Opinion ID: 469994
Heading Depth: 2
Heading Rank: 2

Heading: Subsequent Legislative and Administrative History

Text: 42 The appellees maintain that the Customs regulations are supported by developments in the half-century since the passage of Section 526. First, they contend that the regulations embody a reasonable, longstanding administrative interpretation of the statute; second, they suggest that Congress has manifested its acquiescence in that interpretation. We have already explained that the first argument must fail because deference to an agency's construction is inappropriate when congressional intent is clear; alternatively, we conclude that even if the Customs Service properly enjoys some role in construing the scope of Section 526, the regulations at issue do not in fact constitute a sufficiently reasonable interpretation of the statute. Federal Election Comm'n, 454 U.S. at 39, 102 S.Ct. at 46. See infra p. 916. We also reject the appellees' argument that Congress has somehow ratified the Customs Service's interpretation through its silence. See infra pp. 916-917. 43 1. Developments in the 1930s and 1940s.--Neither the 1923 nor the 1931 regulations had recognized any exceptions to the broad mandate of Section 526. Each contained separate articles enforcing the prohibition of Section 27 of the Trade-Mark Act of 1905 (the predecessor to Section 42 of the Lanham Act) against the entry of goods bearing trademarks that copy or simulate registered trademarks. See Customs Regulations of 1923, Art. 475; Customs Regulations of 1931, Art. 517(b). In 1936, however, the Customs Service unveiled a new approach. Article 518 of the 1931 regulations, which had dealt solely with Section 526, was now amended to correspond to the language of Section 27. The new Article 518 provided, inter alia, that foreign goods bearing a genuine trademark identical to an American trademark shall be deemed for the purposes of these regulations to copy or simulate such protected trade-mark, T.D. 48,537 (1936); 13 however, it then exempted from this prohibition articles bearing foreign trademarks owned by the same person, partnership, association, or corporation as the American trademark in question. Id. The Customs Service regulations offered no explanation for this change, and it is doubtful that amended Article 518 even purported to interpret Section 526 as well as Section 27. 14 44 Certainly the United States Tariff Commission (now the International Trade Commission), another agency dealing with trade matters, did not think so. In 1944, when Congress held hearings on legislation that eventually became the Lanham Trade-Mark Act of 1946, it considered a memorandum submitted by that agency suggesting that Article 518 of the 1936 regulations, in view of its copy or simulate language, implemented Section 27 but not Section 526. Hearings Before a Subcomm. of the Comm. on Patents on H.R. 82, United States Senate, 78th Cong., 2d Sess. 86-87 (1944). The Commission justified this interpretation of Section 27 on the grounds that an enterprise could not copy or simulate its own trademark. Id. at 87. On the other hand, the Commission maintained, Section 526 of the tariff act does apply to the merchandise of the trade-mark owner which bears his trade-mark if the merchandise was produced abroad and if the trade-mark owner is a citizen of the United States. Id. (emphasis added). After having been informed of the relationship between the two statutes and the prevailing administrative practice, Congress left Section 526 untouched and reconstituted Section 27 in identical form as Section 42 of the Lanham Act. 45 2. Developments in the 1950s.--Events of the 1950s reveal the Customs Service's profound confusion about the scope of Section 526 and its relationship to Section 42. On the one hand, in a 1951 private letter, the Commissioner of Customs set forth the agency's view that Section 526 did not bar importation of the trademarked article of a foreign subsidiary of an American trademark owner. Letter from Frank Dow, Commissioner of Customs, to Sen. Paul H. Douglas, March 23, 1951 (Joint Appendix (J.A.) at 350). In 1953, Customs had the opportunity to codify this view when it amended the applicable regulation (now renumbered as Section 11.14) to provide that a genuine foreign trademark will not be deemed to copy or simulate an identical American trademark if both are owned by the same company or related companies. 19 C.F.R. Sec. 11.14 (1953). But the amended regulation actually deleted a reference to Section 526 as statutory authority. And, to confound matters further, in 1958 the Solicitor General of the United States informed the Supreme Court that the Customs Service regarded Section 526 as a bar to importation of grey-market goods even in the related-company context. The Government had brought an antitrust action against American affiliates of foreign enterprises who had used Section 526 to preclude competition from grey-market imports. A district court had held that Section 526 did not protect such American affiliates and had found them guilty of antitrust violations. United States v. Guerlain, Inc., 155 F.Supp. 77 (S.D.N.Y.1957). On direct appeal to the Supreme Court, the Solicitor General informed the Court that the United States wished to abandon the suit, noting the existence of intragovernmental conflict over the interpretation of Section 526 and suggesting that new legislation would be introduced to settle the controversy. Appellee's Motion to Vacate at 7, Guerlain, Inc. v. United States, 358 U.S. 915, 79 S.Ct. 285, 3 L.Ed.2d 236 (1958). According to the Solicitor General, the Justice Department's Antitrust Division considered Section 526 unavailable to American subsidiaries of foreign trademark owners, while Customs regarded itself as legally constrained to enforce Section 526 literally. Id. The Supreme Court accordingly vacated the lower court's judgment. Guerlain, 358 U.S. at 915, 79 S.Ct. at 285. 46 During the 1950s, Congress also reconsidered Section 526. In 1954, a bill was introduced in Congress that would have made the protections of Section 526 unavailable to an American trademark owner affiliated with the owner of an identical foreign trademark--in other words, a bill that closely parallels the Customs regulations at issue here. H.R. 9476, 83d Cong., 2d Sess. (1954). That bill, however, was defeated. In 1959, after the Supreme Court vacated the Guerlain judgment at the Solicitor General's request, another bill was introduced that would have repealed Section 526 altogether. H.R. 7234, 86th Cong., 1st Sess. (1959). But Congress rejected that proposal too. 47 In the aftermath of the Guerlain imbroglio, the Customs Service amended its regulations to delete the related company exception (while retaining the same company exception) and to add a citation to Section 526 as statutory authority for the regulations. See 19 C.F.R. Sec. 11.14 (1959). There is some evidence, however, that the Customs Service privately continued to regard related companies as outside the scope of Section 526's protection. See Letter from D.H. Flynn, Deputy Commissioner of Customs, to Walter A. Slowinski, Esq., June 27, 1962 (J.A. at 355); Atwood, Import Restrictions on Trademarked Merchandise--The Role of the United States Bureau of Customs, 59 Trade-Mark Rep. 301, 310 (1969). 48 3. Developments in the 1970s.--The regulations were adopted in their current form in 1972. These regulations, we have noted, deny the protections of Section 526 to an American trademark owner when that company or an affiliate owns the foreign trademark or when it has authorized the use of the trademark. 19 C.F.R. Sec. 133.21(c)(1)-(3). At no risk of overstatement, however, we observe that the Customs Service has not carefully explained exactly what purpose the regulations serve. The Federal Register notice accompanying the 1972 regulations, 37 Fed.Reg. 20,677 (1972), offers no insight into the agency's reasoning. From the scattered evidence the parties have cited to us, it appears that the regulations might be regarded as resting in part on a reading of the legislative history of Section 526, see Letter from Walker B. Comegys, Acting Assistant Attorney General, Antitrust Division, to Miles J. Ambrose, Commissioner of Customs, April 19, 1971 (J.A. at 343), and in part on an accommodation of Section 526 with the policy of the antitrust laws. See id.; see also Letter from Treasury Secretary Donald T. Regan to Senator Dennis DeConcini, December 23, 1983 (J.A. at 319) (stating that the regulations are based on the Guerlain case). But prevailing antitrust doctrine has changed significantly since the Guerlain era. Perhaps because it is now recognized that domestic vertical restraints such as territorial market divisions may in fact have procompetitive effects, see, e.g., Continental T.V., Inc. v. G.T.E. Sylvania, Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977), the Government apparently no longer emphasizes the antitrust aspects of its interpretation of Section 526. 15 In fact, in a recent case the Justice Department--joined, significantly, by the Customs Service--filed an amicus brief arguing that Section 526 raised no antitrust concerns and ought to be enforced according to its express terms. See Brief of United States as Amicus Curiae, Bell & Howell: Mamiya Co. v. Masel Supply Co., 719 F.2d 42 (2d Cir.1983). That amicus brief, seemingly flatly at odds with the Customs regulations under challenge here, represents yet another curious turn in the sixty years of Customs' administration of Section 526. 49 In 1978, a congressional committee report reviewing the statute took notice of Customs' interpretation. In the Customs Procedural Reform and Simplification Act of 1978, Pub.L. No. 95-410, 92 Stat. 888, Congress created an exception from the broad ban of Section 526 for goods brought into the country by individuals for their personal use, 19 U.S.C. Sec. 1526(d) (1982); thus, after almost fifty years, Congress reversed the rule of Sturges v. Clark D. Pease, Inc., 48 F.2d 1035 (2d Cir.1931), discussed supra at p. 22. The House report accompanying this legislation stated: 50 [Section 526] has been consistently interpreted by the United States Customs Service for the past 20 years as excluding from protection foreign-produced merchandise bearing a genuine trademark created, owned and registered by a citizen of the United States if the foreign producer has been authorized by the American trademark owners to produce and sell abroad goods bearing the recorded trademark. 51 H.R.Rep. No. 621, 95th Cong., 1st Sess. 27 (1977). Neither the Senate report, see S.Rep. No. 778, 95th Cong., 2d Sess. 33 (1978), U.S.Code Cong. & Admin.News 1978, p. 2211, nor the conference report, see H.R.Rep. No. 1517, 95th Cong., 2d Sess. 16 (1978), U.S.Code Cong. & Admin.News 1978, p. 2249, contained any similar reference to administrative practice. 52