ITC held to have erred in 'all or substantially all' analysis

United States of America

In Deere & Co v International Trade Commission (Case 09-1016, May 26 2010), the US Court of Appeals for the Federal Circuit has vacated a remand determination by the US International Trade Commission (ITC) that sales in the United States of a European-version of a harvester was not an act of unfair competition under §337 of the Tariff Act 1930. The court found that the ITC had incorrectly applied the 'all or substantially all' test, which prohibits a trademark owner from seeking any remedy for trademark infringement unless “all or substantially all” of the goods sold by the trademark holder in the United States are an identifiable US version.

Deere & Co authorised the sales of a European version of harvesters, the same goods that it sought to exclude from the US market as being grey market. The ITC determined that Deere had authorised the sale of European-version harvesters by its official dealers through an “apparent authority” theory, even though Deere never expressly authorised such sales. In its analysis, the ITC distinguished Deere authorised dealers from independent dealers over which Deere had no control. Apparent authority was found on the basis of an “informational” website that allowed authorised dealers to advertise European-version harvesters for sale in the United States and to finance them through a Deere subsidiary. After the ITC refused to issue any importation remedy, Deere appealed.

On appeal, the Federal Circuit determined that “substantial evidence” supported the ITC’s determination that Deere condoned sales of the European harvesters in the United States by authorised dealers. The Federal Circuit further noted that “apparent authority” was properly applied here because such authority “arises from buyers' reasonable beliefs”, and trademark infringement law serves to prevent consumer confusion.

However, the Federal Circuit found that the ITC had misapplied the “all or substantially all” test because it had limited its analysis to comparing the number of authorised European-version harvester sales to the total number of European-version harvester sales in the United States, which resulted in a finding that Deere authorised the sale of 96.6% to 96.9% of the grey-market goods. Rather, the court explained, the ITC should have compared the number of authorised European-version harvester sales to the total number of authorised sales (of both US-version harvesters and European-version harvesters). If the ITC had performed the proper calculation, it would have concluded that Deere’s European-version harvesters represented only a little more than 3% of the total authorised US sales. The court (again) remanded the case to the ITC for a determination of whether this percentage was “insubstantial”.

In a separate opinion, Judge Newman concurred in the remand, but dissented as to the court’s “concocted” ruling that Deere authorised the sales of certain European-version harvesters. Judge Newman wrote that the “apparent authority” theory conflicted with the Supreme Court 1923 decision in A Bourjois & Co v Katzel (260 US 689, 692 (1923)), holding that a US trademark owner “has the right to exclude authentic foreign goods bearing an authentic foreign mark, even where there is no consumer confusion as to the origin of the goods”.

Christina A Ondrick, McDermott Will & Emery LLP, Washington DC

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