[Federal Register: August 30, 2004 (Volume 69, Number 167)]
[Rules and Regulations]
[Page 52811-52813]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30au04-2]
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DEPARTMENT OF HOMELAND SECURITY
Bureau of Customs and Border Protection
19 CFR Parts 12 and 24
[CBP Decision 04-29]
RIN 1651-AA36
Patent Surveys
AGENCY: Customs and Border Protection, Department of Homeland Security.
ACTION: Final rule.
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SUMMARY: This document amends the Customs and Border Protection (CBP)
Regulations to eliminate patent surveys. The change is made based on a
lack of demand for the program due to diminishing effectiveness within
the current statutory scheme and other changed circumstances. CBP will
continue to enforce the law and regulations it is responsible for
enforcing regarding the importation of patented merchandise registered
with CBP, and importers and others may continue to avail themselves of
the procedures administered by the International Trade Commission
regarding the importation of patent-infringing merchandise.
DATES: Effective September 29, 2004.
FOR FURTHER INFORMATION CONTACT: George Frederick McCray, Chief,
Intellectual Property Rights Branch (202) 572-8710.
SUPPLEMENTARY INFORMATION:
Background
On March 20, 2003, the U.S. Customs Service (Customs) published a
notice of proposed rulemaking (NPRM) in the Federal Register (68 FR
13636) proposing to amend the Customs Regulations (19 CFR Chapter I) to
eliminate patent surveys. The NPRM explained that patent surveys are
conducted by CBP to assist registered patent owners in pursuing
enforcement actions by the International Trade Commission (ITC) under
section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337;
hereafter, section 1337), pertaining to unfair practices in import
trade.
It is noted that Customs was made a component of the Department of
Homeland Security and is now known as U.S. Customs and Border
Protection (CBP). While this document is being issued by CBP, the
agency is sometimes referred to as Customs in this document to reflect
historical accuracy.
The Statute
Under section 1337, 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 ITC, 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 ITC, under certain circumstances, to issue cease and desist orders,
impose civil penalties, and order seizure and forfeiture relative to
unlawful acts under the statute.
CBP plays a supporting role with respect to patent infringement
cases under section 1337. Where the ITC has determined that merchandise
infringes a patent and has ordered that the patent-infringing
merchandise be excluded from entry, CBP will refuse entry of the
merchandise covered by the order after notification by the ITC (see 19
CFR 12.39). In addition to enforcing ITC exclusion orders, CBP enforces
ITC 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 a regulation designed to assist patent holders in obtaining
information they would need to seek action by the ITC 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
[[Page 52812]]
which to file a complaint with the ITC 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
Sec. 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
periods varying in length of time: 2, 4, and 6 months. The fees for
patent surveys remained under Sec. 24.12(a)(3).
Changed Circumstances
In 1956, when the patent survey program was introduced, Customs
processed just over a million entries. Since then, the volume of
entries has increased dramatically, and CBP now receives over 23
million entries per year (based on 2001 statistics). At the same time,
as a result of changes in applicable law and practice, the old system
under 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. These changed circumstances have severely impacted the
ability of CBP to adequately administer the patent survey program,
resulting in CBP's reconsideration of the program's viability.
Effectiveness of the Patent Survey Program
In addition, the effectiveness of the program has been challenged.
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), CBP 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
importers of merchandise appearing to infringe the patent often
produces over-broad results which lead to the identification of
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 use of CBP
resources.
Value of the Program
Further evidence of the limited value of the patent survey program
is demonstrated by the fact that CBP processes relatively few patent
survey requests per year (research indicates approximately 10 requests
processed per year). The few number of survey requests received call
into question the value of the program. A greater number of survey
requests might suggest a greater need among the importing public and a
more legitimate basis for CBP's investment of time and resources. Also,
no comments were received in response to the proposed rule, requesting
retention of the program. The apparent lack of need, and interest, is
another reason to discontinue the program.
Absence of Statutory Mandate
Finally, CBP notes that section 1337 does not mandate that CBP
perform patent surveys. An examination of the general scheme of section
1337 shows that the statute places primary authority in the ITC, rather
than CBP, to enforce its provisions. The ITC is charged with the
responsibility to conduct investigations and make determinations
regarding violations and sanctions under the statute. In the context of
section 1337, CBP is not authorized to take any action regarding
apparently patent-infringing merchandise without the ITC first taking
action or without receiving a notice, request, or instruction from the
ITC, a clearly secondary role.
Thus, the promulgation of the 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. 1624. As a
discretionary program, CBP is not compelled by law to continue
performing patent surveys, especially when their value appears to have
diminished, resources are scarce, and the agency is faced with elevated
national security priorities.
Comments
The comment period ended on May 21, 2003. No comments were
received.
Conclusion
In the NPRM, Customs examined the options of discontinuing the
program or expending scarce resources to make the program more
effective. After careful consideration, CBP has determined that
committing additional resources to the program would be difficult,
given current enforcement and security priorities, and raising fees to
cover the cost of patent surveys would likely reduce participation even
more. For these reasons, in addition to the lack of interest in the
program, lack of comments (received in response to the proposed rule)
requesting continuation of the program, and the above mentioned
concerns relating to ambiguous legal authority, CBP is amending the
regulations to discontinue the patent survey program. Thus, this
document removes Sec. 12.39a from the CBP Regulations and makes
conforming changes to Sec. 24.12(a) by removing paragraph (3).
This amendment to the regulations is being issued in accordance
with Sec. 0.1(b)(1) of the CBP Regulations (19 CFR 0.1(b)(1))
pertaining to the authority of the Secretary of Homeland Security (or
his/her delegate) to prescribe and approve regulations relating to
customs revenue functions that are not set forth in paragraph 1(a)(i)
of Treasury Department Order No. 100-16 (May 15, 2003) (see CBP
Decision 03-24, 68 FR 51868, August 28, 2003).
Regulatory Flexibility Act
Under 19 U.S.C. 1337 (section 1337), the ITC, 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).) CBP plays a supporting role
with respect to patent infringement cases under section 1337. Where the
ITC has determined that merchandise infringes a patent and has ordered
that the patent-infringing merchandise be excluded from entry, CBP will
refuse entry of the merchandise covered by the order after notification
by the ITC (see 19 CFR 12.39). Neither ITC nor CBP is required to
conduct patent surveys under the statute. They are not necessary to ITC
investigations or enforcement action or to the fulfillment of CBP's
responsibilites under the statute.
As set forth in the preamble, CBP receives very few patent survey
requests under the regulations; the figure is approximately 10 per
year. No comments were received in response to the proposed rule
requesting retention of the program. In addition, most surveys do not
produce beneficial
[[Page 52813]]
results, and the beneficial results that are produced are of limited
value. Thus, pursuant to the provisions of the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.), it is certified that the amendments to the
CBP 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 for
reasons related to changed circumstances, disuse, and ineffectiveness.
Accordingly, these amendments are not subject to the regulatory
analysis or other requirements of 5 U.S.C. 603 and 604.
Executive Order 12866
Since CBP receives so few requests for patent surveys, and
elimination of the program will not preclude a patent owner from
petitioning the ITC for an investigation and action to enforce its
patent, CBP concludes that this rule does not meet the criteria for a
``significant regulatory action'' as specified in E.O. 12866. The rule
will not have an annual effect on the economy of $100 million or more
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities. Because patent surveys are not an essential element of the
ITC enforcement process, elimination of the program in this final rule
does not create serious inconsistency or otherwise interfere with an
action taken or planned by another agency. It is noted that no comments
were received, indicating little if any concern by patent owners that
access to ITC enforcement will be curtailed or the ITC's procedures
will be affected by the final rule. Also, the rule does not materially
alter the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients thereof, as patent
surveys have nothing to do with any of these matters; nor does the rule
raise novel legal policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in E.O. 12866.
Drafting Information
The principal author of this document was Bill Conrad, Office of
Regulations and Rulings, Customs and Border Protection. 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.
Amendments to the Regulations
0
For the reasons stated in the preamble, parts 12 and 24 of the Customs
Regulations (19 CFR parts 12 and 24) are amended as follows:
PART 12--SPECIAL CLASSES OF MERCHANDISE
0
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.
* * * * *
Sec. 12.39a [Removed]
0
2. Part 12 of the CBP Regulations is amended by removing Sec. 12.39a.
PART 24--CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE
0
3. 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 23, 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;
* * * * *
Sec. 24.12 [Amended]
0
4. Section 24.12 of the CBP Regulations is amended by removing
paragraph (a)(3).
Dated: August 24, 2004.
Robert C. Bonner,
Commissioner, Customs and Border Protection.
[FR Doc. 04-19665 Filed 8-27-04; 8:45 am]
BILLING CODE 4820-02-P