[Federal Register Volume 76, Number 244 (Tuesday, December 20, 2011)]
[Notices]
[Pages 78955-78957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32428]


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POSTAL REGULATORY COMMISSION

[Docket No. MC2008-1 (Phase IIR); Order No. 1043]


Review of Nonpostal Services

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is establishing a docket to consider procedures 
on remand in a case involving licensing of Postal Service intellectual 
property for use on Mailing and Shipping products for sale by licensees 
at non-postal retail outlets. This notice provides background 
information and invites comments. It also addresses intervention by 
persons who did not participate earlier.

DATES: Comments are due: January 13, 2012. Reply comments are due: 
January 23, 2012.

ADDRESSES: Submit comments electronically by accessing the ``Filing 
Online'' link in the banner at the top of the Commission's Web site 
(http://www.prc.gov) or by directly accessing the Commission's Filing 
Online system at http://www.prc.gov/prc-pages/filing-online/login.aspx. 
Persons who cannot submit their views electronically should contact the 
person identified in the FOR FURTHER INFORMATION CONTACT section as the 
source for case-related information for advice on alternatives to 
electronic filing.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
at (202) 789-6820 (case-related information) or [email protected] 
(electronic filing assistance).

SUPPLEMENTARY INFORMATION: Regulatory History, 72 FR 73909 (December 
28, 2007); 74 FR 2636 (January 15, 2009).

Table of Contents

I. Introduction
II. Consideration of Issues on Remand
III. Procedures on Remand
IV. Ordering Paragraphs

I. Introduction

    On June 7, 2011, the United States Court of Appeals for the 
District of Columbia Circuit issued an opinion in LePage's 2000, Inc. 
and LePage's Products, Inc. v. Postal Regulatory Commission, No. 10-
1031.\1\ The court granted petitions for review and vacated the 
Commission's Order No. 392 in Phase II of Docket No. MC2008-1.\2\ The 
court, which issued its remand July 26, 2011, found that the Commission 
had not adequately justified its findings regarding the licensing of 
Postal Service intellectual property for use on Mailing and Shipping 
products for sale by licensees at non-postal retail outlets.\3\ It 
instructed the Commission to explain its departure from its findings in 
Phase I of this proceeding in three respects: (1) The classification of 
the licensing of intellectual property for use on Mailing and Shipping 
products as nonpostal; (2) the public need for licensing the Postal 
Service's intellectual property for use on Mailing and Shipping 
products; and (3) the private sector's ability to meet that need. In 
this order, the Commission establishes procedures to address the issues 
on remand.
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    \1\ LePage's 2000, Inc. v Postal Regulatory Commission, 642 F.3d 
225 (DC Cir. 2011) (LePage's v. PRC). Consolidated with Nos. 10-
1033, 10-1279, and 10-1294.
    \2\ Phase II Review of Nonpostal Services Under the Postal 
Accountability and Enhancement Act, January 14, 2010, Order No. 392.
    \3\ The court referred to the licensing of third-party mailing 
and shipping supplies, which includes LePage's licensing agreement, 
as the Bubblewrap program. LePage's v. PRC at 226. This order uses 
the term ``Mailing and Shipping products''.
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II. Consideration of Issues on Remand

A. Classification of Licensing of Mailing and Shipping Products as a 
Nonpostal Service

    In its brief to the court, LePage's argued that the Commission's 
failure to consider whether the licensed products it produced for sale 
at non-Postal Service retail outlets were a ``postal service'' was 
arbitrary and capricious.\4\ The Commission responded that LePage's 
comparison of its products to postal products, such as ReadyPost, was 
misplaced because it wrongly focused on the sale of its products rather 
than the service offered by the Postal Service, i.e., licensing. See 
LePage's v. PRC, supra, 642 F.3d 231.
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    \4\ Brief for Petitioners LePage's 2000, Inc. and LePage's 
Products, Inc., Nos. 10-1031, 10-1033, 10-1279, 10-1294 
(consolidated), January 29, 2011, at 28.
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    The court found that ``[t]he Commission may well be correct that

[[Page 78956]]

the crucial distinction is the seller's identity. But whatever the 
merits of this position, we cannot consider it because the Commission 
did not set it forth below.'' Id. The court held that in Phase II, the 
Commission analysis of the Mailing and Shipping program focused on the 
products themselves, whereas in Phase I, the focus was on the service 
being sold by the Postal Service. Id. Accordingly, the court remanded 
the matter to the Commission ``to explain its departure from the Phase 
I order and adopt a reasoned rationale for classifying the [mailing and 
shipping] program as a `nonpostal service.' '' Id. at 232.
    Interested persons are requested to comment on this issue, 
including specifically whether licensing of Mailing and Shipping 
products should be classified as a postal service or nonpostal service.

B. The Public Need for Licensing of Mailing and Shipping Products

    The court found the Commission's finding that there was no public 
need for the licensing of Mailing and Shipping products for sale by 
licensees at nonpostal retail outlets to be flawed. The court held that 
the Commission had not adequately explained why the benefits ascribed 
to the Officially Licensed Retail Products (OLRP) \5\ in Phase I did 
not also accrue to the Mailing and Shipping program in Phase II. Id. at 
232.
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    \5\ The court referred to the OLRP program as the ``Bears and 
Scales program''. Id. at 228.
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    In Phase I, the Postal Service sought to continue to license its 
intellectual property and to offer OLRP products as a nonpostal 
service.\6\ In authorizing that nonpostal service to continue, the 
Commission found, inter alia, that the OLRP program leverages the 
Postal Service brand, enhances its image, and generates revenues to 
support its core mission.\7\ The court stated: ``We do not understand 
why these same benefits would not accrue to the [Mailing and Shipping 
products], which aside from the seller's identity, is substantially 
similar to the [OLRP] program. At the least, the Commission must 
explain this differential treatment of seemingly like cases.'' LePage's 
v. PRC, 642 F.3d 232.\8\
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    \6\ OLRP products are sold by the Postal Service at its retail 
facilities or via its Web site.
    \7\ Docket No. MC2008-1, Review of Nonpostal Service Under the 
Postal Accountability and Enhancement Act, December 19, 2008, at 49 
(Order No. 154); affirmed USPS v. Postal Regulatory Commission, 599 
F.3d 705 (DC Cir. 2010).
    \8\ The court also faulted the Commission's reliance on certain 
testimony to reach different results in Phase I and Phase II. ``The 
Commission does not explain how it can read the same evidence 
differently when applied to different aspects of the same program.'' 
Id.
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    In addition, the court addresses but does not resolve whether, in 
analyzing public need under 39 U.S.C. 404(e)(3), the Commission may 
consider the products manufactured pursuant to the licensing agreement 
and their potential effect on the market. Before the court, LePage's 
argued that the Commission cannot ``analyze `public need' based on the 
predicted economic effects of a product.'' Id. Finding ``some merit'' 
in LePage's position, the court stated:

    The Act requires the Commission to assess the `public need' for 
the service `offered by' the Postal Service. Yet the service offered 
by the Postal Service in the [Mailing and Shipping] program is, of 
course, the licensing of intellectual property. The Commission's 
focus on the economic effect of the products that result from 
licensing, then, would seem to depart from the Act's plain language.

Id. (citation omitted; emphasis in original).\9\

    \9\ Regarding ``economic impact,'' the court ``perceive[d] no 
explanation of how this concern migrated, in Phase II, to the 
Commission's `public need' inquiry.'' Id. at 233.
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    The court concluded its discussion of public need by noting that in 
Phase II the Commission, without explanation, changed its approach from 
focusing on the service (licensing) to ``assessing the disadvantages of 
the [Mailing and Shipping] program based only on the program's 
products.'' Id. (emphasis in original).
    Interested persons are requested to address, under section 
403(e)(3), the issue of public need for licensing of Mailing and 
Shipping products, including specifically what factors should be 
included in the Commission's assessment of public need.

C. The Private Sector Ability To Meet the Public Need for Licensing 
Postal Service Intellectual Property for Mailing and Shipping Products

    In Phase I, the Commission authorized the continuation of 
promotional licensing by the Postal Service. It found that such 
licensing serves a ``public need which, given the uniqueness of the 
activity, cannot be met by the private sector.'' Order No. 154 at 73. 
The court found the Commission's Phase II conclusion that the private 
sector could meet the need for the licensing of intellectual property 
for use on Mailing and Shipping products departed, without explanation, 
from its Phase I conclusion ``that commercial licensing could not be 
met by the private sector because no entity other than the Service 
could license its intellectual property.'' Id. The court further 
observed:

    [T]he Commission must assess the activity the Service offers. In 
the case of commercial licensing--whether for mailing and shipping 
supplies or for other products--that activity is licensing. 
Therefore, for the Commission to review the private sector factor by 
assessing ability of the private sector to provide similar products 
would bring the Commission into conflict not only with the Act, but 
also [with its Phase I conclusion].

Id. at 233-34.

    Interested persons are requested to address this issue, including 
specifically whether, in assessing under section 404(e)(3) the private 
sector's ability to meet the public need, the Commission may take into 
account the purpose of the product manufactured pursuant to the 
licensing agreement. Stated differently, in considering the private 
sector's ability to meet the need for Postal Service licensing of its 
intellectual property for use on third-party consumer goods, is it 
appropriate to take into account the purpose of licensed consumer good, 
e.g., items, such as hats, toys, or key chains, that primarily serve a 
promotional (or novelty) purpose versus items related to Postal Service 
areas of expertise, such as postage meter ink cartridges or mail 
preparation supplies, that primarily serve a commercial purpose?

III. Procedures on Remand

    The Commission establishes Docket No. MC2008-1 (Phase IIR) to 
consider issues on remand. Docket Nos. MC2008-1 (Phase II) and MC2008-1 
(Phase IIR) are part of the same proceeding. Comments are due January 
13, 2012.\10\ Reply comments, if any, are due January 23, 2012. 
Comments may refer to and rely on evidence received and arguments made 
in Docket No. MC2008-1 (Phase I) and Docket No. MC2008-1 (Phase II).
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    \10\ Interested persons who were not parties to the proceedings 
in Phase II may seek to intervene by filing a notice of intervention 
or of limited participation. See 39 CFR 3001.20 and 3001.20a.
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IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. MC2008-1 (Phase IIR) to 
consider issues on remand.
    2. Robert N. Sidman will continue to serve as officer of the 
Commission (Public Representative) to represent the interests of the 
general public in this proceeding.
    3. Comments are due, as set forth in the body of this order, no 
later than January 13, 2012.
    4. Reply comments, if any, are due no later than January 23, 2012.
    5. All comments and other documents related to issues on remand 
shall be

[[Page 78957]]

filed under Docket No. MC2008-1 (Phase IIR).
    6. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2011-32428 Filed 12-19-11; 8:45 am]
BILLING CODE 7710-FW-P