Lawrence M. Friedman is a partner at Barnes, Richardson & Colburn, LLP and an adjunct professor at the John Marshall Law School’s Center for International Law. He is also the author of the Customs Law Blog. He sent me this final exam, which he recently gave in his Trade Remedies class. According to Prof. Friedman, “I stressed to my students that the names and locations were not particularly relevant. Nevertheless, I have no doubt they are wondering what I was thinking. It is a bit of a scavenger hunt for random DC universe references, from the well-known to the obscure.” Thank you to Prof. Friedman, and I hope you all enjoy reading it as much as I did!
IBT 705 International Trade Remedies Law
Final Exam: The Dark Knight Edition
- To complete this exam, you may rely on your class notes, textbook, and a calculator. No other resources can be consulted.
- Read the facts below and respond accordingly. Credit will be earned by properly identifying legal issues, stating the relevant rules, applying the facts to the rules, and logically stating your advice to the client.
You are an associate in the International Trade Department of Grabemann, Loring and Ross in Ivy Town, USA. Jean Loring, one of the name partners, has called you into her office. She is meeting with a Mr. Alfred Pennyworth, who is there on behalf of your firm’s biggest client, Wayne Enterprises. Ms. Loring and Mr. Pennyworth relayed the following facts to you.
From 2011 on, there have been only three companies in the United States that produce high quality bullet proof body armor. Those companies are Wayne Enterprises, Queen Consolidated, and Kord Industries. Wayne Enterprises produces approximately 60% of the body armor made in the United States. The remaining approximately 40% is divided evenly between Queen Consolidated and Kord Industries (each with 20%). Because of the nature of the product and federal government restrictions, there is a limited U.S. market for body armor.
The basic technology underlying the design and manufacturing of this body armor was invented by Lucius Fox, an employee of Wayne Enterprises. In 2008, Mr. Fox secured a patent covering the technology and its production. He assigned that patent to Wayne Enterprises, making Wayne Enterprises the owner of the patent. Wayne Enterprises has granted non-exclusive licenses to exploit the patent to both Queen Consolidated and Kord Industries. Wayne Enterprises also owns the U.S. trademark rights to “Ballistic Armor Technology” and “BAT” to describe the body armor. Both marks are registered with the U.S. Patent and Trademark Office and appear on the principal register of trademarks.
Somewhere in the central Asian republic of Nanda Parbat (a WTO member), a shadowy company called Demon’s Head Ltd. has been making inferior body armor and supplying it free of charge to the local criminal market. Mr. al Ghul, the president of Demon’s Head, has vowed to enter the U.S. body armor market with the express intention of pushing Wayne Enterprises, Queen Consolidated, and Kord Industries out of the market. That will allow Demon’s Head to sell BAT® body armor to members of the criminal underworld, making al Ghul the leader of a criminal army in the United States. To do that, al Ghul has enlisted the League of Corporate Assassins to launch his four-step plan.
- First, in 2011, al Ghul instructed his associate Antonio Diego to kidnap Mr. Fox in a successful effort to secure the information needed to produce BAT® body armor using the patented production methodology. Fox was later rescued unharmed by Wayne Enterprises Chief of Security Barbara Gordon.
- AlGhul then convinced RamaKushna, President ofNandaParbat, that additional exports to the United States would be good for the local economy. To help encourage economic activity, the President made three declarations having the force and effect of law as of January 1, 2012.
- All companies in Nanda Parbat that export goods are entitled to a credit against their overall corporate income tax liability equal to 1% of the value of the exported products.
- No bank in Nanda Parabat making loans to domestic producers of textiles and apparel may charge interest in excess of 3% per annum but the government will pay the bank to make up any difference between the 3% fixed rate and the prevailing market rate of 15% per annum.
- Every company in Nanda Parabat that employs more than 100 people will receive an annual grant to support on-site child care for workers’ children.
- Next, al Ghul instructed Anthony Ivo, Chief Scientist at Demon’s Head, to begin production of BAT-style body armor suits using Wayne Enterprise’s patented BAT® technology. This product proved to be far superior to his prior efforts, due to the stolen BAT® technology. As a result, in January 2012, Demon’s Head began selling body armor to the Nanda Parabat police and army for the dollar equivalent of $5000 per full suit (not including optional cape). At the same time, Demon’s Head continues giving away body armor suits to criminals in Nanda Parabat.
- Simultaneously, Demon’s Head began shipping body armor to the U.S., where it is imported by the Talia Distributors, a company set up and wholly owned by Demon’s Head. Mr. al Ghul is the president of both companies. Talia Distributors repackages, markets, and sells the body armor at wholesale to Cobblepot & Co., H. Dent Corp., and Sionis Systems Ltd. who sell to retail customers in the United States (both legal and criminal enterprises). Under a strict transfer pricing methodology, Talia Distributors pays Demon’s Head $2500 per full suit. The price to Cobblepot, Dent, and Sionis is set at $3000 per full suit. Talia Distributors keeps the $500 as a commission to cover its costs.
The influx of body armor from Nanda Parabat is taking a toll on the domestic industry. Felicity Smoak, who works for Queen Consolidated, prepared the following report showing declining sales of body armor suits in the U.S. At the same time, sales are increasing in Nanda Prabat. She also confirmed that Demon’s Head has no customers outside of Nanda Parabat and the U.S. However, Smoak identified significant potential markets for body armor suits throughout Europe; but, she does believes Demon’s Head is producing at capacity and lacks resources to serve additional markets.
|Free||Sales||Total Nanda Parabat|
According to Pennyworth, to support its continuing massive investment in research and development, Wayne Enterprises wants to raise the price of BAT® body armor suits in the U.S. The U.S. price for a BAT® body armor suit from any of the three domestic producers is approximately $8,000 (not including optional cape). However, neither Queen nor Kord have moved prices upward to offset lost sales. To meet the competition, Wayne has been unable to increase prices and has, therefore, reduced R&D. To cut costs, Queen has fired Chief Marketing Office Roy Harper and will be consolidating its three sales and distribution centers into its main campus in Star City.
Kord has taken another approach. To cut costs and improve its overall profitability, Kord has decided to start production of BAT® body armor in the Balkan country of Markovia. As on January 1, 2014, Kord has shifted 50% of its production from the U.S. to Markovia. All of the Markovia-produced goods will be exported to the U.S. and imported by Kord.
Thus, the expected 2014 industry snapshot is as follows:
|United States Sales|
The Kord and Demon’s Head imports will be competing for the same few legal customers in the U.S. while the imports from Demon will also supply the criminal market (about 10% of the total U.S. sales).
In January of 2013, Barbara Gordon of Wayne Enterprises’ reported that she has identified the unauthorized use of the BAT® trademark on inferior body armor being sold in the U.S. market. Her sources have provided shipping and commercial documents indicating that the unauthorized BAT® products are coming from Nanda Parabat.
Ms. Loring called you into the meeting with Mr. Pennyworth to help determine whether any U.S. trade remedy laws might help Wayne Enterprises offset the commercial competition from Demon’s Head. Mr. Pennyworth ominously suggested that fending off the threat from Demon’s Head and Mr. al Ghul has larger implications for the fate of the nation. He asked that you consider all options involving the trade laws. According to Pennyworth, the CEO of Wayne Enterprises is considering other options involving independent acts of self-help.
Ms. Loring has asked you to prepare a memo outlining any potential administrative or judicial actions you see as possible support for Wayne Enterprises. For each potential action, she wants you to explain in as much detail as time permits:
- Whether Wayne Enterprises, alone or in conjunction with other companies, has standing to commence the action.
- In what forum is the action commenced and how.
- What proof will be necessary to secure a remedy?
- What data will be considered and how will it be used?
- What problems or opportunities do you see for Wayne Enterprises and the other companies?
- For administrative action, what judicial review is available?
- What is the standard of review applied by the relevant courts?
- Will Wayne Enterprises be likely to prevail?
For no credit other than respect and bragging rights, provide the correct first and last names and popular aliases of the CEOs of Wayne Enterprises, Queen Consolidated, and Kord Industries and the first name of Mr. Pennyworth.