K MART CORP. v. CARTIER, INC.

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Argument of Louis R. Cohen

Chief Justice Rehnquist: Mr. Cohen, you may proceed whenever you are ready.

Mr. Cohen: Thank you, Mr. Chief Justice.

May it please the Court:

As this Court explained quite clearly in Prestonettes and again in Champion Spark Plug, a trademark owner has the right to prevent other people from applying his mark to their goods.

But he does not have any right, by virtue of the trademark, to restrict resales of his own goods after he has put them into commerce.

The Treasury Department has, we think, validly interpreted Section 526 of the Tariff Act in accordance with that basic distinction.

It is common ground between the parties that Section 526 protects a U.S. trademark owner against importation of goods bearing his trademark that were manufactured abroad by someone else.

Section 526 responded to the Second Circuit ruling in the Katzel case which had allowed the importation of such goods as non-infringing on the ground that they were genuine in the country they came from.

Unknown Speaker: Mr. Cohen, I am just curious.

Has a stay been entered in this case?

Mr. Cohen: No, Justice Blackmun, but there has been only a declaratory judgment.

There is no injunction in this case.

The Court of Appeals thought it would not be appropriate.

The question in this case is whether the statute also does something quite different: whether it gives an enterprise operating in more than one country a right, a continuing right by virtue of the trademark to stop its own goods at the U.S. border after it has sold them abroad.

Nothing in Katzel or the legislative history suggests, and I will argue that it is wholly implausible, that Congress intended any such fundamental change in the nature of a trademark.

And, so, Treasury has long interpreted the section as not barring importation where the U.S. owner itself placed the goods in foreign commerce or in certain functionally similar cases.

COPIAT, Respondents, argue that the plain words of the statute compel exclusion of the goods in those cases, too.

But it is altogether proper, we suggest to construe a statute as not encompassing every situation its words might literally reach when that would produce results Congress did not intend.

As the Court said a century ago, a statute making it a crime to hinder a mail carrier in the swift completion of his rounds is quite properly read as if it contained the words except when the mailman has just committed a felony or is about to deliver a bomb.

Unknown Speaker: Mr. Cohen, neither the brief of Government nor your argument thus far addresses the issue of proper jurisdiction in the case.

Do you intend to say anything about it?

Mr. Cohen: The Government's view is that the Court of Appeals was correct.

Section 1581, if read literally, might confer exclusive jurisdiction on the Court of International Trade, but we think the Court of Appeals was correct in understanding that what Congress was getting at there was actions arising under trade statutes of which this is not one.

The Court has often construed statutes more narrowly than the words alone might literally suggest in order to results that Congress did not intend.

I think it is quite implausible that the 1922 Congress intended to change a trademark from an identifying mark only into a partial permanent leash on the goods themselves.

It is implausible, first--

Unknown Speaker: Mr. Cohen, even under your theory, I think it gives more substance to the mark than just an identifier... even the Second Circuit litigation, the way this Court decided it, said it was more than an identifier.

Mr. Cohen: --I think what this Court said was that: If I am the U.S. owner of a trademark, the fact that someone else owns the same mark in France and, therefore, legally entitled to make and sell goods in France doesn't mean that those goods, which would otherwise be infringing goods in the United States, because he is not me, can come into the States.

Unknown Speaker: Yes, but they are made by the same party.

Weren't they the same source of goods in that case?

Mr. Cohen: No.

The goods that were made in France were not made by the U.S. trademark owner.

Unknown Speaker: No, but they were made by the goods the U.S. trademark owner sold, were also made by the same manufacturer; weren't they?

Mr. Cohen: Yes, he got them and he reprocessed them.

Unknown Speaker: So, they had a common source.

Mr. Cohen: And he reprocessed them.

But the case would have been, I suggest, exactly the same if what had happened was that the U.S. rights to manufacture had been bought by the plaintiff in that case and what you had were some goods manufactured in the United States by the plaintiff and some goods manufactured in France by the defendant.

And the plaintiff saying,

"Those French goods are infringing when they come over here because they are not, they are not mine. "

The case would have been quite different, I suggest, and this Court would have decided it differently and Congress would have reacted differently if the U.S. manufacturer had established a French factory and then said,

"Because I am manufacturing these goods in France and I want to keep them there, my trademark will keep them out of the United States. "

I don't think either this Court or the Congress would have had the reaction that they did.

I was starting to say that I think I get some help from the very text of the statute which explicitly protects only U.S. owners of trademarks and protects them only against goods of foreign manufacture.

Those requirements, which are not found elsewhere in trademark law, make sense on our view that Congress was assuming that the U.S. trademark owner and the foreign manufacturer would be two different people and was seeking to protect the trademark owner from the foreign manufacturer's goods.

They make, I suggest, no sense those limitations on COPIAT's view that Congress was seeking to change the characteristics of a trademark, to make it broader to bar the flow of all goods bearing its mark, including its own, into the United States.

Unknown Speaker: Congress never writes a statute that does more than it was intended to do.

Is that the thesis?

Whenever a statute necessarily written in general language goes beyond the specific evils sought to be remedied, we should interpret it, despite its language so that it covers only the specific evils sought to be remedied?

Mr. Cohen: I think that you should interpret it in accordance with it intent as discerned from its language and its context and its history.

There are, here, two different possible general principles and I think--

Unknown Speaker: Well, I am talking about its language, not its intent.

The postman situation you give me is a situation in which you have a different statute that expresses a different policy which has to somehow be reconciled with the statute protecting the postman in the execution of his daily rounds.

And if there were another statute here that similarly indicated an intention that these goods should be admitted, then we would have a different problem.

But, as far as the explicit language of the statute is concerned, it covers this situation as well as the narrow situation that was immediately before the Congress.

Mr. Cohen: --I have in this case at least the general legal background of the trademark law as asserted by this Court I think in Katzel and the following year in Prestonettes which did not extend... which did not make one of the characteristics of a trademark a right to bar the sale of somebody else's goods.

The trademark law says that I can't make a car in my garage and sell it as a Chevrolet.

It doesn't say that I can't resell one of General Motors' Chevrolets anywhere I want to.

And it would have been quite startling for this statute to have changed the law that much, I think.

And I think some of the language that Congress used indicates that that is not what they were trying to do.

And, therefore, I think it is appropriate here as it was in Guerrera where the Court read the language of the Pregnancy Discrimination Act requiring pregnant women to be treated the same as other employees, as a floor and not as a ceiling, as the Court did in the Colorado Public Industry Research Group case where it read pollutants and radioactive materials not to include nuclear wastes as not reaching a case that there is evidence Congress didn't intend to reach.

Unknown Speaker: Mr. Cohen, would you just be... just so I am sure I have your point.

You said there are two principles that this 546 might have indicated.

Would you state the two principles?

Mr. Cohen: Yes.

We think what 526 and this Court's decision in Katzel did was to say that the mere fact that goods are genuine abroad does not mean that they do not infringe here if there is somebody else in the United States who owns the trademark.

I take it that COPIAT thinks that 526 means that the trademark owner in the United States has the right to say that goods to which it applied its own trademark in some foreign country are not trademarked in the United States.

I think that... let me say it a different way.

I think that 526 means that if I own the U.S. trademark and somebody else owns the French trademark for some goods, his goods are infringing here even though they are genuine in France.

I think it does not mean that if I owned both the U.S. trademark and the French trademark I am entitled to be treated as two different people.

I think that the limitations in the statute to U.S. owners and to goods of foreign manufacture make no sense on COPIAT's view.

If they intended to give all trademark owners such a right to stop their own goods at the border, there would be no reason to require Nikon to form a shell U.S. subsidiary to hold the trademark and, conversely, there would be no reason to require Kodak to build an offshore factory in order to get the protection of Section 526.

Now, the other thing I will point to is one important episode in the brief legislative history.

It is the Senate discussion of the Pear's Soap hypothetical which suggests that everybody, whether for or against Section 526 was against giving foreign companies the right to restrict the flow of their own goods into the United States.

COPIAT is reduced to suggesting that the sponsors of 526 were wrong in claiming that 526 didn't do what COPIAT would like.

And the opponents were correct in fearing that it would do what neither they nor the sponsors wanted.

There isn't any reason why a statute that can be read perfectly straight forwardly to do what everyone agrees Congress intended, must also be wrote so literally as to do something no one in congress wanted.

This is also, it seems to us, an appropriate case for deference to the agency.

It is, I think, at the very least not clear from the text and the legislative history that Congress intended to permit a U.S. trademark owner to bar importation of its own goods.

COPIAT challenges Treasury's consistency, but the basic principle of the Treasury regulation that 526 doesn't give a trademark owner the right to bar its own goods sold abroad from being imported into the United States has been set forth in the regulations at all times since 1936 and very clearly and consistently since 1943.

Unknown Speaker: You are taking the position then that the Treasury has been consistent throughout the years and did not take a different position in the Second Circuit case in 1983?

Mr. Cohen: Yes, as to Treasury.

That brief was signed by the General Counsel of the Customs Service.

It was not authorized by Treasury and it should not have been filed.

Unknown Speaker: But at least, then, the Government has been inconsistent?

Mr. Cohen: To that extent... I was going to say the Government has also varied in its handling of a point that I don't think is at issue in this case and that is the extension of the general principle that I have been talking about to cases involving companies that are more distantly related.

There has been some adjustment in the articulation and probably in the policy, but this case is not and has never been about where the Treasury's line ought to be drawn.

This case as framed by COPIAT has always been about whether there can be an exception at all.

Mr. Chief Justice, I would like, if I may, to reserve the remainder of my time.

Argument of Robert W. Steele

Chief Justice Rehnquist: Thank you, Mr. Cohen.

We will hear now from you, Mr. Steele.

Mr. Steele: Mr. Chief Justice, may it please the Court:

This Court has long recognized that considerable weight should be accorded to an executive department's interpretation and construction of a statute when that department has been entrusted with the administration of the statute.

This is an especially strong case for the application of that doctrine for three reasons.

First, the regulation in question has been in existence in one form or another since 1936.

Second, the regulation has been brought before Congress repeatedly in that time period and has been endorsed not by Congressional silence but by actual Congressional language in regard to specific legislation presented to the Congress.

And, third, and perhaps more important from the standpoint of my client, one of the intervenors in this case, during the 50 years that this statute has been interpreted by the Customs Service as it has been interpreted, a tremendous and substantial business has grown up in the United States among retailers based upon parallel imports, that everyone believes are lawful.

And everyone in the industry, the retail industry, believes to be lawful and believed for many years to be lawful.

My client is K Mart Corporation, a discount department store chain with 2,000 locations throughout the United States.

We are one of the intervenors.

47th Street Photo is the other intervenor who appears as a petitioner in this matter also selling merchandise and parallel imports included at discount prices.

The issue is important to the K Marts and the 47th Street Photos because of the difficulties that discounters have in obtaining trademark merchandise from time to time.

They provide price competition.

But more importantly than just the discount segment of the retail industry, the retailing industry generally handles some parallel imports.

Most retailers handle parallel imports.

They provide price competition with those imports.

They are a tool, an anti-monopoly tool.

And in this case, I must say that nothing in a brief filed in the Second Circuit was on the record to give notice to this industry that there had been a change in the views of any of the agencies in Washington, D.C. indeed, the language of the regulation in question has remained substantially the same during the time period with one exception.

In the 1950's, after the passage of the Lanham Act, the language was arguably broadened to permit more goods to be brought into the United States with a reference to the Lanham Act language for related companies dealing with affiliated companies and control.

Now, that language stayed in the regulation until 1959.

It didn't narrow it, as the Respondents would contend it should.

It broadened it.

It is not a real inconsistency in the sense that it supports the position which has been taken by the Respondents in this case.

During that same time period, this general understanding of the statute has been presented to Congress a number of times.

Now, as Mr. Cohen has pointed out, Section 526 was passed very clearly to remedy a perceived defect in a ruling under the 1902 trademark law.

And that ruling arose in the case of Bourjois & Co. v. Katzel.

And that is what caused 526 to be passed.

In 1936, Treasury interpreted the rule to provide and to allow for parallel imports.

But, more importantly, when the trademark act was amended with the Lanham Act in 1946, extensive reports were made to Congress before the passage of the Lanham Act.

And in passing the Lanham Act, Congress was told repeatedly that this regulation is on the books.

And under the trademark law and under 526, it was not envisioned that when one company, a multi-national company is manufacturing overseas and has a U.S. subsidiary, it is not envisioned that that U.S. subsidiary will be able to keep those imports out.

Congress was told that.

They put nothing in the Lanham Act--

Unknown Speaker: Mr. Steele, I am sorry.

Can I interrupt?

Mr. Steele: --Yes.

Unknown Speaker: I have a problem... I am afraid I'm going to hear no argument to it from your side unless I hear something from you on it.

And that is the point on whether this matter should have been brought to the Trade Court or to the Court of Appeals here.

Mr. Steele: Mr. Justice--

Unknown Speaker: I realize that financially this particular case is enormously important, but from the point of view... the merits of the case are enormously important.

But from the point of view of confusion in future cases for the Federal courts, the jurisdictional issue may well be the more significant.

And I would like to know what interpretation of the language of the statute you propose that will prevent jurisdictional disputes into the endless future.

What is the clear line of jurisdiction the Trade Court and the other Federal courts?

Mr. Steele: --I do not believe that there is a clear line.

We did not raise the point of objection of jurisdiction originally when we intervened in the case.

K Mart Corporation took the position at the time that we felt that it should be litigated in the District Court in this particular proceeding.

So, we have not briefed the issue of jurisdiction.

And our position on the matter is that a number of cases have been brought and without undercutting the positions validly raised by 47th Street Photo, we have not addressed those intervening for the primary purpose of dealing with the substantive issue pertaining to the imports.

If I may turn very briefly to--

Unknown Speaker: It is true, is it not, though, that one of the respondents does still maintain there is no jurisdiction.

Mr. Steele: --47th Street does address the question of jurisdiction.

Unknown Speaker: And the United States does.

Mr. Steele: The United States has not address the question of jurisdiction, as I understand it.

Unknown Speaker: No.

It is sort of a one-sided argument we have here.

No one else even seems to want a day to discus the point.

Mr. Steele: Turning back to the contentions I wish to make, in whatever court the issue arises, it has been our belief that there is ample legislative background to endorse the view that Congress has seen this interpretation for many years and has chosen not to disturb it.

The Lanham Act is one example and equally critical example and more up to date arises in 1984 when the Lanham Act was amended by the so-called Counterfeiting Act of 1984.

That Counterfeiting Act when it came in originally covered a number of different subjects and was the subject of extensive consideration by the Senate Judiciary Committee.

And the Senate judiciary Committee when it referred out the legislation ultimately passed, it said the Act did not include within its coverage so-called gray market goods, i.e., authentic trademark goods that have been obtained from overseas markets.

The importation of such goods is legal under certain circumstances.

For example, the Treasury Department has long interpreted Section 526 to permit the importation of such goods.

Now, at this point, before the Court, we have an interpretation which is clearly not Congressional silence sanctioning the Treasury Department, but express language from Congress.

Equally important is a recent situation in which Congress was called upon to look at the situation arising from a liquor importation question wherein specific legislation was proposed which would change the trademark... the trademark regulations and the regulations of the Customs Service.

It was rejected.

Thank you.

Argument of William H. Allen

Chief Justice Rehnquist: Thank you, Mr. Steele.

We will hear now from you, Mr. Allen.

Mr. Allen: Mr. Chief Justice, and may it please the Court:

At the risk of making an argument even more one-sided, I will say a word or two about the question of jurisdiction.

The District Courts have jurisdiction of actions relating to trademark.

And that is conferred by Section 1338 of Title 28 and by a provision of the Lanham Act.

The District Court here had and exercised that jurisdiction.

It had the traditional District Court trademark jurisdiction because nothing, I submit, in Section 1581 of Title 28 which deals with the jurisdiction of the Court of International Trade, makes an exception to the traditional trademark jurisdiction of the District Courts for this kind of case.

Certainly, nothing in Section 1581 says in terms that the Court of International Trade has jurisdiction over any trademark matters.

I have to acknowledge, however, that jurisdiction has been found to reside in the Court of International Trade by that court and it was affirmed in this respect by the Federal Circuit in the Vivitar case, which is a similar case.

That finding was based, that finding was based on provisions of subsection (i) of Section 1581 and, in particular, paragraph 3.

That is at page 9A of our brief.

The paragraph gives the Court of International Trade jurisdiction of any civil action against the government, an agency, or government official, arising out of a Federal statute providing for and, now, I quote:

Embargoes or other quantitative restrictions on the importation of merchandise for reasons other than the protection of public health or safety.

The argument is that Section 526 makes the importation of some goods bearing a United States trademark unlawful and, therefore, imposes an embargo on such goods.

Now, there are reasons set forth on the Court of Appeals opinions in our brief what that is not a tenable view.

I want to focus on just one of them.

What Section 526 really does is to enable the owner of a United States trademark to invoke governmental processes to bar those goods bearing his trademark that he wants to bar and conversely, if he gives consent, to allow those same goods that may be quite identical to enter the country.

The Customs Service is simply directed to enforce a private right to exclude some goods and admit others that may be quite indistinguishable.

And I submit that that sort of enforcement of private rights is not within the common understanding or, indeed, any reasonable understanding of an embargo.

That very point was made during the debate that preceded the re-enactment of Section 526 in 1930.

The Senate debated a proposal to delete from Section 526 the consent clause, the provision that allows the trademark owner to consent to the importation of goods bearing his trademark.

Senator George was one of the opponents of that proposal and he said that if it were adopted, if it were adopted, that would change... that would change Section 526 into an embargo kind of statute, but it wasn't.

It was not an embargo statute as it then stood.

There are plenty of embargo statutes on the books for this provision of Section 1581 to apply to.

There are some statutes that directly bar imports of certain goods or certain goods from some countries.

More commonly, there are statutes like the Trading with the Enemy Act, the Trade Expansion Act, the International Economic Powers Act that empower the President to bar those--

Unknown Speaker: The response to that, Mr. Allen, I presume is that the Senate realized that and taking that into account didn't just say embargo.

It said embargo or other quantitative restrictions.

Mr. Allen: --I do not see how this is a quantitative restriction, even less a quantitative restriction.

That is the typical kind of thing where you have a quota on goods.

I would have though, Your Honor.

Unknown Speaker: I would have thought it was meant to distinguish it from a restriction that consists of a high tariff.

There is no quantitative restriction, but the restriction is the dis-incentive caused by the tariff.

Mr. Allen: Well, I just really would have thought that embargo then or other quantitative restrictions, that it has to do with a measure that keeps out so many goods of this sort and not others.

Unknown Speaker: Well, it is important... to my mind, it is important to have some clear line because we are going to be struggling with this problem in many more contexts than we are going to be struggling with the merits problem that you seek to have before us.

The line you would draw is if the admission of the goods is dependent upon the voluntary agreement of a private party, it does not constitute an embargo or quantitative restriction.

Mr. Allen: That is the position.

That is correct, Your Honor.

Unknown Speaker: It doesn't provide for an embargo, it provides that a private party may impose a total restriction.

That is not providing for an embargo.

Mr. Allen: I understand that is the issue, Your Honor, and I simply say: No, the Customs Service is not directed to keep goods out except at the instance of a private trademark owner enforcing his trademark right.

Unknown Speaker: Enforcing its embargo.

It doesn't provide for... okay.

Mr. Allen: Now, let me turn, let me turn to the merits.

And I want to inquire first whether, as has been argued here this afternoon, I think, whether Section 526 as it is in fact worded can be made to sustain a meaning that is consistent with the Customs Services regulations interpreting it.

If it cannot, if it can't, then I think my clients win.

In every case that I am aware of where, in the eyes of some, this Court has strained a statute, it has thought itself bound to justify what it has done by reference to the text, the statutory words.

Church of the Holy Trinity and perhaps one or two other cases may be exceptions, but this is clearly not the case where statutory words taken at face value yields some sort of absurd result that has to be avoided.

You take any of the cases: Bob Jones, Guerrera, WMATA v. Johnson, the California Coastal Zone case, all of them... all of them, the interpretation of the statute however influenced by context, by secondary sources of illumination like legislative history was ultimately related to statutory text.

On the other hand, in not one of the District Court cases in which Section 526 has been held to have a limited meaning approximating that of the Customs Service regulations has a court engaged in any textual analysis.

I suggest that this inability to swear statute and regulation textually, may be why the Circuit judges of the Federal Circuit in Vivitar, the Second Circuit in Olympus, as well as the judges of the court below, were unwilling to accept the regulations as correctly interpreting the statute.

You cannot find, you certainly cannot find the exceptions that are expressed in the Customs regulations in the words of the statute.

They are not there explicitly.

The question is whether they lurk there or some justification for them lurks in the statutory words.

One suggestion offered this morning... offered this afternoon refers to the term of the statute that requires that trademark be owned by a corporation created within the United States, a citizen or a corporation created within the United States.

The requirement was added in conference, apparently because of questions raised in the Senate debate, and the part of the Senate debate to which Mr. Cohen referred... and I commend that part of the debate to Your Honors.

The lesson I draw from it and the lesson that the court below drew from it is quite different from the lesson that Mr. Cohen would draw.

But, in any event, that owned provision of the statute was added in the conference committee, presumably in the light of that part of the debate.

It has been suggested that a trademark is not owned by the United States subsidiary, that is the distributor for a foreign manufacturing parent, but is instead owned by the parent.

At least I assume that is the... spell it out fully what is suggested.

But the fact is, the fact is that the United States subsidiary distributor is recognized in law as the owner of the United States trademark.

Unknown Speaker: And the subsidiary register it here?

Mr. Allen: Yes.

Unknown Speaker: It is the one who did the registry?

Mr. Allen: A trademark can be registered only by the owner and these people, the subsidiary distributors have the registration certificates.

They are the ones whom the Patent and Trademark Office recognize as the owner.

There is no occasion in Federal law, as a general matter, for going into the corporate family tree of the apparent owner and registrants.

There was a simple way, there was a simple way for the conference committee to limit the class of corporate trademark owners that qualify for the protection of Section 526 if it had wanted to do that.

That would have been to require both the corporation be created in the United States as is done by Section 526 and that some specified proportion of the voting stock and some proportion of directors be United States citizens.

That is done in some other Federal statutes, which we referred to in our brief.

But not in Section 526.

But in any event, if you attribute to Congress the meaning of the word, 526 that is unknown to trademark law, you don't solve the problem of shoe-horning the Customs Service regulations into the text of Section 526.

The regulations deny the benefits of the statute to American manufacturing companies that manufacture trademark goods overseas themselves or have affiliates or licensees that do.

Examples of Duracell, the automobile manufacturers, Proctor & Gamble, some of them which don't even import any of the goods they make overseas.

All of which have described their gray market problems in amicus briefs in these courts.

If those companies are to be excluded from the protection of Section 526, it surely can't be on the ground that they don't own their United States trademarks.

And what has been belatedly suggested is that the case of these American manufacturing companies is covered by another term of the statute.

We have to go... that one didn't work, so, we turn to another provision.

The requirement that goods be of foreign manufacture.

Now, that, I submit, is just too far-fetched.

Congress is supposed to have intended by this argument quite ordinary words that on their face deal with where goods are manufactured in order to refer to something wholly different, i.e., who manufactures the goods.

And if I can depart for a moment from the purely textual argument, the of foreign manufacture amendment was introduced in response to a question that had been marked by Senator Lenroot about a person who went over into Canada and bought there a sack of the fine American product, Wonder Flour, that had been imported into Canada and now was going to bring it back.

He said, he was going to have his flour confiscated just because he was patriotic and wanted to buy American flour instead of Canadian flour.

He said, he said: buys that merchandise, suppose the American citizen purchased and brought back to this country a product of foreign manufacture with a foreign trademark and paid the duty on it in the regular way.

He distinguished the case of foreign manufacture from the case of American manufacture.

He was talking about where the Wonder Flour was made.

Furthermore, furthermore, the idea that of foreign manufacture means manufacture by a non-U.

S. company can't possibly, can't possibly be reconciled with the debate that preceded the re-enactment of the Section 526 as part of the Smoot Hawley Tariff Act in 1930.

The whole subject of that debate was goods manufactured abroad by American companies.

The Senate Finance Committee proposed deleting the clause at the end of Section 526 that permits such companies to consent to the importation of their goods.

The idea was then Ford Motor Company and these other companies that the Senators were complaining of weren't going to establish overseas plants and deprive Americans of jobs.

Whatever else that debate implies for the meaning of Section 526 and Mr. Cohen and I have debated the issue in our briefs, I think it is on the whole, that the debate can't possibly be reconciled with the Customs Service regulations.

But even leaving aside that debate in its whole breadth, surely, surely as to this matter, if even one Senator... if even one Senator had understood that the words, "of foreign manufacture", meant let us say manufactured by a foreign company that has no ownership or licensing ties to an American company, he would have said so.

He would have said,

"Look here. "

"We have to do something more than just delete this consent provision. "

"Because that statute as we enacted doesn't have anything to do with this case we are talking about. "

"If we just adopt the Finance Committee's amendment, we're going to wake up and find that we have accomplished nothing, nothing in the way of saving American jobs. "

Now, that brings me... that brings me to a second point.

I think my clients win on the text.

It can't... the text of Section 526 can't be made to fit the regulations.

But I don't lose.

I don't lose I don't think even if somebody finds some way of, by heroic efforts, of making the fit.

Because what we want to know finally is not what meaning the statute might be made to sustain, but what in fact Congress meant when it enacted the statute in 1922 and re-enacted it in 1930.

Now, a good index to what Congress meant is how what it said was immediately understood.

And I have already suggested that a particularly good index is the understanding that Senators in 1929 debating the re-enactment of Section 526 had, of what they had done back in 1922, absolutely nothing to suggest that any of them thought that it meant what the present Customs Service regulations say it means.

And a lot, a lot to indicate the contrary.

But that's not all.

Those who wrote the regulations for the old Customs Bureau on the heels of the enactment of the Tariff Act of 1922 had to be keenly attuned to what had just happened in Congress.

You would expect that if they had laid the emphasis on the debate in the Senate, the five or six columns of Congressional Record to record that debate that is now laid on it at this late date, they might have said something like this:

"Section 526 is written in seemingly broad terms, but in fact Congress meant only to overrule a decision of a Court of Appeals on its narrowest facts. "

Unknown Speaker: We would also expect, though, Mr. Allen, that if your clients had thought that this regulation was as contrary to the statute as you now tell us it is, they would have challenged it many, many years ago.

Mr. Allen: My clients don't move until they are hurt, I suppose is the answer to that, Your Honor.

And my clients did not move into court quickly even after they had been hurt.

There is a good deal of efforts at the Treasury Department, at the Customs Service that preceded this lawsuit.

And the fact is that the gray market, as a phenomenon, has bloomed in recent years.

And, indeed, if you go back to 1972 rulemaking, you will find... and this is in the record... that a number, a number of companies, a number of entities did say,

"Customs Service, you are, you are interpreting the statute wrong. "

"Section 133.21(c) regulations are not in accord with Section 526. "

Unknown Speaker: Well, I must say that is admirable restraint.

I wish more prospective litigants would emulate it.

[Laughter]

I am just interested in exploring that a little more.

If the answer to the absence of litigation challenging the regulation, and surely the AMOCO brief indicates it is a pretty important problem to a lot of people, is because the problem bloomed lately, the gray market problem bloomed lately, would that no suggest that it was not a problem Congress gave any thought to?

Mr. Allen: It is quite possible that... I mean you could infer that, but I have to look at what Senators Lenroot and Edge and McCumber were debating at the end of the 1922 debate in Congress and it concerned this very kind of thing: what about the Pear's Soap Company that establishes an agent in the United States and he registers this trademark.

I mean this... at least the concept of what became the gray market, what we now call the gray market issue was in Congress' mind.

Yes, yes.

In any event, those regulation writers didn't say that.

They didn't say anything like that.

They, in 1923... and it is a fortunate thing.

There were regulations that were written in 1923 right after the Tariff Act of 1922.

They simply paraphrased the statute.

Unknown Speaker: They just parroted the statute.

Mr. Allen: Just the same way in 1931, the regulation writers who were called upon to flesh out the Smoot Hawley Tariff Act gave subsection 526 its full apparent sweep.

And then you had the Court of Appeals for the Second Circuit deciding a case about this time.

And that court, of course, had to be acutely aware of Section 526, one of two blows suffered by its Katzel decision: reversal by this Court and overruling by Congress.

And were not just acutely aware of it, but perhaps not very hospitable to it.

But the argument was made to that Court that Section 526 should be limited according to its Katzel parentage so as not... so as not to bring in goods that were not imported for commercial purposes.

In that case, a luxury automobile.

Judge Hand, Judge Augustus Hand wrote the opinion for the Court.

He said that, of course, our Katzel decision brought about the legislation, but that fact does not settle the scope of the act.

And he called it this "drastic", "this drastic statute".

The narrow reading, the narrow reading of Section 526 that is now advocated was put to several contemporaneous tests and it flunked.

It flunked every one of them.

You have to move all the way ahead to 1936 where the first positive evidence that can be pointed to of someone understanding that Section 526 doesn't mean all it says.

And, if you look closely at the supposed evidence from 1936, it evaporates.

It evaporates.

The evidence is a provision of the Customs Service regulations that were amended in that year.

The second sentence of the amended Article 518(b).

It is at page 28 of the joint appendix.

On its face, on its face, the amended Article 518(b) is a belated recognition of one of this Court's decisions.

This Court held in 1923, after the Katzel decision that a section of the Trademark Act that forbids the importation of goods with a trademark that copies or simulates a United States' trademark applied to genuine goods with a trademark identical to a United States trademark.

The amended Article 518(b) cites that case from this Court in the margin.

Marginal notation: A. Bourjois Co. v. Aldredge.

And in keeping with the cited Aldredge decision, the first sentence of the amended Article 518(b) says that a genuine identical trademark shall be deemed to copy or simulate.

Those are the words, exact words, a United States trademark.

In that respect and others that are stated in our brief, the amended Article 518(b) was written solely in terms of the pertinent section of the Trademark Act and not at all in terms of Section 526.

Second sentence, Article 518(b) begins with the same, with the word, "However".

It is written in the same Trademark Act terms and says that if the foreign trademark... the United States trademark are owned by the same person, partnership, association or a corporation, the foreign trademark shall not be deemed to copy or simulate the United States trademark.

That, "Aha", say the Petitioners,

"That is the harbinger of everything that is stated in the 1972 regulations. "

Not so.

Not so at all.

The overall reason obviously was to, for this regulation, was to recognize after 13 years the force of this Court's Aldredge decision, the gloss that it had put on Section 27 of the Trademark Act.

It appears from what Congress was told when it was considering trademark legislation in 1944, it appears that the second sentence qualifying the general Aldredge rule was nothing more complicated than someone's conceptual difficulty with the idea that a person's own foreign trademark could be said to copy or simulate his identical United States trademark.

It had nothing to do with any supposed policy of Section 526 or for that matter any policy of the Trademark Act.

We can't know this for sure because the Customs Service has never once explained its regulations.

Not once.

Not once explained what it was doing when it made an amended regulation.

But the explanation was given, as I have said, to a Congressional committee by a witness from what was then the Tariff Commission.

And, without contradiction, he told the committee that Article 518, the amended Article 518 in 1936 effected only Section 27 and did not... and did not limit the reach of Section 526.

And I would pass from there to the 1950's and invite, invite Your Honors' particular attention to the discussion of the Guerlain case in our brief and of the Solicitor General's motion in this Court to vacate the judgment in favor of the government where he said that the Customs authorities have deemed themselves legally constrained to grant the claim of statutory protection invoked by the American distributors of French perfumes who were, according to Judge Edelstein's decision, part of a single international--

Unknown Speaker: But Mr. Allen, wasn't that partly because of the debate over whether they are related companies or the same company within the--

Mr. Allen: --It is very hard to make that out, Your Honor.

Unknown Speaker: --Because there was a factual dispute as to whether they were the same company.

Mr. Allen: There was, indeed.

They did contest that.

But listen to what further the Solicitor General said.

He was asking the judgment be vacated so that they could ask for legislation.

He said,

"An intragovernmental conflict as to the meaning of the tariff or trademark laws should be resolved through means other than antitrust litigation. "

Unknown Speaker: Yes, but that could be that the Department Justice thought that the exception extended to related companies and Treasury thought it only went to the same company.

There is that history.

Mr. Allen: Well, that is barely possible.

Unknown Speaker: There was a debate over that at the time.

Mr. Allen: But if... then if it is only the same company, it surely doesn't reach--

Unknown Speaker: Well, same or affiliated.

Same in the sense of 100 percent owned, whereas the related company concept talked about partially owned.

Mr. Allen: --At least one of the perfume companies in that case was a simple parent and subsidiary situation, according to Edelstein's finding.

Unknown Speaker: But one was not.

Guerlain was not, I think.

Mr. Allen: Guerlain was not.

But at least one of them was.

But that... well, it is a suggestion, Your Honor.

I had thought it seems a narrow view to talk about--

Unknown Speaker: But it is possible if there was that dispute between Treasury and Justice, not necessarily the dispute as to whether to the statute meant exactly what it said.

Mr. Allen: --It is possible, Your Honor.

It had not occurred to me that an intragovernmental conflict as to the meaning of the tariff or trademark laws would be that... would be that narrow a conflict.

But I can be wrong.

Rebuttal of Louis R. Cohen

Chief Justice Rehnquist: Thank you, Mr. Allen.

Mr. Cohen, you have four minutes remaining.

Unknown Speaker: Mr. Cohen, I just want to make clear: the United States has taken a position on the jurisdictional issue.

Mr. Cohen: Yes, and we have filed--

Unknown Speaker: And you agree with the court below?

Mr. Cohen: --Yes.

And we filed a memorandum which is probably lost in the stack of briefs in this case.

Unknown Speaker: Yes, I have it here.

Mr. Cohen: Mr. Chief Justice, with respect to the textual argument, our position is that it is entirely appropriate to read this text with the implicit contextual qualification supplying the ellipses, if you will, that after the words, "bears a trademark", it said...

"bears a trademark not applied by the U.S. owner or any affiliate. "

We think the evidence is consistent with the notion that that was the intention of this statute.

Unknown Speaker: But you do have to rewrite it a little bit.

Mr. Cohen: Well, no more than you have to rewrite an agreement with Panama that says, "any tax", to read it to say,

"any tax, but not a U.S. tax. "

Or to rewrite the statute that was involved in Watt v. Alaska which talks about minerals on Federal wildlife refuges to read:

"But not on reserved lands, only on acquired lands. "

Let me respond to some of the points that Mr. Allen has made.

With respect to the first version of the regulations, it is true that the first version of the regulations simply parroted the statute.

The 1922 Act was a massive statute.

It constituted almost the whole of Title 19.

That Treasury did not see fit to do anything other than quote the statute in the regulations that were adopted immediately thereafter, doesn't seem to us to have much bearing one way or the other.

The Clark Pease case, the Second Circuit case to which Mr. Allen was referring was not about the issue that is presently before the Court.

It was about whether the word, "merchandise", applies to goods brought in for personal use.

It does not appear in the opinion of that case that the U.S. trademark owner and the foreign trademark were the same person or were in any way related.

I will concede that the 1936 regulations, although they cite Section 526 and contain an explicit exception for the related company situation, don't do so as neatly as we might wish.

I think that the 1943 regulations leave no doubt whatever that the Treasury is treating the Lanham Act section, Section 27, which later became the Section 42 of the Lanham Act dealing with copies and Section 526 together and provided quite clearly as to both of them an exception that persists to this day for goods of the U.S. trademark owner.

Unknown Speaker: Mr. Cohen, you don't contend that the interpretation being urged by Respondents here produces an absurdity; do you?

Will you concede also that that result is not an absurd result?

Just a policy result that you say Congress didn't have in mind.

Mr. Cohen: Yes.

And the Court said quite clearly in the 1940 American Truckinq Association case where it was holding that a statute given the ICC jurisdiction of the wages and hours of trucking company employees, the Court said,

"It is said that a broader reading would not be absurd, but it doesn't have to be absurd. "

"What we are looking for is what Congress intended. "

And, therefore, it limited the words of that statute to the case of employees with safety-related jobs.

Chief Justice Rehnquist: Thank you, Mr. Cohen.

The case is submitted.