[Federal Register Volume 68, Number 54 (Thursday, March 20, 2003)]
[Proposed Rules]
[Pages 13636-13638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6756]


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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