[Federal Register Volume 69, Number 167 (Monday, August 30, 2004)]
[Rules and Regulations]
[Pages 52811-52813]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19665]



Bureau of Customs and Border Protection

19 CFR Parts 12 and 24

[CBP Decision 04-29]
RIN 1651-AA36

Patent Surveys

AGENCY: Customs and Border Protection, Department of Homeland Security.

ACTION: Final rule.


SUMMARY: This document amends the Customs and Border Protection (CBP) 
Regulations to eliminate patent surveys. The change is made based on a 
lack of demand for the program due to diminishing effectiveness within 
the current statutory scheme and other changed circumstances. CBP will 
continue to enforce the law and regulations it is responsible for 
enforcing regarding the importation of patented merchandise registered 
with CBP, and importers and others may continue to avail themselves of 
the procedures administered by the International Trade Commission 
regarding the importation of patent-infringing merchandise.

DATES: Effective September 29, 2004.

Intellectual Property Rights Branch (202) 572-8710.



    On March 20, 2003, the U.S. Customs Service (Customs) published a 
notice of proposed rulemaking (NPRM) in the Federal Register (68 FR 
13636) proposing to amend the Customs Regulations (19 CFR Chapter I) to 
eliminate patent surveys. The NPRM explained that patent surveys are 
conducted by CBP to assist registered patent owners in pursuing 
enforcement actions by the International Trade Commission (ITC) under 
section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337; 
hereafter, section 1337), pertaining to unfair practices in import 
    It is noted that Customs was made a component of the Department of 
Homeland Security and is now known as U.S. Customs and Border 
Protection (CBP). While this document is being issued by CBP, the 
agency is sometimes referred to as Customs in this document to reflect 
historical accuracy.

The Statute

    Under section 1337, 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 ITC, 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 ITC, under certain circumstances, to issue cease and desist orders, 
impose civil penalties, and order seizure and forfeiture relative to 
unlawful acts under the statute.
    CBP plays a supporting role with respect to patent infringement 
cases under section 1337. Where the ITC has determined that merchandise 
infringes a patent and has ordered that the patent-infringing 
merchandise be excluded from entry, CBP will refuse entry of the 
merchandise covered by the order after notification by the ITC (see 19 
CFR 12.39). In addition to enforcing ITC exclusion orders, CBP enforces 
ITC seizure/forfeiture orders (19 U.S.C. 1337(i)(2)) and certain court 

Patent Surveys

    In 1956, while under no statutory mandate to do so, Customs 
promulgated a regulation designed to assist patent holders in obtaining 
information they would need to seek action by the ITC 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

[[Page 52812]]

which to file a complaint with the ITC 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 
Sec.  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 
periods varying in length of time: 2, 4, and 6 months. The fees for 
patent surveys remained under Sec.  24.12(a)(3).

Changed Circumstances

    In 1956, when the patent survey program was introduced, Customs 
processed just over a million entries. Since then, the volume of 
entries has increased dramatically, and CBP now receives over 23 
million entries per year (based on 2001 statistics). At the same time, 
as a result of changes in applicable law and practice, the old system 
under 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. These changed circumstances have severely impacted the 
ability of CBP to adequately administer the patent survey program, 
resulting in CBP's reconsideration of the program's viability.

Effectiveness of the Patent Survey Program

    In addition, the effectiveness of the program has been challenged. 
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), CBP 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 
importers of merchandise appearing to infringe the patent often 
produces over-broad results which lead to the identification of 
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 use of CBP 

Value of the Program

    Further evidence of the limited value of the patent survey program 
is demonstrated by the fact that CBP processes relatively few patent 
survey requests per year (research indicates approximately 10 requests 
processed per year). The few number of survey requests received call 
into question the value of the program. A greater number of survey 
requests might suggest a greater need among the importing public and a 
more legitimate basis for CBP's investment of time and resources. Also, 
no comments were received in response to the proposed rule, requesting 
retention of the program. The apparent lack of need, and interest, is 
another reason to discontinue the program.

Absence of Statutory Mandate

    Finally, CBP notes that section 1337 does not mandate that CBP 
perform patent surveys. An examination of the general scheme of section 
1337 shows that the statute places primary authority in the ITC, rather 
than CBP, to enforce its provisions. The ITC is charged with the 
responsibility to conduct investigations and make determinations 
regarding violations and sanctions under the statute. In the context of 
section 1337, CBP is not authorized to take any action regarding 
apparently patent-infringing merchandise without the ITC first taking 
action or without receiving a notice, request, or instruction from the 
ITC, a clearly secondary role.
    Thus, the promulgation of the 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. 1624. As a 
discretionary program, CBP is not compelled by law to continue 
performing patent surveys, especially when their value appears to have 
diminished, resources are scarce, and the agency is faced with elevated 
national security priorities.


    The comment period ended on May 21, 2003. No comments were 


    In the NPRM, Customs examined the options of discontinuing the 
program or expending scarce resources to make the program more 
effective. After careful consideration, CBP has determined that 
committing additional resources to the program would be difficult, 
given current enforcement and security priorities, and raising fees to 
cover the cost of patent surveys would likely reduce participation even 
more. For these reasons, in addition to the lack of interest in the 
program, lack of comments (received in response to the proposed rule) 
requesting continuation of the program, and the above mentioned 
concerns relating to ambiguous legal authority, CBP is amending the 
regulations to discontinue the patent survey program. Thus, this 
document removes Sec.  12.39a from the CBP Regulations and makes 
conforming changes to Sec.  24.12(a) by removing paragraph (3).
    This amendment to the regulations is being issued in accordance 
with Sec.  0.1(b)(1) of the CBP Regulations (19 CFR 0.1(b)(1)) 
pertaining to the authority of the Secretary of Homeland Security (or 
his/her delegate) to prescribe and approve regulations relating to 
customs revenue functions that are not set forth in paragraph 1(a)(i) 
of Treasury Department Order No. 100-16 (May 15, 2003) (see CBP 
Decision 03-24, 68 FR 51868, August 28, 2003).

Regulatory Flexibility Act

    Under 19 U.S.C. 1337 (section 1337), the ITC, 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).) CBP plays a supporting role 
with respect to patent infringement cases under section 1337. Where the 
ITC has determined that merchandise infringes a patent and has ordered 
that the patent-infringing merchandise be excluded from entry, CBP will 
refuse entry of the merchandise covered by the order after notification 
by the ITC (see 19 CFR 12.39). Neither ITC nor CBP is required to 
conduct patent surveys under the statute. They are not necessary to ITC 
investigations or enforcement action or to the fulfillment of CBP's 
responsibilites under the statute.
    As set forth in the preamble, CBP receives very few patent survey 
requests under the regulations; the figure is approximately 10 per 
year. No comments were received in response to the proposed rule 
requesting retention of the program. In addition, most surveys do not 
produce beneficial

[[Page 52813]]

results, and the beneficial results that are produced are of limited 
value. Thus, pursuant to the provisions of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.), it is certified that the amendments to the 
CBP 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 for 
reasons related to changed circumstances, disuse, and ineffectiveness. 
Accordingly, these amendments are not subject to the regulatory 
analysis or other requirements of 5 U.S.C. 603 and 604.

Executive Order 12866

    Since CBP receives so few requests for patent surveys, and 
elimination of the program will not preclude a patent owner from 
petitioning the ITC for an investigation and action to enforce its 
patent, CBP concludes that this rule does not meet the criteria for a 
``significant regulatory action'' as specified in E.O. 12866. The rule 
will not have an annual effect on the economy of $100 million or more 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities. Because patent surveys are not an essential element of the 
ITC enforcement process, elimination of the program in this final rule 
does not create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency. It is noted that no comments 
were received, indicating little if any concern by patent owners that 
access to ITC enforcement will be curtailed or the ITC's procedures 
will be affected by the final rule. Also, the rule does not materially 
alter the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof, as patent 
surveys have nothing to do with any of these matters; nor does the rule 
raise novel legal policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in E.O. 12866.

Drafting Information

    The principal author of this document was Bill Conrad, Office of 
Regulations and Rulings, Customs and Border Protection. 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.

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 amended as follows:


1. The general authority citation for part 12 continues to read as 

    Authority: 5 U.S.C. 301; 19 U.S.C. 66; 1202 (General Note 23, 
Harmonized Tariff Schedule of the United States), 1624.
* * * * *

Sec.  12.39a  [Removed]

2. Part 12 of the CBP Regulations is amended by removing Sec.  12.39a.


3. The general authority citation for part 24 continues to read as 

    Authority: 5 U.S.C. 301; 19 U.S.C. 58a-58c, 66, 1202 (General 
Note 23, 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;
* * * * *

Sec.  24.12  [Amended]

4. Section 24.12 of the CBP Regulations is amended by removing 
paragraph (a)(3).

    Dated: August 24, 2004.
Robert C. Bonner,
Commissioner, Customs and Border Protection.
[FR Doc. 04-19665 Filed 8-27-04; 8:45 am]