Lois Jeans & Jackets, U.S.A., Inc., now known as Lois Sportswear, U.S.A., Inc., plantiff v. United States, defendant

Lois Jeans & Jackets, U.S.A., Inc., now known as Lois Sportswear, U.S.A., Inc., plantiff v. United States, defendant Court Nos. 83-4-00620, 82-12-01715 Dated May 12, 1983 [MAJORITY — Newman, Judge:] Order Newman, Judge: This matter came before the Court on plantiff s application for an order to show cause, dated and entered on April 28, 1983, after conferring with counsel for the parties. Pursuant to that order, defendant was directed to appear at a hearing on May 9, 1983, to show cause why an order should not be entered, in conformance with rule 65 of the Rules of the Court of International Trade, enjoining defendant during the pendency of this action from enforcing notices of redelivery issued by the United States Customs Service, dated March 1, 1983 and predicated upon a ruling of the Customs Service issued June 30, 1982. The Customs Service ruling in question had determined that the stitching design on the back pockets of certain jeans imported by plaintiff infringes upon the registered and recorded trademark (a “Double Arcuate” design) owned by Levi Strauss & Co., a domestic manufacturer of jeans; and therefore, plaintiffs jeans would be denied entry under said ruling. This Court, having heard and considered the oral testimony, affidavits, briefs and arguments submitted by the parties in support of, and in opposition to, plantiff s application for a preliminary injunction, and upon all other papers and proceedings herein, finds and concludes as follows: 1. That the Court of International Trade lacks jurisdiction of the action in Court No. 82-12-01715; 2. That the Court of International Trade has jurisdiction over the action in Court No. 83-4-00620 pursuant to 28 U.S.C. § 1581(a); 3. That plaintiff has raised questions going to the merits of its substantive trademark claim so serious, substantial and difficult as to make the issue of trademark infringement fair ground for litigation; 4. That the issue of trademark infringement before this Court is also sub judice in a declaratory judgment action heretofore filed by plaintiff against Levi Strauss & Co. in the United States District Court for the Southern District of New York (82 Civ. 8326); 5. That the ruling issued by the United States Customs Service on June 30, 1982, upon which the notices of redelivery dated March 1, 1983 were based, was issued without giving plaintiff the notices specified by the Customs Regulations (19 CFR §§ 177.10(c)(2) and 177.9(d)(1)); and plaintiff therefore has established a likelihood of success on the merits respecting its procedural claim that the June 30, 1982 ruling and the redelivery notices are invalid; 6. That plaintiff has further established the likelihood of success on the merits of its alternative claim that all of the jeans which have been ordered redelivered by Customs were “on order” before December 18, 1982, effective date of the June 30, 1982 ruling, by virtue of an extension of time granted by Customs for implementation of its ruling; 7. That enforcement of the June 30, 1982 ruling by the United States Customs Service prior to a resolution of the merits will result in immediate and irreparable injury, loss, or damage to the plaintiff; 8. That the injuries suffered by plaintiff as a result of the Customs ruling and notices of redelivery have been, and absent temporary injunctive relief would continue to be, among others: Plaintiffs loss of its substantial expenditures for promotional efforts, marketing and advertising in reliance upon a prior favorable ruling by Customs on the infringement issue dated June 4, 1981, which ruling was reversed on June 30, 1982 by the Customs Service without notice to plaintiff; default by plaintiff in filling customer’s orders and fulfilling other commitments previously entered into; past and potential lost sales; lost credibility with plaintiffs customers; adverse effect upon plaintiffs reputation as a reliable supplier; and additionally, the cost of altering plaintiffs production methods. 9. That while there is a viable threat of immediate irreparable injury to plaintiffs business if the June 30, 1982 ruling were implemented by Customs, a preliminary injunction restraining such implementation will not cause significant harm or injury to defendant; and that balancing the hardships placed upon the parties decidedly tips the scale in favor of plaintiff; 10. That while defendant’s statutory obligations respecting trademark infringement under 15 U.S.C. § 1124 and 19 U.S.C. § 1526 serve the public interest, there is a likelihood that plaintiff can establish the invalidity of the June 30, 1982 ruling, and hence, plaintiff s jeans should not be denied entry based upon Customs’s ruling. Now, therefore, in accordance with the foregoing findings and conclusions, it is Ordered Adjudged and Decreed: 1. That defendant’s cross-motion to dismiss the prior action filed by plaintiff, Lois Sportswear, U.S.A., Inc. v. United States, Court No. 82-12-01715, is granted on the ground that the Court lacks jurisdiction in that action; 2. That defendant together with its officers, agents and employees of the United States Customs Service shall be and hereby are enjoined, pending the resolution of this case on the merits, from issuing or enforcing notices of redelivery, seizing, or excluding plaintiffs merchandise from entry, predicated upon the June 30, 1982 ruling of the United States Customs Service; 3. That the Customs Service shall release forthwith to plaintiff any of plaintiffs merchandise which has been seized or redelivered pursuant to Customs’ June 30, 1982 ruling, and which is now in Custom’s custody; 4. That further proceedings in this section shall be stayed pending the final determination of the declaratory judgment action now pending in the United States District Court for the Southern District of New York, entitled Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 82 Civ. 8326; 5. That within ten days of the entry of this order, plaintiff shall give and file security in the amount of $25,000.00 (an amount agreed to by the parties and approved by this Court) to indemnily defendant for any costs or damages as may be incurred or suffered by defendant should it ultimately be determined that defendant was wrongfully enjoined or restrained by the preliminary injunction granted by this order. This order was entered expeditiously due to the exigencies of the case and no further reflection by the Court was required. In due course, this order will be supplemented by a detailed memorandum.