On January 13, 2012, the International Trade Commission (the “Commission”) issued a notice that Bourdeau Bros., Inc., OK Enterprises, and Sunova Implement Co. (collectively, “Bourdeau”) were found on remand to violate Section 337 by infringing Deere & Co.’s (“Deere”) trademarks through gray market sales of self-propelled forage harvesters in Certain Agricultural Vehicles & Components Thereof (Inv. No. 337-TA-487).  The Commission reinstated a general exclusion order against the subject harvesters and cease and desist orders that issued in the original investigation.

By way of background, the ITC instituted an investigation in February 2003 based on a complaint filed by Deere alleging that Bourdeau and other Deere dealers unlawfully imported and sold Deere’s European-version harvesters in the U.S. in violation of Section 337’s prohibition against importation of products “produced by the owner of the United States trademark or with its consent, but not authorized for sale in the United States,” often called “gray market goods.”  In May 2004, the ITC determined there were material differences between Deere’s North American version and European version harvesters, supporting a finding of trademark infringement and thus a general exclusion order.

In March 2006, the Federal Circuit vacated-in-part and remanded the ITC’s decision based on the additional requirement that Deere also show that all or substantially all of its authorized domestic products (North American version) are materially different from the accused gray market goods (European version).  On remand, in December 2006, the ALJ issued an initial determination of infringement, finding that the original record showed that Deere did not authorize the sales of the European version in the U.S., that new evidence of alleged Deere financing of the European version sold by its dealers did not show authorization, and that the number of sales Bourdeau alleged were authorized was in any event so small that “substantially all” of Deere’s authorized U.S. sales were of the North American version.

In August 2008, the ITC reversed the ALJ, finding substantial evidence that Deere’s U.S. and European dealers had apparent authority to sell the European version, that Deere itself sold and/or facilitated the sale of the European version in the U.S., and that not “all or substantially all” of the authorized harvesters sold in the U.S. were the North American version.  The ITC noted that since the total number of authorized sales of the North American version in the U.S. was approximately only 4400, the introduction of even a small number of the European version could cause substantial consumer confusion.  The ITC then found such confusion based on its determination that at least 141 European version harvesters sold in the U.S. were sold by official Deere dealers.  The ITC considered 141 to be a “substantial quantity” of nonconforming goods because it constituted 40 to 57% of the 247 to 347 European version harvesters sold in the U.S. by both official and independent (in some cases, accused) dealers.  Importantly, the ITC did not use as its denominator the total number of authorized harvesters sold in the U.S., which would have been the number of authorized North American version harvesters (4400) plus the number of authorized European version harvesters (141), or 4541.

In May 2010, the Federal Circuit held that the ITC misapplied the “all or substantially all” test, and that the denominator should have been the total authorized sales in the U.S. in accordance with the court’s remand instructions, not the total European version sales in the U.S.  Using the ratio dictated by its remand instructions as well as the ITC’s lower-end and upper-end findings, the court concluded that a total of 3.1 to 3.4% of the authorized harvesters sold in the U.S. were the European version, or conversely that 96.6 to 96.9% of the authorized harvesters sold in the U.S. were the North American version.  The court observed that those figures may be insubstantial, but that is for the ITC to determine on remand based on all of the relevant facts, noting that “[t]he cutoff as to what is to be considered ‘substantially all’ is a question of fact.”  See our May 27, 2010 post for more details.

According to the January 13 notice, the Commission requested briefing on the merits of the remand, and after examining the record of the investigation, including the parties’ submissions on remand, the Commission determined that Deere established that substantially all of the U.S. sales of the subject harvesters were of the North American version, and Deere therefore met its burden to prove on remand that it satisfied the “all or substantially all” test for gray market trademark infringement.  Accordingly, The Commission reinstated the exclusion order and cease and desist orders with respect to European versions of the subject harvesters issued by the Commission in the original investigation.  Based on the above, the Commission proceeded to terminate the investigation.