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August 7 2012 Issue

Tuesday, August 07, 2012
Sandler, Travis & Rosenberg Trade Report

Auto Parts IPR Bill Gets Hearing in House Subcommittee  

The House Judiciary Intellectual Property Subcommittee heard testimony Aug. 1 from auto industry members, aftermarket automobile repair experts and consumer groups regarding the Promoting Automotive Repair Trade and Sales (PARTS) Act (H.R. 3889). Rep. Darrell Issa, R-Calif., said upon introducing this bill in February that it is designed to preserve customer choice in auto collision repair parts like fenders, side mirrors, door panels and bumpers. 

Issa noted that in recent years auto companies have been increasingly seeking design patents on these parts, which creates a 14-year window of exclusivity. The PARTS Act would instead set a 2.5 year limit on the exclusivity period for automotive design patents related to so-called alternatively supplied parts and equipment. According to the Congressional Research Service, this bill would make it not an act of infringement, with respect to a design patent that claims a component part of a motor vehicle as originally manufactured, to (1) make, test or offer to sell within the U.S., or import into the U.S., any article of manufacture that is similar or the same in appearance to the component part claimed in that patent if the purpose of the article is for the repair of a motor vehicle to restore its appearance to as originally manufactured; and (2) use or sell within the U.S. any such same or similar articles for such restorations more than 30 months after the claimed component part is first offered for public sale as part of a motor vehicle in any country. Issa emphasized that this bill does not deal with interior parts, engines, transmissions or undercarriages, parts that are covered by utility patents rather than design patents. 

At the hearing Neal Menefee, testifying on behalf of two insurance associations, asserted that H.R. 3889 is necessary to preserve competition, and thus lower costs, in the auto repair parts market. Menefee stated that car companies already have about two-thirds of this market, compared to about 14% for alternative suppliers, and are trying to expand that share by obtaining and enforcing 14-year design patents on collision parts, including through Section 337 patent infringement cases. If these actions result in the elimination of competition, he said, $2.4 billion could be added to insured auto repair costs every year, which could have a number of significant economic effects on consumers. Menefee said the insurance industry believes the PARTS Act “carefully balances the car companies’ intellectual property rights with the need to protect consumers by preserving competition.” 

Opposing the bill was Kelly Burris, a former design engineer and current patent attorney, who expressed concern that a patent protection exemption for automotive repair parts could “lead us down a slippery slope” and stifle innovation in automotive design and potentially the entire industrial design community. He also claimed that “non-OEM parts will likely be lower quality and present safety risks without any controls on their specifications,” which not only presents potential hazards to consumers but also could tarnish the reputation of automotive brand owners. 

Guitar Maker to Pay $350,000 to Settle Charges of Lacey Act Violations  

The Department of Justice announced Aug. 6 that a major guitar manufacturer will pay a $300,000 penalty as part of a deferred prosecution agreement settling allegations that the company violated the Lacey Act by illegally purchasing and importing ebony wood from Madagascar and rosewood and ebony from India. The agreement also requires the company to implement a program to strengthen its compliance controls and procedures and pay a $50,000 “community service payment” to the National Fish and Wildlife Foundation that will be used to promote the conservation, identification and propagation of protected tree species used in the musical instrument industry and the forests where those species are found. In addition, the company will withdraw its claims to the wood seized in the course of the criminal investigation. 

According to a DOJ press release, the guitar company purchased fingerboard blanks consisting of sawn boards of Madagascar ebony from a supplier who obtained them from an exporter in Madagascar. The harvest of ebony in, and export of unfinished ebony from, Madagascar was banned in 2006, and the company was made specifically aware of these restrictions following a 2008 trip to Madagascar by one of its employees. Nevertheless, the DOJ states, the company continued to place and receive orders for ebony fingerboard blanks with no further investigation or action on its part. 

The penalty announcement will likely increase calls for reform of the Lacey Act Amendments of 2008, which among other things prohibits the importation of plants and plant products (including wood) that are harvested and exported in violation of any foreign law. The guitar maker’s chief executive officer is among those supporting the Retailers and Entertainers Lacey Implementation and Enforcement Fairness (RELIEF) Act (H.R. 3210), which would clarify that the Lacey Act only prohibits the importation of wood products harvested in violation of foreign laws that pertain to plants. Other changes in this bill, which was approved by the House Natural Resources Committee and placed on the House calendar last month, including (1) exempting plant products imported or manufactured before May 22, 2008, from Lacey Act requirements, (2) providing that individuals who have wood that violates the Lacey Act amendments but do not know it would not be penalized and their property could not be confiscated, (3) limiting the penalty for a first-time Lacey Act violation involving a plant product to a $250 fine for all violations in a single offense (as long as it was not knowingly committed), (4) requiring the federal government to compile a database of forbidden wood sources on the Internet, and (5) limiting the requirement to declare the genus and species of imported plant material on an import declaration to solid wood and items imported only for commerce.

CPSC to Meet Aug. 9 to Consider Proposed Rule on Hazardous Magnet Sets  

The Consumer Product Safety Commission will hold an open meeting Aug. 9 to consider a proposed rule on hazardous magnet sets. A live webcast of the meeting can be viewed here ( 

The CPSC recently filed an administrative complaint against a New York company alleging that certain desk toys containing up to 216 powerful rare earth magnets contain a defect in their design, packaging, warnings and instructions that pose a substantial risk of injury to the public. According to an agency press release, a number of retailers have voluntarily agreed to stop selling these and similar high-powered, manipulative magnetic products after dozens of young children and teenagers swallowed multiple magnets, which connected inside their gastrointestinal tracts and caused internal injuries requiring surgery. The CPSC filed the administrative complaint, only the second such action taken in the past 11 years, after discussion with the company and its representatives failed to result in a voluntary recall plan that CPSC staff considered to be adequate.

OFAC Removes Sanctions on Seven Vessels, Three Entities  

Effective July 12, 2012, the Treasury Department’s Office of Foreign Assets Control unblocked and removed three entities from its list of Specially Designated Nationals and Blocked Persons, whose property and interests in property were blocked pursuant to an executive order concerning the proliferation of weapons of mass destruction and the means of delivering them. OFAC also unblocked and removed from the SDN List seven vessels that were property blocked under that executive order. The list of removed entities and vessels is as follows. 

- Oasis Freight Agencies (a/k/a Oasis Freight Agency LLC), United Arab Emirates 
- Great Ocean Shipping Services (LLC), United Arab Emirates 
- Pearl Ship Management LLC, United Arab Emirates 
- vessel Despina (a/k/a Iran Kolahdooz), general cargo 
- vessel Gomidas (a/k/a Iran Estaghlal), bulk carrier) 
- vessel Hootan (a/k/a Iran Sepah), bulk carrier 
- vessel Iran Beheshti, unknown type 
- vessel Iran Sarbaz, bulk carrier 
- vessel Markarid (a/k/a Iran Deyanat), bulk carrier 
- vessel Tabak (a/k/a Iran Amanat), bulk carrier

AD Notices: Carboxymethylcellulose, Copper Pipe and Tube  

Agency: International Trade Administration. 
Commodity: Purified carboxymethylcellulose. 
Country: Finland. 
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period July 1, 2010, through June 30, 2011. 
Details: Weighted average dumping margin of 5.86% for sole reviewed manufacturer/exporter. 

Agency: International Trade Administration. 
Commodity: Seamless refined copper pipe and tube. 
Country: China. 
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period Nov. 22, 2010, through Oct. 31, 2011. 
Details: Weighted average dumping margins of zero for one reviewed exporter and 60.85% for another.

ITC Reviewing Finding of No IPR Infringement on Imported Polyimide Films  

The International Trade Administration has determined to review and partially vacate the presiding administrative law judge’s final initial determination that the importation, sale for importation and sale within the U.S. after importation of certain polyimide films, products containing same and related methods are violating patents owned by Kaneka Corporation of Japan. The ITC is requesting that interested parties submit information on specific issues no later than Aug. 15 but is not requesting briefing on remedy, the public interest and bonding at this time.

BIS Corrects Export Regulations  

The Bureau of Industry and Security has issued a notice making the following corrections to the Commerce Control List. 

- in ECCN 7A002, under the table in “Licensing Requirements”, add the following “License Requirements Note” 

* * * * * 
* * * * * 
7A002 Gyros or angular rate sensors, having any of the following (see List of Items Controlled) and specially designed components therefor. 
* * * * * 
License Requirement Note: For the purpose of MT controls only, the term ’stability’ is defined as a measure of the ability of a specific mechanism or performance coefficient to remain invariant when continuously exposed to a fixed operating condition. (This definition does not refer to dynamic or servo stability.) (IEEE STD 528–2001 paragraph 2.247) 

- in ECCN 7A005, above “LICENSE REQUIREMENTS”, remove the note to 7A005 

- in ECCN 7A008, add “LICENSE REQUIREMENTS” above “Reason for Control” 

- in ECCN 7B101, in the heading, add a quotation mark before “Production”

- in ECCN 7E003, at the end of “Related Definition,, add “for ‘Maintenance Level I’ or 
‘Maintenance Level II’” 

- in ECCN 9E003, below paragraph a.10, remove Note 1 and Note 2


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