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CHESTER'S
World of Innovation & Trade Law
February 2008
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Editor-In-Chief
J. F. (Jim) Chester, JD/LL.M
Managing Editor
Bradford Luo
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CHESTER'S World is Back!
FROM THE EDITOR-IN-CHIEF - After a hiatus of several months, CHESTER'S World of Innovation & Trade Law is back with a new
name and a new resolve. We have revamped our content to better serve the needs and interests of our readers. Like law and
business, our newsletter will continue to evolve. Over the next few months, we hope you will find our reports on developments
in intellectual property and international business & trade law to be useful in your personal and professional life.
We appreciate your comments, and your continued interest. Best wishes for a prosperous 2008!
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UPCOMING SEMINARS
Legal Aspects of International Trade Workshop
Date: Thursday, January 31, 2008
Time: 9 A.M. - Noon
Place: Fort Worth International Center CALL (817) 392-2672 FOR INFO
Cost: $33.00 (Complimentary Breakfast will be served )
International Trade Finance
Date: March 27, 2008
Time: 9 A.M. - Noon
Place: Fort Worth International Center CALL (817) 392-2672 FOR INFO
Cost: $33.00 (Complimentary Breakfast will be served )
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Customs' Proposes Interpretation to have Significant Impact on Customs Valuation . . . and Duties.
US Customs and Border Protection (CBP) recently proposed changes to its interpretation of the proper import value for so-called
"middle-man"; or multiple-sale transactions. Under the existing interpretation, where a product is sold multiple times before
entering the US, CBP bases the imported value on the first sale. This is called the "First Sale Rule". Under the proposed
interpretation, CBP would instead use the last sale that occurs prior to the actual entry of the goods into the US.
The amount of the first sale is often significantly lower than the amount of subsequent sales. Because most Customs duties
are based on the value of entered goods, this new interpretation would significantly increase the Customs duties owed in connection
with the importation of goods in such circumstances.
To illustrate: ABC Company orders a container of semiconductor chips from SemiCo, a company located in Mexico, for which
SemiCo charges ABC Company $1,000,000. SemiCo locates a semiconductor manufacturer in Taiwan that can fulfill the order at
a Cost to SemiCo of $250,000. Let's assume that the applicable rate of duty is 10%. If the first sale is used as the value
of the imported goods, the duties would be $25,000. By contrast, if the last sale is used, the duties owed would be $100,000.
Quite a difference, indeed!
More information regarding the proposed new interpretation can be obtained from the Federal Register notice published 24 Jan
2008. Otherwise, if you have questions about the current proposal, or about any import or Customs law issues, please contact
Chester/Associates at trade@tradelawfirm.com
Source: CBP
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Huge Increase in Maximum Export Penalties
The International Emergency Economic Powers Enhancement Act (IEEPA), signed into law Oct. 16, 2007, increases the maximum
civil and criminal penalties for violations of US export laws and most sanctions regulations administered by OFAC. IEEPA increases
maximum criminal penalties to $1,000,000 per violation for both companies and individuals (20 times higher than the previous
maximum criminal penalty of $50,000). The maximum civil penalty per violation increased from $50,000 to $250,000 or twice
the amount of the transaction.
With increases already mandated in the Patriot Act, the maximum civil penalty for a violation of export laws or OFAC regulations
has now increased almost 25-fold in the past 19 months.
In the broader context of anti-terrorism and export compliance, exporting companies face a daunting task of not only finding
the right business partners, but also obeying a host of complex export laws and regulations. Failure to do so will subject
exporters to ever increasing amounts in both civil and criminal penalties. If you have questions about complying with the
IEEPA, OFAC, or export laws, please contact Chester/Associates at trade@tradelawfirm.com
Source: US Dept. of Commerce
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Value of Counterfeit Goods Seized at US Border Increases 27%
The U.S. Department of Homeland Security (DHS) seized counterfeit or pirated merchandize worth approximately $200 million
in domestic value during 2007. The year's activities continue a significant upward trend in the value of seizures, exceeding
the value of last year's by 27 percent.
The departments of U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE), components
of DHS, made over 13,600 seizures last year. ICE investigations in 2007 resulted in 241 arrests, 149 indictments and 134 convictions
on intellectual property rights violations.
DHS is countering the growing trade in counterfeit commodities that adversely impacts the American economy and may pose health
and safety risks to consumers. Although the top commodity seized in 2007 continued to be footwear with a domestic value of
$77.7 million, which accounted for 40 percent of the entire value of goods seized; counterfeiters use the same methods to
bring in fake pharmaceuticals, electrical items, food and hygiene products that threaten the health and safety of consumers
as well as their pocketbooks.
Other highlights from 2007 include:
* In September 2007, CBP officers in Anchorage, Alaska, targeted a shipment from China manifested as "samples". When officers
opened the box, they discovered 1,460 counterfeit "IDT" ("Integrated Device Technology") integrated circuits. Integrated Circuits
(ICs) are used in a wide range of applications, including automobiles, appliances, computers, telecommunications, medical
devices, and consumer electronics. Counterfeit ICs can create reliability problems in end-products.
* On Aug. 1, 2007, ICE agents from 22 offices assisted by representatives of the electronic industry executed 32 federal search
warrants in 16 states as part of an investigation into the alleged sale and distribution of illegal modification chips and
disc copyright circumvention devices. This investigation represents the largest national enforcement action of its kind targeting
this type of illegal activity. The search warrants were executed at businesses, storefronts and residences associated with
subjects who are allegedly involved in the direct importation, installation, sale and distribution of the devices that are
of foreign manufacture and smuggled into the United States. The chips and devices allow users to play illegally obtained,
pirated and/or counterfeit software on video game consoles by Microsoft, Nintendo and Sony. The names of those targeted and
case specifics are not releasable at this time.
* In July 2007, CBP officers at the Los Angeles Seaport seized a shipment of counterfeit Nike footwear. Counterfeiters attempted
to smuggle the 21,492 pairs of fake Nike shoes by describing the merchandise as furniture.
* In July 2007, CBP officers in Newark seized 20,208 bottles of counterfeit Ralph Lauren perfume. The counterfeiters attempted
to smuggle in the perfume by concealing it in the nose of the container. This counterfeit perfume could have potentially contained
harmful bacteria.
* In late June 2007, 29 defendants were charged in three separate complaints with conspiracy to smuggle over 950 shipments
of merchandise into the United States, principally from China - through ports of entry at Newark, N.J., Houston, Tex., Long
Beach, Calif., New York Container Terminal in Staten Island, N.Y. and John F. Kennedy International Airport - and/or conspiracy
to traffic in counterfeit goods. Four of the defendants were also charged with money laundering. The charges are the result
of a 19-month coordinated initiative by agents of ICE and CBP. The investigative techniques employed by ICE and CBP included
the use of cooperating witnesses, undercover agents and video and audio surveillance. During the course of their investigation,
officers seized counterfeit merchandise which, had it been authentic, ICE and CBP estimate would have had a manufacturer’s
suggested retail price of approximately $700 million.
* In May 2007, CBP officers in Newark seized 144,000 tubes of counterfeit Colgate toothpaste. Some of the toothpaste in the
shipment contained a toxic chemical found in antifreeze and posed a serious health and safety risk to the buying public.
Recording your trademarks, trade names and copyrights with CBP can be an effective tool to stop counterfeiting. If you have
questions about protecting your IP, please contact Chester/Associates at IP@tradelawfirm.com
Source: CBP
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Lacoste Loses Trademark Opposition Case to British Dentists
French fashion company Lacoste, maker of a popular clothing line known for its "alligator" logo on its apparel, has lost its
battle against a Gloucestershire-based dental practice owned by two British dentists. Lacoste attempted to oppose the dentists'
application to register a trademark for the dental practice using a green crocodile, arguing there was a likelihood of confusion
between the mark of Lacoste and that of the dentists.
The United Kingdom's Intellectual Property Office in London (IPO) ruled that there was no likelihood of confusion between
the respective marks. In reaching its conclusion, the IPO stated, "Dental services are highly personal in nature, and often
require significant discussion regarding suitable care and treatment which is provided by qualified practitioners," and "the
average consumer will generally take great care in trying to find and then choose a suitable practitioner whether the treatment
sought is medical or cosmetic." Lacoste's appeal was subsequently rejected.
Source: UK Intellectual Property Office
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Likelihood of Confusion Test: More Confusing Now? (Trademark)
Applied Information Science (AIS) owns a registered mark-- SMART SEARCH for computer software. AIS sued eBay for using the
term SMART SEARCH in connection with web searches. In affirming a district court's grant of a summary judgment motion for
eBay, the 9th Circuit held that, although protection of a mark is limited to the goods and services registered, an infringement
analysis can extend to any goods and services where confusion is likely to result. The significance of the ruling is this:
when analyzing whether a infringement has occurred, courts in the 9th Circuits do not have to limit their analysis to the
registered uses of a mark; they can look further into uses for which the mark is not registered.
If you have questions about how to protect your trademark rights, and how this case will impact your trademark portfolio,
please contact Chester/Associates at IP@tradelawfirm.com
Source: US Court of Appeals, 9th Circuit
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FTC New Franchise Rule: Phase-in Period Ends on July 1, 2008
The FTC adopted its new Amended Franchise Rule 16 C.F.R. Part 436 (2007), allowing a phase-in period for franchisors to transition
from the current Franchise Rule to the amended rule. Franchisors may elect to comply with the amended rule starting on July
1, 2007, but must be compliant to the amended rule by July 1, 2008. In order to compliant, franchisors must use the new FTC
disclosure document format, which incorporates the former Uniform Franchise Offering Circular with various modifications.
Failure to comply with the FTC franchise may result in civil penalties, suspension of franchisors' eligibility to sell franchises,
and possible civil damages. Franchisees may make less informed investment decisions when purchasing franchises without adequate
disclosure from franchisors. If you have questions about either selling franchises, please contact Chester/Associates at
ip@tradelawfirm.com
Source: FTC
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Get "REAL" about Homeland Security
The U.S. Department of Homeland Security (DHS) announced on January 11, 2008 a final rule establishing minimum security standards
for state-issued driver's licenses and identification cards. The rule sets uniform standards that enhance the integrity and
reliability of driver's licenses and identification cards, strengthen issuance capabilities, and increase security at driver's
license and identification card production facilities.
This rule has the twin purpose of tackling terrorism and identity theft. REAL ID will address document fraud by setting specific
requirements that states must adopt for compliance, to include: (1) information and security features that must be incorporated
into each card; (2) proof of the identity and U.S. citizenship or legal status of an applicant; (3) verification of the source
documents provided by an applicant; and (4) security standards for the offices that issue licenses and identification cards.
The first deadline for compliance with REAL ID is Dec. 31, 2009. By then, states must upgrade the security of their license
systems, to include a check for lawful status of all applicants, to ensure that illegal aliens cannot obtain REAL ID licenses.
Some states are expected to be compliant well before that time. Compliance will be needed for access into a federal facility,
boarding commercial aircraft, and entering nuclear power plants.
Source: DHS
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Exporting Clean Energy Technologies Creates Opportunities
Clean energy technologies have moved to the forefront of energy infrastructure investments in China and India. These two powerhouse
economies are seeking to diversify energy sources while reducing carbon emissions in the context of sustained economic growth.
Clean energy investments in both nations will be enormous over the next 10 years, so now is the time to enter these important
markets.
China aims to double the country's renewable energy supply by 2020. The Chinese Government would like to increase renewable
energy to 10 percent of the country's electricity consumption by 2020. In 2005 alone, China invested $7 billion in renewable
energy capacity.
India has set a goal of electrifying 18,000 remote villages and meeting 10 percent of its energy demand with clean energy
by 2012. The Indian market for clean energy is estimated at $600 million with an annual growth rate of 25 percent. The current
8,000 MW of installed capacity is expected to reach 20,000 MW by 2012.
Facing such an incredible business opportunity, U.S. companies with clean energy technologies must strategically select business
partners and protect their intellectual property while taking advantages of many tax incentives offered in the target countries.
If you have questions about taking advantages of the business opportunities in China and India, contact Chester/Associates
at trade@tradelawfirm.com
Source: DOC
No claim to government works. Otherwise, © Chester/Associates, PLLC 2008
The material in this newsletter is for informational purposes only. It is not legal advice, and does not create an attorney-client
relationship. To subscribe, or to be removed from this subscription list, send an email to: chestersworld@tradelawfirm.com.
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Chester/Associates, PLLC
Trademarks - Transactions - Trade
6060 N. Central Expressway, Suite 560
Dallas, Texas 75206
Ph 214.800.2845
Fx 214.242.3769
Em jfchester@tradelawfirm.com
Toll Free 877.34.WORLD
www.tradelawfirm.com
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