                  UNITED STATES COURT OF APPEALS
                       For the Fifth Circuit



                            No. 92-2266



                     UNITED STATES OF AMERICA,

                                                  Plaintiff-Appellee,


                               VERSUS


                    EIGHTY-THREE ROLEX WATCHES,

                                                           Defendant,

                               VERSUS

         SAM'S WHOLESALE CLUB AND WAL-MART STORES, INC.,

                                                 Claimants-Appellants.




           Appeals from the United States District Court
                 For the Southern District of Texas
                          (May 21, 1993)
                      (                     )


Before REYNALDO GARZA, HIGGINBOTHAM, and DeMOSS, Circuit Judges

DeMOSS, Circuit Judge:

                          I.   Background

     This appeal involves a forfeiture of 83 Rolex Watches, so-

called "gray market" goods, in the inventory of Sam's Wholesale

Club.   Sam's Wholesale Club and Wal-Mart Stores, Inc., its parent,

(collectively, Wal-Mart) intervened as owner of the watches.       On
cross-motions for summary judgment, the district court ordered

forfeiture.    We affirm.

                     A.     Statute and Regulations

     Section 526 of the Tariff Act of 1930, 19 U.S.C. § 1526,

prohibits the importation of any merchandise bearing a trademark

"owned by a citizen of, or by a corporation . . . created or

organized within, the United States," and registered in the Patent

and Trademark Office by a person domiciled in the United States,

without written consent of the domestic trademark owner.

     Customs regulations provide that the § 526 import prohibition

is inapplicable if "both the foreign and the U.S. trademark . . .

are owned by the same person or business entity," or if "the

foreign and domestic trademark or trade name owners are parent and

subsidiary companies or are otherwise subject to common ownership

or control."    19 C.F.R. § 133.21(c)(1) and (2).        The regulations

define "common ownership" as "individual or aggregate ownership of

more than 50 percent of the business entity."         "Common control" is

defined as "effective control in policy and operations and is not

necessarily synonymous with common ownership."         19 C.F.R. § 133.2

(d) (1) and (2).

                                B.   Rolex

     On March 15, 1983, Rolex Watch U.S.A. Inc., a New York

corporation (Rolex USA), recorded its ownership of the "ROLEX"

trademark with Customs. The recordation form stated that Rolex USA

consented to importation of two articles "bearing the 'ROLEX'

trademark" upon entering the United States if for personal use and


                                     2
not for sale, but that otherwise importation of these articles was

forbidden unless consigned to or for the account of Rolex USA.

      On June 16, 1986, Customs sent attorneys for Rolex USA a

letter, advising that Customs had decided "not [to] continue to

provide protection to Rolex Watch, U.S.A., Inc., against the

importation of genuine "ROLEX" watches (so-called "gray market"

goods)." Customs denied continued protection because Rolex USA "is

under common ownership or control, either beneficial and/or legal,

with a foreign company owning the trademark abroad in circumstances

similar to those found by the U.S. District Court in Parfums Stern,

Inc. v. United States Customs Service, 575 F. Supp. 416 (U.S.D.C.

S.D. Fla. 1983)."1

      In response, the Rolex USA attorneys filed a submission

contending that Customs should continue to protect Rolex USA

against unauthorized gray market imports because Rolex USA is not

under common ownership or control with the foreign Rolex trademark

owner.    The submission explains that the Swiss manufacturer of

Rolex watches, and the owner of the Swiss "ROLEX" trademark, is

Manufacture des Montres Rolex S.A. Bienne (Bienne).          Bienne has

assigned the U.S. Registration for the "ROLEX" mark and good will

to   Rolex   USA.    The   worldwide   distributor   of   Rolex   watches

manufactured by Bienne is Montres Rolex S.A. (Geneva) located in

Geneva, Switzerland.       Bienne has authorized Geneva to obtain


      1
       In Parfums Stern, the district court denied protection to
the domestic trademark owner because it and the foreign trademark
owner were part of a "single international enterprise." 575 F.
Supp. at 420.

                                   3
various registrations for Rolex combination marks in Switzerland,

such as Rolex Crown, Tite Fit and Oyster Perpetual. However, under

Swiss law, Bienne remains the owner of the "ROLEX" trademark.

      Geneva and Rolex USA are under common ownership. Rolex USA is

wholly     owned    through     two      intervening       subsidiaries       (Rolex

Industries,      Inc.    and   Rolex     Holdings,     S.A.)    by   the    Wilsdorf

Foundation of Geneva, Switzerland (Wilsdorf).                  Wilsdorf also owns

86% of Geneva.          By contrast, the only link between Bienne and

Geneva is a shareholder, Dr. Harry Borer, who owns a mere 26 shares

of Geneva, representing .43% of Geneva's 6000 outstanding shares.

Dr. Borer is a also shareholder, officer and director of Bienne.

Wilsdorf, however, owns no shares of Bienne.                   Bienne has a five-

member board of directors of which no member sits on the boards of

Geneva, Wilsdorf or Rolex USA.            Bienne has seven officers none of

which is a director or officer of Geneva, Wilsdorf, or Rolex USA.

Bienne and Geneva, however, jointly own Rolex Le Locle S.A. (Le

Locle), which owns the building in Le Locle, Switzerland, where

Geneva and Bienne each lease separate premises.

      In addition to addressing the issue of common ownership and

control, the Rolex USA submission to Customs contended that gray

market   imports     undercut      its    investment    in     customer     goodwill

associated with the "ROLEX" trademark.               Rolex USA contended that

gray market importers provide inferior inspection and testing of

the   watches,     substitute      nongenuine      watch   parts,    and     provide

inferior    warranty     service    and    parts     replacement.          Rolex   USA

asserted that gray market importers unfairly compete by taking a


                                          4
"free   ride"   on   Rolex   USA's      goodwill,   without   incurring   the

advertising and quality control costs.

     In response to the submission, Customs reversed its position

and decided to continue protecting the "ROLEX" trademark under §

526. Customs then pursued this forfeiture of 83 Rolex watches from

the inventory of Sam's Wholesale Club, which were imported without

Rolex USA's permission.       The parties stipulated that the watches

were manufactured by Bienne and sold by Geneva, and that Geneva's

company name ("Montres Rolex, S.A., Geneva") is imprinted on every

watch casing.

                             C.    District Court

     The district court held on cross-motions for summary judgment

that the watches should be forfeited under § 526.                As for the

regulatory exception, the district court held that Wal-Mart failed

to show that Rolex USA and Bienne, the domestic and foreign owners

of the "ROLEX" mark, were subject to common ownership or control.

Significantly, the district court found that the mark at issue is

the "ROLEX" mark, owned by Bienne, not the combination mark "Rolex

Crown", owned by Geneva.           The court reasoned, "as long as the

'Rolex' mark is on the watch, the importer must first obtain Rolex

USA's permission."     Rec. Vol. 6 at 377.

                                  II.   Analysis

     Wal-Mart's arguments for reversal are as follows.            Initially,

Wal-Mart contends that Rolex USA, as a foreign-owned corporation,

is not entitled to § 526 gray market protection.              Alternatively,

Wal-Mart argues that the Rolex entities are subject to common


                                         5
ownership or control and therefore fall within the regulatory

exception to the statute.    Finally, Wal-Mart submits that it is an

"innocent owner" of the watches, and forfeiture is inappropriate.



                     A.   Applicability of § 526

     Wal-Mart first asks this court to narrow the protection

afforded by § 526.   Wal-Mart argues that Congress in § 526 intended

only to protect domestic companies and not foreign-owned companies

such as Rolex USA.   Wal-Mart asserts that the Supreme Court in K-

Mart Corp. v. Cartier, Inc.2 interpreted the phrase in § 526, "a

trademark owned by a . . . corporation created or organized within,

the United States" to mean an exclusively American corporation and

not one, such as Rolex USA, that is a wholly-owned subsidiary of a

foreign-based   conglomerate.         Wal-Mart's   argument,   however,

misconstrues the holding in K-Mart and ignores the history and

development of the Tariff Act, the Customs regulations and the

related case law.3


     2
      486 U.S. 281, 290, 108 S. Ct. 1811, 1817, 100 L. Ed. 2d 313
(1988). The Court held that the Customs Regulations 19 C.F.R. §
133.21 (c)(1) and (2) were consistent with § 526.
         3
        "Although the plain language of a statute should be the
starting point to determine Congressional intent, statutory
language cannot control if clearly demonstrated Congressional
intent requires a different construction. Legislative history is
important evidence of Congressional intent. And in construing a
statute, the administrative practice of the agency charged with
administering the statute is entitled to substantial deference.
Therefore, a careful examination of the legislative and
administrative history is essential in determining the intended
scope of § 526."   Vivitar Corporation v. United States, 593 F.
Supp. 420 (C.I.T. 1984) (citations omitted); aff'd, 761 F.2d 1552
(Fed. Cir. 1985).

                                  6
     First, Wal-Mart mischaracterizes the holding in K-Mart where

the Court was faced with a challenge to the validity of the

regulatory exceptions.        The K-Mart court gave several examples of

how trademark owners can be subject to gray market imports.              The

court analyzed each of the gray market examples and concluded that

Congress    intended    not    to   protect   subsidiaries       of   foreign

manufacturers from parallel imports.           Justice Brennan in his

concurrence reasoned that the statute's protectionist, "almost

jingoistic,   flavor"    bespeaks    an   intention   not   to    protect   a

subsidiary created here to register the trademark on the parent's

behalf, but he was considering the case where the foreign parent

also owned the trademark.        Id. at 1821 (Brennan, J. concurring).4

This holding, however, cannot be construed to exclude Rolex USA

from § 526 protection.5

    4
      ". . .it will not even suffice for the foreign manufacturer
to incorporate a subsidiary here to register the trademark on the
parent's behalf, if the foreign parent still owns the trademark."
Id. 108 S. Ct. at 1821 (Brennan, J. concurring).
        5
        Wal-Mart also cites that two other cases to support its
argument that a foreign related company can not avail itself of §
526 protection. Parfums Stern v. United States Customs Service,
575 F. Supp. 416 (S.D.Fla. 1983); Vivitar Corp. v. United States,
593 F. Supp. 420 (C.I.T. 1984), aff'd, 761 F.2d 1552 (Fed. Cir.
1985), cert. denied, 474 U.S. 1055 (1986).        These cases are
inapposite.
     In Parfums Stern, a corporation that owned the U.S. trademark
and license to manufacture and distribute talcum powder, sued
challenging importation of fragrances bearing the trademark. The
court found that the "American" plaintiff was, in fact, "a cog or
entity in what appears to be a single international enterprise
operating through an amoeba-like structure."     Id. at 418.    The
court refused to grant an injunction against gray market
importation. In Vivitar, the Court of International Trade refused
to issue a declaratory judgment to exclude all imports of genuine
Vivitar products without the consent of the U.S. owner of the mark.
The source of the gray market goods was the parent company of the

                                      7
     Second, Wal-Mart ignores the development of § 526 and its

related regulations.   Section 526 was first enacted as part of the

Tariff Act of 1922 to reverse the effect of a Second Circuit case,

A. Bourjois & Co. v. Katzel, 275 F. 539 (2d Cir. 1921), rev'd, 260

U.S. 689 (1923).   In that case, the court declined to enjoin the

parallel importation of goods bearing a trademark that a domestic

company had purchased from an independent foreign manufacturer at

a premium.   In Katzel, the domestic company seeking protection was

a "'prototypical gray-market victim' -- a United States trademark

holder that purchased its trademark rights, at arm's length and at

substantial cost, from an unaffiliated foreign producer."   K-Mart,

486 U.S. at 287, citing Katzel.




American trademark owner.
     These cases do not stand for the proposition that Wal-Mart
suggests. The Parfums Stern case does not clearly describe the
type of relationship between the foreign and domestic trademark
holders, but simply holds that the U.S. trademark holder was
seeking the protection of the trademark laws to insulate itself
from what it placed in motion itself through its own "strongly
related" foreign manufacturers and distribution sources.         In
Vivitar, the U.S. trademark owner marketed its equipment outside of
the U.S. through its wholly-owned subsidiaries, which were not
licensed to market the goods in the U.S. This holding is fully
consistent with the Customs regulations concerning common ownership
and control, and the cases are not supportive of Wal-Mart's
position.

                                  8
     The legislative history of § 526 clearly reveals that reversal

of Katzel was the purpose of the section.6           Senator Sutherland, a

proponent of the bill, noted that:

     [A]ll that this paragraph does is to prevent fraud, and
     I believe that the Senate is in favor of protecting the
     property rights of American citizens who have purchased
     trade-marks from foreigners, and when these foreigners
     deliberately violate the property rights of those to whom
     they have sold these trade-marks by shipping over to this
     country goods under those identical marks.

Id. at 11603.


     Shortly after § 526 became law, the Supreme Court reversed

Katzel   and   held   that   the   Trademark   Act    of   1905   prohibited

importation of trademark goods from a foreign manufacturer who had

sold the American trademark to the plaintiff.          The court based its

decision on the law governing assignment of trademark rights.7

     Section 526 was reenacted without change as part of the Tariff

Act of 1930 in the face of a proposed amendment, to encourage

domestic production, that would have prohibited importation of all


     6
       The Conference Report notes:
     A recent decision of the circuit court of appeals holds
     that existing law does not prevent the importation of
     merchandise bearing the same trade-mark as merchandise of
     the United States, if the imported merchandise is genuine
     and if there is no fraud on the public.       The Senate
     amendment makes such importation unlawful without the
     consent of the owner of the American trade-mark.
H.R. Rep. No. 1223, 67th Cong., 2d Sess. 158 (1922).
    7
      A. Bourjois & Co., Inc. v. Katzel, 260 U.S. 689, 691, 43 S.
Ct. 244, 245, 67 L. Ed. 464 (1923); Trademark Act of 1905, Pub.L.
No. 58-84, §10, 33 Stat. 727 (1905).      In a similar case, the
Supreme Court held that §27 of the 1905 Act, 19 U.S.C. § 1124,
required the same result. A. Bourjois & Co., Inc. v. Aldridge, 263
U.S. 675, 44 S. Ct. 4, 68 L. Ed. 501 (1923), answering questions
certified at 292 F. 1013 (2d Cir. 1922).

                                     9
goods bearing a U.S. registered trademark.                  71 Cong. Rec. 3871

(1929).

      The initial Customs Regulations promulgated shortly thereafter

suggest a broad application of § 526.8 If Customs intended a

sweeping result, that view was short lived.                   In 1936, Customs

issued a      new   regulation   interpreting      §   526.       The   regulation

prohibited importation of U.S. registered trademarked goods but

excepted goods bearing a foreign trademark which is identical to

the   U.S.    trademark   and    which    is   owned   by   the   "same    person,

partnership, association, or corporation."                  T.D. 48537 (1936).

Therefore, § 526 protection was not extended if the same entity

owned the foreign and domestic trademarks.             Thus, the plaintiff in

Katzel that bought certain United States trademark rights was

protected from imports of genuine goods bearing the trademark of

the foreign company that sold its U.S. rights.

      In 1953, Customs expanded its construction of § 526 and

adopted a provision denying protection to a domestic trademark

owner if it was a "related company" to the foreign manufacturer.9

          8
        "Prohibition of Entry -- Entry is prohibited of imported
merchandise bearing a genuine trade-mark when such trade-mark is
recorded with the Treasury Department. . . " Customs Regulations
of 1931, Article 518(a).
      9
      The term "related company" was defined in § 45 of the Lanham
Act as "any person who legitimately controls or is controlled by
the registrant or applicant for registration in respect to the
nature and quality of the goods or services in connection with
which the mark is used."
     Despite the change, it has been said that Customs interpreted
the regulation in accordance with its previously stated policy.
See, Vivitar, 593 F. Supp. at 430, quoting a 1951 letter written by
Commissioner of Customs Frank Dow explaining Customs' policy to
Senator Paul Douglas. The letter concludes the following:

                                         10
In 1959, however, Customs revised the regulation to eliminate the

related   company   provision   and   return   to   the   "same   company"

formulation.   The court in Vivitar opined that the amendment did

not reflect a substantive change in Customs' policy, especially

since the amendment retained the limitation based on ownership of

the foreign and domestic trademark by the same person, partnership,

association, or corporation.10


     However, if the United States trademark owner and the
     owner of the foreign rights to the same mark are one and
     the same person, articles produced and sold abroad by the
     foreign owner may be imported by anyone for the reason
     that the trade-mark owner has himself introduced the
     articles into commerce or authorized such introduction
     and may not unreasonably restrict the use of the product
     thereafter. For this purpose a foreign subsidiary or
     licensee of the United States trade-mark owner is
     considered to stand in the same shoes as such trade-mark
     owner.
     10
       In Vivitar, the court quotes several letters to illustrate
that Customs maintained a consistent application of the regulation
even though the wording was changed.       In the letters, Deputy
Commissioner Flinn wrote in 1963:
     It has been the Bureau's position for many years that in
     permitting anyone to import merchandise manufactured or
     sold by the foreign parent or subsidiary corporation of
     an American trademark owner is the correct interpretation
     of section 526 . . .
In 1962 Flinn wrote:
     . . . a foreign wholly owned subsidiary and its United
     States parent corporation are the same corporation within
     the meaning of . . . [the] Customs Regulations. This
     interpretation has been consistently applied for some
     years before the insertion of the "related companies"
     provision in the customs regulations and since the
     "related companies" provision was deleted from the
     regulations in 1959.
In 1968, Paul K. McCarthy, Assistant Director (Restricted
Merchandise) for Customs wrote:
     . . . if any goods sold to markets abroad by a foreign
     branch, subsidiary, or agent should be offered for
     importation into the United States, those goods would be
     considered to bear genuine . . . trademarks and would be
     admissible to entry.     This position is based on the

                                  11
     Enacted in 1972, the current regulations 19 C.F.R.§ 133.21 (c)

(1) and (2) were enacted in response to a group of antitrust cases,

known as the "perfume" cases.11         In those cases, the district court

held that § 526 did not protect a United States company against

parallel   imports    because      it     was   part    of   an    international

enterprise.    On    appeal   to    the      Supreme   Court,     the   Government

requested that the judgment be vacated and remanded to the district

court where the government could dismiss its own case to allow

legislation restricting § 526 to be submitted.               Congress, however,

did not change the section.             Thereafter, the regulations were

promulgated allowing the unrestricted importation of trademarked

products manufactured abroad where both the foreign and American

trademark rights are owned by the same company or companies under

common ownership or control.

     Nothing in the case law, legislative or regulatory history

suggests that an American company under foreign ownership may not

avail itself of § 526 protection.            We agree with the district court

that in order to allow parallel imports of goods bearing the

"ROLEX" mark, Wal-Mart must show that the domestic and foreign

owners, Rolex USA and Bienne, are subject to the common ownership

or control exception to § 526.




     legislative and judicial history of [§ 526].
    11
       United States v. Guerlain, 155 F. Supp. 77 (S.D.N.Y. 1957),
vacated and remanded, 358 U.S. 915, 79 S. Ct. 285, 3 L. Ed. 2d 236
(1958), action dismissed, 172 F. Supp. 107 (S.D.N.Y. 1959).

                                        12
                   B.   Common Ownership or Control

                            1.    Which Mark?

     The district court concluded that "the mark for the word

`Rolex' . . . is the mark at issue."        Rec. Vol. 6 at 380.     The

court also concluded that Bienne "has always exclusively owned the

`Rolex' mark." Ibid. Therefore, Wal-Mart is required to show that

Rolex USA and Bienne, the domestic and foreign owners of the

"ROLEX" mark, are subject to "common ownership or control."        Wal-

Mart argues that this finding is clearly erroneous because in the

Amended Stipulation of Facts, both parties agreed that the mark at

issue was the "Rolex Crown" mark owned by Geneva, which is subject

to common ownership with Rolex USA.12           Alternatively, Wal-Mart

argues that Geneva constructively owns the "ROLEX" mark.           Both

arguments lack merit.

     The district court properly based its finding on the actual

recordation document identifying Rolex USA as the owner of the

rights to the "ROLEX" mark in the United States.        See, Government

Exhibit 1, Rec. Vol. 2 at 60.        Based on this document, plus the

undisputed fact that the name "ROLEX" appears on the watches, the

district court correctly concluded that "ROLEX" is the mark at

issue.    Rec. Vol. 6 at 377.13

     12
       The Rolex Crown mark is engraved on the forfeited watches,
however, the district court found that as long as the name, "ROLEX"
is on the watch, regardless of its appearance in a combination
mark, the importer must first obtain Rolex USA's permission or show
that Bienne and Rolex USA are under "common ownership or control."
     13
        The Amended Stipulation of Facts was filed September 11,
1990. The government clearly contended that "Rolex" was the mark
at issue in a brief filed on November 7, 1990. The district court

                                    13
     Alternatively, Wal-Mart argues that Geneva is the "equitable

or constructive owner" of the "ROLEX" trademark, because Bienne has

authorized it to register this mark in combination with marks

Geneva already owns.   This contention does not comport with either

Swiss or American trademark law.        The record shows that "[t]he

presumption under Swiss law is `that the first depositor of a mark

is also the real owner thereof.'"         Record Vol. 3 tab 23 Gov't

Exhibit 7 p. 22;    Record Vol. 3 tab 23, Gov't Exhibit 9, Exhibit H

(Switzerland Trademark Act, Art. 5).      "Bienne is the owner of the

earliest   registration   for   the     mark   Rolex   in   Switzerland,

Registration No. 34251 issued October 17, 1913, renewed August 22,

1974 under Renewal No. 273,292."         Record Vol. 3 Tab 23 Gov't

Exhibit 7, p. 22.   Bienne's authorization of Geneva to use the mark

does not alter this presumption.       "Registrations of the same mark

by manufacturers or merchants `who are closely connected with each

other from the economic point of view' are permitted under Swiss

law." Swiss Trademark Act, Art. 6 bis.           Therefore, Wal-Mart's

argument that Geneva constructively owns the mark has no merit.14


did not decide the case until March 19, 1992 giving Wal-Mart ample
time to assert its position or declare prejudice.
      14
         Wal-Mart's assertion that under U.S. law Geneva is the
constructive owner of the "Rolex" mark is equally meritless. Wal-
Mart cites dictum from an 1891 Colorado decision stating that "a
corporation which succeeded to all the rights, good-will and trade
of the former owner" is "treated as the equitable owner" of the
trademark. Solis Cigar Co. v. Pozo, 16 Colo. 388, 395, 26 Pac.
556, 558 (1891).    However, we find no evidence to support the
assertion that Geneva succeeded to all the rights, good will and
trade of Bienne; indeed Bienne continues to operate as the
manufacturer of the Rolex movements. Moreover, although Bienne has
authorized Geneva to obtain various registrations for Rolex
combination marks in Switzerland, Geneva does not have an unlimited

                                  14
      Moreover, the presence of Rolex Geneva's name on the watch

does not indicate ownership of the Rolex mark.            See, Nabisco, Inc.

v. George Weston Limited, 179 U.S.P.Q. 503, 508 (Patent Office

Trademark Trial and Appeal Board): stating that "the trade name of

the seller or distributor of the goods appears in conjunction with

the   manufacturer's      trademark   does    not    serve   to    divest   the

manufacturer of its trademark rights in said designation since the

inclusion of a dealer of distributor's name serves merely to

indicate from whom the product is purchased by the consumer."

      In sum, the district court correctly concluded that Rolex is

the mark at issue; that Bienne "has always exclusively owned the

`Rolex' mark".       Rec. Vol. 6 at 380.     Consequently, Wal-Mart must

show that the district court erred in holding that the regulatory

exception does not apply to Bienne and Rolex USA.

             2.   Common Control Between Rolex USA and Bienne

      Conceding that Bienne and Rolex USA are not subject to common

ownership, Wal-Mart contends that Rolex USA and Bienne are subject

to common control, which means "effective control in policy and

operations," based on the history and operations of the "Rolex

empire."     Wal-Mart argues that all of the arms of this empire form

a   single    organization.     Wal-Mart     tries   to   equate    the   Rolex

corporate arrangement to the "amoeba-like" structure referred to in




authorization to use the Rolex mark itself. See, Callman, Unfair
Competition, Trademarks and Monopolies, § 19.46 (stating that a
license involves the transfer of something less than the entire
interest, and does not affect the licensor's title).

                                      15
the Parfums Stern case.15       Wal-Mart also asserts that Bienne and

Geneva are subject to common control because Bienne manufactures

the watch movements and Geneva places these movements into the

watch casings it manufactures and distributes the finished product

worldwide. Wal-Mart reasons that if there were no effective common

control between the operations of these two entities, no watches

manufactured in Bienne would ever be sold.

      Wal-Mart's arguments are not persuasive.          We simply do not

find support in the legislative history or the case law for the

proposition that a close and profitable business relationship

amounts to "common control."

      We agree that Bienne and Geneva perform essential functions in

manufacturing and selling Rolex products, but this is not a basis

for a finding of common control.         One court has stated that the

regulatory language contemplates the sort of control that a parent

corporation would exercise over a subsidiary or that a common owner

might exercise over both organizations.         United States v. Eighty-

Nine (89) Bottles of Eau de Joy, 797 F.2d 767 (9th Cir. 1986),

citing Coalition to Preserve the Integrity of American Trademarks

v. Unites States, 598 F. Supp. 844, 850 (D.C.D.C. 1984).         Wal-Mart

is   essentially   suggesting    that    the   relationship   between   the

American firm and the foreign firm trademark owner need not be

clearly shown; it is enough to show that the American is part of a

        15
          Unfortunately, the basis for this description is not
detailed in the Parfums Stern opinion because the facts are not
recited in the published opinion.    The companies involved were
simply described as "affiliated" and "strongly related." Id. at
420.

                                    16
larger closely knit foreign structure.          While this argument has

some appeal to this court, the regulations promulgated under the

statute and upheld by courts interpreting the statute focus on the

ownership structure regardless of the practical realities of these

business enterprises.       We will not depart from such a framework

without a word from Congress.

     For    example   an   argument   similar   to   Wal-Mart's   has   been

rejected in Bell & Howell: Mamiya Co. v. Masel Supply Co.16         There,

the defendant argued that the affiliations between the plaintiff,

the American trademark owner, and its parent company Osawa-Japan,

who traded exclusively with the foreign trademark owner, Mamiya Co,

formed part of "a unified international enterprise engaged in the

production and world wide distribution of Mamiya camera equipment."

Id. at 1066.     Therefore, the defendant argued that the American

trademark owner was not entitled to protection under § 526.              The

court rejected this argument, and after describing in detail the

history of the statute and regulations concluded,

     [t]his regulatory exception has no application in this
     case.   Mamiya Co., the owner of the trademarks in
     question, owns only 7% of plaintiffs stock and there is
     no evidence that it exerts any control over plaintiff's
     policies and operations.

The court found that the plaintiff was not a mere shell but a

"legitimate and actual owner of the business of selling MAMIYA




     16
          548 F. Supp. 1063, 1065 (E.D.N.Y. 1982).

                                      17
                                     17
. . . products in this country."          In a related case, Osawa & Co.

v. B & H Photo, 589 F. Supp. 1163 (S.D.N.Y. 1984), Bell & Howell,

renamed Osawa & Co., sued B & H Photo and Tri-State Inc., New York

discount camera dealers, who were selling Mamiya equipment without

authorization.    The district court granted Osawa's preliminary

injunction against the defendants under § 526.          The defendant also

argued that the common control exception should apply to exclude

plaintiff from § 526 protection because Osawa-Japan, the exclusive

worldwide distributor, not only controlled the plaintiff, but also

controlled Mamiya Co., the foreign trademark owner, through its 30%

ownership.   The court held that the defendants had not shown common

control between Mamiya Co. and Osawa & Co., and did not accept the

defendants   argument   that   the   plaintiffs   had    an   unjustifiable

monopoly on the sale of Mamiya equipment.

     Wal-Mart points to Weil Ceramics & Glass, Inc. v. Dash, 878

F.2d 659 (3d Cir.), cert. denied, 493 U.S. 853 (1989) as a case

suggesting common control exists if the American firm enjoys a close

relationship with the foreign firm, because this "presents the

potential for undesired monopoly of the domestic market."               The

"close relationship" between Bienne and Geneva, according to Wal-

Mart, creates the same monopoly potential.        Weil, however, did not


     17
        The Second Circuit vacated the order and remanded to the
district court because the district court had failed to make the
requisite findings concerning: the likelihood of irreparable harm
and either the likelihood of success on the merits or sufficiently
serious questions going to the merits to make them a fair ground
for litigation and a balance of hardships tipping decidedly toward
the party requesting the preliminary relief. Bell & Howell: Mamiya
Co. v. Masel Supply Co., 719 F.2d 42, 44 (2d Cir. 1983).

                                     18
hold that a potential for monopoly alone satisfies the common

control requirement.         In Weil, the American owner of the LLADRO

trademark     was   the     wholly-owned        subsidiary   of     the    foreign

manufacturer and foreign owner of the LLADRO trademark.                   There was

common ownership in the strict sense of the term, i.e. common

ownership of controlling shares of stock.

     NEC Electronics v. CAL Circuit Abco, 810 F.2d 1506 (9th Cir.),

cert. denied, 484 U.S. 851 (1987), also cited by Wal-Mart is

similarly inapplicable.          There the domestic trademark holder (NEC-

USA) was a wholly-owned subsidiary of the foreign manufacturer and

trademark     holder      (NEC-Japan);        indeed,   NEC-Japan's       directors

constituted a majority of the NEC-USA's board of directors.                  Id. at

1507.    This was a clear case of common ownership and control, and is

unlike the case before us.

     Moreover, in Lever Bros. v. United States, 877 F.2d 101 (D.C.

Cir. 1989), Wal-Mart correctly points out that the court assumed

common    control      although    the    American      trademark     holder   was

"affiliated . . . in some manner not precisely disclosed in the

record" with the foreign trademark holder.                   Id. at 102 n. 2.

However, the issue of common control was conceded, as the court

specifically noted.        Id.    The court ultimately declined to rule on

the § 526 issue and held that § 42 of the Lanham Act barred

importation of foreign goods with identical trademarks if the goods

were physically different without regard to the affiliation between

the foreign and domestic firms or the genuineness of the trademark.

Id. at 111.    The Lever Bros. court found the affiliate exception of


                                         19
19 C.F.R. § 133.21 (c) to be inconsistent with § 42 with respect to

physically different goods.

     We simply find no support in the record before us that shows

that Rolex USA and Bienne are subject to common control.                    Even

though   these    two        companies   maintain    a   longstanding    business

relationship, effective control in policy and operations has not

been shown.   Bienne manufactures the movements of the Rolex watches

which are then placed into casings manufactured and distributed

worldwide by Geneva.          Without more proof that Bienne and Rolex USA

are subject to common control by some source other than the ties

that bind two entities with a profitable business relationship, we

cannot hold under the current state of the law that common control

has been shown.

                        C.    The Innocent Owner Defense

     Wal-Mart argues that the district court erred by granting a

summary judgment of forfeiture, without conducting a trial on its

assertion of innocent ownership.               Wal-Mart's assertion stems from

dicta in Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663,

94 S. Ct. 2080, 40 L. Ed. 2d 452 (1974) where the Supreme Court held

constitutional     a     Puerto      Rican     forfeiture   statute     providing

forfeiture of a vessel without notice and hearing until after

seizure.   Police had found marijuana on the owner's yacht while in

the possession of a lessee who chartered the boat.              The statute did

not require notice prior to seizure and did not exempt property of

an owner who was neither involved in nor aware of the act of his

lessee which resulted in the forfeiture. In dicta, the Court said,
     . . it would be difficult to reject the constitutional

                                          20
     claim of an owner whose property subjected to forfeiture
     had been taken from him without his privity or consent.
     Similarly, the same might be said of an owner who proved
     not only that he was uninvolved in and unaware of the
     wrongful activity, but also that he had done all that
     reasonably could be expected to prevent the proscribed use
     of his property; for in such circumstance, it would be
     difficult to conclude that forfeiture served legitimate
     purposes and was not unduly oppressive.

Id. 416 U.S. at 689-90, 94 S. Ct. at 2094-95 (citations omitted).

Wal-Mart also relies on a Second Circuit decision to support its

assertion that there is a constitutional "innocent owner" defense to

customs violations.   United States v. One Tintoretto Painting, 691

F.2d 603, 607-08 (2d Cir. 1982) (owner of the painting attained

ownership before the illegal importation into the U.S. and did all

that reasonably could be expected to prevent the proscribed use of

his property before letting another take it on commission to sell in

the U.S.).   However, as the Sixth Circuit recognized, both the

Calero-Toledo and Tintoretto Painting cases involved situations

where the owner of the property subject to forfeiture attained

ownership rights prior to the illegal use of the property.   United

States v. One 1984 Mercedes Benz Model No. 380 SE, 836 F.2d 268, 270

(6th Cir. 1988) (stating that in those cases where the innocent

owner defense was successful, the owner's rights to the property did

not flow from the illegal activity itself).

     By contrast, Wal-Mart's ownership of the watches arises only

after the unauthorized importation.   Wal-Mart seems to suggest that

we apply an "innocent purchaser for value" defense here.   But, the

Sixth Circuit has held, in an illegal importation case that Calero-

Toledo does not create this defense.    See, One 1984 Mercedes Benz


                                21
Model No. 380 SE, 836 F.2d at 270 (no innocent purchaser defense for

one who purchased vehicle from importer who falsely claimed that the

vehicle was for personal use only and paid no duty because allowing

defense would seriously undermine the enforcement of the customs

laws).         The Sixth Circuit decision was followed by the Eighth

Circuit in United States v. One Cessna Model 210L Aircraft, 890 F.2d

77, 82 (8th Cir. 1989) (alternatively holding that appellant's

ownership of plane flowed from another's illegal drug trafficking

and ordering forfeiture).       Since Wal-Mart purchased these watches

after their unauthorized importation, we hold that no innocent

purchaser or owner defense is available to Wal-Mart.     It would seem

to render useless the current system of public recordation if

purchasers of imported items could ignore the listings and obtain

good title by simply asking their sellers, as Wal-Mart did, whether

the imports were authorized.

AFFIRMED.




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