[Federal Register: March 20, 2003 (Volume 68, Number 54)]
[Proposed Rules]
[Page 13636-13638]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20mr03-20]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Parts 12 and 24
RIN 1515-AC93
Patent Surveys
AGENCY: Customs Service, Department of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes to amend the Customs Regulations to
eliminate patent surveys. After careful review, Customs questions the
worthiness of continuing the patent survey program given lack of demand
for the program, stemming in part from the program's apparent lack of
effectiveness within the current statutory scheme, and other changed
circumstances.
DATES: Written comments must be received on or before May 19, 2003.
ADDRESSES: Written comments may be submitted to the U.S. Customs
Service, Office of Regulations and Rulings, Attention: Regulations
Branch, 1300 Pennsylvania Ave., NW., Washington, DC 20229. Submitted
comments may be inspected at the U.S. Customs Service, 799 9th Street,
Washington, DC, during regular business hours. Arrangements to inspect
comments should be made in advance by calling Mr. Joseph Clark at (202)
572-8768.
FOR FURTHER INFORMATION CONTACT: George McCray, Branch Chief,
Intellectual Property Rights Branch (202) 927-2330.
SUPPLEMENTARY INFORMATION:
Background
Under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337;
hereafter, section 1337), concerning unfair practices in import trade,
it is unlawful to, among other things, import merchandise into the
United States that infringes a valid and enforceable United States
patent. Under the statute, the International Trade Commission (the
Commission), after conducting a proper investigation, is authorized to
exclude patent-infringing merchandise from entry into the United
States. (19 U.S.C. 1337(a)(1)(B)(i) and 19 U.S.C. 1337(d).) The statute
also authorizes the Commission, under certain circumstances, to issue
cease and desist orders, impose civil penalties, and order seizure and
forfeiture relative to unlawful acts under the statute.
Customs plays a supporting role with respect to patent infringement
cases under section 1337. For example, where the Commission has
determined that merchandise infringes a patent and has ordered that the
patent-infringing merchandise be excluded from entry, Customs will
refuse entry of the merchandise covered by the order after notification
by the Commission (see 19 CFR 12.39). In addition to enforcing
Commission exclusion orders, Customs enforces Commission seizure/
forfeiture orders (19 U.S.C. 1337(i)(2)) and certain court orders.
Patent Surveys
In 1956, while under no statutory mandate to do so, Customs
promulgated
[[Page 13637]]
a regulation designed to assist patent holders in obtaining information
they would need to seek action by the Commission under section 1337. In
Treasury Decision (T.D.) 54087, published in the Federal Register (21
FR 3267) on May 18, 1956, Customs amended Sec. 24.12(a) of the Customs
Regulations by adding paragraph (3), under which Customs would issue
the names and addresses of importers of articles appearing to infringe
a registered patent. The T.D. explained that the purpose of the new
provision was to assist the owner of a registered patent in obtaining
data upon which to file a complaint under section 1337 charging unfair
methods of competition and unfair acts in the importation of
merchandise infringing the patent. The provision required an
application by the patent owner and set forth appropriate fees.
In T.D. 56137, published in the Federal Register (29 FR 4909) on
April 8, 1964, Customs amended Part 12 of the regulations to add new
section 12.39a to prescribe the procedure and requirements for
obtaining the names and addresses of importers of merchandise appearing
to infringe a patent (thereby transferring authority for the procedure
from Sec. 24.12(a)(3)). The new section referred to the procedure as a
patent survey and provided patent survey requestors three survey period
options varying in length of time: 2, 4, and 6 months. The fees for
patent surveys remained under Sec. 24.12(a)(3).
Changed Circumstances
Over the years, Customs has continued to perform patent surveys
under Sec. 12.39a, but changed circumstances call into question the
effectiveness of the patent survey process and the ability of Customs
to continue to provide the manpower and resources required. Customs,
therefore, has had to reconsider the viability of the program.
In 1956, when the above mentioned program was introduced, Customs
processed just over a million entries. Because the volume of imports
has exploded since 1956, Customs now receives over 23 million entries
per year (based on 2001 statistics). At the same time, as a result of
subsequent changes in Customs law and practice, the old system in which
Customs officers were responsible for completing the processing of each
entry has been replaced with what, in practice, is a self-assessment
system based on electronic reporting without paper invoices.
Effectiveness of the Patent Survey Program
The patent survey seeks to identify importers who may be importing
merchandise that appears to infringe a patent. After initial approval
of a survey request (application), Customs determines which tariff
provisions may apply to particular patented merchandise, a task
complicated by the fact that patented articles are often new or novel
commodities. Often, these identified tariff provisions are broad or
basket provisions, with the broad provisions covering several similar
articles and the basket provisions covering a wide breadth of articles
that do not fit under more specific subheadings. Thus, searching for
merchandise that appears to infringe the patent often produces
overbroad results. These overbroad results lead to identifying
importers who in fact do not import merchandise appearing to infringe
the patent at issue. These searches are of questionable value to the
patent owner and do not produce results that justify the required use
of Customs resources.
Further evidence of the limited value of the patent survey program
is demonstrated by the fact that Customs processes relatively few
patent survey requests (although not a data element routinely tracked,
research indicates about 10 requests processed per year). While the
survey requests received present the problems discussed in this
document (time-consuming process, overbroad results, questionable value
of results, competing mission priorities), their few number call into
question the value of the program. A greater number of survey requests
would suggest a greater need among the importing public and a more
legitimate basis for Customs investment of time and effort. The
apparent lack of need is another reason to discontinue the program.
Unappealing Options
Customs recognizes that today it faces a situation with unappealing
options. Recognizing the ineffectiveness of the program and the lack of
demand suggests discontinuing the program. Making the program more
effective, in the hope of generating new demand, would require the
commitment of scarce resources. Moreover, Customs would have to
increase the cost of patent surveys dramatically to cover the expense
of a stepped up program. Customs believes that intensifying the program
is not possible operationally or economically.
The Statute--19 U.S.C. 1337
Finally, Customs notes that section 1337 does not mandate that
Customs perform patent surveys. An examination of the general scheme of
section 1337 shows that the statute places primary authority in the
Commission, rather than Customs, to enforce its provisions. The
Commission is charged with the responsibility to conduct investigations
and make determinations regarding violations and sanctions under the
statute. Customs is not authorized to take any action regarding
apparently patent-infringing merchandise without the Commission first
taking action or without receiving a notice, request, or instruction
from the Commission, a clearly secondary role.
Thus, the promulgation of Customs patent survey regulation (first
in Sec. 24.12(a)(3) and then in Sec. 12.39a), though intended to
support section 1337, is not rooted in explicit statutory authority.
Rather, the regulatory program was initiated in the exercise of agency
discretion under the general authority of 19 U.S.C. 66 and 1624.
Conclusion
Based on all the foregoing that calls into question the continued
viability of the Customs patent survey program under Sec. 12.39a, for
reasons relating to effectiveness of the program, burden on Customs
manpower and systems, the impracticality of intensifying the program,
and ambiguous statutory authority, Customs is considering discontinuing
the program. Thus, this document proposes removing Sec. 12.39a from
the Customs Regulations and making conforming changes to Sec. 24.12(a)
by removing paragraph (3).
Comments
Before adopting as final the proposed removal of Sec. 12.39a,
consideration will be given to any written comments timely submitted to
Customs. Customs requests that commenters opposed to removal of the
regulation include in their comments suggestions to maintain the patent
survey program that address Customs concerns regarding the program's
effectiveness. Comments submitted will be available for public
inspection in accordance with the Freedom of Information Act (5 U.S.C.
552), Sec. 1.4 of the Treasury Department Regulations (31 CFR 1.4),
and Sec. 103.11(b) of the Customs Regulations (19 CFR 103.11(b)) on
regular business days between the hours of 9 a.m. and 4:30 p.m. at the
U.S. Customs Service, 799 9th Street, N.W., Washington, D.C.
Arrangements to inspect submitted comments should be made in advance
[[Page 13638]]
by calling Mr. Joseph Clark at (202) 572-8768.
Executive Order 12866
This document does not meet the criteria for a ``significant
regulatory action'' as specified in E.O. 12866.
Regulatory Flexibility Act
Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), it is certified that, if adopted, the amendments
to the Customs Regulations set forth in this document will not have a
significant economic impact on a substantial number of small entities.
The regulation would merely discontinue the patent survey procedure.
Accordingly, these amendments are not subject to the regulatory
analysis or other requirements of 5 U.S.C. 603 and 604.
Drafting Information
The principal author of this document was Bill Conrad, Office of
Regulations and Rulings, U.S. Customs Service. However, personnel from
other offices contributed in its development.
List of Subjects
19 CFR Part 12
Entry of merchandise, Customs duties and inspection, Fees
assessment, Imports, Patents, Reporting and recordkeeping requirements.
19 CFR Part 24
Accounting, Customs duties and inspection, Fees, Imports, Reporting
and recordkeeping requirements.
Proposed Amendments to the Regulations
For the reasons stated in the preamble, Parts 12 and 24 of the
Customs Regulations (19 CFR Parts 12 and 24) are proposed to be amended
as follows:
PART 12--SPECIAL CLASSES OF MERCHANDISE
1. The general authority citation for Part 12 continues to read as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66; 1202 (General Note 23,
Harmonized Tariff Schedule of the United States), 1624.
* * * * *
2. It is proposed to amend Part 12 by removing Sec. 12.39a.
PART 24--CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE
1. The general authority citation for Part 24 continues to read as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 58a-58c, 66, 1202 (General
Note 22, Harmonized Tariff Schedule of the United States), 1505,
1624; 26 U.S.C. 4461, 4462; 31 U.S.C. 9701.
* * * * *
Section 24.12 also issued under 19 U.S.C. 1524, 46 U.S.C. 31302;
* * * * *
2. It is proposed to amend Sec. 24.12 by removing paragraph
(a)(3).
Robert C. Bonner,
Commissioner of Customs.
Approved: February 28, 2003.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 03-6756 Filed 3-19-03; 8:45 am]
BILLING CODE 4820-02-P