OT:RR:BSTC:IPR H302369 JW
VIA EMAIL: [email protected]
Mr. Eric Batt
Director, Apparel, Footwear & Textiles Center
U.S. Customs and Border Protection
San Francisco, CA
RE: Protest 2704-19-102107; U.S. International Trade Commission; General Exclusion Order; Investigation No. 337-TA-976, Certain Woven Textile Fabrics and Products Containing the Same
Dear Mr. Batt:
This letter is in response to protest number 2704-19-102107. Mytex, LLC (“Protestant” or “Mytex”) is the protesting party. Mytex is protesting the denial of entry of Entry No. 8E401035549, which included 4452 bedsheet sets (the “merchandise at issue”). See e.g., CBP Form 19; CBP’s Letter to Mytex Dated December 18, 2018. The protest filed with U.S. Customs and Border Protection (“CBP”) includes a CBP Form 19, a Continuation Sheet, and Exhibits 1 to 5 (collectively, “Mytex’s Protest”). This protest was received by CBP on January 7, 2019. See CBP Form 19.
We find that the merchandise at issue is subject to the general exclusion order issued by the International Trade Commission (“Commission” or “ITC”) in Investigation No. 337-TA-976 pursuant to section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337. This protest challenging an exclusion from entry is DENIED.
Mytex’s Protest does not designate any information as confidential. None of the information in this letter will be redacted. Sixty days from the date of the decision, Regulations and Rulings of the Office of Trade will make the decision available to CBP personnel, and to the public on the CBP website at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
BACKGROUND
Procedural History of ITC Investigation No. 337-TA-976
The Commission instituted Investigation No. 337-TA-976 (the “underlying investigation” or the “976 investigation”) on December 18, 2015 based on a supplemented and twice amended complaint filed by AAVN, Inc. of Richardson, Texas (“AAVN”). 80 Fed. Reg. 79094 (Dec. 18, 2015); Commission Opinion Dated March 20, 2017 (“Comm’n Op.”) at 1. The complaint alleged violations of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337, in the importation into the United States, the sale for importation, or the sale within the United States after importation of certain woven textile fabrics and products containing the same, by reason of infringement of claims 1-7 of U.S. Patent No. 9,131,790 (“the ‘790 patent”) and/or by reason of false advertising. Id. The notice of investigation named fifteen respondents. Id. Fourteen of those respondents were terminated from the investigation based upon settlement agreement or consent order. Id. The last remaining respondent was Pradip Overseas Ltd. of Ahmedabad, India (“Pradip”). Id.
AAVN accused Pradip of false advertising, specifically alleging that Pradip misrepresented the thread count of sheets manufactured in India, imported into the United States, and sold in United States department stores. Id. Pradip was not accused of infringing the ‘790 patent. Id.
On September 2, 2016, AAVN moved for leave to file a motion for summary determination of violation out of time. Id. at 2. In the motion, AAVN noted that as a result of the settlements and consent orders, Pradip was the last remaining respondent. Id. The summary determination motion that was appended argued, inter alia, that Pradip had violated section 337 by falsely advertising the thread count of its imported sheets, and that the false advertising was deceptive, material, and injurious to AAVN. Id. AAVN requested that the administrative law judge (“ALJ”) recommend the issuance of a general exclusion order and also sought a 100 percent bond during the Presidential review period. Id.
On September 15, 2016, the Commission investigative attorney (“IA”) responded in support of the motion for leave and the accompanying summary determination motion. Id. Pradip did not respond. Id.
On November 10, 2016, the ALJ granted the motion for summary determination and issued the initial determination and recommended determination on remedy (“ID/RD”) (Order No. 21). Id. The ALJ found that AAVN had shown a violation of section 337 by reason of false advertising under section 43 of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B). Id. (citing Order No. 21 at 7-9, 13-15). The ALJ found that Pradip’s packaging of its sheets with a falsely stated thread count was a false and misleading description of the sheets, that the misdescription was deceptive, that it is material to consumers in determining the sheets’ quality, that the advertised goods traveled in interstate commerce, and that there is a likelihood of injury to AAVN (i.e., injury under the Lanham Act). Id. at 2-3 (citations omitted). Further, the ALJ found substantial injury to AAVN under section 337(a)(1)(A) “as a result of the false claims of Pradip and its competitors regarding the actual thread count of its products and their ability to sell their products to retailers at lower prices.” Id. at 3 (citing Order No. 21 at 15) (internal quotations omitted). The ALJ also found that the importation requirement of section 337 had been satisfied, that Pradip had submitted to the Commission’s jurisdiction (i.e., in personam jurisdiction), and that the Commission had in rem jurisdiction over the imported articles. Id. (citations omitted).
The ALJ recommended the issuance of a general exclusion order finding that “the evidence shows a widespread pattern of violation of Section 337,” and “the evidence shows that it is difficult to identify the source and manufacturers of the falsely advertised products.” Id. (citing Order No. 21 at 16-18) (internal quotations omitted). The ALJ also recommended the bond be set at 100 percent of the entered value of the falsely advertised products. Id.
No petitions for review of the ID were filed, and on December 20, 2016, the Commission determined not to review the ID. Id. (citing 81 Fed. Reg. 95195 (Dec. 27, 2016)). The Commission requested written submissions on remedy, the public interest, and bonding. Id. (citations omitted). On January 6, 2017, AAVN and the IA filed submissions on these issues. Id. On January 13, 2017, the IA filed a reply to AAVN’s submission. Id. No other submissions were received. Id.
The Commission found that the statutory requirements for relief under 19 U.S.C. § 1337(d)(2) were met and that the public interest factors enumerated in 19 U.S.C. § 1337(d)(1) did not preclude issuance of the statutory relief. Commission Notice of Issuance of General Exclusion Order Dated March 20, 2017.
The Commission determined that the appropriate remedy in the investigation was a general exclusion order prohibiting the entry of certain woven textile fabrics and products containing same that are falsely advertised through a misrepresentation of thread count. Id.; see also General Exclusion Order Issued in ITC Inv. No. 337-TA-976 (March 20, 2017) (“976 GEO”). The Commission also determined that the bond during the period of Presidential review to be in the amount of 100 percent of the entered value of the imported articles that are subject to the general exclusion order. Id.
False Advertising of Thread Count
Overview
Higher thread count sheets are generally perceived by consumers to be higher quality than lower thread count sheets. See Statement of Undisputed Facts in Support of AAVN’s Motion for Summary Determination (Inv. No. 337-TA-976) (“SUF”) at ¶ 7. To make high thread count products, manufacturers have to use smaller and finer yarns. Id. However, it is difficult to incorporate synthetic fibers – like polyester – into high thread count woven textile fabrics as they become increasingly brittle when made smaller and finer, and can break when fed into the loom apparatus used in making high thread count cotton-polyester blended fabric product. Id.
To circumvent the problem of brittleness and breakage for synthetic yarns, some manufacturers twisted individual synthetic fibers together during manufacturing. Id. at ¶ 8; see also ALJ ID (Order No. 21 at 12, fn.4). This twisting increased tensile strength and helped stop synthetic fibers – like polyester – from breaking in looms, but it sacrificed comfort. Id. The twisted combination of fibers was then used as a plied yarn in the weaving process. Id.
The products created using these plied yarns result in lower thread count products. Id. However, to appeal to consumers, some manufacturers falsely advertised their products with an inflated thread count achieved by counting the components of the plied yarns as multiple individual yarns instead of as one yarn. Id. at ¶¶ 13, 19. The Federal Trade Commission (“FTC”) concluded that the practice of counting individual plied components (or plies) within plied yarns to be a deceptive act or practice under Section 5 of the FTC Act, 15 U.S.C. § 45 and “would likely mislead consumers about the quality of the product being purchased.” Id. at ¶¶ 19, 20; see also ALJ ID (Order No. 21) at 12; see also FTC Letter to Mr. Wright Dated August 2, 2005.
The ITC’s Finding of False Advertising in the 976 Investigation
In the 976 investigation, the complainant AAVN’s false advertising claim was based on respondent Pradip’s false advertising of the thread counts of its woven textile fabric products in violation of the Lanham Act. ALJ ID (Order No. 21) at 12. To support its false advertising claim, AAVN cited the ASTM Standard 3775 (“Standard Test Method for Warp (End) and Filling (Pick) count of Woven Fabrics”) (“ASTM Standard 3775” or “ASTM D3775” or “ASTMD 3775”). Id. Pradip appeared to agree that the ASTM D3775 standard was the appropriate test procedure for measuring thread count of woven textile fabric products. Id. AAVN argued that Pradip’s accused products were advertised through a misleadingly inflated thread count as confirmed by independent testing (using ASTM Standard 3775) of Pradip’s Westwood 800 Thread Count Sheets and Astor Place 650 Thread Count Sheets. Id.
In accordance with the testing results provided by AAVN, the ALJ found that the statements made by Pradip with respect to the thread counts of Pradip’s accused products were literally false. ALJ ID (Order No. 21 at 13). The ALJ stated that the independent testing under the ASTM Standard 3775 showed that the actual thread counts were 407 for the Astor Place 650 Thread Count Sheets (advertised as 650 thread count sheets) and 253 for the Westwood 800 Thread Count Sheets (advertised as 800 thread count sheets). Id. The ALJ further noted that Pradip failed to present any evidence that would contradict the veracity of the testing reports provided by AAVN. Id.
Along the same lines, the ALJ also found that there was actual deception. Id. at 13-14. The ALJ noted that while Pradip claimed that its Westwood 800 Thread Count Sheets and its Astor Place 650 Thread Count Sheets were the advertised thread counts, the actual thread counts were 253 and 407, respectively. Id.
Accordingly, finding that the other elements of a false advertising claim were met as well, the ALJ concluded that AAVN demonstrated that Pradip’s false advertising of its woven textile fabric products through the misrepresentation of thread counts was an act of unfair competition in violation of Section 337. Id. at 13-15.
ASTM Standard 3775
“ASTM International is an international standards organization that develops and publishes voluntary consensus technical standards for a wide range of materials, products, systems, and services.” ALJ ID (Order No. 21) at 12, fn. 3 (citations omitted) (quotations omitted). ASTM’s definition of “thread count” is:
in woven textiles as used in sheets and bedding, the sum of the number of warp yarns (ends) and filling yarns (picks) per unit distance as counted while the fabric is held under zero tension and is free of folds and wrinkles, individual warp and filling yarns are counted as single units regardless of whether comprised of single or plied components.
See ASTM D7023 06 (Reapproved 2012) Standard Terminology Relating to Home Furnishings.
ASTM Standard 3775 is titled “Standard Test Method for Warp (End) and Filling (Pick) Count of Woven Fabrics.” Id.; see also ASTM Designation: D3775-12. “Under the ASTM Standard 3775, in order to calculate thread count, one must count ‘plied components’ (such as twisted fibers) as ‘single units.’” ALJ ID (Order No. 21) at 12 (citation omitted); ASTM Designation: D3775-12 at ¶ 9.1.1. ASTM Standard 3775 further states that “[w]hen two yarns are laid-in together and parallel, count each yarn separately, as a single unit, regardless of whether it is comprised of single or plied components.” ASTM Designation: D3775-12 at ¶ 9.1.2.
ASTM’s definition of “yarn” is:
a generic term for a continuous strand of textile fibers, filaments, or material in a form suitable for knitting, weaving, or otherwise intertwining to form a textile fabric.
ASTM Designation: D123-03 Standard Terminology Relating to Textiles.
The Instant Protest (Protest No. 2704-19-102107)
CBP received the instant protest, protest no. 2704-19-102107, on January 7, 2019. CBP Form 19. The protesting party is Mytex, LLC. Id. Mytex is protesting “Customs’ decision to exclude from entry the bedsheet sets imported by Mytex, LLC” specifically, entry no. 8E401035549. Id.
Entry No. 8E401035549
Entry No. 8E401035549 consists of 4452 bedsheet sets of varying sizes. See Birla Century/Mytex Commercial Invoice. Mytex LLC was identified as the importer of record. See Exhibit 3 of Mytex’s Protest. The U.S. port of unlading was identified as port 2704 (Los Angeles/Long Beach Seaport). Id. The arrival date was identified as November 6, 2018. Id. The entry type was identified as 01 (consumption entry). Id.; see also https://www.cbp.gov/trade/automated/ace-transaction-details.
In a letter dated December 18, 2018, CBP notified Mytex that the merchandise at issue was “excluded from entry for consumption into the United States . . . for violation of the general exclusion order issued by the U.S. International Trade Commission in Investigation No. 337-TA-976.” CBP Letter to Mytex Dated December 18, 2018.
Mytex’s Protest Arguments
In the protest, Mytex argues that “its imported bed sheets correctly state a 700 thread count and therefore are not subject to the ITC’s Exclusion Order.” Continuation Sheet of Mytex’s Protest at 1. Mytex states that “Mytex (through Marco Polo Sourcing) sent samples of the subject sheets to Intertek India Private Limited for testing to verify the thread count. . . .” Id. (citing Exh. 4 of Mytex’s Protest (Intertek Test Report)). Mytex notes that “[t]he samples provided to Intertek were the same color, size, and thread count sheets that are covered by this protest.” Id. at 2. Mytex points out that the report issued by Intertek, Report Number BOMT18053394, states that the Intertek lab applied ASTMD 3775 to determine the thread count of the sheets and confirmed that the thread count for these sheets is 700. Id. Accordingly, Mytex concludes that the “Intertek Test Report is conclusive evidence that Mytex accurately declared the correct thread count for its imported sheets” and “[t]here is no misrepresentation of thread count that might justify exclusion under the ITC’s General Exclusion Order.” Id.
The Merchandise at Issue
The merchandise at issue is 4452 bedsheet sets of varying sizes. See Birla Century/Mytex Commercial Invoice. The bedsheet sets are all specified as 60% Cotton and 40% Polyester. Id. CBP tested the merchandise at issue at its laboratories to determine thread count. See CBP Laboratory Report Nos. LA20181031 and LA20182141. Mytex also sent samples of sheets (that according to Mytex were of the same color, size and thread count as the sheets covered by this protest) to a laboratory in India, Intertek India Private Limited. Continuation Sheet of Mytex’s Protest at 1-2; see also Exh. 4 of Mytex’s Protest. The thread count results as found by CBP and Mytex are provided below.
Thread Counts Obtained by CBP
The CBP laboratory tested two sample sets of the merchandise at issue. The first sample was composed of five bed sheet sets: twin, full, queen, king, and cal. king. See CBP Lab Report No. LA20181031. With the exception of the twin set, each set had six pieces: one flat sheet, one fitted sheet, and four pillowcases. Id. The twin set had four pieces: one flat sheet, one fitted sheet, and two pillowcases. The sets were labeled as “Home Reflections Décor, 700 thread count, 60% Cotton 40% Polyester.” Id.
The method used to obtain the thread counts of these sets was ASTM D3775. Id. CBP found that the thread counts of the sets were similar, and the results were combined for an average count of 247. Id. The table below shows the individual counts of the flat sheets in each of the five bed sheet sets:
Flat Sheets
Warp/inch
Filling/inch
Cal King
182
67
King
182
65
Twin
180
67
Queen
180
67
Full
183
66
Total
907
332
Average
181
66
See Raw Data for Laboratory Report No. 2018-1031 (LA20181031) (Dated December 11, 2018).
The table above shows that there are on average 181 warp yarns per inch, and on average 66 filling yarns per inch: 181 + 66 = 247. Id. Hence the average thread count of the bed sheet sets of this was first sample was reported as 247. Id.
The second sample tested by CBP was composed of three bed sheet sets: twin, full, and cal. king. See CBP Lab Report No. LA20182141. With the exception of the twin set, each set had six pieces: one flat sheet, one fitted sheet, and four pillowcases. Id. The twin set had four pieces: one flat sheet, one fitted sheet, and two pillowcases. Id. The sets were labeled as “Home Reflections Décor, 700 thread count, 60% Cotton 40% Polyester.” Id.
The method used to obtain the thread counts of these sets was ASTM D3775. Id. CBP found that the thread counts of the sets were similar, and the results were combined for an average count of 248. Id. The table below shows the individual counts of the sheets as indicated in each of the three bed sheet sets:
Warp/inch
Filling/inch
Cal King – Flat Sheet
184
65
Cal King – Fitted Sheet
183
65
Full – Flat Sheet
182
65
Twin – Flat Sheet
183
65
Twin – Fitted Sheet
184
65
Total
916
325
Average
183
65
See Raw Data for Laboratory Report No. 2018-2141 (LA20182141) (Dated December 12, 2018).
The table above shows that there are on average 183 warp yarns per inch, and on average 65 filling yarns per inch: 183 + 65 = 248. Id. Hence the average thread count of the bed sheet sets of this was first sample was reported as 248. Id.
Thread Counts Obtained by Mytex
Mytex states that it (through Marco Polo Sourcing) sent samples of sheets of the same color, size, and thread count as those covered by this protest to Intertek India Private Limited (“Intertek”) for testing to verify thread count (among other properties). See Continuation Sheet of Mytex Protest at 1-2. The Intertek Test Report indicates that the method used to measure thread count was ASTMD 3775. See Exh. 4 of Mytex Protest (Intertek Test Report No. BOMT18053394) at 10.
The thread count portion of the Intertek Test Report is provided below:
Id. Mytex states “Intertek confirmed that the thread count for these sheets is 700.” Continuation Sheet of Mytex Protest at 2.
ISSUE
Whether the 4452 bedsheet sets from Entry No. 8E401035549 are subject to exclusion for violating the 976 GEO for false advertising through the misrepresentation of thread counts.
LEGAL STANDARDS
Section 337 Exclusion Order Administration
Section 337 of the Tariff Act of 1930 authorizes the Commission to exclude articles from entry into the United States when it has found “[u]nfair methods of competition [or] unfair acts in the importation of [those] articles.” 19 U.S.C. § 1337(a)(1)(A). When the Commission determines there is a violation of section 337, it generally issues one of two types of exclusion orders: (1) a limited exclusion order or (2) a general exclusion order. See Fuji Photo Film Co., Ltd. v. U.S. Int’l Trade Comm’n, 474 F.3d 1281, 1286 (Fed. Cir. 2007).
Both types of orders direct CBP to bar infringing products from entering the country. See Yingbin-Nature (Guangdong) Wood Indus. Co. v. U.S. Int’l Trade Comm’n, 535 F.3d 1322, 1330 (Fed Cir. 2008). “A limited exclusion order is ‘limited’ in that it only applies to the specific parties before the Commission in the investigation. In contrast, a general exclusion order bars the importation of infringing products by everyone, regardless of whether they were respondents in the Commission's investigation.” Id. A general exclusion order is appropriate only if two exceptional circumstances apply. See Kyocera Wireless Corp. v. U.S. Int’l Trade Comm’n, 545 F.3d 1340, 1356. A general exclusion order may only be issued if (1) “necessary to prevent circumvention of a limited exclusion order,” or (2) “there is a pattern of violation of this section and it is difficult to identify the source of infringing products.” 19 U.S.C. § 1337(d)(2); see Kyocera, 545 F.3d at 1356 (“If a complainant wishes to obtain an exclusion order operative against articles of non-respondents, it must seek a GEO [general exclusion order] by satisfying the heightened burdens of §§ 1337(d)(2)(A) and (B).”).
In addition to the action taken above, the Commission may issue an order under 19 U.S.C. § 1337(i) directing CBP to seize and forfeit articles attempting entry in violation of an exclusion order if their owner, importer, or consignee previously had articles denied entry on the basis of that exclusion order and received notice that seizure and forfeiture would result from any future attempt to enter articles subject to the same. An exclusion order under § 1337(d)—either limited or general—and a seizure and forfeiture order under § 1337(i) apply at the border only and are operative against articles presented for customs examination or articles conditionally released from customs custody but still subject to a timely demand for redelivery. See 19 U.S.C. §§ 1337(d)(1) (“The Commission shall notify the Secretary of the Treasury of its action under this subsection directing such exclusion from entry, and upon receipt of such notice, the Secretary shall, through the proper officers, refuse such entry.”); id. at (i)(3) (“Upon the attempted entry of articles subject to an order issued under this subsection, the Secretary of the Treasury shall immediately notify all ports of entry of the attempted importation and shall identify the persons notified under paragraph (1)(C).”) (emphasis added).
Significantly, unlike district court injunctions, the Commission can issue a general exclusion order that broadly prohibits entry of articles that violate Section 337 of the Tariff Act of 1930 without regard to whether the persons importing such articles were parties to, or were related to parties to, the investigation that led to issuance of the general exclusion order. See Vastfame Camera, Ltd. v. U.S. Int’l Trade Comm’n, 386 F.3d 1108, 1114 (Fed. Cir. 2004). The Commission also has recognized that even limited exclusion orders have broader applicability beyond just the parties found to infringe during an investigation. See Certain GPS Devices and Products Containing Same, Inv. No. 337-TA-602, Comm’n Op. at 17, n. 6, Doc ID 317981 (Jan. 2009) (“We do not view the Court’s opinion in Kyocera as affecting the issuance of LEOs [limited exclusion orders] that exclude infringing products made by respondents found to be violating Section 337, but imported by another entity. The exclusionary language in this regard that is traditionally included in LEOs is consistent with 19 U.S.C. § 1337(a)(1)(B)–(D) and 19 U.S.C. § 1337(d)(1).”).
Moreover, “[t]he Commission has consistently issued exclusion orders coextensive with the violation of section 337 found to exist.” See Certain Erasable Programmable Read Only Memories, Inv. No. 337-TA-276, Enforcement Proceeding, Comm’n Op. at 11, Doc ID 43536 (Aug. 1991) (emphasis added). “[W]hile individual models may be evaluated to determine importation and [violation], the Commission's jurisdiction extends to all models of [violative] products that are imported at the time of the Commission's determination and to all such products that will be imported during the life of the remedial orders.” See Certain Optical Disk Controller Chips and Chipsets, Inv. No. 337-TA-506, Comm’n Op. at 56–57, USITC Pub. 3935, Doc ID 287263 (July 2007).
Lastly, despite the well-established principle that “the burden of proving infringement generally rests upon the patentee [or plaintiff],” Medtronic, Inc. v. Mirowski Family Ventures, LLC, 134 S. Ct. 843; 187 L. Ed. 2d 703; 2014 U.S. LEXIS 788 (2014), the Commission has held that Medtronic is not controlling precedent and does not overturn its longstanding practice of placing the burden of proof on the party who, in light of the issued exclusion order, is seeking to have an article entered for consumption. See Certain Sleep-Disordered Breathing Treatment Systems and Components Thereof, Inv. No. 337-TA- 879, Advisory Opinion at 6–11. In particular, the Commission has noted that “[t]he Federal Circuit has upheld a Commission remedy which effectively shifted the burden of proof on infringement issues to require a company seeking to import goods to prove that its product does not infringe, despite the fact that, in general, the burden of proof is on the patent to prove, by a preponderance of the evidence, that a given article does infringe. . . .” Certain Integrated Circuit Telecommunication Chips, Inv. No. 337-TA-337, Comm’n Op. at 21, n.14, USITC Pub. 2670, Doc ID 217024 (Aug. 1993), (emphasis in original) (citing Sealed Air Corp. v. U.S. Int’l Trade Comm’n, 645 F.2d 976, 988–89 (C.C.P.A. 1981)).
This approach is supported by Federal Circuit precedent. See Hyundai Elecs. Indus. Co. v. U.S. Int'l Trade Comm'n, 899 F.2d 1204, 1210 (Fed. Cir. 1990) (“Indeed, we have recognized, and Hyundai does not dispute, that in an appropriate case the Commission can impose a general exclusion order that binds parties and non-parties alike and effectively shifts to would-be importers of potentially infringing articles, as a condition of entry, the burden of establishing noninfringement. The rationale underlying the issuance of general exclusion orders—placing the risk of unfairness associated with a prophylactic order upon potential importers rather than American manufacturers that, vis-a-vis at least some foreign manufacturers and importers, have demonstrated their entitlement to protection from unfair trade practices—applies here [in regard to a limited exclusion order] with increased force.”) (emphasis added) (internal citation omitted).
Accordingly, the burden is on Mytex to show that the merchandise at issue is not subject to the general exclusion order issued by the ITC in Inv. No. 337-TA-976.
False Advertising Under the Lanham Act
Under the Lanham Act, it is unlawful to use in commerce, in connection with any goods or services, any false or misleading description of fact, or false or misleading representation of fact, which "in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods [or] services." 15 U.S.C. § 1125(a)(l)(B).
To prevail on a claim of false advertising under the Lanham Act, a plaintiff must prove that:
1.) The defendant made false or misleading statements about his own or another person's product;
2.) There is actual deception or at least a tendency to deceive a substantial portion of the intended audience;
3.) The deception is material in that it is likely to influence purchasing decisions;
4.) The advertised good traveled in interstate commerce; and
5.) There is a likelihood of injury to the [complainant] in terms of declining sales, loss of good will, etc.
Groupe SEB USA, Inc. v. Euro-Pro Operating LLC, 774 F.3d 192, 198 (3rd Cir. 2014); see also Certain Light-Emitting Diode Products and Components Thereof ("LED Products"), Inv. No. 337-TA-947, Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Bonding ("ID"), pp. 430-432 (July 29, 2016) (describing the five elements) and Certain Cigarettes and Packaging Thereof ("Cigarettes"), Inv. No. 337-TA-424, Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Bonding ("ID"), pp. 43-44 (June 22, 2000) (unreviewed).
In order to show element 1 (a false statement), the complainant must prove that the advertisement is "either (1) literally false, or (2) literally true or ambiguous but likely to mislead or deceive consumers." Groupe SEB, 774 F.3d at 198 (citing Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm. Co., 290 F.3d 578, 586 (3rd Cir. 2002)); see also Clorox Co. Puerto Rico v. Proctor & Gamble Commercial Co., 228 F.3d 24, 33 (1st Cir. 2000) ("A plaintiff can succeed on a false advertising claim by proving either that an advertisement is false on its face or that the advertisement is literally true or ambiguous but likely to mislead and confuse consumers.") (citations omitted). In determining whether the advertisement is "literally false," the court must first decide whether the message is unambiguous and, second, whether the unambiguous message is false. Groupe SEB, 774 F.3d at 198 (citations omitted). The "literally false message" can be either (1) explicit or (2) "conveyed by necessary implication when, considering the advertisement in its entirety, the audience would recognize the claim as readily as if it had been explicitly stated." Id. at 198 (citing Novartis, 290 F .3d at 586'-87). "Unless the claim is unambiguous, it cannot be literally false." Id. The more the message relies upon the consumer to integrate its components and draw apparent conclusions, the less likely it that a finding of a literally false message. Id. at 198-199 (citing Novartis, 290 F.3d at 587).
Whether the statement is "literally false" is a question of fact. Clorox Co., 228 F .3d at 34 (citing Mead Johnson & Co. v. Abbott Labs., 209 F.3d 1032, 1034 (7th Cir. 2000).) First, the factfinder must determine the claim conveyed by the advertisement and, second, it must then evaluate whether the claim is false. Id. If the statement is literally false, then the ALJ "may grant relief without considering evidence of consumer reaction." Clorox Co.,228 F.3d at 33. If the statement is not literally false, then the complainant must show that the statement "conveys a misleading message to the viewing public" and must show "how consumers actually reacted to the challenged advertisement rather than merely demonstrating how they could have reacted." Id.
In a Section 337 investigation, a complainant who alleges false advertising as an act of unfair competition must also show substantial injury or the threat of substantial injury to "an industry in the United States." 19 U.S.C. § 1337(a)(l)(A)(i). To determine whether a complainant's domestic industry has been substantially injured, the Commission considers "a broad range of indicia" including "'the volume of imports and their degree of penetration, lost sales, underselling by respondents, reductions in complainants' profits or employment levels, and declining production, profitability and sales."' LED Products, ID, p. 481 (quoting Certain Electric Power Tools, Battery Cartridges & Battery Chargers ("Electric Power Tools"), Inv. No. 337-TA-284, Initial Determination ("ID"), p. 246 (June 2, 1989) (unreviewed).
IV. ANALYSIS
The Different Thread Count Results Obtained By CBP and Mytex
There is no dispute that the correct standard to apply for thread count is the ASTM Standard 3775. See CBP Lab Report Nos. LA20181031 and LA20182141, Exh. 4 of Mytex Protest (Intertek Test Report No. BOMT18053394) (all of the reports indicate that the thread count method applied was ASTM D3775). Instead, the dispute as to whether the merchandise at issue is subject to the 976 GEO centers on the different thread counts obtained for the merchandise at issue by CBP and Mytex. Accordingly, as a preliminary matter, we will discuss the different thread count results.
By way of background, the yarns in the length direction of a woven fabric are called WARP yarns. The yarns in the width direction of a woven fabric are called FILLING (commonly used in the United States) or WEFT yarns. Countries such as India (where Intertek is located), belonging to the British Commonwealth, typically use the term WEFT (commonly used in British descriptions of yarn). Hence, that is a reason why the term FILLING is used in the CBP laboratory reports and the term WEFT is used in the Intertek Report.
The picture below is a photomicrograph taken by the CBP laboratory. This photomicrograph is of one of the bedsheets from the merchandise at issue that was tested, specifically the cal. king flat sheet from sample set one (i.e., CBP Laboratory Report No. LA20181031). This photomicrograph illustrates some of the concepts discussed above and will help further illustrate some additional concepts discussed below.
It is important to further note that all of the CBP Los Angeles laboratory reports (including the ones at issue here, i.e., CBP Laboratory Report Nos. LA20181031 and LA20182141) regarding bed sheets have consistently identified, and labeled the spun yarns as the WARP yarns (i.e., labeled as “staple yarn” in the picture above) and Multifilament Polyester Yarns as the FILLING yarns (i.e., labeled as “multifilament yarn” in the picture above). The Intertek Test Report appears to have done the opposite, and erroneously labeled the staple yarns as the WEFT (filling) and the multifilament yarns as the WARP. Notwithstanding this labeling error in the Intertek Test Report, the calculation of the thread count would yield the same result (regardless of what is considered the warp and the filling/weft) because the thread count is the sum of the number of warp yarns (ends) and filling yarns (picks) per unit distance.
A comparison the CBP’s thread count results and Intertek’s thread count results show that the primary dispute regarding the thread count centers on count of the multifilament polyester yarns. See CBP Laboratory Report Nos. LA20181031 and LA20182141 and Exh. 4 of Mytex Protest (Intertek Test Report No. BOMT18053394) (the count for the staple yarns in all of these reports are very close at 181, 183 and 180 respectively).
For the multifilament yarns, in one sample set the average count CBP obtained was 66 and in the second sample set the average count was 65. See CBP Laboratory Report Nos. LA20181031 and LA20182141. In contrast, for the multifilament yarns, Intertek had a count of 520. Exh. 4 of Mytex Protest (Intertek Test Report No. BOMT18053394) at 10. Intertek’s report shows that this 520 was obtained by multiplying 65 by 8. Id. There is a remark in the Intertek report that states, “8 strands are running together in length direction.” Id.
For CBP’s count of the multifilament yarns, CBP considered the section of the polyester encapsulated in the over and under of the staple yarn to be a single unit (or yarn) for thread count purposes. This concept is illustrated in the photomicrograph below. This photomicrograph is the same photomicrograph as above (i.e., the photomicrograph of one of the bedsheets from the merchandise at issue that was tested, specifically the cal. king flat sheet from sample set one (i.e., CBP Laboratory Report No. LA20181031)) with additional annotations to illustrate what CBP considered to be a single unit (or yarn) for thread count purposes.
Intertek, on the other hand, appeared to also count similar numbers as CBP with respect to the number of sections of the polyester encapsulated in the over and under of the staple yarn (i.e., what CBP considered to be a single unit) as shown by the 65 in the Intertek test report. See Exh. 4 of Mytex Protest (Intertek Test Report No. BOMT18053394) at 10 (indicating WARP as 65*8 = 520). However, Intertek did not appear to consider that to be one single unit (or yarn) for thread count purposes, as shown by Intertek’s final count of 520 for the multifilament yarns. Id. Instead, Intertek appeared to see 8 units (or yarns) within those sections of polyester encapsulated in the over and under of the staple yarn and accordingly multiplied the 65 by 8. Id. (The remarks in the Intertek test report states, “8 strands are running together in the length direction.”).
CBP disagrees with Intertek’s thread count for the multifilament yarns. The photomicrograph below was also taken by the CBP laboratory. This photomicrograph is of the same bedsheet the photomicrographs above were for, i.e., the cal. king flat sheet from sample set one (i.e., CBP Laboratory Report No. LA20181031). This photomicrograph shows one section of polyester encapsulated in the over and under of the staple yarn, i.e., what CBP considers to be a single unit (or yarn) for thread count purposes. Intertek’s test report indicates that within these sections, there are “8 strands running together in the length direction” and accordingly seems to believe that what CBP considers to be a single unit (or yarn) for thread count purposes should instead be counted as 8 single units (or yarns) for thread count purposes. See Exh. 4 of Mytex Protest (Intertek Test Report No. BOMT18053394) at 10. As clearly illustrated in the picture below, there do not appear to be 8 distinct subsections or splays (or “strands” as Intertek states in their test report) to justify Intertek’s finding that the below section should be counted as 8 single units (or yarns); rather, the picture appears to support CBP’s counting of the section as one single unit (or yarn).
The CBP laboratory took photomicrographs of all of the sheets they tested, including a photomicrograph for each sheet, which shows one section of polyester encapsulated in the over and under of the staple yarn, i.e., what CBP considers to be a single unit (or yarn) for thread count purposes. These pictures are provided for reference in Appendix A of this letter. None of the pictures show or support the idea that there are 8 distinct subsections or splays (or “strands” as Intertek states in their test report) to justify Intertek’s finding that the sections should be counted as 8 single units (or yarns); rather, the pictures support CBP’s counting of the sections as one single unit (or yarn).
In Mytex’s Protest, Mytex also provided CBP with the photographs Intertek took of its testing for thread count. See Continuation Sheet of Mytex’s Protest at 2; see also Exh. 5 of Mytex’s Protest. These photographs purport to show the “8 strands running together in the length direction.” Id. (the pictures seem to show that the multifilament yarn first falls into 2 sections, then upon further separation, each of the 2 sections fall into 4 sections resulting in what Intertek refers to as “8 strands.”). Intertek’s photographs are provided below for reference:
See Exh. 5 of Mytex’s Protest.
The CBP laboratory also took similar pictures during the testing of the merchandise at issue. The pictures below were taken by the CBP laboratory. The pictures are of the same bedsheet the photomicrographs above were for, i.e., the cal. king flat sheet from sample set one (i.e., CBP Laboratory Report No. LA20181031). These pictures show CBP’s testing did not find the same distinct 8 subsections or “8 strands” that Intertek purported to have found; rather, as shown in the pictures and identified by the laboratory’s annotations, the subsections or “strands” cross over each other and are spread or splay in a non-uniform manner. Moreover, this is clearly confirmed by the third picture below, which is a close up of the multifilament yarn depicted in the pictures above: “8 strands running together in the length direction” is not shown.
The CBP laboratory took pictures similar to the three provided above of all of the sheets they tested. These pictures are provided for reference in Appendix B of this letter. None of the pictures show or support the idea that there are “8 strands running together in the length direction.” Instead, the pictures show that the subsections or “strands” cross over each other and are spread or splay in a non-uniform manner.
CBP’s thread count results and the analysis provided above are consistent with ASTM Standard 3775. “Under the ASTM Standard 3775, in order to calculate thread count, one must count ‘plied components’ (such as twisted fibers) as ‘single units.’” ALJ ID (Order No. 21) at 12 (citation omitted); ASTM Designation: D3775-12 at ¶ 9.1.1. ASTM Standard 3775 further states that “[w]hen two yarns are laid-in together and parallel, count each yarn separately, as a single unit, regardless of whether it is comprised of single or plied components.” ASTM Designation: D3775-12 at ¶ 9.1.2.
ASTM’s definition of “yarn” is:
a generic term for a continuous strand of textile fibers, filaments, or material in a form suitable for knitting, weaving, or otherwise intertwining to form a textile fabric.
ASTM Designation: D123-03 Standard Terminology Relating to Textiles.
As discussed above (and shown in the picture below, which is the same photomicrograph as provided above earlier in the analysis section), CBP considered each section of the polyester encapsulated in the over and under of the staple yarn to be a single unit (or yarn) for thread count purposes. The picture shows that these sections are parallel to each other and are continuous strands of textile filaments in a form suitable for weaving or otherwise intertwining to form a textile fabric thereby fitting ASTM’s definition of “yarn”.
To the contrary, Intertek’s thread count method does not so clearly fit into ASTM Standard 3775. As shown above, it is not clear how Intertek is finding “8 strands running together in the length direction.” Moreover, even if there were 8 strands running together in the length direction it is not clear whether these 8 strands are all parallel to each other (as the ASTM Standard 3775 requires to be counted as a single unit) or whether these 8 strands fit ASTM’s definition of “yarn” meaning that each of these 8 strands are in a form suitable for weaving or otherwise intertwining to form a textile fabric.
Accordingly, it is our position that the Intertek test report (and corresponding photographs of the Intertek testing) submitted by Mytex does not show that Mytex accurately stated the correct thread count for its imported sheets. Further, it is our position that the CBP laboratory test results should be used in the analysis of whether the merchandise at issue is subject to the 976 GEO. This analysis is provided below.
Application of the 976 GEO to the Merchandise at Issue
The general exclusion order directs CBP to exclude certain woven textile fabrics and products containing same; specifically paragraph 1 of the 976 GEO states:
Woven textile fabrics and products containing same that are falsely advertised through the misrepresentation of thread counts are excluded from entry for consumption in the United States, entry for consumption from a foreign trade zone, or withdrawal from a warehouse for consumption, except as provided by law.
For ease of reference, the conditions of paragraph 1 of the 976 GEO can be represented as follows:
Condition
976 GEO Paragraph 1
1
Woven textile fabrics and products containing same
2
that are falsely advertised through the misrepresentation of thread counts
3
are excluded from entry for consumption in the United States, entry for consumption from a foreign trade zone, or withdrawal from a warehouse for consumption,
4
except as provided by law.
As shown below, we find that all the conditions of paragraph 1 of the 976 GEO have been met. Accordingly, we find that the merchandise at issue is subject to the general exclusion order issued in ITC Inv. No. 337-TA-976.
“Woven textile fabrics and products containing same”
The 4452 bedsheet sets (i.e., the merchandise at issue) are woven textile fabrics and products containing same. The “woven textile fabrics and products containing same” accused and found to be violative at the ITC were bedding products, such as Pradip’s “Westwood 900 Thread Count Sheets” and “Chantilly 600 Thread Count Sheet Set.” ALJ ID (Order No. 21) at 6. As described in the entry documents, this shipment also contains sheet sets. See e.g., Birla Century/Mytex Commercial Invoice; see also Exh. 2 of Mytex’s Protest (Intertek Test Report BOM18053394) (describing the sample as “woven sheet set[s]” and “woven fabric samples”).
“that are falsely advertised through the misrepresentation of thread counts”
Mytex does engage in the false advertising analysis in the protest. Mytex’s primary argument centered on the conclusivity of the Intertek Test Report. Nevertheless, as shown below, it is our position that all five of the elements needed to satisfy a claim of false advertising under the Lanham Act are met.
For false advertising claim under the Lanham Act, the following five elements must be met:
a.) The defendant made false or misleading statements about his own or another person's product;
b.) There is actual deception or at least a tendency to deceive a substantial portion of the intended audience;
c.) The deception is material in that it is likely to influence purchasing decisions;
d.) The advertised good traveled in interstate commerce; and
e.) There is a likelihood of injury to the [complainant] in terms of declining sales, loss of good will, etc.
Groupe SEB USA, Inc. v. Euro-Pro Operating LLC, 774 F.3d 192, 198 (3rd Cir. 2014); see also Certain Light-Emitting Diode Products and Components Thereof ("LED Products"), Inv. No. 337-TA-947, Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Bonding ("ID"), pp. 430-432 (July 29, 2016) (describing the five elements) and Certain Cigarettes and Packaging Thereof ("Cigarettes"), Inv. No. 337-TA-424, Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Bonding ("ID"), pp. 43-44 (June 22, 2000) (unreviewed).
These elements are discussed in order below.
a. False or Misleading Description
The first element of establishing a claim for false advertising is showing that "the defendant has made false or misleading statement as to his own product [or another's]." Groupe SEB, 774 F.3d 198. In the underlying investigation, to satisfy this element the complainant did independent testing under the ASTM Standard 3775 ("Standard Test Method for Warp (End) and Filling (Pick) count of Woven Fabrics"). See ALJ ID (Order No. 21) at 13. This testing showed that the actual thread counts for the sheets were lower than the advertised thread count. Id. Based on this evidence the ALJ found that the statements made by the respondent were literally false. Id.
Similarly, with respect to the articles in question, CBP’s Los Angeles Laboratory did testing under the ASTM Standard 3775. See CBP Laboratory Report Nos. LA20181031 and LA20182141. While Mytex submitted their own results from Intertek, which have different thread counts than the results from CBP’s laboratories, as discussed above in Section IV.A., it is CBP’s position that the CBP laboratory test results should be used in the analysis of whether the merchandise at issue is subject to the 976 GEO (and accordingly, this false advertising analysis).
The samples that CBP tested were advertised as having a 700 thread count; yet the thread count results showed that the sheets had average thread counts of 247 and 248. See CBP Laboratory Report Nos. LA20181031 and LA20182141. As set forth supra, whether the statement is "literally false" is a question of fact. Clorox Co., 228 F.3d at 34. First, we must determine the claim conveyed by the advertisement and, second, it must then evaluate whether the claim is false. Id. Here, the claim conveyed is that the merchandise at issue contain a 700 thread count, but the evidence shows that the thread count is actually less than 300. See CBP Laboratory Report Nos. LA20181031 and LA20182141. Accordingly, it is our position that these statements are literally false and this first element is met.
b. Deception
The second element that must be shown is "that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience." Groupe SEB, 774 F.3d 198.
In the underlying investigation, the ALJ found that the evidence showed that there was actual deception because the respondent claimed that its Westwood 800 Thread Count Sheets and its Astor Place 650 Thread Count Sheets are the advertised thread counts, but the actual thread count was 253 and 407, respectively. ALJ ID (Order No. 21) at 13-14. Thus, the ALJ found that complainant had showed actual deception.
With respect to the merchandise at issue, the evidences shows that there is actual deception because the merchandise at issue is advertised with a claimed thread count of 700, but the actual thread count based on the CBP laboratory testing is less than 300. See CBP Laboratory Report Nos. LA20181031 and LA20182141. Thus, it is our position that there is actual deception and this element is met.
c. Materiality
The third element that must be shown is that the "deception is material in that it is likely to influence purchasing decisions." Groupe SEB, 774 F.3d 198.
The ALJ found that the evidence showed that thread count is an important indicator of fabric quality for consumers and is used by consumers in making a purchasing decision. ALJ ID (Order No. 21) at 14. Thus, the ALJ found that complainant has shown that thread counts are material to consumers in determining the product's quality. Id.
Mytex has not provided CBP with any arguments or evidence to suggest otherwise. Accordingly, in line with the ALJ’s findings, it is our position that the deception is material and likely to influence purchasing decisions. This third element is met.
d. Interstate Commerce
The fourth element to a false advertising claim is showing that the "advertised goods traveled in interstate commerce." Groupe SEB, 774 F.3d 198.
In the underlying investigation, the evidence showed that respondent had placed the accused products in interstate commerce and respondent admitted that its accused products, which have been sold for importation and/or imported into the United States, are available for purchase at retailers (such as Ross). ALJ ID (Order No. 21) at 14. Therefore, the ALJ found that respondent had placed the accused products in interstate commerce. Id.
The merchandise in question were entered as a consumption entry, meaning that they would enter the United States commerce if cleared and released by CBP. See Exhibit 3 of Mytex Protest (indicating the entry type as 01); see also, https://help.cbp.gov/app/answers/detail/a_id/761/~/consumption-entry. Moreover, Mytex has not suggested or argued to the contrary. Accordingly, it is our position that this fourth element is met.
e. Injury
For the final element, the complainant must show that "there is a likelihood of injury to the plaintiff in terms of declining sales, loss of good will, etc." Groupe SEB, 774 F.3d 198.
In the underlying investigation, the evidence showed that complainant had been injured as a result of respondent's misrepresentation of thread counts. ALJ ID (Order No. 21) at 14. The evidence showed that complainant had lost sales to competitors, including respondent, which have sold woven textile fabric products with misleading thread counts at lower prices. Id. The ALJ found that the evidence showed that complainant suffered substantial injury as a result of the false claims of respondent and its competitors regarding the actual thread count of its products and their ability to sell their products to retailers at lower prices. Id. at 15. Moreover, the ALJ found that complainant had suffered substantial injury to "an industry in the United States," as required under Section 337 based on complainant's lost sales. 19 U.S.C. § 1337(a)(l)(A)(i); see also LED Products, ID, p. 481 (quoting Electric Power Tools, ID, p. 246).
With respect to the current import transaction and merchandise at issue, Mytex has not provided evidence or argued that this final element is not met. Accordingly, in line with the ALJ’s findings, it is our position that this element is satisfied.
As all five elements of the false advertising claim are satisfied, we find that the merchandise at issue falsely advertises through the misrepresentation of thread count.
“are excluded from entry for consumption into the United States, entry for consumption from a foreign-trade zone, or withdrawal from a warehouse for consumption,”
The entry type of the merchandise at issue was identified as 01 (consumption entry). See Exh. 3 of Mytex’s Protest (identifying the entry type as 01); see also https://www.cbp.gov/trade/automated/ace-transaction-details.
“except as provided by law.”
The arrival date of the merchandise at issue was identified as November 6, 2018. See Exh. 3 of Mytex’s Protest. The 976 GEO issued on March 20, 2017 and is still currently active. See 976 GEO. The 976 GEO became final on May 21, 2017. Id. Accordingly, paragraph 2 of the 976 GEO does not apply to the merchandise at issue. We further note that there was no indication (and Mytex does not state) that the merchandise at issue was “imported by or for the use of the United States, or imported for and to be used for, the United States with the authorization or consent of the Government.” Id. Accordingly, paragraph 4 of the 976 GEO also does not apply to the merchandise at issue.
Accordingly, we find that all the conditions of paragraph one of the 976 GEO have been met; hence, the merchandise at issue is subject to the 976 GEO.
V. HOLDING
We find that Mytex has not met its burden to establish that the merchandise at issue does not falsely advertise through the misrepresentation of thread count.
We hold that the merchandise at issue is subject to the 976 GEO. This protest challenging an exclusion from entry is DENIED.
In accordance with the Protest/Petition Processing Handbook (CIS HB, December 2007), you are to mail this decision to the Protestant. Sixty days from the date of the decision, Regulations and Rulings of the Office of Trade will make the decision available to CBP personnel, and to the public on the CBP website at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Charles R. Steuart
Chief, Intellectual Property Rights Branch
APPENDIX A
APPENDIX B