• ALJ Luckern Issues Public Version Of Initial Determination Finding Violation of Section 337 In Certain Energy Drink Products (337-TA-678)
  • April 26, 2010 | Author: Eric W. Schweibenz
  • Law Firm: Oblon, Spivak, McClelland, Maier & Neustadt, L.L.P. - Alexandria Office
  • On April 12, 2010, Chief ALJ Paul J. Luckern issued the public version of his Initial Determination (dated March 30, 2010) (“ID”) in Certain Energy Drink Products (Inv. No. 337-TA-678).  In the ID, ALJ Luckern found a violation of Section 337.

    By way of background, the Complainants in this investigation are Red Bull GmbH and Red Bull North America, Inc. (collectively, “Red Bull”). The Respondents are Avalon International General Trading, LLC (“Avalon”); Posh Nosh Imports (USA), Inc. (“Posh Nosh”); Greenwich, Inc. (“Greenwich”); Advantage Food Distributers (“Advantage Food”); Central Supply, Inc. (“Central Supply”), Chicago Import Inc. (“Chicago Import”), and Lamont Dist., Inc. (“Lamont”) (collectively, “Defaulting Respondents”).  On December 2, 2009, Red Bull moved for summary determination on the issues of domestic industry, importation and violation of Section 337.

    Complainants argued that a domestic industry exists; that Defaulting Respondents unlawfully sold for importation in the US, imported into the US, and/or sold within the US after importation Gray Market Unauthorized Red Bull Energy Drink (“Gray Market Energy Drink”); and that Defaulting Respondents infringed Red Bull’s asserted registered marks and copyright.  Thus, Red Bull argued that they were entitled to summary determination on the issues of domestic industry, importation, and violation and that because of the likelihood of circumvention, pattern of violation, difficulty in identifying the source, and the lack of harm to the public interest, they are also entitled to a general exclusion order.  Red Bull further argued that its energy drink has been successful and that brand image and quality control have been central to such success.

    With regard to the Gray Market Energy Drink, Red Bull noted material differences including omitting the nutrition requirements, volumetric information, and state deposit information, and identifying foreign distributors as contacts.  Red Bull further noted that since the Gray Market Energy Drink is not subject to Red Bull’s quality control and safety procedures, the sales of such drinks damage the reputation and goodwill of Red Bull and pose a risk to public safety.

    In the ID, ALJ Luckern found that no genuine issue of material fact existed as to whether Red Bull’s asserted registered marks and copyright were valid and enforceable, as to the establishment of domestic industry, and as to importation of Gray Market goods.  Thus, ALJ Luckern determined a violation of Section 337 had occurred.

    Domestic Industry

    Both Red Bull and OUII argued that a domestic industry exists with respect to the U.S. Red Bull Energy Drink and Red Bull Energy and Sugarfree Shot products intended for sale in the US.

    ALJ Luckern determined that Red Bull’s asserted registered marks and copyright and/or derivative works are featured on Red Bull Domestic Industry Products sold in the US.  The ALJ also determined that Red Bull’s sales of the Red Bull Domestic Industry Products are significant. Thus, ALJ Luckern determined the technical prong of the domestic industry requirement was satisfied.

    The ALJ also found the economic prong of the domestic industry requirement satisfied, noting that Red Bull had invested significantly in plants and equipment in connection with the Red Bull Domestic Industry Products in the US; had made a significant employment of labor and capital relating to the Red Bull Domestic Industry Products in the US; had made significant investment in the exploitation of Red Bull’s asserted registered marks and copyright, including research, development, and licensing; had used Red Bull’s asserted registered marks and copyright in connection with numerous promotional and other items related to the US Red Bull Energy Drink; and had expended significant resources in conducting market research and advertising and marketing with respect to the US Red Bull Energy Drink.

    Gray Market Trademark Infringement

    Both Red Bull and OUII argued that gray market infringement had been established.

    ALJ Luckern found that the Gray Market Energy Drink cans bore the same trademarks as are registered in the US by Red Bull. ALJ Luckern found that importation of these drinks had occurred in violation of Section 337 by Respondents Avalon, Posh Nosh, Greenwich, Advantage Food, Central Supply, and Chicago Import.  Specifically, the ALJ found that these Gray Market Energy Drinks were necessarily imported into the US because the products were only manufactured outside of the US, and authorized for sale outside of the US as evidenced by various markings on the cans.  With regard to Respondent Lamont, the ALJ found no evidence of actual sale by Lamont in the US, merely an offer for sale.

    The ALJ also found material differences with respect to the Gray Market products including the lack of UPC codes, nutritional information, volumetric information, deposit information, batch codes, expiration dates, toll-free number and website information, and notice statements. ALJ Luckern also noted that phraseology and spellings that differ from standard American English were used.  A recycling symbol not known to American consumers was also used.

    Thus, ALJ Luckern determined that there had been trademark infringement of the Red Bull Registered Marks and thus, a violation of Section 337.

    Copyright Infringement

    ALJ Luckern determined that the asserted Red Bull Copyright was valid and enforceable, that the infringing energy drink cans featured the Red Bull Copyright or derivative works, and that Defaulting Respondents were not authorized to use the Red Bull Copyright.  Thus, ALJ Luckern determined that there had been infringement of the Red Bull Copyright and thus, a violation of Section 337.

    Remedy

    Regarding remedy, ALJ Luckern recommended the entry of a general exclusion order. The ALJ determined there had been widespread unauthorized use due to the importation of Gray Market Energy Drinks.  ALJ Luckern also determined that business conditions, namely the supply and demand for Gray Market Energy Drinks in the US and the few barriers for selling such a product, support the entry of a general exclusion order.  In addition, the ALJ noted that it was difficult to identify the source of the infringing products.  ALJ Luckern also determined that public interest favored the entry of a general exclusion order and that issuance of such an order would not have any effect on competitive conditions in the US.

    With regard to bond, the ALJ found that each of Defaulting Respondents set its price for infringing products differently, thus a price comparison would be difficult to calculate. Therefore, ALJ Luckern determined 100% bond was appropriate.