv. No. 337-TA-406 (Apr. 6, 2004). The ITC administrative law judge f ound that Ja

zz had viola

ted the Exc lusion Ord

er with r espect t o some of i

ts product imported from various facilities in the People’s Republic of China (“China”). See ITC Enforcement Initial Determination at 149. The ITC Enforce ment Initial Determination effectively became the determination of the Commission when the I TC issued a notice declining to review the Enforc ement Initial Determination on July 27, 2004. Determination Not To Review the Presiding Administrative Law Judge’s Enforcement Initial Determination and Request for Briefing on Recommended Enforcement Measures on Certain Lens-Fitted Film Packages , 69 Fed. Reg. 46,179 (Aug. 2, 2004). In addition to the actions it had brought bef ore the ITC, Fuji sued Jazz for patent infringement in the U.S. District Court for New Jersey

. See Fuji Photo Film Co. Ltd. v. Jazz Photo

Corp ., 249 F. Supp. 2d 434 (D. N.J. 2003). The District Court, after a jury trial, found Jazz “liable for infringement of Fuji’s patents with respect to 40,928,185 cameras sold by

Jazz during the period 1995 through August 21, 2001.” Id. at 459. The District Court set damages owed by Jazz at $22,919,783.60. The Court also found Jazz’s president personally

liable for inducement of infringement with respec t to 39,103,664 ofCourt No. 04-00494 Page 8

the cameras, and held him jointly and severally

liable for an amount of $21,898,051.84. Id. at 459-60

. The D istri ct Cou rt jud gment appare

ntly cont ribut ed toa dec ision

by Jazz to seek protection under chapter 11 of Title 11, United States Code. Jazz is now the subject of ongoing bankruptcy proceedings in the Bankruptcy Court for the Distr ict of Ne w Jersey . On Aug

ust 2, 2004 , Fuji, a c

reditor p articipa

ting in those proceedings, filed a motion to convert the proce edings from reorganization under chapter 11, to liqui dation und

er chapter 7, of

Title 11, U

nited State s Code. I

n this Court , Jaz z has argued t hat it will have n o mean s of st aying in bu sines s and a void ing bankrup tcy

under chapter 7 should it be unsucce ssful in ob taining the immedi ate rele ase of its merchandise.

II. S UMM ARY O F C ONTENTIONS OF THE P ARTIES In its argument bef

ore this Court, Jazz submits that the subject imported merchandise reflects modifications Jazz made in its business operations to correct the circumstances that caused the ITC and the District Court for New Jersey to conclude that certain previous imports of Jazz’s disposable cameras infringed Fuji’s patents. B y way of background, the I TC considered, and found infringing, re loaded LFFPs imported and sold by Jazz that fall into four categories: (1) c ameras refurbished using shells that had been collected outside the United States; (2) cameras tha t had been refurbished more than once (so-called “reloaded re loads”); (3) Kodak cameras which, whe n undergoing the refurbishing process abroad, ha d been fitted with a full-width replacement back for the

camera case tha t was not pr

oduced by Fuji or a Fuji licens ee and that infrin ged a F ujiCourt No. 04-00494 Page 9

patent; and (4) cameras for which Jazz was unable to show evidence that the refurbishing constituted “permissible repair.” Jazz maintains that it has established, by a preponderance of the evidence, that the cameras in the two entries at issue were re furbished only from she lls collected in the United States, that in sorting the shells the supplier of the refurbished camer as, Polytech, excluded f

rom proc essing shells that were pr eviously reloade d, that Poly

tech did n ot use any full-width repla

cement backs in making the subject merchandise , and that the refurbishing process conformed to the standa rd of “permissible repair.” Defenda nt United States asserts generally that Jazz has failed to meet its burden of proof for either “first sa le” or “ permissib le repa

ir.” The United Sta

tes further arg

ues that th

is Court, in the even t it order s the rele ase of a ny merchan

dise, shou ld gran t no expedit

ed relie f to Jazz, disputing

plaintiff ’s conte ntions abo

ut Jazz’s pre carious

financi al status.

III. A PPLI CABLE L EGAL S TANDARDS The cour t review s de novo the protested decision by Customs to exclude the subject merchandise. See 28 U.S.C. § 2640(a)(1). For purposes of this review, the factual determinations by Customs are presumed to be correct. 28 U.S.C. § 2639(a)(1). To overcome this presumption, Jazz must establish, by a preponderance of the evidence, that the single use cameras qualify for admission. See St. Paul Fire & Marine I ns. Co. v. United States , 6 F.3d 763, 769 (Fed. Cir. 1993) (holding that the preponde rance of the evidenc e standa

rd is the a dequate burden o f persua sion for f actual ma tters in po stimportation cases). Under the requirements found by the Court of Appeals for the Federal Circuit in Jazz Photo Corp. v. Int’l Trade Comm’n, plaintiff must establish thatCourt No. 04-00494 Page 10

3 The court’s judicial notice is informed by consideration of this question by another court. The District Court for New Jersey has rejected the view that “first sale” must be established with direct evidence of the first sale such as a sales receipt. See Fuji Photo Film Co. Ltd. v. J

azz Photo Co rp ., 249 F. Supp. 2d at 451-52. each ind ividual c amera o ffere d for adm ission unde

rwent a p atent exha

usting f irst sale in the Unite d States a

nd that the

process ing per

formed by Pol

yte ch in China

was conf ined to “permissible repair,” i.e. , that it did not constitute “prohibited reconstruction.”

A. The Requirement of a Patent-Exhausting “First Sale” The court takes judicial notice that Jazz, in marketing LFF Ps reloaded from the shells manufactured by

or under license of Fuji, does not have acc ess to documentary evidence, such as sales receipts, establishing the location of the original sale. 3 This conclusi on stems fr

om the pra

ctical c onsidera

tion that Jazz a

nd similar

companie s must obtain shells, directly or indirec tly, from the businesses that deve lop the film in the LFF Ps. The co

urt take s furthe

r judicia l notice that, as an

y c onsumer o f a dispos able

camera knows fr om experie

nce, if n ot from the

label on t he came ra itself , the photo processor typic ally retains the spent she ll when the consumer receives the prints or negatives. A second practical consideration, stemming at lea st in part from the protracted litigation between Fuji and Jazz, is that Jazz and similarly situated companies cannot

reasona bly be expect

ed to have

access to informa

tion that do es or may

exist, and would be expect ed to be pr

oprieta ry to Fuji an

d the lice nsees, f rom which

the loca tion of first sale of a shell could be ascertained to a ce rtainty. I n order for the “permissible repair” exception identifie d and deli

neated by th e Court of

Appeals for the F ederal

Circuit inCourt No. 04-00494 Page 11

4 In a rece nt decision, the Court of Appeals for the Federal Circuit re jected an argument by

Fuji that this presumption of regularity is unwarranted. See Fuji P hoto Film Co., Ltd, v. Int’l Trade Comm’n , 386 F.3d 1095, 1107 (Fed. Cir. 2004) (“To the extent that Fuji’s argument is directed at a per ceived lack of resources or c ompetence on the part of the Customs Service, we cannot address that problem throug h a judicial directive that would, in effect, require the Commission to alter its practices based on our unsupported suspicion that the Customs Service is incapable of performing the duties Congress has assigned to it.”). Jazz Photo Corp. v. Int’l Trade Comm’n to have any pr actical meaning in commerce, Jazz must be permitted to conduct its business such that “first sale” may be established on the bas is of evid

ence tha t is commer

cially availab le to it. As a threshold consideration, the court is unable to presume that a shell collected from any source i n the Unite d States, a

nd not pre

viously reloade d, result

ed from a single use camera that underwent a patent- exhausting first sale in the United States. The court finds no support in the Federal Circuit’s opinion in Jazz Photo Corp. v. Int’l Trade Comm’n , or in the Exclusion Order, for such a genera l presumption. Rather, the court concl udes f

rom th ese so urces o f law t hat J azz m ust m eet it s evid entia ry burden t hrough factual evidence establishing first sale that goes beyond the mer e fact that the shells were obtained in the Unit

ed States

. However, Jazz argues, and the court agr ees, that Jazz should be entitled to rely on a “presumption of regularity ” under which Customs must be presumed to be enforcing the Exclusion Order. Under such a presumption, any new single use cameras identified by the Exclusion Order that are commercially imported by anyone other

than Fuji or one of its lice nsees wo uld be unla

wful impor

ts and pre sumed to be

excluded f

rom the U. S. market. 4 Because the Exclusion Order contains an exception allowing nonc ommercialCourt No. 04-00494 Page 12

(“personal use”) importations, this presumption does not extend to the LFF Ps, which may be called “tourist” cameras, that are imported under that exception. The court addresses below the legal issues posed by previously-re loaded shells and by nonc ommercial importations. Following this discussion, the court addresses the remaining leg al issues posed by the fac ts in this ca se as the y pe rtain to th e circu

mstance s under w

hich the shells used to produce Jazz’s imported cameras were collected. 1. The “Reloaded Reload” I ssue In this proceeding, Jazz acknowledg es that a shell from a “reloaded” ca mera, as opposed to a new camera, is not entitled to a presumption of patent-exhausting first sale, as such a shell could have resulted from a single use camera previously

imported and found to have infringed Fuji’s patents. I nstead, Jazz points to record evidence of a sorting operation conducted on the shells prior to the processing that refurbishes them with new f

ilm and, where app licable, flash ba tteries. That sort

ing ope ration, a ccordin g to Jazz, reliably excludes from processing shells from re loaded cameras, based on phy sical indications of the previous reloading, such as the prese nce of black tape, the presence of replacement parts, or the absence of an original label of Fuji or one of its licensees. As discusse d later in

this opinion , Jazz at trial met its bur

den of es tablishing

that its operations satisfactorily

addressed the “reloaded reload” issue. 2. The “Tourist Camera” I ssue In these procee dings, the parties devoted considerable ar gument to the issue of shells from what may be

called “tourist cameras.” Jazz acknowledges, as a general matter, t hat some s hells coll ected in the Unite d States, e

ven thoug h proces sed by

a filmCourt No. 04-00494 Page 13

developer in the United States, may nevertheless have been first sold abroad. Such a shell would result, for example, if a U.S. tourist purchased and used a disposable camer a in a foreign country

and brought it back to the United States for developing of the film. The camera in its original condition could have bee n imported lawfully under the personal use exception in the Exclusion Order. The parties disagree on whether the resulting shell, if exported and permissibly r epaired, would qualify

for admission to the United States under the Exclusion Order. Jazz maintains that such a camera would be deemed under patent law principles not to violate the Exclusion Order. Jazz argues in the alternative that if the court should find to the contrary, it nevertheless should conclude that Jazz has met its evidentiary burden by presenting evidence that the sorting ope ration conducte d on the she lls prior t o the proc essing, mentione d above, also is suf ficientl y reliable to exclude

shells tha

t contain labeling in a fore ign lang

uage or are ot

herwise identifiable as being of models of L FFPs not typical of those f ound in the United States market. The afo rementioned “pe rsonal us e,” or “

tourist ca mera,” exception , set for

th in parag raph fou r of the E xclusion Or

der, provides tha

t the L FFPs are entitled to entry

for consumption into the United States, without payment of bond, if upon importation they accompany

a person arriving in the United States and are for the a rriving person’s personal use, or which are otherwise imported into the United States in such small quan

tities and under suc

h circum stances

so as to re asonably indicate to the satisfaction of the U.S. Customs Service that they are being im ported f or personal use r

ather th an for c ommercia l purpose s. The Exclusion Order was issued before the Court of Appeals for the Federal Circuit, in Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d 1094, hel d that per

missiblyCourt No. 04-00494 Page 14

repair ed LF FPs that un

derwen t a paten t-exhausti ng firs t sale constitute a

n exception to its general finding that the imported L FFPs at issue infringed Fuji’s patent rig hts. Under the clear holding of

the Court o f Appea

ls, a L FFP must u

nderg o a paten

t-exhausti ng firs t sale in the Unit

ed States to qualify

for per missible r epair. I t is just as c lear tha

t LFF Ps brought in under the “tourist” exception in paragr aph four of the Exclusion Order do not meet this test. These two conclusions, however, do not resolve entirely the legal question posed by the fa

ctual situation of disposable cameras offered for importation into the United Sta

tes afte r being refurb ished abr

oad using “tourist shells” c ollected from U.S. photo processors, a situation not addressed any where in the Exclusion Order. Nor does the legal question posed by such cameras appear to have be en before the Court of Appeals in Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d 1094. This court concludes that, in resolving the dispute between the par ties in this case, it need not decide the issue of whether shells from “tourist camer as,” in all circumstances and as a matter of law, maybe exported from the United States, refurbished, and reimported lawfully under the Exclusion Order. That conclusion is grounded in the particular findings of fact identified later in this opinion. The court notes, in particular, the absence of any

record evidence from which it could conc lude that a camera made from a “tourist” shell actually is present in either of the entries of merchandise a t issue. As also discussed later in this opinion, the only evidence of record bearing on the question o f the like lihood of t he prese nce of to urist shel ls among

collecti ons of she lls obtained from phot

o proces sors in the

United Sta

tes suppor

ts a findin

g of fa ct that tou rist shells may be prese

nt at a percentage that is “ver y small, much less than one per cent.”Court No. 04-00494 Page 15

A third group of findings relevant to the tourist came ra question pertain to the evidence of sorting conducted by

Polytech, Jazz’s Chinese supplier of refurbished ca meras. Under the particular factual circumstances tha t plaintiff, by a preponde

rance of the evidence, established to exist in this case for a portion of the cameras offere d for importation, the “first sa le” req uiremen t has bee n met. Because it would have simplified the issues presented by this case were the court able to a ccept pl aintiff’ s arguments that c ameras refurb ished fr

om tourist c amera shells collecte d from U.S . photo pro cessors may lawfully be enter ed for c onsumption , it is helpful to address the arguments and the rea sons why the court conc ludes that plaintiff’s arguments do not suffice. As a threshold considera tion, the court notes that the questions of law properly

before it concern the enforce ment by Customs of the Exclusion Order as modified by th e Court of

Appeals . It is

not the ro le of this C ourt or of Customs to se

ttle questions of intellectual property law. See K Mart Corp. v. Cartier, Inc., 485 U.S. 176, 189 (1988 ). Thus, it

is not within

the powe r of this Co

urt in the f

irst insta nce to determine whether, as a matter of patent law , Fuji’s patent rights in tourist cameras or shells of tourist cameras have been extinguished under some princ iple distinct from the exhaustion by “first sale” princ iple or any other patent law principle unrelated to the applica tion of the

Exclusion O rder. A s a resul t, defen ses to infr

ingeme nt that Jazz co

uld have asserted before the I TC in the Section 337 proceeding, and thereafte r raised on appeal before the Feder

al Circuit, will not be availing in this forum. That still leaves for this court’s consideration, however, the arg uments advanced by

plaintiff that stem from the pers onal use e

xception its elf or fr

om the I TC’s Sect

ion 337 pro ceeding

and Jazz’sCourt No. 04-00494 Page 16

subsequent appeal of the I TC’s decisions affecting its imports in Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d 1094. Plaintiff’s first argument is that the Exclusion Order, by explicitly creating the exception for personal use imports, implicitly approve s of the use of tourist cameras for any purpose inc luding repair and re-importation. The court f inds no basis to conclude that the Exclusion Order, by excepting from the import exclusion the importation of cameras for personal use, had any legal effect bey

ond the express terms of paragraph four therein. Section 337 proceedings are ba sed in patent law; however, they are not identical to patent law. A decision by Customs to enforc e or not enforce the full scope of the patent ho lder’s r

ights to c ontrol the

sale, use and manuf

acture of the me

rchandi se in question does not affect other rights held by the patent holder. See Corning Glass Works v. U.S. Int’l Trade Comm’n , 799 F.2d 1559, 1571-72 (Fed. Cir. 1986) (noting that I TC decision not to issue

an exclusi on order

does not sa

nction the infring ement of

U.S. patents by imp orters) . On its fa ce, the e xception to

the Exclusi on Order

applies only

to those cameras being imported for personal use. When a refurbished camera is imported for commercial purposes, the exception does not apply . To qualify for e ntry for consumption in the Customs territory, a disposable camer a must comply with the Exclusion Order as a whole. Jazz’s second argument is that Fuji gave an implied license of its patent rig hts by not seeking an import exclusion for tourist cameras in the Section 337 proceeding

. Patent law, however, does recognize the possibility of an implied license. See De F orest Radio Tel. Co. v. United States , 273 U.S. 236 (1927). The common thread of impliedCourt No. 04-00494 Page 17

license claims is equitable estoppel. “Thus, an implied license cannot arise out of the unilater al expect ations or even re asonable

hopes of o

ne party . One must have bee n led to take action by the

conduct of the other party .” H.M. Stickle v. Heublein, Inc. , 716 F.2d 1550, 1559 (Fed. Cir. 1983). There is no evidence in the re cord that Fuji took any a ction, upon which Jazz reasonably could have re lied, that implied a waiver of Fuji’s rights. Decisions as to the scope of the enforcement of a n exclusion order are within the purview of Customs and the ITC. Ty pically, an implied license is found by determining “what the parties reasonably

intended as to the scope of the implied license based on the circumstances of the sale.” Carborundum Co. v. Molten Metal Equip. Innovations, Inc. , 72 F.3d 87 2, 878 (F ed. Cir. 1 995). I n this insta

nce, the re was no sale fr

om Fuji to Jazz t

o examine. The sale of the camera to a customer by the patent holder or a licensee does not create an implied license that a third party can rely upon when that sale occurs in a foreign country

. See Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d at 1105. Third, and related to the second theory, plaintiff maintains that the ITC and Customs, by not enforcing F uji’s rights through an exclusion of the tourist cameras, has created a waiver of those rig hts. If the relationship between F uji and Jazz is not sufficie nt groun ds to esta blish an imp lied lice

nse, then actions by a

third par ty, Customs in this case, cannot impose on a patent holder a waiver of pa tent rights. Customs and the ITC can exercise their discr etion not to use their powers to enforce those rights, but that does not waive Fuji’s ability to pursue those rights in other fora. See Corni ng Glass Works , 799 F.2d at 1571-72. The court finds no legal authority allowing it to concludeCourt No. 04-00494 Page 18

that either the Exclusion Order by itself, or actions by Customs to permit importation of LFF Ps for personal use , established an imp lied waiv er of Fu ji’s pate nt right s. Fourth, Jazz maintains that by failing to bring any action under domestic patent law that would seek to prevent the use or sale of the personal use cameras while they are in the United States, Fuji has abandoned any right to object to Jazz’s subsequent action rely ing on the legal c ollection

of the she lls in the U

nited State s. The pa

rties app arently disagr ee as to w hether F uji could bring an

action un der the p atent law s to preve nt the use by consumers of the

personal use LFF Ps imported under paragraph four of the Exclusion Order; b oth partie s agre e that Fu ji has not d

one so. Pla

intiff’s contenti on essent

ially is that if, arguendo , Fuji could bring such an action or an action to enjoin photo proce ssors from sell ing spen

t tourist sh ells, its f

ailure to do so has c onstituted

a waive r of those rights. However, the court finds no leg al authority under w hich it could conclude that Fuji’s failure to take either of these steps cre ates any suc h waiver. The rema ining ar guments Jazz advanc es on the t

ourist ca mera issu e perta in to its contenti on that an

y c ameras refurb ished fr

om tourist c amera shells woul d exist, if a t all, only in de minimi

s quantitie s. Actions

arising under se ction 337 d

o include an implici

t de minimi s exception. This stands in contrast to traditional patent law, which holds that any infring ing prod

uct cre ates a c ause of a

ction. Under sec tion 337, on ly th ose impor ts which cause substantial injury will prompt the ITC to issue an exclusion order. See Corning Glass Works , 799 F.2d at 1567 (“[T]o accept proof of a conceiva ble or actual loss of sales or profits of any amount by the patentee

as sufficient proof of an effect or tendency to substantially

injure the domestic industry would eliminate the ‘inde pendentCourt No. 04-00494 Page 19

proof’ o f the ‘dis tinct injur y r equirement’ hel d to be nec essary in [ Textron, Inc. v. U.S. Int’l Trade Comm’n , 753 F.2d 1019, 1028 -29 (Fe d. Cir. 198 5)].”). I t is there fore pos sible that the ITC could amend its Exclusion Order expressly to permit re-importation of the tourist cameras, finding that they do not create a substantial injury . However, that determination is wi

thin the power of the IT C, and not w ithin the ju

risdiction of this Court. The

issue bef ore this c ourt is co nfined to the exerc ise by

Customs of i

ts author ity to enforce the Exclusion Order as it applies to the subject single use ca meras. To incorporate a de minimi

s exception

into the Exc lusion Ord

er, Jazz must present it s argument before the I

TC, with any appea

l therefrom brought in the Court of Appeals for the Fed eral Cir cuit. Nevertheless, as noted earlier, there is no record evidence from which the cour t may conclude

that the subject merchandise actually includes cameras refurbished from tourist shells. That, and the findings concerning the re lative rarity of tour ist shells, and

concer ning the sorting conducte d to remov e from pr ocessing those tour

ist shells presenting indications allowing them to be identified, are sa tisfactory to re solve the tourist camera issue as it is presented by the record evidence in this case. Defendant United States made much of the possibility that some tourist cameras may be labe led in English because theywere intended for sale in various Englishspeaking foreign countries, a nd of the likelihood that such shells could be selected for process ing duri

ng the sorting pr

ocedure describ ed at tria

l. Under defenda nt’s arg ument, Jazz would be expected to arrange for foolproof sorting of she lls based on information known to Fuji and its licensees, which information Jazz likely could not obtain. TheCourt No. 04-00494 Page 20

court declines to disallow the entire “permissible use” exception, which the Court of Appeals conditioned on first sale in the United States, on the theoretical possibility that the entries at issue contain one or more camera s made from shells of tourist cameras collected in the United States. Were the court to impose a blanket prohibition upon such a theore tical poss ibility , it would be acting contrar y to the inten t the Court

of Appea ls demonstrated by g oing to the lengths it did to apply the permissible repair doctrine to the specific class of merchandise at issue in this case.

3. Collection of Shells in the United States In the I TC enforcement proceeding, the a dministrative law judge concluded that forty percen t of the L FPPs Jazz impor

ted in the time peri od Augu st 21, 2001 to Decemb er 12, 20 03 were refurb ished fr

om shells of

LFPPs for whic h the firs t sale occurred outside the United States. [

.] ITC Enforcement Initial Determination at 43. With out s pecifyin g an ex act per centage , the j udge ma de a fin ding, based on an admission by Jazz, that “the primary source of foreign shells among sa mples of empty Jazz shells is the reloaded reloads.” ITC Enforcement Initial Determination at 65. Before the administrative law judge, Jazz contended that there was no practical means to differentiate between a shell sold abroa d and one sold in the United States using nonproprietary

information. ITC Enforcement Initial Determination at 35. The administrative law judge disagreed w ith Jazz, finding that with regard to Fuji, Kodak, andCourt No. 04-00494 Page 21

Konica, the language in whic h the package label is presented is a n indication of the country in which the or

iginal manufacturer intended the L FFP to be sold. ITC Enforcement Initial Determination at 35. The administrative law judge observed that prior to the August 21, 2001 decision of the Court of Appeals in Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d 1094, Jazz re lied on foreign c ollection of shells f

or ninety percent of its refurbished L FFPs. These previously

reloaded foreign shells were found not to have been screened by Jazz from its shells collected in the United States, and they were fo und to hav e been the primar y so urce of the LFFPs re furbishe d from foreign shells that w ere fou nd in the sa mple o f Jaz z’s LFFP s in t he enfo rcemen t proc eedin g. Before this court, Jazz argued that if it were to sort out from shells collected in the United States the two known sources of shells resulting from infringing LFFPs, i.e. , shells labeled in a foreign langua ge and shells previously

reloaded, then a presumption arises that the remaining shells were subject to a pa tent-exhausting first sale in the United States. The court disagrees. A sorting process that removes foreig n-language shells and pre viously reloaded shells, standing by itself, is not sufficient to esta blish first sale. Plaintiff did not make or attempt to make an evidentiary showing that LFF Ps by the four original manufacturers (Fuji, Kodak, Konica and Concord) labeled in English are not sold in foreign countries. Theref ore, the court doe s not have

facts on the rec ord suppo rting a

finding that sorti ng is a foolproof method of identify ing and sorting out shells from cameras first sold abroa d. As counse l for the U

nited State s argue d, sorting that exclud

es fore ign-la

nguag e shells cannot identify shells that may have been sold abroad in an English-spea king country

.Court No. 04-00494 Page 22

Such shells could be imported into the domestic market and then sold to a company that refurb ishes L

FFPs. As plaintiff itself ac knowledg ed during

its closing

argume nt at tria l, shells may be imported into the United States without violating the Exclusion Order, which according to plaintiff does not apply to “Lens-Fitted Film Packag es” that are not fitted with film. According to the ITC a dministrative law judge, there is a significant international market in used shells. ITC Enforcement Initial Determination at 65. The court infers from the existence of this market, and from the absenc e of a prohibition on the importation of shells into the United States, that a collection of shells obtained in the United States, from which previously r eloaded shells and foreign-labeled she lls have been removed, would not necessarily satisfy the first sale r

equirement. The court concludes, in the particular context of the facts established in this case, as se t forth later in this opini on, that a

dditional e

vidence is neces sary

to establi sh complia

nce with t he first sale requirement. As discussed in detail in the Findings of Fa ct portion of this opinion, Jazz was able to demonstrate, for some but not all of its LFFPs in the two entries, that the shells used by Poly

tech in the refurbishing process not only were collected in the United States, but were collected, directly or indirectly, fr

om entities engaged in the particular business of photo processing. Collection from a photo processor located in the United States, combined with a sys tem to sort

out shells t

hat prev iously were re loaded, w

ould addr ess the po ssible sources of shells from LFF Ps first sold abroad, except for shells from LFF Ps that entered the United States in violation of the Exclusion Order or entered the United States under the personal use exception in the Exclusion Order. As to the former, Jazz may re ly onCourt No. 04-00494 Page 23

the afor emention ed presu

mption of r

egular ity t hat Customs

is enfor cing the clear te rms of the Exclusion Order and preventing importation of infringing LFFPs sold outside the United States. See Fuji Photo Co., Ltd. v. Int’l Trade Comm’n , 386 F.3d 1095, 1107 (Fed. Ci r. 2004). Concern

ing the l atter, the “touri st camer a” shell s, sorting

of shells s o that those with original labels in a foreign lang uage, or those with other indications that would reveal, based on nonproprietary information, that they are of a type not sold in the U.S. mark

et, are not selected for processi

ng is a pr actica l means to r

emove “t ourist

camera ” shells f rom the mix of

collecte d shells. Thus, shells collected, directly or indirectly, fr

om a photo processor in the United States are far more reliable, from the standpoint of showing “first sale,” than those that are shown to have been collected in the United States but that have no evidence linking th em t o a s our ce i n t he U ni ted St ate s t hat act ual ly is in th e ph ot o pr oce ss in g bu si nes s. It is theoretically possible that a U.S. photo proce ssor could engage in the additional business of “international shell arbitrage,” i.e. , importing shells fr om abroa d for re sale to shell coll ectors or reloa

ders. Th e court, however , finds this hyp othetica

l to be hig hly specula tive. Def endant pl aced no

evidenc e on the r

ecord in this proc eeding

to establi sh that such a scena rio actually

exists. B. The Requirement of “Permissible Repair” Polytech’s came

ra refurbishing operations in China must comply with the requirement of “permissible repair,” i.e. , the processing must not constitute “prohibited reconstruction.” Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d at 1101. The Court of Ap pe al s f

or th e F ed er al Ci rc ui t i de nt if ie d, as pe rm is si bl e r ep ai r, th e p re vi ou sl y-Court No. 04-00494 Page 24

mentioned eight-step process, which includes: (1) re moving the cardboard cover; (2) opening the body

of the shell (usually by

cutting at least one weld); (3) replacing the winding wheel or modify ing the f ilm cartr idge to b e inserte d; (4) re setting the film

counter ; (5) rep lacing

the batte ry in a came

ra equip ped with a

flash; (6 ) winding

new film out of a cannister onto a spool or into a roll; (7) resealing the camera body

using tape and/or glue; and (8) apply ing a new cardboard cove r. In the procee dings in U .S. District Court for New Jerse

y, t he permi ssible re

pair standard set forth by

the Federal Circuit was further elucida ted. The District Court identified a series of nineteen permissible steps that included operations incidenta l to the eight steps identified by

the Court of Appeals. However, the District Court did not conclude that the nineteen steps it identified were exhaustive. The Court held that under the Federal Circuit’s formulation in Jazz v. I TC , when a c amera is opened, film is pro

perly inserted , the batt

ery is replac ed, and the camer a is closed, t he came ra has be en permi ssibly

repair ed. Thes e four pe

rmissible processes serve the function of preser ving the remaining useful life of the camera as a whole. Fuji Photo F

ilm Co. Ltd. v

. Jazz Pho to Corp ., 249 F. Supp. 2d at 445-46. The District Court further noted: Whether these refurbishment procedures ar e counted as four, eight or nineteen “steps” is a matter of semantics, as virtually any step ca

n be divided in

to multiple

“sub-ste ps.” The legal i ssue is whe

ther the totality of the refurbishment procedures are of such a nature that they preserve the useful life of the patented article, or whether they in fact r

ecreate the article after it has become spent. Id. at 446-47. This court agrees with the District Court’s analy sis, noting that the opinion of the Court of Appeals for the Federal Circuit is not properly interpreted to disallow minorCourt No. 04-00494 Page 25

processing incidental to the eight steps identified in the Court’s opinion in Jazz Photo Corp. v. Int’l Trade Comm’n, 264 F.3d 1094

.

IV. F INDINGS OF F ACT ON F IR ST S ALE AND P ERMISS IBL E R EPA IR At trial, Jazz produced two witnesses who testified on various factual matters releva nt to the fi rst sa le and permi ssib le repa ir is sues. Jaz z als o int roduc ed a lar ge number of documents, almost all of which documents the court found admissible and, accord ingly , admitted

to the re cord. De fendant United Sta

tes decl ined to put

on a case in chief, i nstead r ely ing lar gely on its cro ss-examina

tion of pla

intiff’s two witne sses to support its contention that Jazz had failed to show that all the cameras at issue satisfied the first sale and permissible repair requirements. As a r esult, the critical evidence introduced by the plaintiff a t trial in this case is unrebutted. Th e c ou rt , a ft er co ns id er in g w he th er pl ai nt if f h as me t i ts bu rd en of

pr oo f b y a preponderance of the evidence on each of the various factual issues in this case, has made individual findings of fact on the following core issues: (A) Whether Jazz has established a patent-exhausting first sale for any or all of the cameras at bar, based on the circumstances under which the shells used in processing were collected; and (B) Whether Jazz has established that Polytech’s camera re furbishing operations qualify as “permissible repair” for any or all of those cameras. These core findings of fact, and certain related factual finding s, are set forth in this section of the opinion. The findings of fact reache d by the court on issue (A ), i.e. , “first sale,” required the court to make findings of fact on a third issue. That issue is whethe r Jazz has demonstrated, by a

preponderance of the evidence , that cameras refurbished from a g roupCourt No. 04-00494 Page 26

of shells obtained from a company known as Seven Buck’s, I nc. can be segreg ated from the remaining cameras in the two shipments. A fourth fa ctual issue pertains to a determination unde

r USCI T R. 62 go verning any stay affec ting the

time at wh

ich this court’s judgment may

be enforced. The findings of fa ct and conclusions of law pertain ing to the se two ad

ditional is sues are

set forth in subsequ

ent sect ions of this opinion. A. Findings of Fact Relevant to the I ssue of First Sale in the United States Plaintiff established at trial that the LFFPs in the two shipments at bar w ere refurb ished in Chi

na by Poly tech. Pla intiff al so establ ished tha t a portion

of these LFF Ps were refurbished by

Polytech using shells that Poly tech obtained from a collector of shells, Photo Recycling Enter prises, Inc. (“Photo Recy

cling”), a company

headquartered in Piscataway, Ne

w Jersey. Plaintiff established that the re mainder of the LFF Ps at issue were refurbished by

Polytech in China using shells that Jazz provided to Polyte ch after acquiring them from the company known as Seven Buck’s, I nc. (“Seven Buck’s”), which operated in Newport Beach, Califor nia. The court further finds, based on the recor ds of plaintiff admitted into evidence and the testimony of the two witnesses a t trial, that the LFFPs made from she lls acquired from Seve

n Buck’ s were id

entified separa tely in plaintif

f’s inve ntory control s yst

em, which assigned to these L FFPs a “Master L ot Number” (“MLN” ), and that they we re identified in that inventory control sy stem by Master L

ot Number 463. The court further finds, based on plaintiff’s records and the testimony of the two witnesses at trial, that plaintiff’s inventory contr ol system assigned Ma ster Lot Numbers other than Master LotCourt No. 04-00494 Page 27

Number 463 to the LFFPs in the two subject shipments that resulted f rom Polytech’s refurbishing of shells acquired from Photo Recy cling. The evidence establishes, as discussed later in this opinion, that the inventory control sy stem using Master Lot Numbers enables finished LF FPs to be identified by Master Lot Number according

to the shipments of shells from which they we re refurbished by

Polytech. Based on a preponderanc e of the e vidence present ed at tria l, the cou rt finds a s a fact that all the shells acquired from Photo Recy cling that were used in refurbishing LFFPs in the two subject shipments were a cquired, directly

or indirectly, fr

om entities that performed photo processing operations in the United States. With respect to any of the aforementioned shells that Polyte ch acquired from collectors of shells, instead of from U.S. photo processors, the court finds, based on a preponder ance of the evidence, that a condition of

the purchase of s

uch shell s was coll ection f rom photo processors in the United States. The evidence supporting the afore mentioned findings of fact and other findings of fact relevant to the issue of first sale is summarized below.

1. Findings of Fact Established by the Testimony of Mr. Leon Silvera Jazz introduc ed at tria

l the testi mony of Mr. L eon Silver

a, Presid ent of Phot

o Recycling . The court found his testimony cr edible based on his demeanor, demonstrated knowledge of Photo Recy cling’s business activities, and general knowle dge of the business of collecting spent shells. His testimony e stablished, by a preponde rance of the evidenc e, the fo llowing f

acts.Court No. 04-00494 Page 28

1. Photo Recycling is in the business of c ollecting spent shells from three distinct typ es of ven

dors. The se vendors includ e (1) na tional re tailers t hat oper ate interna l photo pro cessing

labs ( e.g. , CVS and CO STCO), (2 ) indepe ndent pho to processors or small, wholesale photo finishing labs, and (3) entities that are in the business of collecting shells, otherwise known as shell collectors. Tr. 184-86. 2. Photo Recycling c ontracts a price for shells with individual vendors and sends each pr e-paid, domestic U

PS labels a

nd cartons that most

supplier s use to shi

p shells to Photo Recycling’s wa rehouse in Piscataway , New Jersey. Tr. 188- 89. 3. Approximately 80% of the shells collected by Photo Recycling in the United States in 2004 were obtained from the national retailers ref erred to in paragraph 1, above. Tr. 187. 4. Approximately 10% to 15% of the shells collecte d by Photo Recy cling in the United Sta

tes in 2004

were ob tained f

rom indep endent ph

oto proce ssors or s mall, wholesale photo finishing labs. Tr. 187. 5. According to Mr. Silvera, based on his knowledg e of the industry, 85% of disposable cameras developed at photo processing locations are likely pur

chased from that same location. Tr. 316-17. 6. The remaining 10% to 12% of the shells collected by Photo Recycling in the United States in 2004 were obtained from shell collectors. Tr. 187. 7. Photo Recycling c ontracts to buy from the third ty pe of vendor, i.e. , shell collectors, only shells with orig inal Kodak, Fuji, Konica or Concord packaging identifying the ma

nufacturer. Tr. 192, 341.Court No. 04-00494 Page 29

8. Photo Recycling r equires that shipments it purchases from shell collectors be accompanied with letter certifications indicating tha t the shells in the cartons were collected from photo processors in the United States. Tr. 303-04, 354-55. 9. Photo Recycling c ollects in excess of one million shells per month from approximately 5,000 differe nt vendors. Tr. 314, 321. 10. Photo Recy

cling se lls and ship s at least 90% of al l the shell s it collects to Polytech in China. Tr. 193, 218. 11. Betwee

n the summe

r of 2001 a

nd the win

ter of 20 03, Photo Re cycling sorted all the shells it collec ted. Tr. 3 19, 326. Pho to Recy cling di d not sort f

or tourist shells unti l the latte

r stage s of this sor

ting pro gram. T

r. 326. To

urist shel ls, with clearly identify ing for eign ma rkings a nd forei gn lang

uage, comprise d “way

less than 1 %” of t he tot al she lls co llect ed dur ing th at ti me. Tr . 323. This percen tage is based on Photo Recycling ’s sorting experience gained fr om the sorting of “probably in excess of 10 million shells.” Tr. 323. 12. Photo Recycling no long er performs complete sorts of the shells it collects. Instead, Photo Recy

cling performs sample sorts of approximately 5% of the total shells it receives from all its vendors. Tr. 301-02, 320. 13. Photo Recy

cling’ s sample sorting sy

stem focu ses prima

rily on identif

yin g shells that came from disposable cameras first sold in the United States by sorting for shells with original labeling and those with foreign ma rkings. Tr. 326-28. During sample sorts, shipments from collectors are, on rare occ asion, completely sorted.Court No. 04-00494 Page 30 Tr. 329. A complete sort of a shipment occurs only when a variance involving previously reloade d or foreign-labeled shells is detected. Tr . 301-02, 329, 357. 14. In Mr . Silvera ’s opinion , if there were a n inordina

tely high numb er of tou

rist shells in th e mix of shel ls sent to Po lyte ch, Poly tech wou ld repor t that to Pho to Recycling as being some aberration, which Poly tech and Photo Recyc ling then would discuss. Photo Recycling ha s not had that reporting from Poly tech. Tr. 323-24. 15. In Mr. Silvera’s opinion, pay ments received by

Photo Recycling f

rom Polytech and the r eports g enerat

ed by Poly tech indi cate tha

t Photo Recyc ling doe s not sell Polytech a signif

icant number of tourist shells. Tr. 332. 16. Photo Recycling’ s sample sorting system a lso screens for shells with black tape and other signs ind icating shells tha

t previou sly

were re loaded. T

r. 328. Pho to Recy cling de pends upon report s from Poly tech to e nsure tha t a shipmen

t of Photo Recycling shells does not contain a high percentag e of reloaded shells. Tr. 357. 17. Photo Recy

cling a lso collec ts shells f rom count

ries othe r than the United Sta

tes, but these shells are shipped directly to Hong Kong from those countries instead of being shipped to Photo Recyc ling in New Jersey. T r. 308. 18. In Mr. Silvera’s opinion, a “very tiny” number or de minimi s amount of

tourist shells tha t were f irst sold in

English- speaking

countrie s, such as

Ire land, Aus tralia or the Un ited King dom, could

possibly have be en among

the shells Photo Recycling collected in 2004 from photo processors in the United States. Tr. 308, 317-18.Court No. 04-00494 Page 31

19. In Mr. Silvera’s opinion, a “very tiny” number or de minimi s amount of

tourist shells with foreign-languag e wrappers or bilingual wrapper s could possibly have been among the shells Photo Recy cling collected in 2004 from photo processors in the United States. Tr. 316-19. 2. Findings of Fact Established by the Testimony of Mr. Michal Z awodny During trial, Jazz also introduced the testimony of its quality manager, Mr. Michal Zawodny , who oversees the production quality of all Jazz disposable cameras and is responsible for overseeing the proc edures that the Polytec h factory in China uses to produce Jazz cameras. The court found his testimony c redible, based on his demeanor, his demonstrated knowledge of Poly tech’s sorting and processing oper ations, and the precisio n with whic

h he resp onded dur

ing dire ct testimo ny a

nd cross- examination. His testimony , some of w

hich was aided by viewing the foota ge of two videota

pes filme d in 2003 of Polytech’s fa

cility, and admitted into evidence, e stablished, by a preponde rance of the ev idence, the follow

ing fac ts. 20. The Polytech fa

cility occupies seve

ral floors in an industrial building in Shenzhen City. Shells sent to the Poly tech facility a

re stored, sorted, refurbished and packaged on different f

loors. Tr. 395. 21. The sorting operation begins with Poly tech sorters “dumping” shells from individual shipping boxes, previously part of a lar ger container, onto the sorting line. Tr. 399. Sorters then select shells for the production of Jazz cameras intended for sale in the United States. Tr. 400-01.Court No. 04-00494 Page 32

22. Poly

tech emp loy s betwee

n 30 and 40

sorters, and the f

acility sorts approximately 130,000 to 150,000 shells per day or da y and a ha

lf. Tr. 411-12, 588-90. 23. Shipments o f shells us ually contain 5 0% to 60% K

odak bra nd shells, approximately 20% Fuji brand she lls, 5% to 10% Konica brand shells and a relatively small perc entage of Concord brand shells. Tr. 586-87. 24. Only Kodak, Fuji, Konica and Concord brand shells are chosen for pr oduction for the United States. Tr. 399-400. 25. Within the g

roup of a ccepta ble bran ds, Poly tech sor ters cho ose only

shells with original wrapping or labeling produced by K

odak, Fuji, Konica and Concord, and they screen for any shells with

foreig n chara cters ( i.e. , Japanese or Arabic). Tr. 406, 410-11, 585-90. Sorters will not choose shells with foreign charac ters for United States production. Tr. 588-59. 26. Questionable shells, such as shells with English lettering not ty pical of the United States market, are further reviewe d by other Poly tech staff; shells not chosen for production for the United States are sent back to the storag e area and labeled as “inactive for U.S. production.” Tr. 400-01, 406, 587-88, 590. Shells neither selected for production nor set aside as “inactive” are placed on the sorting line a second time. Tr. 589. 27. Although Polytech’s sor ters do not, for the most part, speak English, they select shells for processing by

comparing the shell packaging to the packaging on sample packages. Tr. 590.Court No. 04-00494 Page 33

28. In Mr. Zawodny’s opinion, it may not be possible to screen out all foreign ( i.e. , English language shells that may have been sold abroad, e.g. , in England) or foreig n language sh ells ( i.e. , shells labeled in French and English that were probably sold in Cana

da). Tr. 588, 590. T

he sortin g sy stem is bas ed on a “ certain process and certain standards.” Tr. 598. I n Mr. Zawodny ’s opinion, the sorting system is “quite accur

ate” and “works well.” Tr. 598. 29. Poly

tech’s s orting procedur

e requir es that e ach shipment is sort ed separ ately , so that shipments collected from foreign sources ar e removed from the sorting line and sorting area. Tr. 398-99. 30. Poly

tech sor ters also screen for shel ls with bla

ck tape or shells that conta in replacement parts. Tr. 551-52. 31. In 20 04, Jazz purchased one shipmen t of shells from Seve

n Buck’ s Inc ., in Newport Beach , Califor

nia. Jazz purc

hased fr om Seven B uck’s onl

y sh ells with original wrappers. Mr. Za wodny witnessed the sorting of this shipment in the great er L os Ange les are a, and “ reviewe d” the pr

oducts tha

t were ma de avail able by Seven Buc

k’s for purchase by

Jazz. Tr. 556-57; Pl.’s Ex. 19. 32. Seven Buck’s workers “separ ated” shells in accordance with the samples provided by Mr. Z awodny and using the same standards employ ed by sorters a

t Poly tech. Sev en Buck ’s employ ees pre pared th e contai

ner for shipment to Polytech. Tr. 556-57. The court finds, based on the testimony of Mr. Zawodny , corroborated by documentary e

vidence, including reports of sorting, that Poly tech, during the time atCourt No. 04-00494 Page 34

which the LFFPs at issue we re processed, employ

ed a sorting sy stem adequate to identify and exclude from processing shells that previously were reloaded, and adequa te in the context of the information commercially a vailable, to identify and e xclude from processing any

shells of cameras, if present, that entered the U nited States under the personal use exception in the Exclusion Order.

B. Findi ngs of F act Rele

vant to the

Issue of Permiss ible Repa

ir Mr. Zawodny ’s testimony, some of which, as noted a bove, was aided by

viewing th e f oo ta ge of tw o v id eo ta pe s f

il me d i n 2 00 3 o f P ol yte ch ’s fa ci li ty, es ta bl is he d, by a prepond erance of the ev idence, the follow

ing fac ts. 33. Mr. Zawodny

spent February , March, April, June, August, and September of 2004 in China overseeing the Poly tech facility’ s processes of sorting shells and producing Jazz disposable cameras. Tr. 393-94. 34. Boxes containing sorted shells to be repaired for the U nited States market are moved to pr

oduction a

reas of the Poly tech fa cility . Tr. 412-14. Mr. Zawodny characterized this procedure as the first step of the repair process. Tr. 415. 35. Each shipment of shells is processed one at a time on the production lines. Tr. 415. 36. Polytech operate s three production lines for day light camera loading opera tions and one production line for dark loading opera tion (for Fuji and Konica ty pe shells) at Polytech. Tr. 513, 540. 37. The removal of original wrapping and packaging from the she lls is the next step of the process. Tr. 415.Court No. 04-00494 Page 35

38. Operators stationed at production lines perform differe nt procedures, including opening the shells , replac ing adv ance wh eels to fi t the new f

ilm, remov

ing dust and debr is from the

interior , replac ing batt

eries in f lash cameras, lo ading the film, checking the charg e of the flash and resetting the counter . Tr. 514-18. 39. Operators close the camera with the orig inal back covers produced by Kodak, Fuji, Konica or Concord and attach an additional molded part to cove r the portion of the camera where the film is placed. T r. 515-16. 40. “Full back replacement” is a term use d to describe a reloaded camera with a completely new f

ull back cover. Tr. 607. Shells that were repaire d with full back replacements are easily

identifiable by inspecting the exterior of the back cover and are not used for production of Jazz cameras intended for sale in the U nited States. Tr . 607, 611. The “fu ll back r eplace ment” tes timony

refer s to refurbishing of Kodak shells. Tr. 611. 41. Black light-tight tape is used to seal any gaps between the seams. Tr. 516. 42. Jazz cameras are screened at quality control stations to ensure that the flash and trigger function properly

and are ultimately pa

ckaged with new, Jazz wrappers. Tr. 517-18, 537, 553-54. The exhibits admitted into evidence establish that the subject LFFPs wer e refurbished in late July 2004. Mr. Z awodny’s testimony was aided by vie

wing the videotapes admitted into evidence as Segments 1 and 2 of Plaintiff’s Exhibit 18. Mr. Zawod ny’ s testimony

showed th at the vid

eotapes were fi lmed in 200 3. The co urt finds, based on Mr. Zawodny ’s testimony, that the processe s shown in the videotapes do notCourt No. 04-00494 Page 36

differ in a way

material to the permissible repair issue, from Mr. Zaw odny’s descr

iption of the processes used to refurbish the subject merc handise. The court further finds, based on Mr. Za wodny’s testimony, that the processing undertaken by

Polytech at the time the subject mer chandise was refurbished were opening of the body

of the shell, replacement of the advance wheel, replacement of the film and of the battery

(if a flash camera), rese

tting the counter, closing and repairing the case using original parts except for the a dditional molded part referred to above, repack aging the ref urbished camera , and var

ious minor o

perations incide

ntal to the se processes. The court further finds, based on his testimony , that the aforementioned processing did not employ full-width back replacements in reloading Koda k or other shells. C. Findings of Facts Relevant to Jazz’s Inventory Control Program 1. Findings of Fact Established by the Testimony of Mr. Leon Silvera Mr. Silvera’s testimony established, by a preponderance of the evidenc e, the following facts. 43. Photo Recycling ships shells to Poly tech via ocean freight, Tr. 252, a nd prepares summary information documents for each shipment, which include the vessel name, the date that the shipment sailed, where the shipment is consigned to, the quantity of car

tons and shells and the total weight of shells. Tr. 225; Pl.’s Exs. 1- 14 (encompassing both parts A and B). 44. Photo Recycling a ssigns a unique master lot number (“ML N”) to every

shipment sent to Polytech to identify each shipment. Tr. 251-52, 330, 381.Court No. 04-00494 Page 37

45. A collector shipme nt rece ives a se

parate MLN only

when the quantity of shells receiv ed is suff

icient to f ill an enti re conta iner. Tr . 358. When

the quant ity received is not sufficient to fill a container, then identification marks a re placed on each carton o f collector shells within the

containe r, which Poly tech use s to segregate collec

tor shells for sorting purposes. Tr. 358. The court finds, based on the testimony concerning inventory

control and the documentary e

vidence, that the shells provided to Polytec h from Photo Recycling

were maintaine d under the Master Lot Nu mber inve

ntory control s yst

em. 2. Findings of Fact Established by the Testimony of Mr. Michal Z awodny Mr. Zawodny ’s testimony established, by a preponderance of the evidenc e, the following facts. 46. MLNs a

re generated

by Ja zz in New Jers ey

and rela ye d to Photo Re cycling in New Jersey. Tr. 396- 97, 459, 583-84. 47. MLNs are used to trac e shells through the sorting and production processe s. Tr. 459, 548-49. They

appear on most shipping documents used to transport shells from location to location. Tr. 459. All shells belonging to one ML N are stored in one location. Tr. 398. 48. Shells sele cted for United Sta

tes consu mption by

Poly tech sor ters are stored in large cardboard conta

iners indicating the quantity of shells and marked with the corresponding MLN . Tr. 400. 49. Polytech’s sorting pr ocedure requires that each ML N be sorted separately , so thatCourt No. 04-00494 Page 38 MLNs collected from fore ign sources are removed fr om the sorting line and sorting area. Tr. 398-99. 50. Polytech’s production proc edure requires that shells in each ML N are processed on production lines one at a time. Tr. 415. 51. Ink dots are placed on the back of each Jazz camera produced for the U nited States an d finishe d camer

as are p laced in

boxes. The

boxes are

placed on pallets that are marked with quantity , MLN, ty pe of film used to reload, and the date the cameras were repaire d. Tr. 537, 542, 554. The court finds, based on the testimony concerning inventory

control and the document ary evidenc e, that th e opera

tions of Pol

yte ch involvi

ng the su bject mer chandise were conducted according to plaintiff’s inventory control sy stem using Master Lot Numbers.

V. C ONCLU SIONS OF L AW ON P ERMISS IBL E R EPAI R AND F IR ST S ALE Plaintiff established, by a pre ponderance of the evidence, that the L FFPs in the two shipme

nts at issue

in this cas e that we

re ref urbished from she lls provide d by

Photo Recy cling sa tisfied both the per

missible r epair a nd first sa le requi rements. Plaintiff

did not meet its burden of proof to establish that the LFF Ps refurbished from Seven Buck’s shells sat isfy the first sale re quireme

nt. A. Plaintiff Has Established by a Pre ponderance of the Evidence that the Subject Mercha ndise Und

erwent P ermissibl e Repair Plaintiff offered unrebutted testimonial and videotape evidence from which the court concludes that the process used at the Poly tech facility a

t the time the subjectCourt No. 04-00494 Page 39

5 This evidence is consistent with the findings of the District Court for New Jersey and, with respec

t to Kodak shells, of the International Tra de Commission’s administrative law judge that the Poly tech facility ope

rates in conformity w

ith the permissible repair doctrine. See Fuji Photo Film Co. Ltd. v. Jazz Photo Corp. , 249 F. Supp. 2d at

445-47; ITC Enforcement Initial Determination at 91-92.

6 The documentation submitted by plaintiff and a dmitted into evidence shows that these cameras were ref

urbished in or around late July of this y ear. See Pl.’s Exs. 17, 20. merchandise was refurbished was in ac cordance with the permissible repair standard se t forth by the Court of Appe als for the Federal Circuit. See Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d at 1106-07. 5 Defendant attacked only the probative value of the evidence offered by

plaintiff on permissible repair. A principal argument of defendant was that the videotapes admitted into evidence were made before the time at which the LFFPs at issue were

refurbished. 6 However, Mr. Zawodny testified from personal knowledge, gained throug h observation, of the changes made in the proc essing operations at the Polytech pla nt since the videotapes were made. None of those c hanges establishes an impermissible repair process, and instead they relate to matters other than the physical re

pair processes performed on the L FFPs. The gov ernment

also arg ued that t he videot apes do not depict

the repa ir proce ss for every kind of camera Jazz imported. However, Mr. Zawodny ’s testimony, based on his personal knowledge stemming from his position with Jazz, presented unrebutted evidenc e allowin

g the co urt to con clude tha t the rep air proc ess was p ermissibl e regardless of differe

nces in camera make or model. The court finds the testimony of Mr . Zawodny credible, based on his demeanor, his demonstrated knowledge of Poly tech’s processes and the precision with which he gave his responses to questioning. His testimony was bolstered by his e

xplanation of theCourt No. 04-00494 Page 40

7 Mr. Silvera also testified, based on his knowledge of the industry , that 85% of shells are processed at the same store wher e the original camera was pur chased. He offere d no docum entary

evidenc e to suppor

t this state

ment. processes demonstrated on the videotapes. Base d on this evidence, and the evidence

co nc er ni ng in ve nt or y co nt ro l, as di sc us se d e ls ew he re in th is op in io n, th e c ou rt fi nd s b y a preponderance of the evidence that all of the cameras in the two shipments at bar were refurbished by

a process at Polytec

h that constituted permissible repair, as established by the Court of Appeals in Jazz Photo Corp. v. Int’l Trade Comm’n , 264 F.3d at 1106-07. B. Pl ai nt if

f H as Sa ti sf

ie d a Re qu ir em en t o f “ Fi rs t S al e” by E st ab li sh in g b y a Preponderance of the Evidence that All of the Subjec t Cameras Were Repaired Using Shells Collected from Photo Processors Located in the United States, Except for Camer as Repaired from Shells Purchased from Seven Buck’s Plaintiff has pres ented suf

ficient, unrebutt

ed evide nce to es tablish tha

t the shell s collected by Photo Recy

cling and subsequently

used by Poly

tech in producing LF FPs at issue in this case were collected from photo processors in the U nited States. Mr. Silvera’s testimony established that the shells Photo Recy cling collected in the United States were purchased from photo processors in the United States or from independ ent colle ctors who

certifi ed that th ey

provided Photo Recy

cling with shells only from Unit ed States photo proc essors. 7 No evide nce of r ecord r ebuts or o therwise

casts doubt on Mr. Silvera’s testimony or the documenta ry evidenc e supporting it. Plaintiff established, throu

gh testi mony of its witne sses at tr

ial and do cuments p ertainin g to inventory control, the ne cessary identification between the shells collected, directly or indirectly, from photo proc essors and the finished LFF Ps in the two subject shipments.Court No. 04-00494 Page 41

8 Plaintiff’s records, as admitted into evidence, indicate that the L FFPs resulting from Seven Buck’s shells comprise a significa nt portion of the two entries. Determining the exact quantity will require the se gregation of the mercha ndise, a subject discussed infra

. It is undisputed that the two subject entries contain some L FFPs repaired from shells obtained from a source other than Photo Recy cling and that this other source of shells was Seven Buck’s, I nc. 8 The evid

ence sho ws that Jazz bo

ught the se shells d

irectly from Seven Buck’s and sent them from California to Poly tech in China. Jazz did not offer any evidence that the terms of the contract with Seven B uck’s required that Seven Buck’s provide only

shells collected in the United States. Nor is there any evidence that the Seven Buck’s shells we re colle cted, dir

ectly or indire ctly , from U.S . photo processors. Unlike the independent shell collectors with whom Photo Recy cling contracted, Seven Buck’s did not provide Jazz any certification that they

collected the shells solely in the United States or from U.S. photo proce ssors. Jazz contend s that the S even Bu ck’s she lls under

went two s orting o

perations to remove f oreign shells, one done un

der Mr. Z awodny ’s obser vation in Ca

lifornia , prior to shipment of the shells to China, the other performed in China under Poly tech’s standard procedures. Jazz asks the court to conclude that the double sorting is as reliable, if not more reliable, a measure of first sale than c ollection from a photo processor in the United States. The court is unable to reach such a conclusion on the evide nce presented. As discussed previously, any sorting process Jazz is able to conduct to exclude foreign-sold shells is subject to inherent limitations that permit a camera with a wra pper printed in English but first sold in a country othe r than the United States to remain in theCourt No. 04-00494 Page 42

chain of production. Plaintiff did not introduce evidence establishing that English-label disposable cameras are not sold in foreign c ountries. Although there was testimony that the Polytech sorting pr

ocess was capable of detecting and removing from production shells of a

typ e not ty

pically sold in the

U.S. mark

et, no evi dence w as introd uced to establish that Eng lish-labe led came ras that aretyp ical of the U.S. mar ket are not also sold abroad, in English-speaking countries or e lsewhere. There is no evidence that any such cameras would necessarily be identified as “inactive for U.S. production” by Polytech. The findings of fact the court has made c oncerning sorting of shells have significant implications for the cameras made fr om the shells provided to Polytech by Photo Recy

cling a nd, in con trast, for the ca

meras ma de from the shells provided t o Poly tech by Jazz after p

urchase from Seve

n Buck’ s. For the

Photo Recy

cling sh ells, which have been shown to have been collected from U.S. photo processors, the court’s findings of fact, and reasonable infe rences drawn from those findings of f act, support the conclusion that the only shells included in the mix that resulted from camer as that did not undergo first sale in the United States would have been pr eviously reloade d shells and tourist shells. This conclusion stems in part from the presumption of regularity arising from the enforcement by

Customs of the Exclusion Order, under which commercial importation of LFFPs infringing Fuji’s patents is prohibited. As discussed previously, the e vidence establishes that Polytec h sorted to exclude from pro duction those shell s display ing indic ations of

previous reloadi ng. Such shells,Court No. 04-00494 Page 43

according to the testimony of Mr. Zawodny , are identifiable by the presence of the black tape, by the pre sence of replacement parts, or by the absence of an original label. Th e r em ai ni ng po ss ib il it y is th e p re se nc e o f t ou ri st sh el ls . A s n ot ed pr ev io us ly, there is no evidence of record that the subjec t shipments included any came ras refurbished from tourist shells. The only evidence of record pertaining to the likelihood of the presence of tourist shells among shells collected f rom U.S. photo processors is that they would exist at a perce ntage of much less than one perce nt. The sorting employe d by Poly tech, tho ugh inhe rently less than foolproo f, is suff

icient, o n the facts of this c ase, to establish that Jazz has met its burden of establishing first sale for the cameras refurbished from shells collected from photo processors in the United States. Regar ding the remaining cameras, i.e. , those refurbished from Seven Buck’s shells, there has been no showing that shells from LFF Ps first sold abroad will be confined to reloaded shells and tourist shells. There is no evidence from which the court may draw an inference that shells fr om camer as first s old abroa

d would be

rare or nonexisten

t among t he shells bought from Seven Buck’s. The evidenc e that two sorting operations were perfor med on these shells is insufficient because, as discussed above, sorting has inherent limitations. The court cannot ignore the limitations in the sorting process whe re the sorting operation is relied upon not only to re move any tourist shells present, but also to re move all shells fr om camer as first s old abroa

d, includi ng those shells sold

in the U.S. market, or importe d from abroad, for which no connection is esta blished to a U.S. pho to processor. Two, or even more, sorting ope rations are not sufficient to overcome this lack of proof concer ning the location of sale o f the ca

mera whe n it was ne

w. For th eseCourt No. 04-00494 Page 44

reasons, plaintiff has not met its burden of establishing, by the preponderance of the evidence, that the LF FPs refurbished from Seven Buck’s shells satisfy the requirement of patent- exhausting

first sal e in the Un

ited State s. C. Pl ai nt if

f H as Sa ti sf

ie d a Re qu ir em en t o f “ Fi rs t S al e” by E st ab li sh in g b y a Preponderance of the Evidence that, a t the Time the Cameras Were Repaired, a Sy stem Was in Place to Identify

and Remove Shells from Previously Reloaded Ca meras Mr. Zawodny

presented unrebutted testimony that the Polytech fac ility sorts and excludes from processing shells in a condition indicating previous reloading . As noted supra , the so-called “reloaded reloads” were the primary source of infringing came ras according to the I TC administrative law judge. See ITC Enforcement Initial Determination at 65. Jazz established, by a preponderanc e of the evidence, that previously reloade d shells are recognizable by physical char

acteristics, such as the lack of an original wrapper, the pre sence of black tape on the repaire d camera shell, or the presence of replacement pa rts. On the subject of replacement parts, Mr. Z awodny testified that a full-width replacement back used to repa ir a Kodak LFF P appears physically

different from the original, and that Poly tech’s sorting sy stem would exclude such shel ls from the

reloadi ng proc ess. From all the evidence plaintiff presented on the sorting process employe d by Poly tech, tog ether wi

th the evi dence o n inventor y c ontrol, di scussed e lsewher e in this opinion, the court concludes that plaintiff has met its burden of establishing that the LFF Ps at issue

were no t refurb ished fr

om previo

usly reloade d shells.Court No. 04-00494 Page 45 D. Pl ai nt if

f H as Sa ti sf

ie d a Re qu ir em en t o f “ Fi rs t S al e” by E st ab li sh in g b y a Preponderance of the Evidence that, a t the Time the Cameras Were Repaired, a Sy stem Was in Place to Identify

and Remove, Based on Non-Proprietary Information, Shells of Cameras Indicating

First Sale Outside the United States Plaintiff established by a pre ponderance of the evidence that Poly tech had a sorting system in place

at the time the subject cameras were proc essed. That evidence showed th at the she lls, during the sortin

g proc ess, are

checke d for sev eral cr

iteria including make, model, whether they were previously

reloaded, whether they

have any foreign languag e or markings indicating they were first sold in a country other than the United States, whether they are of a ty

pe not typical for the

U.S. market, and whether they are in good enough condition to be repaired. Particula rly releva nt to the issue of tourist shells was Mr. Zawodny ’s testimony that the shells are sorte d at the Polytech facility to acc ept for reloading only those shells that are of specific models and that do not have f

oreign langua ge on th e packa

ge. Thi s sorting

process is part of the same process whereby

reloaded shells, defective shells, and shells without an original wr apper are removed from those shells designated f or repair. The language of the or

iginal wrapper is an indication of the country in which the shell was intended to be sold, according to the ITC Enforcement Initial Deter mination. ITC Enforcement Initial Determination at 35. De fendant has not es tablished

that ther e is any other pub licly

-availa ble infor mation upon which a

company repair ing L FFP shel ls could rely to re

move shells first sold in a market other than the United States. By esta blishing collection of the shells from U.S. photo processors, and by presenting evidence of sorting to e xclude from processing, according to infor mation

av ai la bl e t o J az z, to ur is t s he ll s t ha t m ay h av e b ee n p re se nt , J az z e st ab li sh ed by aCourt No. 04-00494 Page 46

preponderance of the evidence that the LFFPs in the subject shipments that were repaired using she lls other t

han the Se

ven Buck’s shells

satisfy the requ irement o f patent

exhausting first sale. It appears that sorting

for shells of foreign-sold camera s by examining the pac kag in g fo r fo rei gn l ang uag e ma y be a n ov er- and und er- in clu si ve s ort in g pr oce ss . It may be over

-inclusive, in that this court has no evidence before it forec losing the possibility

that biling

ually or multi-li

ngually labeled LFF Ps, or L

FFPs not l abeled i

n English, are sold in some places in the United States. Similarly , it may be underinclusive, because this court has no evidence showing that English-labeled LF FPs may be sold in English-speaking countries other than the United States. Due to the inhe rent limitations in the sorting process, the court is unable to conclude, under the fac ts and circumstances presented by this case, that first sale may be established by e

vidence of sorting that is not a

ccompan ied by evidenc e that the

shells we re colle cted fr

om photo process ors in the

United Sta

tes. E. Plaintiff Met Requirements of “First Sale” and “Permissible Repair” by Establishing by a Preponder

ance of the Evidence that it Had, at the Time the Camer as Were Repaired, an Inventory

Control System to Track the Shells it Designate d for Use in Repairing Cameras Destined for the United States Plaintiff has established with unrebutted testimonial, video and documentary evidence that during the time the subject mercha ndise was refurbished, and during the time the shells used for that process were acquire d, it had a system in place ba sed on “Master Lot Nu mbers” ( “MLN s”) that t

racked a grou p of shell s purcha sed by

Photo Recycling or Jazz from point of shell purchase to LFFP reimportation into the United States. The evidence showed that ML Ns are assigned by

Jazz, and Photo Recycling andCourt No. 04-00494 Page 47

Polytech coordinate the ir activities with Jazz to maintain the MLN system throug hout the entire process. Mr. Zawodny testified that boxes containing MLNs are sorte d and processed one at a time to prevent commingling of one MLN with another and tha t at the conclusion of the repair process in China, the L FFPs are packed into cartons for shipment to the United States. The documents submitted by Jazz, and admitted into evidence, corroborate Mr. Zawodny ’s testimony concer ning the tracking of mercha ndise by ML

N. An adequate inventory

control system is required so that “ first sale” and “permissible repair” can be established for the particular cameras in the two shipments. The court concludes, based on findings of fa ct, that plaintiff has satisfied this inventory control r equirem ent.

VI. S EGREGATION OF THE C AMER AS R EFURB IS HED U SING S EVEN B UCK ’ S S HELLS At a status conference held on November 1, 2004, the court informed the parties of its tentative findings of fact and conclusions of law conc erning the first sale and permissible repair issues. Those tentative findings of fact and conclusions of law are set forth in this opinion as adopted findings of fact and conclusions of law, as a re additional findings of fact and conclusions of law that are needed to resolve the issues for which additiona l procee dings we

re nece ssary

after N ovember

1, 2004. O ne of thos e issues in dispute between the parties, and requiring a dditional proceedings, was the issue of segregation of the merc

handise. The court had raised, during plaintiff’ s closing argument on Octobe

r 18, 2004 , the ques tion whether came ras made from Seve

n Buck’ s shells could be s egregated. Th e issue ha d not been

factua lly r esolved by th e close o f trial.Court No. 04-00494 Page 48 The cour t reopened the tr

ial record for th e purpose of allowi ng the p arties to intro duce ev idenc e on th e segrega tion issu e. Pl ainti ff prod uced t hree on e-page “In spection

Reports,”

each of which we

re pres ented wit

h multi-pa

ge atta chments presenting tables of numbers, which plaintiff offe red for the purpose of demonstrating correspondence between var ious MLNs, including ML N 463 that was assigned to the Seven Buck’s shells, and the numbers on the individual cartons (ea ch containing sets of cameras) in the two shipments. Defendant at first objected to the a dmission of the document into evidence on grounds of authentication and he arsay a nd also questioned whether the document, eve

n if it wer e to be ru led admiss ible, re liably

could be u sed to establish segregation of the merc handise. To determine the issue of whether the tables attache d to the three Inspection Reports corresponded to the labeling of the ca rtons in the two shipments so as to allow segregation, the court, pursua nt to authority gra

nted by 28 U.S.C. § 2643(b), enter ed, on November 5, 2004, an Order for an Expedited Administrative Deter mination. The Order directed, inter alia , that Customs conduct a physical examination of the merc handise and its packa ging a nd repor t to the co urt whether the do cumenta tion offe red by plaintiff in suppo rt of s egregati on, wh en com pared t o mark s and l abels presen t on t he pack aging, provided a means to identify the cameras related to ML N 463. The Order directed that repres entative s of plain

tiff be a llowed to b e prese

nt for the examination, to part

icipate i n the admin istrative procee ding, a

nd to submit i

ts own rep ort of the

examination. It a

lso allowed counsel for both parties to be present and to participa te in the administrative procee ding.Court No. 04-00494 Page 49 Both parties submitted, on November 8, 2004, reports on the administrative proceeding and the examination. The reports ar e in agreement that all of one entry and a portion (approximately 60 perce nt, according to plaintiff) of the other entry were examined using the documentation provided by plaintiff. They also a

gree that the examination was sufficient to allow complete and accurate re porting in response to the court’s inquiries and, in defendant’s words, “to draw c lear conclusions about whether merchandise from Master L ot Number 463 can be identified.” Def.’s R esp. Purs uant to Order for Expedited Administrative Determination at 2. Plaintiff reported, inter alia , that it s r ep re se nt at iv es “r ep or te d t ha t t he y we re ab le to co nd uc t t he se gr eg at io n p re ci se ly, using the Inspection Reports provided by plaintiff.” Pl.’s Interim Report Concerning Segregation & M

ot. For Order Directing Completion of Segregation & R elease of Segrega ted Merc

handise at 2. The Customs report is far from a model of clarity . As a threshold observation, some of th e lack of

clarity in the re port appe ars to be

the resu lt of pains taking e ffort to preserve defendant’s then pending objection to the admissibility of the documentation plaintiff offered on the issue of segre gation (which objection defendant later wa ived by stipulating to the admissibility of that documentation). Taking such pains in the report was unnecessary

because the Order expressly noted the admissibility objection and viewed it as premature “in view of the administrative proce eding,” and because the Or der indicates that the documentation was to be relied upon for purposes of the e xamination. The Customs report also appears to take grea t pains to emphasize the observation by Customs, not disputed by plaintiff, that the individual cartons in the two shipments areCourt No. 04-00494 Page 50

not labeled according to Master Lot Number. This observation is also irrelevant to the information sought by the Order. Were the cartons labeled with ML Ns, the do cu me nt at io n p la in ti ff

su bm it te d w ou ld be un ne ce ss ar y fo r s eg re ga ti on on a c ar to n- bycarton basis. As the Order indicated, the examination of the car tons together with the document ation was needed to deter mine “whe

ther the informat ion in that d

ocument, togethe r with any

other inf ormation p laintiff

may submit or c ommunica

te to Custom s in the proceeding ordered he rein, corresponds to labels, markings or other infor mation in or on the LFFPs, boxes, cartons, or other pa ckaging so as to indicate a re lationship between Master Lot Number 463 and spec ific LFFPs or pac kages of LF FPs.” Order for Expedited Administrative Determination at 3. Nevertheless, the Customs report contains the state ment that “ Customs has

no indepe

ndent mea

ns of iden tify ing whic h of the L FFPs in the subject shipment are related to Master L ot Number 463.” Def.’s R esp. Purs uant to Order for Expedited Administrative Determination at 2. “In Customs’ view, the marking s on the ca

rtons tha t were examined do n

ot establi sh which L

FFPs ar e relate d to Master Lot Number 463. Acc ordingly, in the a bsence of a finding by

the Court that the aforem entioned

document s submitted

by p laintiff

are who lly a

uthentic and reli able, the se LFFPs cannot be a

ccurately identified and segregate d from the balance of the merchandise.” Id

. Despite the above-quoted languag e, the court interprets the Customs report, read in its entirety, to be in ag

reement with the report of plaintiff that the documentation submitted by plaintiff enables identifica tion and segregation of the ca rtons in the two shipments that are associated with MLN 463. Certa in statements in the Customs reportCourt No. 04-00494 Page 51

cause the court to find there is no disagree ment between the parties that the documentation allowed identification of the individual cartons containing the ca meras of MLN 463. For example, the Customs report states as follows: “We note that I mport Specialist Dan Johnson has indicated which cartons, allegedly associated with Master Lot Number 463, were actually examined by placing

check marks and his initials next to the line corresponding to those cartons on the attache d copy of plaintiff’ s submission (as discussed in more detail below).” Def.’s Resp. Pursuant to Order for Expedited Administrative Determination at 2 (footnote omitted). The checkmarks appear on the copy beside e ach line

refer ence to MLN 46 3 listed in t he handw ritten ta bles. After taking the deposition of a witness in Hong Kong whose availability for a video conference Jazz arranged, def endant stipulated to the admissibility of the Inspection Reports and attachments a s business records of Jazz. Those documents are ordered to be admitted to the record in these proce edings as Plaintiff’s Exhibit 23. At the motion of plaintiff, consented to by def endant, the court also admits the deposition transcript into evidence as Plaintiff’s Exhibit 24.

A. Findings of Fact on the Segr egation Issue The court adopts a finding of fact, base d on unrebutted evidence, that plaintiff’s Master L ot Number

sys tem of inve

ntory control, address ed previ ously , assigned a single MLN (ML

N 463) to the shells Jazz purchased from Seven Buck’s and the reloaded cameras that Polyte ch produced from these shells. ML N 463 is associated with the Seven Buck’s shells and resulting camer as by various business re cords produced by plaintiff. See Pl.’s Ex. 19.Court No. 04-00494 Page 52 Based on all the e

vidence present ed on the s egregation issue , includin g in particu lar the I nspection Reports a

nd the han

dwritten tables a ttached to them, a

nd also including the report of Customs made in the administrative proceeding , the court reaches the finding of fact that the I nspection Reports (including their attached handwritten tables) allow segrega

tion of the specific cartons in the two shipments that contain the cameras of MLN 463. Based on the handwritten tables attached to the I nspection Reports, the court adopts the finding of fact that the shipment contains inner car tons in which cameras from MLN 463 are commingle d with cameras from other of plaintiff’s Master L ot Numbers. The car tons in whic

h this commi

ngling occurr ed are i dentifie d on the ha ndwritte n tables. B. Conclusions of Law on the Seg regation Issue Pl ai nt if f’ s b ur de n o f p ro of

of sh ow in g b ot h f

ir st sa le an d p er mi ss ib le re pa ir by a preponderance of the evidence applies to each camera in the two shipments. Accordingly , plaintiff is required to establish that the cameras refurbished f rom Seven Buck’s shells are segre gable, on a direct identification basis, from the re maining cameras. Plaintiff has met, by a

prepond erance of the ev idence, its burde

n of proof as to this segre gation, with the exception of the seve ral car tons in whic

h camer as made f rom shells purchas ed from Se

ven Buck’s were

comming led with ot

her cameras in the shipmen t. Defendant pointed out, and the court agre ed, that the handwritten Inspec tion Report ta bles show that some c artons c ontain L FFPs fr om MLN 463 and a

lso conta in cameras from other ML

Ns. Plaintiff does not dispute this point and has not offered any evidence upon which those commingled camer as may be sorte d. Accordingly , theCourt No. 04-00494 Page 53

plaintiff has not met its burden of proof establishing segre gation of those particular cartons. The court concludes that the camer as in cartons shown by the handwritten tables to contain cameras from ML N 463 and to also contain cameras from other ML Ns do not satisfy the first sale r

equirement and are determined by the court, by applica

tion of the Ex cl us io n O rd er , t o b e e xc lu de d f ro m e nt ry.

VII. A PPLICATION OF US CIT R. 62(a) Rule 62(a ) of this c ourt prov

ides that “ [e]xcept as s tated he rein or a s otherwi se ordered by

the court, no execution shall issue upon a judgment nor shall proceedings be taken for enfor

cement u ntil the expi

ration of 30 days after i

ts entry .” Plaintif

f urge s this court to order the release of the merc handise on the day judg

ment is entered, through an immediately enforc eable judgment order, and hence is urging this court not to allow any automatic stay pursuant to USCI T R. 62(a) . Its a rgumen t is that Jazz ne eds immedi ate release of the merchandise bec ause of its precarious financial status and that the government would not be injured by the loss of its opportunity to seek a stay preventing the release of the merchandise pending appeal. The United States objects to any shortening of the 30-day

period. After considering the arg

uments of the parties on this point and the evidence of record, the court has decided to shorten the a utomatic stay period to 10 day s. The court believes this result balances the interests of, and in particular the likelihood of ha rm to, both part ies. The c ourt note s, moreov er, that the 10-da y a utomatic s tay

period it i s determin ing to be appropr iate for this case conform s with the a

utomatic s tay

period inCourt No. 04-00494 Page 54

effec t for the d

istrict c ourts unde

r the ana logous Ru

le 62(a) of the Fe deral Rul es of Civil Procedure. The cour t has cond

ucted the procee dings in t

his case on an expe dited bas is, with the consent of both parties. Approximately two we eks elapsed from filing of the summons and complaint on October 4, 2004 to the last day of trial (October 19, 2004). The court informed the parties of its tentative findings of fa ct and tentative conclusions of law on two issues in the case–first sale and permissible repair–on N ovember 1, 2004, after which time additional proceedings we re necessary , as discussed above, on the issue of segregability

of the merchandise. The administrative proceeding addressed to the segregation issue produced r eports to the court that were filed on November 8, 2004. A 30-day a

utomatic stay period would be two- thirds as long as the time consumed from filing o f the ca se to entr

y of judgmen t. The considerations leading to the expedited trial schedule wer e understood by both parties. They include the bankruptcy pr

oceeding involving Jazz, in which Fuji is the primary credito r. The pu

blic rec ord of tho se proce edings d isclose that a motion

is pending to conver t the bank ruptcy procee dings fr

om reorg anization u

nder cha pter 11, t o liquidation under chapter 7, of Title 11, United States Code. Another consideration relevant to the need for expedited trial, which consideration had be en apparent to the court and the defendant from the pleading s Jazz filed on the record in Court No. 04-00442, brought in this court under a claim of jurisdiction under 28 U.S.C. § 1581(i), was that Customs had detained a number of shipments of Jazz’s merchandise other than the two shipments involved in this case.Court No. 04-00494 Page 55 The 30-day

stay provided for

under Rule 62(a) applies only if the court takes no action to shorten t his time pe

riod. Rule

62(a) w as amend

ed in 1986to allow th e court, in its discretion, to make an exception to the automatic 30-day stay. A considera

tion underly ing the c hange in the rule

appare ntly was the problem po sed by perisha ble merchandise or by

other situations in which time is of the essence. See Practice Comment to USCIT R. 62. Although USCIT R. 62(a) clea rly gr ants the court discretion to shorten the 30-day period, there is scant case law providing g uidance on the standard to apply in deciding whether, and by

how much, to shorten the automatic stay period. More common are th os e m ot io ns se ek in g, un de r R ul e 6 2( d) , a st ay p en di ng ap pe al lo ng er th an th e 3 0 d ays provided under Rule 62(a). The court considers the shor tening of a stay

to involve the same considerations as do the extending of a stay . In American Grape Growers Alliance v. United States , 9 CIT 505, 507 (1985), the Court stated that “[t]he crux of the matter, as it should be , is the que stion of whether th e stay will avoid an injury or cause an injury.” (emphasis in original). The criteria the cour t applies to grant a stay

are four fold: (1) likelihood of success of the party seeking relief; (2) whether pla intiff will suffer irrepa rable ha rm; (3) th e balanc e of har m to the pa

rties invo lved; and

(4) any public interest that should be served. Id. The first factor has been met in part, as Jazz has established the admissibility of some of its merchandise.

A. Findings of Fact on the Rule 62(a) I ssue The court makes a finding on which it is basing its decision to shorten the Rule 62(a) period for an automatic stay . This finding is independent of any considerationCourt No. 04-00494 Page 56

9 Jazz repeat

edly has empha sized the im

portanc e of the holiday

selling season to its business, e.g. , in pleadings in the related Court No. 04-00442. See Pl.’ s Mot. for E

ntry of a Tempor

ary Inj. at 3 (Sept. 16, 2004). of Jazz’s financial status. Spe cifical ly, the cour t finds tha t the subje ct merchandise is likely to be significa

ntly less valuable to Jazz if it is released too late for Jazz to have a meaningful chance of selling it during the current holiday

selling season. The court takes judicial notice of the importance of the holiday selling season to retailers, including Jazz’s custom ers. 9 Moreover, factual evidence re cently admitted to the rec ord upon defendant’s motion, as discussed infra , establishes that Jazz has an imme diate ne ed to fill current orders. Allowing the ordinary stay of 30 day

s would mean that Jazz would be unable to enforce the judgment entere d by the court until Dece mber 18, 2004. By

that time, and allowing for the ti me neede d to get t

he merchandise i

nto reta il channe ls, practically a

ll of the holiday selling sea son will have passed. The court believes that the consider ation con cerning the holida

y se lling se ason and

Jazz’s need t

o fill cur rent ord ers, by itself, is sufficient in the context of this case to support a de cision to shorten the stay period. Wh

ile the me rchandi se is not “

perisha ble,” it is in an ana logous st ate, its

commerc ial import

ance to t he plaint iff depe ndent sig nifican tly on its avail ability

for sale in the very nea

r future. The court also notes that Congress viewe d cases involving the exclusion of merchandise as deserving of expedited adjudication and judicia l review. See 19 U.S.C. § 1499(c).Court No. 04-00494 Page 57

10 On November 17, 2004, defendant filed a motion to leave to file a status re port. That stat us repor t stated that a hea

ring to c onsider F

uji’s motio n to conve

rt previo usly scheduled for November 19, 2004 had been c hanged to January

28, 2005. The court hereby grants defenda nt’s motion

for lea ve to file the status report. B. Absence of Factual Rec ord Sufficient to Eliminate 10-Day Automatic Stay Period The court may

take notice from the public record in the bankruptcy proceeding that Fuji, a creditor participating in those procee dings, is seeking to effect the conve rsion of the proc eedi ngs f rom r eorg aniza tion o f Jazz u

nder chap ter 1 1, to l iquid

ation of Jazz under chapter 7, of the Bankruptcy Code. Fuji filed the motion to convert on August 2 of this year. The B ankruptcy Court is curr ently scheduled to conside r that motion on January 28, 2005, though it may consider it earlier if events require. 10 At a statu s confer

ence, the court o ffere d defend ant the op portunity to move to place on the record evidence r elevant to Jazz’s financial status as it relates to the issue of whether, and how long, there should be an a utomatic stay of judg

ment. On November 12, 2004, defendant moved to supplement the record w ith a transcript of deposition testimony of Jazz’s controller. The court has gr anted defendant’s motion. The deposition testimony establishes that Customs released to Jazz ten containers of LFFPs with a value estimated a t “close to $2 million.” This fact, which plaintiff does not contest, corroborates the court’s finding that Jazz has failed to demonstrate that allowing defendant a reasonable time (in this instance, the ten-da y automatic stay

provided under the Federal Rules of Civil Procedure) is likely to cause Jazz irreparable harm. The deposition testimony, as mentioned previously, also corroborates that Jazz has a pressing need to ob tain goo ds to fill c urrent orders.Court No. 04-00494 Page 58

11 In the pleadings filed in that pr eceding action, plaintiff submitted an affidavit of Jazz Chief Exec

utive Off icer Jack Benum, d

ated Sept ember 26 , 2004. I

n that af fidavit, Mr. Benum stated that: unless Jazz secures relief from this court it is expected to be forced out of busi

ness withi

n day s; selling

LFF Ps repre sented 85 % of Jazz’s bu siness; due to Customs action Jazz has run out of merchandise and is without cash flow; without release of the subject merchandise Jazz will suffer cance llation of customer orders and likely loss of future business. Jazz also filed a cash flow repor t in the previous case. Neither has been admitted to the record in this case. Eve n had plaintiff done so, the court conclude s that those

document s would not

have est ablished the likeli hood of ha

rm to Jazz sufficient that it would convince this court to dispense with a 10-day automatic stay

. The affidavit was not accompanied with corrobor ating evidence. The cash flow r eport does not provide the court an independent basis to conclude that the cour t’s allowing for a 10- day stay peri od is l ikely

to inj ure Ja

zz.

12 These documents, even had they been admitted to the record, would not be sufficient to cause this court to conclude, in the context of all the evidence of r ecord, that th e 1 0- da y au to ma ti c s ta y pe ri od sh ou ld no t a pp ly. As part of the pleadings in Court No. 04-00442, Jazz filed two documents that relate generally

to the issue of its immediate need for the release of merc handise. 11 On October 28, 2004, Jazz filed with the court a report “concerning ma tters requiring immediate

determination.” A

ppended thereto were c ertain c onfident

ial documents offered to show business exigencies supporting the nee d for an immediate determination. Plaintiff did not move

to reope n the rec ord or oth erwise move to adm it these do cuments into evidence, and they

have not been admitted into evidence. 12 Such evid ence as is availa ble on the record to this cou

rt is insuf ficient t o support a factua l conclus ion that Jazz wi ll have to cease b usiness op eration s if it does not obtain immediate

releas e of the s

pecific mercha ndise this c ourt has found to be admissible. Also, the e

vidence on the re cord bef

ore this c ourt is insu

fficien t to establ ish that a t

ime period of 10 days betwee

n entry of judgment and e

nforce ment of tha

t judgme nt willCourt No. 04-00494 Page 59

13 Counsel for defen

dant state d at a poin

t late in th e proce edings t hat while defendant would object to any shortening of the 30-day automatic stay, it would need a n absolute minimum automatic stay of five day s in order to seek a stay

pending appeal. The cour t decline s, on the pa

rticular facts shown in this c ase, to shorten the automatic stay of Rule 62(a)

to five days. As discussed he rein, plaintiff has not shown that the 10-day period, w

hich is the

period pr ovided for under t

he Fede ral Rules of Civil Procedure, is likely to ca

use it irreparable harm. During a five-day period, defendant cause Jazz su

ch harm t hat this co

urt should

deny defenda nt a mean ingful o pportunit y to obtain a s tay

pending appeal. C. Conclusions of Law on the Rule 62(a) I ssue The purpose of the 30-day stay provided for

in Rule 62 of this Court’s Rules, and the 10-day stay

provided by Rule 62(a) , Fed. R. Civ. Pro., is to allow a losing party an opportuni ty to secure a stay pending appeal. The oppor

tunity to seek su

ch a stay is a legitima te and ne cessar

y e lement in t

he judici al proce ss. Further, the U nited State s has a legitimate interest in preventing the entry of merchandise it believes to be in violation of the Exclusion Order. The factor of “public interest to be serve d” also favors the position of defendant that it should have a reasonable opportunity to seek a stay pe

nding appeal. Neither side disputes that if the merchandise were re leased, there would be no opportunity for subsequent re delivery. F or these reasons, the court will not eliminate the ability of defenda

nt to seek a stay pe

nding appeal, nor does it wish, on the facts presented by t his case , to shorte

n the time t

he Court o f Appea

ls will nee d to consid

er any motion to stay to a period less than tha t ordinarily apply

ing to civil cases. Some balance must be struck between the competing interests of Jazz to obtain expeditious release of the portion of the subject merchandise for which it has established admissibility , and the interest s of the de fendant to have a motion to sta

y c onsidere d by

the Court o f Appea

ls. 13Court No. 04-00494 Page 60

would nee d to seek a

stay in this cou

rt, then if unsucce ssful pre

pare an d file a mo tion to stay in the Fede

ral Circuit. The voluminous record in this case would limit the opportuni ty o f the Cour

t of Appe als to con sider fu lly t he issues that may be raise d in such a motion.

14 Becau se, unde

r this Cour

t’s Rules ( as under

the Fed eral Rule s of Civil Procedure), the ten-day

period does not include intervening holidays and weekends, the actual time period of the automatic stay is the equivalent of 15 calendar day s, or half the time peri od that wo

uld apply were the court to ma

ke no spe cial ruli

ng on the automatic stay period provided f

or under USCIT R. 62(a). The court concludes that defendant United States will suffer no sig nificant prejudic e from the

shorteni ng of the automatic

stay to 10 day s, the same amount o f time that appl ies in civi l cases in the distri ct court s. 14 In addition, the court, on November 1, 2004, notif

ied the pa rties of prelimina

ry conclusi ons of law

and fact on permis sible rep air and first sale and explained the need for the court to obtain a re solution of the issues

concer ning seg regat ion of the mercha ndise ten tatively found to be

inadmissib le. This action placed the defendant on notice as to the proba ble outcome of this case and provided an opportunity for defendant to begin to prepare a motion to stay prior to entry of judgment. The court finds that irreparable harm, stemming f rom the unavailability, for almost all of the holiday selling se ason, of the merchandise found to be admissible by this court, is likely to befall Jazz if the full 30-day stay is required. The

court also finds that it is possible to balance the competing hardships of the parties by providing for a 10- day stay . In light of the fore going, the court will order that its judgment directing the release of all merchandise deeme d admissible within the two subject entries will be stayed for te

n business days, which per iod will expire on December 2, 2004. The

st an da rd 30 -d ay s ta y of

en fo rc em en t u nd er Ru le 62 wi ll no t a pp ly.Court No. 04-00494 Page 61

15 Portions of plaintiff’s exhibits 1 through 7 and 9 through 14 contained pages of the exhibits to which the defendant did not object. Parts B of the same exhibits contained those pages that the defendant specific ally objected on a uthentication grounds.

16 The government raised the same objection to plaintiff’s exhibits 16, 17, 19 and 20. A deposition of Mr. Jack Benum, Chief Executive Officer of Jazz, was held on Friday , Octobe r 15, 2004 , for the

limited pur

pose of a ddressin g the iss ue of adm

issibility of the documents. At trial, after resumption of court procee dings, the government withdrew its additional hearsay objection to Plaintiff’s Exhibit 20 (pre-marked as Plaintiff’s Exhibit 4) but preserved its authentication objection for further consideration by t he court

. 17 Defendant objected to Bates number 78 of Plaintiff’ s Exhibit 7B on the additional ground that the document is incomplete and unreliable. The c ourt sustains de fe nd an t’ s o bj ec ti on an d s tr ik es Ba te s n um be r 7 8 f ro m t he tr ia l r ec or d. Ad di ti on al ly, VIII. R ESOLUT ION OF R EMAINI NG O UTSTANDI

NG M OTIONS A. Continui

ng Obje ctions by

Defend ant to Admi ssibility

of Exhibits At trial, d efenda nt object ed to the a

dmission of

plaintiff ’s docume

ntary exhibits, claiming that the proffer

ing witne sses fail ed to auth enticate certain document s within those exhibits in accordance with Fed. R. Evid. 901. Specifically , defendant argued that the proponents of t

he evide nce cou ld not show

that the e vidence is what the

propone nts claim it to be. At trial, the court admitted most of plaintiff’s exhibits but segregated some of th e docume

nts into two

parts (d esigna ted “A” and “B” ) of plain

tiff’s Exhi

bits 1 through 7 and 9 through 14, 15 noting defendant’s objection to for the recor d and giving the gov ernmen t an op portu nity to f urthe r exp lain t he obj ectio n in p ost-t rial b riefi ng. 16 Upon review of the government’s ar gument, plaintiff’s memorandum in support of admission, and the tr

ial record, the c ourt over

rules the defenda nt’s obje ctions an

d affirm s its ruling to admit the exhibits without condition, with the exception of a small number of document s. 17Court No. 04-00494 Page 62

the court reserved its evidentiary ruling on Bates numbers 223 and 229 of Plaintiff’s Exhibit 17; pla

intiff wit hdrew its motion to ad

mit those pa

ges into the rec ord in the se proceedings during a sideba r discussion. Plaintiff sought to lay the founda tion for the admissibility of the exhibits at issue through the testimony

of Messr s. Silvera

and Za wodny that the d

ocuments were bu siness records of either Photo Recy cling or Jazz, and that they qualified for a dmission under the business records exception to the hearsay rule. See Fed. R. Evid. 803(6). The gover nment con

tended that Messrs . Silvera and Za wodny could not properly

authenti cate the bu sines s recor ds bec ause, in it s view , thes e two w itnes ses “w ere wit hout knowl edge of the process by

or location at which . . . the documents were ge nerated.” Def.’s P

ostTrial Br. at 22. The court disagrees with defenda nt’s contention. “The proponent need not establish a proper foundati on throug

h persona l knowled ge; a pr oper fou ndation ‘ can res t on any manner

permitted by Fe deral Rule of Evidence 901(b) and 902.’” United States v. Pang , 362 F .3d 11 87, 11 93 (9t h Cir . 2004 ) (cit ing Orr v. Bank of America, NT & SA , 285 F.3d 764, 774 (9th Cir. 2002)). The government’s objection to the admissibility of the business records amounts to an objection that plaintiff did not proffer a witness or affidavit from the companies that gener ated all the documents contained within the documents proffered as business records. See Def.’s Post-Trial Br. at 22; Tr. at 238-297, 417-45, 477-504, 557-63, 635-40. The cont ention tha t each a nd every business d

ocument o ffere d into evid ence mus t be separ ately authenti cated by

a witness from the e

ntity that pre pared th e docume

nt, however, has no basis in law. See Unite d States v . Jakobe tz , 955 F.2d 786, 800-01Court No. 04-00494 Page 63

(2d Cir. 1992) (holding that “[e]ven if the document is originally created by

another entity, its creator ne ed not testify when the doc ument has been incorporated into the business records of the testify ing entity” ( citation omitted)). Defendant’s narrow rea ding of the re quireme

nt of Fed . R. Evid. 90 1 essenti ally would swa

llow the 80 3(6) busi

ness records exception and prevent most entities from using documents at trial that ar e germa ne to the o

peratio n of their

businesse s. Mr. Silvera testified that he is familiar with the documents contained in the business r

ecord of Photo Recy

cling a nd that the

exhibits at i ssue wer

e in fac t business record s gene

rated a nd/or main

tained or integr ated dur ing the ordinary

course o f Photo Recycling ’s business. See Tr. at 225-47, 257-97. Although Mr. Zawodny could not testify definitively

that every doc

ument within the subject exhibits were “records of operation” maintained by Jazz in the ordinary course of business, he was a ble to identify the exhibits

as busine ss recor

ds and expla

in the con tents of e ach doc

ument and

their significance to Jazz’s business operations. See Tr. at 463-98. After a deposition was taken of Jazz’s Chief E

xecutive O fficer , the go vernmen t conced ed that th e docume

nts used to elicit testimony from Mr. Z awodny we re, in fact, business records of Jazz and stipulated that Plaintiff’s Exhibit 20 contains documents that are maintained as part of Jazz’s business records. The government withdrew its hearsay objection to Plaintiff’s Exhibit 20, but reserved its objection under Fed. R. Evid. 901 to all business records proffered by

Mr. Zawodny

that were not produced by Jazz. The witnesses purport that the documents at issue are either business re cords of Photo Recycling or

Jazz. The trial testimony of Messrs. Silvera and Zawodny and theCourt No. 04-00494 Page 64

government’s consent to waive its hearsay objection in light of Mr. Benum’s deposition have, for purposes of Fed. R. Evid. 901, established that the documents ar e what the proponents claim; therefore, the grounds for any authentica

tion objection have been extinguished. Fed. R. Evid. 901(a) (“The requireme nt of authentication or identification as a cond ition prec edent to a

dmissibility

is satisfie d by

evidenc e suffic ient to sup port a finding that the ma

tter in que stion is wha

t its proponent claim s.”); see M C C ORMIC K ON E VID . § 292 (5th Ed.) (“[W]hen the business offering the records of anothe r has made an independent check of the records, ha s integrated them into their own business operation, or can establish accuracy

by other means, the

necessary

foundation may be e stablished.”) The law of the Federal Circuit instructs that it is of no consequence that the witnesses who laid the foundation for admissibility did not gene rate, prepare, or maintain the records, or even work at the rec ord-keeping entity as an employee

. Conoco Inc. v. Dep’t of Energy , 99 F.3d 3 87, 391-9 2 (Fed. Cir. 1996) ; Munoz v. Strahm Farms, Inc. , 69 F.3d 501, 503- 04 (Fed . Cir. 1995 ); see also Saks Int’l, Inc. v. M/V Exp. Champion , 817 F.2d 1011, 1013 (2d Cir. 19 87); United States v. Basey , 613 F.2d 198, 201 n.1 (9th Cir. 1979), cert. denied, 446 U.S. 919 (1980). The court has no reason to question the testimony and circumstantial evidence that these exhibits are actually business re cords of either Photo Recy cling or Jazz or the testimony of the wit

nesses r elating to their r eliance on such re cords. A

ny q uestions a s to the extent o f a witne ss’ pers onal know ledge o f the con

tents of the busines s recor ds will be considered by

the trier of fact, in this case the trial court, only in determining the credibility of the witness and the weight to be accorded to the solicited testimony

.Court No. 04-00494 Page 65

See Unite d States v . Stavroff , 149 F.3d 478, 484-485 (6th Cir. 1998) (citation omitted). Defendant also objected, on authentication gr ounds, that some of the documents are not on the let terhea d of the e ntities tha t gener ated the m and that

some cont

ain text in Chinese. That some of the documents contained within the business records are written in a foreign languag e or not produced upon company letterhead does not defeat admissibility but instead affects only the probative value of such documents, a determination that is reserved for the trier of fa ct. B. Defen dant’ s Mot ion fo r Jud gment o n Part ial Fi ndin gs At the close of plaintiff’s case in chief, defe ndant moved for judgment on partial finding s pursuan

t to Rule 52( c) of this

Court. De fendant

argue d that Jazz fa

iled to establish, by a preponde

rance of the evidence, that the shells used to produc e the cameras in the two s

ubject e ntries we re first sold in the

United Sta

tes. To ma

ke its arg ument, defendant pointed to what it claimed were severa l deficiencies in Jazz’s case in chief, including the fact that Jazz presented no evidence to establish the origin of the Seve n Buck’s shells. Tr. 645-64. During trial, the court r eserved ruling on defendant’s Rule 52(c) motion and now denies this motion for the reasons that are subsumed in the findings of fact and conclusions of law set forth in this opinion.

C. Defendant’s Motion to Reopen the Trial Record On October 19, 2004, the day following the conclusion of the trial, defendant made an e

merge ncy motion to re open the t

rial rec ord for t

he singl e and limit

ed purpo se of introducing one “sample” Jazz disposable camera that, accor ding to the motion, was drawn by Customs at r

andom fr om one of t

he two en tries at i ssue. De fendant

sought toCourt No. 04-00494 Page 66

introduce this camera into evidence through pr offered testimony

of a Customs senior import specialist, Mr. Dan Johnson. That testimony would be offere d solely for the purpose of establishing chain of custody, i.e. , that the senior import specialist had obtained the camera from one of the entrie s and had marked the sample with the entry number. Defendant represented that the ca mera it offered for admission into evidence, revealed, following removal of Jazz’s label, original bilingua l labeling in English and French and that

such labe ling indi cated th at the ca mera or iginally was inten

ded for s ale in a fore ign cou

ntry . Counsel f

or defe ndant acknowledg ed that th e camer a was in their possession since th e first da y of trial but a

rgued that the expedited tr

ial sche dule prevent ed the g overnme

nt from ins

pecting the sample s and “ob tain[ing] a full appreciation of their relevance pr ior to trial.” Def.’s Emergency Mot. to Reopen the R. at 2. In its motion, defendant claimed that this camera is “newly discover

ed evidence that is highly rele

vant to the first sale issue” and maintained that Jazz would be in no way prejudic ed by

its introdu

ction bec ause pla

intiff sho uld be aw are of t

he conte nts of its entries. Id. at 3. During the court’s emerg ency he aring held at the request of defe ndant and cond ucted by telephone becau se counse l for the U nited State s was not present in New York at the time, the court orally denied defendant’s motion and explained why that motion, as written, was not being granted. It is well established that it is within the trial court’s discretion to reopen the record. See Jones &Laughlin Steel Corp. v. Pfeifer , 462 U.S. 523, 551 (1983); see also Enzo Biochem, Inc. v. Calgene, Inc. , 18 8 F. 3d 1 362 , 13 79- 80 ( Fed . C ir. 199 9). InCourt No. 04-00494 Page 67

determining whether or not to reopen the evide ntiary rec ord, a trial court considers the probative value of the evidence proffe red, the proponent’s explanation for failing to offer such evidence earlier and the likelihood of undue pr ejudice to the proponent’s adversary

. See Blinzler v. Marriott Int’l, Inc. , 81 F. 3d 114 8, 116 0 (1st Cir. 1996) (citi ng RiveraFlores v. Puerto Rico Tel. Co. , 64 F.3d 7 42, 746 (1 st Cir. 1995 ); Joseph v. Terminix Int’l Co. , 17 F.3d 1282, 1285 (10th Cir. 1994); 6A J AMES W M . M OORE ET AL ., M OORE ’ S F EDERA L P RACTICE ¶ 59.04[13], at 59.33 ( 2d ed. 199 3)); see also Confederated Tribes of the Warm Springs Reservation of Or. v. United States , No. 02-5167, 2004 U.S. App. LEXI S 11249, at *11 (Fed. Cir. June 8, 2004) (non-precedential). Defe ndant’s motion failed to satisfy these thr ee fac tors. First, the co

urt could accord little pro bative we ight to a single camera (one out o f a total o f approxima tely 160,000 c ameras

in the two e

ntries) offered by

itself to show that the plaintiff had failed to meet its burden of establishing first sal e. The c amera w

ould be re levant to

the issue of the ef fective ness of th e shell sorting activity unde

rtaken by Poly

tech, but meaningful findings of fact on this issue would require statistically va lid sampling of both entries. Regarding the second fa

ctor, the conducting of these procee dings, on an expedited basis, al lowed the

United Sta

tes and its agenc y, C ustoms, the

opportuni

ty to examine the merchandise that was the subject of this litigation. The court rec ognizes that the parties conducted discovery and trial proceedings accor ding to an accelerated schedule ; howeve

r, the co urt notes that the p arties a

greed to the expe dited sch edule during pre-trial conferenc es and also agreed to the court’s pr e-trial order. Moreover, the

court se es no rea son why

defenda nt could no t have mov ed into the record during t rial aCourt No. 04-00494 Page 68

group of twenty

cameras that, according to the motion, Customs had removed fr om the two shipme

nts and se nt to the c ourt at the

request of counse l for the U

nited State s. These cameras were placed on the E xhibit Table, in plain sight in the courtroom, where they remained throughout the proceeding s. At no time during trial did the government attempt to introduce into evidence any of these twenty c ameras. These cameras, and the specific camera describ ed by

defenda nt, could have bee

n used in th e gove

rnment’scrossexamination of Mr. Zawodny , who testified concerning the sampling conduc ted by Polytech. Additionally, the merchandise that was the subject of this action was in the custody or constr uctive c ustody of Customs s ince its im

portation in late Au

gust of t his year. Customs made thre e administrative determinations with respect to that merchandise prior to the filing of this case. I t made an initial determination to detain the merchandise pursuant to 19 U.S.C. § 1499(c)(1) (2000). I t denied the release of the merchandise on September 24 and 26, 2004, thus making the admissibility determination that is the subject of 19 U.S.C. § 1499(c)(1) and that constituted the exclusion determination add

ressed i n 19 U.S.C. § 1514(a) (4). Finally , Customs de nied Jazz’s administrative protest of the exclusion determination, Jazz’s contesting of which resulted in this action. Thus, Customs had numerous opportunities to examine and sample the merchandise during the time available for c onsidering Jazz’s pleas for administrative relief. Under the third factor, defendant’s motion on its face de monstrates the likelihood of undue prejudic e to the pl aintiff. As submitte d, the motion was man ifestly unfair inCourt No. 04-00494 Page 69

declining to present the plaintiff with any meaningful opportunity

to present new evidenc e and, ins tead, limi ting the introduc tion of evidence t o just one o f the twe

nty cameras on the Exhibit Table. Defendant’s motion would have the court re strict plaintiff’s opportunity to rebut this evidence to cross-examination of Mr. Dan Johnson “regarding his selection of these samples and his markings of the entry numbers on the outer boxes of these cameras.” Def.’s Emergency Mot. to Reopen the R. at 3. The court, during the emerg ency he aring on defendant’s motion, informed the parties t hat in gi ving its r easons f or deny ing the m otion it wa s not indic ating th at it necessarily

would deny any

motion to reopen the trial record. As the court then notified the parties, were a motion of the gene ral type made

by defenda

nt to avoid undue prejudice, it would have to provide for opening of the tr ial record to allow both sides the opportunity to produce evide nce on the issue or issues for which admission into evidence of the sin gle ca mera wa s being o ffere d. Althoug h defend ant, duri ng a tel ephonic confer ence on the rec ord conc erning

the issue of segr egation of merc

handise, orally

renewe d its denie d motion, de fendant did not subm

it anothe r written motion dur

ing thes e proceedings to reopen the trial rec ord. D. Other Outstanding Motions The parties and amicus curiae made a nu mber of o ther motions that re main outstandi ng. The court dis poses of t hese motions as follows: (1) pl aintiff’ s motion to consolidate Court Nos. 04-00442 and 04-00494, filed on October 4, 2004 is denied as moot; (2) amicus c uriae’s motion to file post-hearing brief on legal issues, filed October 15, 2004 is granted; (3) amicus curiae’s motion to file post-trial brief, filed onCourt No. 04-00494 Page 70

October 20, 2004 is granted; (4) L etters of amicus curiae filed on October 21, 2004, October 22, 2004, and October 25, 2004 are rule d out of order and are struck from the record; (5) defendant’s motion to strike plaintiff’s “Report Conce rning Matters Requiring Immediate Determination” filed on O ctober 29, 2004 is denied as status reports from parties are an appropriate means of communicating with the court; (6) amicus curiae’s motion to file a brief on waiver of automatic stay filed on November 5, 2004 is denied as beyond the scope

of the issues for which amicus curiae status was previously g ranted; (7) amicus curiae’s motion to file a reply brief on waiver of the automatic stay filed on November 8, 2004 is denied as bey ond the scope of the issues for which amicus curiae status wa s previou sly

grante d; (8) de fendant ’s motion to suppleme

nt the re cord and

to strike amicus curiae’s motion to reopen the record filed on November 12, 2004 is gr anted and the November 10, 2004 deposition of Joseph M. Weber is admitted as Defendant’s Exhibit A; (8) defendant’s motion to strike plaintiff’s status report dated November 13, 2004, file d on Novem

ber 16, 2 004, is den

ied, plai ntiff hav ing the r ight to r espond to defendant’s motion of November 12, 2004 to reopen the rec ord. Other motions made orally or in writ ing are hereby denied a s moot or su

bsumed in t

he judg ment. IX. D ISPOS ITI ON OF THE I MPORTED M ERCHA NDISE The court will order immediate release of the mer chandise for which plaintiff has met its burden of establishing admissibility, subject only to the 10-day automatic sta y of enforcement of the judgment, discussed previously . The remaining merchandise in the two entries is excluded from entry . Because, as the parties ag ree, that excluded merchandise has remained in the constructive custody of Customs, an order forCourt No. 04-00494 Page 71

redeliv ery

is unnece ssary . The ord

inary disposition

of merchandise e

ntered i n good f aith but subsequently deemed not to be e ntitled to admission is the opportunity for the importer to export or destroy the excluded merc handise under the supervision of Customs. See 19 C.F.R. § 158.45(c) and 158.41(c) (2004). Defe ndant has not sought otherwise. The court concludes that the excluded mercha ndise shall be allowed to be exported or destro ye d under the superv ision of Cus toms.

X. C ONCLUS ION Fo r t he fo re go in g r ea so ns , t he co ur t f in ds th at pl ai nt if

f h as me t, by a prepond erance of the ev idence, its burde

n of esta blishing the admiss ibility

of those LFFPs at issue in this case that are neither included in plaintiff’s Master Lot Number 463, nor commingled in inner cartons with L FFPs from plaintiff’s Master L ot Number 463. Because plaintiff has established, for those LFFPs, that it has satisfied the legal requirements of first sale, permissible re pair, and segrega

tion, the court concludes that those LFF Ps are out side the s cope of t he Gene ral Exclus ion Orde

r agai nst Certain Lens-Fitted Film Packages , USITC I nv. No. 337-TA-406, Pub. No. 3219 (1999) and are entitled to entry and re lease from the custody of Customs. For reasons also stated previously , plaintiff has failed to meet its burden of establishing that the LFF Ps in the subject shipments that are included in plaintiff’s Master Lot Number 463 are outside the scope of the General Exclusion Order. Plaintiff further has failed to establish segreg ation of the LFFPs that are located in innerCourt No. 04-00494 Page 72

cartons that contain LFF Ps from Master Lot Number 463 and also conta in LFFPs of other Master Lot Numbers. These L FFPs are excluded from entry and may be e

xported or destroyed, unde

r the supervision of Customs. Judgment for plaintiff in part and for de fe nd an t i n p ar t w il l b e e nt er ed ac co rd in gl y.

/s/ Timothy C. Stanceu Judge

Dated: November 17, 2004

New York, New York