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Case 1:18-cv-00225-UNA Document 1 Filed 02/07/18 Page 1 of 38 PageID #: 1

IN THE UNITED STATES DISTRICT COURT


FOR THE DISTRICT OF DELAWARE

)
LKQ CORPORATION and KEYSTONE )
AUTOMOTIVE INDUSTRIES, INC., )
)
Plaintiffs, )
) C.A. No.
v. )
) JURY TRIAL DEMANDED
UNITED STATES DEPARTMENT OF )
HOMELAND SECURITY and )
SECRETARY KIRSTJEN NIELSEN, )
in her official capacity, )
)
Defendants. )
)

COMPLAINT
Plaintiffs, LKQ CORPORATION and KEYSTONE AUTOMOTIVE INDUSTRIES,

INC., by their undersigned attorneys, complain against UNITED STATES DEPARTMENT OF

HOMELAND SECURITY (“DHS”) and SECRETARY KIRSTJEN NIELSEN, in her official

capacity, and allege the following:

NATURE OF THE ACTION


1. This is an action for declaratory and injunctive relief to prevent the continued

unlawful application of the Tariff Act of 1930 (the “Tariff Act”) and certain provisions of Title

15 U.S.C. relating to trademarks (the “Lanham Act”) by the United States Customs and Border

Protection (“CBP”), an agency of DHS, and, in the process, the violation of the constitutional

rights of LKQ Corporation and its subsidiary, Keystone Automotive Industries, Inc.

(“Keystone”), (LKQ Corporation and Keystone, collectively, “LKQ” or “Plaintiff”). In addition,

LKQ seeks relief from baseless and excessive fines and seeks release of all currently-seized

goods held by CBP. Finally, LKQ seeks its attorneys’ fees incurred in connection with this

action.
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2. The genesis for this action is that CBP has illegally seized grilles intended for the

repair of vehicles (“Repair Grilles”) being imported by LKQ on the basis that they allegedly

infringe the trademarks held by the original automobile manufacturers (i.e., original-equipment

manufacturers, or “OEMs”). Generally, these trademarks, as applied against LKQ, purport to

cover the shape of the grilles themselves. However, LKQ’s Repair Grilles cannot violate the

OEM’s trademark rights (a prerequisite for seizures under the Tariff Act) because they are

authorized under the long-standing and well-established trademark doctrines of functionality and
repair. Further, in many instances, LKQ’s Repair Grilles are expressly licensed by the OEMs.

Finally, LKQ’s Repair Grilles are not likely to cause confusion amongst purchasers or the

relevant public.

3. Automakers Ford Motor Company (“Ford”), FCA US LLC (“Chrysler”),

Bayerische Motoren Werke, Aktiengesellschaft (“BMW”), Honda Motor Co., Ltd (“Honda”),

Hyundai Motor America (“Hyundai”), Toyota Motor Corporation (“Toyota”), and Mazda Motor

Corporation (“Mazda”)—each an “Automaker” and collectively the “Automakers”—have

obtained certain trademark registrations for grille designs or for logo emblems. These

Automakers have recorded these trademark registrations with CBP. These recorded registrations

form the purported basis for CBP’s seizure of LKQ’s Repair Grilles.

4. Beginning in April 2017, CBP began its campaign—which continues through the

present day—of erroneously applying the Tariff Act to Repair Grilles being imported by LKQ

(the “CBP-Automakers Grille Monopoly Campaign”). The CBP-Automakers Grille Monopoly

Campaign has since resulted in more than 165 unlawful seizures of LKQ’s Repair Grilles

intended for delivery to LKQ’s customers. These seizures are listed at Exhibit A, attached hereto

(each, a “Case,” and collectively, the “Cases”), and have resulted in the unlawful detention,

seizure, and threatened forfeiture of thousands of LKQ’s products embodying hundreds of


different grille designs. The seizures have occurred at the following CBP ports:

• Port of Savannah, Georgia (“CBP Savannah”): 158 Repair Grille Seizure Cases;

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• Port of Long Beach, California (“CBP Long Beach”): 6 Repair Grille Seizure

Cases; and

• Port of International Falls, Minnesota (“CBP International Falls”): 3 Repair Grille

Seizure Cases.

5. In each Case, CBP contended that the seized Repair Grilles were “counterfeit” of

one or more of the registered and recorded trademarks of the Automakers and that the Repair

Grilles were, therefore, subject to seizure and forfeiture under 19 U.S.C. § 1526(e). In response
to 162 of the Cases, with the first being filed on May 26, 2017, LKQ began submitting petitions,

generally responding (at CBP’s request) to two cases at a time. In each petition, LKQ requested

that CBP: (1) determine that LKQ’s Repair Grilles are not counterfeit as a matter of law, but,

rather, that they are lawful replacement parts; and (2) release the seized Repair Grilles. A

representative petition of the type submitted by LKQ in response to the Cases is attached hereto

as Exhibit B. Specifically, LKQ argued that its grilles were not counterfeit as they were

authorized by law under the functionality and repair doctrines, they were authorized by the

Automaker under confidential licenses, and/or they were not virtually indistinguishable from the

registered and recorded trademark relied upon by CBP as the basis for its seizure. LKQ’s

petitions were fully supported by two nationally-recognized trademark experts: Professors Mark

P. McKenna, of the University of Notre Dame Law School, and David J. Franklyn, of the

University of San Francisco School of Law. Professors McKenna and Franklyn submitted sworn

declarations that, in their opinion, LKQ’s Repair Grilles were non-infringing and the asserted

trademarks could not be asserted against the aftermarket repair parts market.

6. In all, LKQ has submitted 81 petitions. Additionally, LKQ has met personally

with CBP attorneys, including the Chief of United States Customs and Border Protection

Headquarters, Intellectual Property Rights division (“CBP IPR HQ”), Charles Steuart, and LKQ
has explained that its grilles were not counterfeit because they are authorized by law and/or they

are expressly licensed by the Automaker. Despite LKQ’s many attempts to explain the

lawfulness of its Repair Grilles, CBP continued (and continues) to seize LKQ’s Repair Grilles.

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As months went by without any ruling on LKQ’s petitions, and with seizures continuing to

mount, it became clear to LKQ that CBP believed it had unfettered discretion to rule on the

petitions at its leisure, having no duty or obligation to resolve the issue forthwith or without

delay. As such, in an attempt to expedite the process, LKQ withdrew some of its Petitions and

filed claims to its goods. Upon filing such claims, the law requires CBP to “expeditiously” refer

the matter to the U.S. Attorney for the district in which the seizures occur. 19 USC §§ 1602–04.

As new seizures took place, LKQ continued to file claims to those products as well. But, again,
months went by without CBP referring the issue to a local U.S. Attorney. Indeed, on information

and belief, neither the Port of Savannah nor the Port of Long Beach have yet submitted any of

LKQ’s claims to the local U.S. Attorney, and the Long Beach CBP attorney responsible for

evaluating the claims filed there has indicated that it is her view that action need not be taken for

five (5) years.

7. On October 30, 2017, the Port of Long Beach agreed to release certain of LKQ’s

Repair Grilles, but only pursuant to inequitable remission conditions that are unjustifiable and

unacceptable to LKQ, namely that LKQ be required to pay the storage fees for the improperly

seized grilles and that LKQ sign a hold-harmless agreement disallowing any future claims

against the government related to the improper seizures. On November 15, 2017 and December

13, 2017, without any substantive analysis, CBP Long Beach issued additional decisions

determining that several LKQ Repair Grilles were in violation of certain Automakers registered

and recorded trademarks and refused to release those grilles.

8. Beginning January 17, 2018, CBP Savannah responded to LKQ in a number of

final agency actions relating to the filed petitions after receiving advisory opinions from the

Chief of CBP IPR HQ, Charles Steuart. These advisory opinions purport to set forth a

substantive analysis of the seizure of LKQ’s Repair Grilles; the advisory opinions acknowledged
that certain of LKQ’s Repair Grilles were not subject to seizure but took the position that many

of the grilles were allegedly properly seized. See Exhibit C (exemplary copies of CBP’s final

agency actions). Notably, while CBP originally seized LKQ’s grilles on the basis that they were

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counterfeit, in many CBP final agency actions it was forced to concede that a number of LKQ’s

grilles were not counterfeit because they were not virtually identical to the asserted marks.

Nevertheless, CBP now alleges that many of these grilles were properly seized on the basis that

the grilles still violate the Automakers’ rights. However, those grilles fail to meet not only the

“virtually identical” requirement defeating CBP’s original ground for seizure, but they also fail

to meet the requirement of a likelihood of confusion, thereby defeating CBP’s new ground for

seizure. LKQ’s seized Repair Grilles can be classified into the following four categories:
1) Seizure Category 1: grilles that CBP now acknowledges are lawful and that

CBP concedes it had no basis to seize because LKQ was licensed to make

those grilles under its design patent license agreements with certain OEMs,

(see Exhibit D1, showing the trademark originally asserted by CBP as a basis

for seizure, the seized LKQ grille that CBP acknowledges is licensed, and the

design licensed by LKQ);

2) Seizure Category 2: grilles that CBP now acknowledges are lawful because

the seized grilles were substantially distinguishable from the recorded mark,

but that CBP now alleges it had probable cause at the time to seize because

the Automakers told CBP that the grilles violated their rights (see

Exhibit D2, showing the trademark originally asserted by CBP as a basis for

seizure and the seized LKQ grille that CBP now acknowledges is not similar

to the asserted trademark);

3) Seizure Category 3: grilles that CBP now acknowledges are not counterfeit

but that CBP, instead, now alleges are confusingly similar to the asserted

mark (see Exhibit D3, showing the trademark originally asserted by CBP as a

basis for seizure, the seized LKQ grille, and, to the extent LKQ contends the
grille is also licensed, the design licensed by LKQ); and

4) Seizure Category 4: grilles that CBP maintains are allegedly counterfeit

(see Exhibit D4, showing the trademark originally asserted by CBP as a basis

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for seizure, the seized LKQ grille, and, to the extent LKQ contends the grille

is also licensed, the design licensed by LKQ).

As a complement to the above four seizure categories and their corresponding Exhibits D1–D4,

also attached hereto, as Exhibit D5, is a listing of all of the remaining LKQ Repair Grilles that

have been seized on the basis that they are counterfeit but that CBP has not yet formalized its

seizure decision. Exhibit D5 shows the trademark originally asserted by CBP as a basis for

seizure; the detained LKQ grille; to the extent LKQ contends the grille is also licensed, the
design licensed by LKQ; and LKQ’s best estimate of which Seizure Category CBP will place

each grille when CBP eventually formalizes its seizure decision for each of the detained LKQ

Repair Grilles.

9. Although CBP acknowledges that the Repair Grilles in Seizure Categories 1 and 2

do not violate the Automakers’ rights, CBP still refuses to release them without the substantial

payment of fees by LKQ. See, e.g., Exhibit C.

10. Specifically, despite the concession that the grilles in Seizure Categories 1 and 2

are lawful and were not subject to seizure as counterfeit under 19 U.S.C. § 1526(e), CBP refuses

to release LKQ’s lawful merchandise without LKQ first agreeing to certain unlawful and

inequitable conditions: namely, a demanded payment of a “remission amount” equivalent to 10%

of the merchandise’s value, payment of the storage fees that have accrued on the merchandise,

and the signing of a hold harmless agreement that precludes LKQ from bringing suit against

CBP in the future. CBP’s decision to demand inequitable conditions from LKQ as a predicate

for the return of LKQ’s goods—goods that CBP admits do not violate the law—is arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with law, and as such is subject

to reversal under 5 U.S.C. § 706(2)(A). See, e.g., Exhibit C.

11. Furthermore, CBP’s decision that the Repair Grilles in Seizure Category 3 violate

15 U.S.C. § 1124 and that the grilles in Seizure Category 4 violate 19 U.S.C. § 1526(e) is

arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, and as such

is subject to reversal under 5 U.S.C. § 706(2)(A). For many reasons, as explained herein, all of

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LKQ’s Repair Grilles are lawful repair parts and are not counterfeits of, nor do they infringe, the

Automakers’ registered and recorded trademarks.

12. CBP’s position is not supported by—and, in fact, contradicts—established law.

First, the Automakers’ trademarks cannot be enforced against LKQ’s Repair Grilles because of

the trademark doctrine of functionality. Second, the Automakers’ trademarks are not infringed

by LKQ’s Repair Grilles because of the well-established right to repair trademarked articles

when not likely to cause customer confusion.


13. Further, not just the Repair Grilles in Seizure Category 1 are licensed under the

design patent licenses between LKQ and Ford and Chrysler. Rather, the majority of LKQ’s

Repair Grilles cannot be considered counterfeit because they are authorized to be manufactured,

imported, and sold pursuant to confidential design patent license agreements that LKQ entered

into with Automakers Ford and Chrysler. CBP’s decision that certain grilles in Seizure

Categories 3 and 4 were not licensed is directly contradicted by the language of the licenses, and

therefore is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,

and as such is subject to reversal under 5 U.S.C. § 706(2)(A).

14. Finally, in many instances, LKQ’s Repair Grilles are readily distinguishable from

the Automakers’ recorded trademarks. Seized goods must bear a mark “identical to,” or

“substantially indistinguishable from;” a recorded mark, or must create consumer confusion.

CBP acknowledges this requirement in the advisory opinions distributed from CBP IPR HQ

where CBP acknowledges that, in fact, there was no basis to seize the Repair Grilles falling

within Seizure Category 2, while at the same time confirming the seizures in Categories 3.

However, CBP’s decision that the grilles in Seizure Category 3 create consumer confusion is

unsupported, arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with

law, and as such is subject to reversal under 5 U.S.C. § 706(2)(A).


15. In the first wave of CBP final agency decisions, CBP failed to provide LKQ with

any explanation or justification of the CBP’s failure to acknowledge and take into consideration

the functionality of the recorded marks, the right to repair, and the fact that LKQ’s design patent

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license agreements expressly authorize the grilles currently being subjected to seizure. However,

in these final agency decisions, reference was made to a separate, internal CBP Memorandum

(Internal Memo H288596) purporting to address LKQ’s legal arguments. On February 5. 2018,

and only after LKQ requested that it be provided, CBP Savannah provided LKQ with a copy of

Internal Memo H288596, along with another final agency action. Of note, Internal Memo

H288596 was signed by Charles Steuart, Chief of CBP IPR HQ, on October 31, 2017, more than

three months before it was provided to LKQ (and only at LKQ’s request). See Exhibit E (copy
of Internal Memo H288596).

16. LKQ has exhausted all recourse provided by CBP to protect its rights.

Specifically, LKQ has filed 81 petitions for relief from seizure and forfeiture of its Repair

Grilles. LKQ has supplemented these petitions periodically with supplemental argumentation

and evidence that constitute further basis for relief. LKQ officials and attorneys have met with

CBP officials, including the CBP IPR HQ Chief, Charles Steuart, in Washington D.C., and

LKQ’s attorneys have corresponded with numerous DHS and CBP officials at both CBP

headquarters as well as the ports from which the Cases have issued.

17. Further, LKQ has requested judicial forfeiture as to certain of the cases to be able

to challenge the forfeiture of its goods and the legality of the seizures judicially, though CBP has

refused to forward said cases for judicial forfeiture in an expeditious manner, insisting that there

is a five-year statute of limitations and no statutory requirement that CBP proceed without delay.

See 19 U.S.C. §§ 1602–04.

18. Despite LKQ’s repeated best efforts, CBP has continued with the CBP-

Automakers Grille Monopoly Campaign and has repeatedly taken the position that it will not

cease its incorrect application of the Tariff and Lanham Acts with respect to LKQ’s Repair

Grilles. Accordingly, and especially in light of legal analysis in Internal Memo H288596 and in
the subsequent advisory opinions issued by CBP IPR HQ Chief Charles Steuart, further resort by

LKQ to administrative procedures would be futile. Without a judicial determination of the

legality of LKQ’s Repair Grilles under the Tariff and Lanham Acts, LKQ will continue to have

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its business disrupted and reputation harmed by CBP’s unlawful seizure of LKQ’s Repair Grilles

through the CBP-Automakers Grille Monopoly Campaign.

19. LKQ has contacted each of the Automakers to request that the Automaker provide

written consent to CBP for LKQ to import the lawful Repair Grilles. However, only BMW—

recognizing the legality of LKQ’s Repair Grilles—has provided written consent to CBP. Despite

never bringing (or even threatening) legal action themselves, each of the other Automakers has

refused to provide said consent despite full awareness of the legality of LKQ’s activities under
the law. In fact, in each of CBP’s final agency actions denying LKQ’s petitions, CBP has stated

that they have consulted with the Automakers corresponding to each of the Cases and that in

each Case, the Automakers have claimed that “the protected marks were not authorized to be

applied to the merchandise in question.” See Exhibit C. On information and belief, the

Automakers have been complicit in the CBP-Automakers Grille Monopoly Campaign by

misleading CBP as to the legality of LKQ’s products; and with regards to Ford and Chrysler,

they have further misled CBP as to the scope of the confidential design patent license agreements

between LKQ and Ford and Chrysler.

JURISDICTION AND VENUE


20. LKQ seeks judicial review of notices and decisions issued by CBP instituting

seizures and forfeitures of LKQ’s Repair Grilles. This case, therefore, arises under the
Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701, 702, 704, and 706. LKQ has suffered

a legal wrong because of, and is adversely affected and aggrieved by, the challenged CBP

notices and decisions addressing the Cases and the seizures, forfeitures, and remission conditions

that have followed. In addition, LKQ seeks interpretation of federal statutes and (a) a

determination that the seizures violate the Fifth Amendment to the Constitution, (b) a

determination that the excessive remission conditions violate the Eighth Amendment to the

Constitution, and (c) an injunction against CBP requiring release of all seized LKQ products and

precluding further erroneous and unlawful enforcement of the Tariff and Lanham Acts against

LKQ. Thus, this Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331,

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1346(a)(2), and 1356 because the action arises under the constitution and laws of the United

States and because the United States is a defendant.

21. This Court has authority to grant declaratory judgment pursuant to 28 U.S.C.

§§ 2201–02.

22. Venue lies in this district pursuant to 28 U.S.C. § 1391(e) governing venue in

actions against the government because (1) Plaintiff LKQ Corporation is incorporated in

Delaware, and therefore resides in Delaware; (2) no real property is involved in this action; and
(3) DHS and its secretary, which maintain offices in Delaware, is a defendant.

THE PARTIES: LKQ AND KEYSTONE


23. Keystone Automotive Industries, Inc., is a corporation organized and existing

under the laws of the State of California with its corporate office located at 500 W Madison

Street, Suite 2800, Chicago, Illinois 60661. Keystone is a wholly owned subsidiary of LKQ

Corporation.

24. LKQ Corporation is a corporation organized and existing under the laws of the

State of Delaware with its corporate office located at 500 W Madison Street, Suite 2800,

Chicago, Illinois 60661. LKQ Corporation and its subsidiaries, including Keystone, import and

sell, among other items, commercially successful automotive replacement parts.

25. For decades, LKQ and its predecessors have been importing and offering for sale
replacement automotive parts including grilles, fenders, bumpers, and more. LKQ and its

competitors offer alternatives to OEM replacement parts; without LKQ and its competitors,

consumers would be forced to purchase replacement automotive parts only from one source – the

relevant OEM. Indeed, the use of aftermarket repair parts saves American consumers about $1.5

billion annually in insurance costs. See Exhibit F hereto.

26. LKQ has about 42,000 employees with more than 20,000 of those employees

living in the United States. LKQ has more than 500 facilities located within the United States.

27. LKQ carefully monitors its parts production with the objective that all Repair

Grilles meet or exceed the quality of the OEM part it replaces. Due to its long-standing presence

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in the aftermarket industry and its reputation for quality, LKQ has become a national leader

among Repair Grille providers. LKQ’s quality assurance department inspects the production and

manufacturing plants and randomly tests parts post-production to ensure all parts meet LKQ’s

high standards. In addition, at least two independent testing organizations review and certify

certain Repair Grilles: NSF International and the Certified Automotive Parts Association.

Finally, vehicle insurance carriers also require LKQ to maintain quality levels that meet or

exceed OEM quality standards. LKQ has relationships with all of the major insurance carriers.
28. LKQ’s customers for Repair Grilles primarily consist of professional auto body

and mechanical repair shops that are knowledgeable about the automotive industry. When LKQ

sells its aftermarket parts, it makes clear through its sales channels, and on its packaging, that the

products are not manufactured by the automobile manufacturer that originally sold the vehicle on

which the Repair Grille is intended to be placed.

29. Indeed, LKQ’s website expressly touts the fact that its Repair Grilles are a low-

cost alternative to OEM parts:


Keystone Automotive Industries, Inc., a subsidiary of LKQ
Corporation, is the United States’ largest aftermarket auto parts
supplier. Keystone Automotive is an ISO registered distributor
that offers a high-quality, low-cost alternative to new OEM
parts for autos and trucks. Keystone's aftermarket auto parts
product lines include: bumpers, hoods, fenders, grilles,
remanufactured wheels, radiators, and condensers. We offer a
variety of Keystone aftermarket product lines to meet or exceed the
needs of any vehicle owner or repairer.
(Emphasis added.) True and correct copies of screenshots of LKQ’s website are attached hereto

as Exhibit G.

30. To the extent that LKQ references an OEM trademark in the course of marketing

or selling its products, it is done in a nominative, fair use fashion to truthfully inform customers

of the OEM vehicles on which the LKQ Repair Grilles can be used, and LKQ does not make

more use of the trademark than is necessary to inform the customer.

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31. In addition, many of LKQ’s Repair Grilles are sold under LKQ’s own

“REPLACE” trademark. LKQ’s packaging indicates that the parts inside are aftermarket parts.

Attached hereto as Exhibit H are true and correct photographs exemplary of LKQ’s packaging

for its Repair Grilles. In addition, repair parts sold by LKQ pursuant to one of its license

agreements with the OEM’s prominently display stickers identifying the contents as a “Non-

OEM Aftermarket Part.”

32. Furthermore, when auto body shop customers buy, or insurance underwriters
prepare an estimate for, aftermarket Repair Grilles, they almost always do so through an online

parts estimating system that requires the user to select whether he or she wishes to purchase or

price out an OEM, a recycled, or an aftermarket Repair Grille. If the user selects an aftermarket

part, he or she can then choose LKQ or another aftermarket Repair Grille supplier. It is therefore

clear to the user (i.e., LKQ’s customer) whether he or she is purchasing or estimating OEM or

aftermarket Repair Grilles. Attached hereto as Exhibit I is a true and correct copy of a

screenshot of the CCC Information Services, Inc. online estimating system. CCC is the most

used system, but all other systems are substantially similar for purposes of this paragraph.

THE PARTIES: UNITED STATES CUSTOMS AND BORDER PROTECTION


33. Defendant DHS is a federal agency whose component, CBP, issued the

challenged Case decisions and is responsible for the seizure and threatened forfeiture of LKQ’s
Repair Grilles.

34. Defendant Kirstjen Nielsen is the Secretary of DHS. Secretary Nielsen serves as

DHS’s chief administrative officer and is responsible for overseeing enforcement of the Tariff

Act, including issuing such regulations as are necessary to ensure compliance with it. LKQ sues

Secretary Nielsen in her official capacity.

THE RECORDED TRADEMARKS


35. Ford has registered two trademarks for grille design, U.S. TM Reg. No.

3,453,754, and U.S. TM Reg. No. 3,580, 534, and one trademark for a Ford logo design, U.S.

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TM Reg. No. 2,067,346, (collectively, the “Ford Marks”) that have been recorded with CBP and

form a basis of the challenged Cases; the Ford Marks are reproduced below:

Ford Reg. No. 3,453,754, for use in Ford Reg. No. 3,580,534, for use in
connection with automobile grilles. connection with automobile grilles.

Ford Reg. No. 2,067,346, for use in connection


with toys and sporting goods, namely, [dart
cases, dart flights] and dart boards.

36. Chrysler has registered five trademarks for grille design, U.S. TM Reg. No.

2,593,670, U.S. TM Reg. No. 2,764,249, U.S. TM Reg. No. 2,794,553, U.S. TM Reg. No.

2,970,629, and U.S. TM Reg. No. 3,062,290 and one trademark for a Chrysler logo design, U.S.

TM Reg. No. 2,357,408, (collectively, the “Chrysler Marks”) that have been recorded with CBP

which form a basis of the challenged Cases; the Chrysler Marks are reproduced below:

Chrysler Reg. No. 2,764,249, for use in


Chrysler Reg. No. 2,593,670 for use in
connection with structural parts for motor
connection with trucks and their structural
vehicles, namely, automobiles and sport utility
parts.
vehicles.

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Chrysler Reg. No. 2,794,553 for use in Chrysler Reg. No. 2,970,629, for use in
connection with motor vehicle parts, namely, connection with motor vehicles, namely pickup
grilles and grille appliques. trucks and their structural parts.

Chrysler Reg. No. 3,062,290, for use in


connection with motor vehicles and their
structural parts.

Chrysler Reg. No. 2,357,408, for use in


connection with automobiles and structural
parts therefor.

37. BMW has registered one trademark for grille design that has been recorded with

CBP which forms a basis of the challenged Cases: U.S. TM Reg. No. 3,431,482 (the “BMW

Mark”); the BMW Mark is reproduced below:

BMW Reg. No. 3,431,482, for use in


connection with Motor vehicles, namely,
automobiles, sport utility vehicles, and light
trucks.

38. Honda has registered one trademark for a Honda logo design that has been

recorded with CBP which forms a basis of the challenged Cases: U.S. TM Reg. No. 2,976,445

(the “Honda Mark”); the Honda Mark is reproduced below:

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Honda Reg. No. 2,976,445, for use in


connection with a wide variety of goods and
services including hub caps, steering wheels,
vehicle windows, and windshields.

39. Hyundai has registered one trademark for a Hyundai logo design that has been

recorded with CBP which forms a basis of the challenged Cases: U.S. TM Reg. No. 1,569,538

(the “Hyundai Mark”); the Hyundai Mark is reproduced below:

Hyundai Reg. No. 1,569,538, for use in


connection with automobiles and structural
parts thereof.

40. Toyota has registered one trademark for a Toyota logo design and one trademark

for a Lexus logo design that have been recorded with CBP which form a basis of the challenged

Cases: U.S. TM Reg. Nos. 1,797,716 and 2,575,617 (collectively, the “Toyota Marks”); the

Toyota Marks are reproduced below:

Toyota Reg. No. 1,797,716, for use in Toyota Reg. No. 2,575,617, for use in
connection with automobiles and structural connection with Automobile airbag systems
parts thereof. comprising the airbag cover, airbag and
inflater.

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41. Mazda has registered one trademark for a Mazda logo design that has been

recorded with CBP which forms a basis of the challenged Cases: U.S. TM Reg. No. 2,219,891

(the “Mazda Mark”); the Mazda Mark is reproduced below:

Mazda Reg. No. 2,219,891, for use in


connection with automobiles and structural
parts thereof.

42. The Automakers have recorded the above federal trademark registrations

(collectively, the “Recorded Trademarks”) with CBP pursuant to CBP Service Regulations, 19

C.F.R. § 133.1, et seq. True and correct copies of the above Recorded Trademarks’ federal

trademark registrations are attached hereto as Exhibit J.

LKQ’S REPLACEMENT AUTOMOTIVE PARTS ARE NOT COUNTERFEIT


AND DO NOT INFRINGE THE RECORDED TRADEMARKS
43. As a fundamental matter, the Recorded Trademarks cannot be enforced against

LKQ’s Repair Grilles—and LKQ’s Repair Grilles do not infringe the Recorded Trademarks—

because of the well-recognized trademark doctrine of functionality. See TrafFix Devices, Inc. v.

Marketing Displays, Inc., 532 U.S. 23 (2001) (finding no infringement because the claimed

trademark to a dual-spring mechanism road sign was functional, and finding that a feature cannot

serve as a trademark when: (1) the feature is essential to the purpose of the article / the feature

affects the cost or quality of the article, or (2) if it is competitively necessary to use the feature in

the relevant market). The Recorded Trademarks are functional under both TrafFix tests when

sought to be enforced against aftermarket Repair Grilles because the design of a replacement part

is essential to the use or purpose of the replacement part and because the specific design of a

replacement part is a competitive necessity to serve the aftermarket replacement automotive part

market; thus, the exclusive use of the Recorded Trademarks on the part of the Automakers would

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put competitors like LKQ at a significant, indeed insurmountable, non-reputation-related

disadvantage.

44. Similarly, as to the logo marks, they too are unenforceable against LKQ’s Repair

Grilles having placeholders designed to accommodate badges that embody said logos as it is

essential to the purpose of a replacement grille to use a placeholder region to allow consumers to

be able to mount a genuine logo tag to properly identify their vehicle as being manufactured by

the corresponding Automaker, even if the consumer has replaced the grille, and it is also
competitively necessary for LKQ to make use of a placeholder region on its Repair Grilles as

customers will not purchase a Repair Grille that does not return their vehicle to the original

appearance.

45. If the Recorded Trademarks could be applied against LKQ’s Repair Grilles, it

would in effect create an unconstitutional monopoly for the Automakers in aftermarket

replacement grilles for vehicles manufactured by that corresponding Automaker. Indeed, LKQ is

not, as CBP suggests, arguing that the Recorded Trademarks are invalid on the grounds that the

marks are functional as a defense. Rather, LKQ is arguing that in the unique circumstances of

this particular market (i.e., the aftermarket repair parts market), the Automakers’ Recorded

Trademarks cannot be enforced because the marks are functional in this context. Because

insurance repairs predominate the aftermarket repair parts market, and insurance repairs are

typically required to restore a car to its original appearance, prohibiting a replacement grille from

matching the appearance of the original grille entirely eliminates the Repair Grille’s ability to

fulfill its purpose—to restore automobiles to their original pre-accident condition and

appearance. Additionally, prohibiting aftermarket suppliers from providing replacement grilles

that replicate the design of the corresponding vehicle’s original grille would eliminate all

competitors from the aftermarket repair parts market. As such, finding a trademark valid and
enforceable in one context and functional and therefore unenforceable in another context is

appropriate depending on the specific nature of the market in which the products are being sold.

See Chrysler Corp v. Vanzant, 44 F.Supp.2d 1062, 1070-71 (C.D. Cal. 1999) (“functionality

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must be assessed within the context in which the product design is used” because “a product

design or feature may be non-functional in one context while its use in another context is

functional and non-infringing.”) (emphasis added); see also Dippin’ Dots, Inc. v. Frosty Bites

Distribution, LLC, 396 F.3d 1197, 1203-04 (11th Cir. 2004) (“precluding competitors . . . from

copying any of these aspects of dippin’ dots would eliminate all competitors in the flash-frozen

ice cream market, which would be the ultimate non-reputation-related disadvantage.”).

46. At least one of the Automakers, Ford, has acknowledged in judicial filings that
design patent law, not trademark law, is the means by which to protect component parts for

vehicles. Specifically, Ford stated that “[i]n trademarks, the ‘functionality’ doctrine is intended

to prevent trademarks from perpetually covering innovations reserved to the stringent

requirements of the Patent Act…. ‘It is the province of patent law, not trademark law, to

encourage innovation by granting inventors a monopoly over new product designs or

functions for a limited time[], after which competitors are free to use the innovation. Protection

of aesthetics (i.e., ornamental design of an article of manufacture) is the province of design

patents. The very reason that trademark aesthetic functionality exists is not to invade the design

patent arena…. Trademarks are intended to protect source identification—and are not

intended to provide an unlimited monopoly over an appearance that consumers desire for

aesthetic reasons. Design patents, on the other hand, are intended to protect for a limited time

aesthetically-pleasing designs so as to encourage the decorative arts….” See Ford Global’s

Opposition to the ABPA Mot. for Summary Judgment on Functionality and Patent Exhaustion at

14, Automotive Body Parts Assoc. v. Ford Global Techs., LLC, 2:15-cv-10137-LJM-SDD, Dkt.

#46, Pg ID 795 (E.D. Mich. Jan. 31, 2017) (citing Qualitex, 514 U.S. at 164–65) (emphasis

added).

47. Further, as a matter of trademark law, there is a right for a consumer to repair, or
have repaired, their trademarked articles, and in the process of that repair, the consumer, or

whomever the consumer hires to effectuate the repair, can refurbish or even reapply trademarks

when necessary as part of that repair, provided there is no confusion as to the source of the

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article. See e.g., Nitro Leisure Products, L.L.C. v. Acushnet Co., 341 F.3d 1356 (Fed. Cir. 2003);

Champion Spark Plug Co. v. Sanders, 331 U.S. 125 (1947). As to the Recorded Trademarks, if

the vehicle is the good needing to be repaired or to be refurbished, and the design of the grille or

logo constitutes a trademark (as CBP contends), LKQ can, as a matter of law, supply parts to the

automotive repair shops that reapply the grille/logo/trademark to that good in order to repair it

for a customer if there is no confusion as to source. 1 As discussed above, LKQ makes prominent

disclosures to its customers as to the aftermarket nature of its repair parts and only sells through

market channels that, by design, are fully informative to the user of the aftermarket nature of the

repair parts. Further, as discussed infra, it has been held as a matter of law that there is no

possibility of confusion at the point of sale for LKQ’s repair parts.

48. Further, given that design patents (and not trademarks) may protect the design of

aftermarket autobody parts, LKQ has entered into confidential design patent license agreements

with Automakers Ford and Chrysler that specifically grants LKQ a license to manufacture,

import, and sell replacement parts, including some of the very grilles that have been seized by

CBP as part of its Grille Monopoly Campaign. While CBP acknowledges that the Repair Grilles

in Seizure Category 1 are licensed and are therefore non-infringing, LKQ maintains that it is

licensed to a far more expansive selection of parts than the enumerated part numbers that CBP

concedes LKQ is licensed to import as part of Seizure Category 1. Indeed, LKQ’s licenses are to

1
Of note, the Court of Justice of the European Union (CJEU) recently confirmed that the EU’s
right to repair law is analogous to the right to repair doctrine in the U.S.—it, too, exempts auto
repair parts from trademark (or “design”) infringement. In the recent CJEU Acacia cases, the
CJEU explicitly ruled that “the ‘repair’ clause ... makes the exclusion of protection …
[regarding] a component part of a complex product which is used for the purpose of the repair of
that complex product so as to restore its original appearance subject to the condition that the
replacement part must have an identical visual appearance to that of the part which was
originally incorporated into the complex product when it was placed on the market.” Acacia Srl
v Audi AG and Acacia Srl v Dr. Ing. h.c. F. Porsche AG, Joined Cases Nos. C-397/16 and C-
435/16 (Court of Justice of the European Union, Dec. 20, 2017). Thus, not only does the CJEU
acknowledge the right to repair, but it also acknowledges that to be a repair part in the EU, it
necessarily must be visually identical to the part it is replacing. But being identical to the
original part doesn’t make the part a “counterfeit.” It makes it a protected, exempted repair part.

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the entirety of Ford and Chrysler’s design patent portfolios, entitling LKQ to make any part that

is covered by the claims of those design patents. As such, no Repair Grille made by LKQ which

is covered by the claims of one of the licensed design patents can be considered to be infringing,

as the manufacture of said grille would be licensed by the owner of the Recorded Trademark.

49. Even if the Recorded Trademarks could be applied against LKQ’s Repair

Grilles—which they cannot, in light of the trademark doctrines of functionality and right to

repair—and, further, even if those Repair Grilles are not licensed, the LKQ’s Repair Grilles still
cannot be seized because they do not cause consumer confusion. While originally seized on the

basis that they were “virtually indistinguishable” from the recorded trademarks, CBP conceded

that the grilles in Seizure Category 3 Grilles were not “virtually indistinguishable,” but were

nevertheless appropriately seized ostensibly on the basis that they cause consumer confusion.

Under the law, the Seizure Category 4 Grilles must also cause consumer confusion. Specifically,

§ 1526(e) of the Tariff Act sets forth: “Any such merchandise bearing a counterfeit mark (within

the meaning of section 1127 of title 15) imported into the United States in violation of the

provisions of section 1124 of title 15, shall be seized and, in the absence of the written consent

of the trademark owner, forfeited for violations of the customs laws” (emphasis added).

50. The aforementioned 15 U.S.C. § 1124 states “[N]o article of imported

merchandise ... which shall copy or simulate a trademark registered in accordance with the

provisions of this chapter ... shall be admitted to entry at any customhouse of the United States

...” (emphasis added). 19 C.F.R. § 133.22(a) of CBP regulations define that a “‘copying or

simulating’ trademark or trade name is one which may so resemble a recorded mark or name as

to be likely to cause the public to associate the copying or simulating mark or name with the

recorded mark or name” (emphasis added). Courts have determined that this test is equivalent to

the traditional likelihood of confusion test used to determine infringement of a federally

registered trademark in ordinary litigation. The determination of a likelihood of customer

confusion is a question of fact to be determined in an Article III court with the right of jury trial

under the Seventh Amendment to the United States Constitution. Thus, in the case of all

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seizures, CBP must show that there is a likelihood of confusion on the part of the relevant

consuming public.

51. In early 2005, another automobile manufacturer, General Motors Corp. (“GM”),

filed a trademark infringement suit against Keystone in the Eastern District of Michigan on the

basis that Keystone’s replacement automotive grilles bearing a placeholder simulating the GM

logo infringed GM’s logo design trademarks. Keystone raised several defenses, including

noninfringement and the functional nature of GM’s trademarks as applied to Repair Grilles.
52. The District Court in the Eastern District of Michigan granted summary judgment

to Keystone, holding that there was no possibility of a likelihood of confusion at the point of sale

between Keystone and GM’s products. The ruling was upheld and affirmed by the Sixth Circuit

Court of Appeals (together, the “Keystone Cases”). 2 The Sixth Circuit also found that there was

a genuine issue of material fact as to whether the placeholder region was sufficient to create a

likelihood of downstream confusion.

53. The Keystone cases established that, as a matter of law, there is no point of sale

confusion when LKQ’s Repair Grilles with placeholders are sold to customers, due in part to the

extreme lengths that LKQ goes to inform its customers of the aftermarket nature of LKQ’s

Repair Grilles. See Exhibits G—I. If there is no confusion for grilles with placeholders there

can certainly be no confusion for grilles without placeholders.

54. Since Keystone, other cases have established that there is no “downstream”

confusion either, as the general public understands that unless a vehicle is new and sitting on the

dealer lot, not every component of a vehicle is expected to have been made by the OEM that

manufactured the vehicle. See Nitro Leisure Products, 341 F.3d at 1362 (“For used or

refurbished products, customers … do not expect the product to be in the same condition as a

new product.”).

2
See General Motors Corp. v. Keystone Automotive Industries, Inc., 453 F.3d 351 (6th Cir.
2006); General Motors Corp. v. Keystone Automotive Industries, Inc., 2005 WL 2297140 (E.D.
Mi. 2005).

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55. Further, unlike in the Keystone case, to the extent LKQ’s grilles have a

placeholder region, LKQ has affirmatively modified the placeholder area of LKQ’s seized

Repair Grilles to look different than the Automakers’ emblem to be affixed to the grille. In

addition, once a Repair Grille has been properly installed, LKQ’s placeholder regions are

completely covered by a properly affixed authorized Automaker emblem (i.e., they are invisible).

And LKQ does not provide Automaker emblems (although, under the law, LKQ would be

permitted to do so). Therefore, the likelihood that LKQ grilles are likely to cause confusion is
even more remote.

56. Indeed, no Automaker whose recorded marks on grille designs or logo marks

form the purported basis for the seizure of LKQ’s grilles in this case has complained of or

alleged trademark infringement against LKQ based on the shape or design of aftermarket

replacement grilles—which constitute the majority of parts seized in the challenged Cases. The

disputes that have arisen in the past, i.e., the Keystone Cases, pertained not to the general shape

and design of the grilles but, rather, to the shape and design of the placeholders designed to

accommodate the OEM’s logo badge or to design patents (as opposed to trademark registrations)

covering grille designs. The lack of OEM trademark enforcement efforts as to grille design

evinces a key fact: participants in the pertinent industry have long recognized and conceded that

trademark law is not a valid means to prevent fair competition in the aftermarket for Repair

Grilles, and the doctrines of functionality and the right to repair preclude using trademark law to

do so.

57. In the years since the Keystone Cases—in good faith reliance on the

Automakers’ granting it licenses to their design patents and acquiescing to the configuration of

LKQ’s replacement products—LKQ has purchased Keystone and other subsidiaries, expended

significant amounts of money to develop additional aftermarket Repair Grilles for the repair of
vehicles originally manufactured by the Automakers, and paid millions of dollars in design

patent license fees.

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SEIZURE OF LKQ’S REPAIR GRILLES

58. Beginning January 17, 2018, CBP Savannah issued several decisions in response

to LKQ’s petitions, making final CBP’s determination that certain seized LKQ Repair Grilles

infringe the rights of the Automakers. See Exhibit C. Notably, the decisions incorporate the

analysis prepared by CBP IPR HQ Chief Charles Steuart in Internal Memo H288596. See

Exhibit E. The analysis makes only passing mention of only some of the arguments raised by

LKQ as to the legality of the seizures and the legality of the goods. CBP IPR HQ’s abbreviated

analysis is arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with

law, and as such is subject to reversal under 5 U.S.C. § 706(2)(A).

59. CBP’s outright refusal to consider whether LKQ’s imports are allowed under the

trademark law doctrines of functionality and right to repair is arbitrary, capricious, an abuse of

discretion, and otherwise not in accordance with law, and as such is subject to reversal under 5

U.S.C. § 706(2)(A). See Exhibit E, at 9 (“Challenges to a mark’s validity may be lodges [sic]

with the USPTO’s Trademark Trial and Appeal Board or in District Court. Inasmuch as the

marks at issue were eligible to be recorded with CBP, petitioner’s argument in [sic] respect of

functionality are [sic] inapposite.”); id., at 9 (mischaracterizing LKQ’s argument and contending

that the right to repair doctrine is inapposite because “[LKQ] did not import refurbished goods,

rather the imported merchandise consisted of new goods.”).

60. CBP’s overly narrow interpretation of which LKQ Repair Grilles are licensed

from the Automakers is similarly flawed. Despite CBP’s implicit acknowledgement, through

their findings regarding the Seizure Category 1 grilles, that LKQ does have a valid license to any

grille covered by the design patent licenses that LKQ has entered into, CBP has ignored the plain

language of the design patent license agreements at issue which grant LKQ licenses to the

designs embodied in the claims of each design patent—not a license to individual part numbers.

Indeed, CBP’s analysis in Internal Memo H288596 makes no mention of the language of either

design patent license agreement. Internal Memo H288596, instead, states that “[Automakers

Ford and Chrysler] consented to the importation of merchandise bearing the model numbers

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listed in the design patent agreement.” However, the part numbers listed in the design patent

license agreements are only found in the schedules of the agreements, and the identified part

numbers were never held out to be—nor were they intended by either party to be—a complete

listing of the licensed parts. In fact, the Chrysler agreement explicitly identifies the listed

Chrysler part numbers as “exemplary.” As such, CBP’s continued erroneous interpretation of

the design patent license agreements is arbitrary, capricious, an abuse of discretion, and

otherwise not in accordance with law, and as such is subject to reversal under 5 U.S.C.
§ 706(2)(A).

61. As two examples of CBP’s erroneous interpretation of the design patent license

agreements, CBP has acknowledged that Repair Grilles CH1200367 and FO1200456 are

licensed to LKQ by way of the Chrysler and Ford design patent license agreements. However,

CBP simultaneously asserts that Repair Grilles CH1200368C and FO1200457—Repair Grille

designs that are identical to Repair Grilles CH1200367 and FO1200456, respectively—are not
licensed and are therefore infringing Chrysler’s and Ford’s trademark rights:

Repair Grille CBP Admits is Licensed Repair Grille CBP Alleges is Infringing

Repair Grille CH1200367 Repair Grille CH1200368C

Repair Grille FO1200456 Repair Grille FO1200457

The conclusions regarding the Repair Grilles that CBP concluded infringe (i.e., Repair Grille

CH1200368C and Repair Grille FO1200457) are inconsistent with the plain and ordinary

language of the design patent license agreements and are contrary to the law of the design patent

regime. As such, CBP’s analysis and application of the design patent license agreements that

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LKQ has with Automakers Chrysler and Ford is arbitrary, capricious, an abuse of discretion, and

otherwise not in accordance with law, and as such is subject to reversal under 5 U.S.C.

§ 706(2)(A).

62. CBP’s analysis of the likelihood of confusion amongst the relevant consuming

public is nonexistent. Instead, CBP reduces the analysis to a strict liability test based upon visual

similarity in the eyes of a CBP official and proclaims, via circular argumentation, that LKQ’s

Repair Grilles are inherently confusing because “[c]onfusion is presumed in the case of
counterfeit marks.” (But under 15 U.S.C. § 1124, for a good to qualify as a counterfeit, it must

first be found to be likely to create confusion amongst the relevant consuming public.)

Similarly, CBP discounts all evidence and arguments that LKQ provided, all of which obviate a

likelihood of confusion as to the relevant consuming public. CBP hastily states “Petitioner’s

argument is therefore unavailing in so far as it relates to counterfeit marks.” Exhibit E, at 11.

Thus, CBP’s conclusion that the likelihood of confusion as to LKQ’s Repair Grilles—a predicate

to finding them to be counterfeit—is presumed because CBP considers the goods to be

counterfeit is arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with

law, and as such is subject to reversal under 5 U.S.C. § 706(2)(A).

63. Some of the specific conclusions that CBP reached regarding the likelihood of

confusion are clearly arbitrary and capricious. CBP IPR HQ has, in different decisions issued on

the same day from the same office, found the Repair Grille HO1200198PP is both (1) non-

infringing, and therefore subject to remittance to LKQ—on the condition of LKQ agreeing to the

challenged inequitable conditions discussed supra—and (2) non-counterfeit, but still “copying”

or “simulating” the Recorded Trademark and therefore infringing of the Honda Mark and subject

to seizure. These conflicting decisions issued on the same grille in consideration of the same

arguments and same law cannot be anything other than the result of a decision-making process
that is arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law,

and as such CBP’s findings are subject to reversal under 5 U.S.C. § 706(2)(A).

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64. Furthermore, CBP’s express refusal to release to LKQ, without LKQ first

acquiescing to coercive remission conditions, parts for which LKQ has received explicit consent

to import, or to which CBP admits that there was no basis to seize the goods under the law, is

arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law, and as

such is subject to reversal under 5 U.S.C. § 706(2)(A).

65. Further, regarding Ford and Chrysler, specifically, CBP acknowledges that Ford

and Chrysler identified certain grilles as counterfeit prior to CBP’s seizure of those grilles, only
to later recant and admit to CBP, once LKQ provided the licensing documentation, that grilles

previously identified as counterfeit were in actuality manufactured by LKQ pursuant to a license

agreement. Despite the clear and admitted legality of these Repair Grilles in Seizure Category 1,

CBP still demands a payment of 10% of the value of the Repair Grilles and a payment of the

storage fees associated with the illegal seizure of the Repair Grilles, as well as a requirement that

LKQ sign a hold harmless agreement to retrieve its admittedly lawful property that was not

subject to seizure. See Exhibit C. CBP’s decision to withhold LKQ’s lawful Repair Grilles

absent LKQ’s agreement to coercive and inequitable remission conditions is arbitrary,

capricious, an abuse of discretion, and otherwise not in accordance with law, and as such is

subject to reversal under 5 U.S.C. § 706(2)(A).

66. On October 26, 2017, Automaker BMW submitted a letter to CBP giving consent

to LKQ’s continued manufacture and importation of Repair Grilles for BMW vehicles. The

BMW consent letter expressly states that BMW gave consent to the parts for repair of BMW

vehicles that had been “seized to date by U.S. Customs and Border Protection.” A true and

correct copy of the BMW consent letter is attached hereto as Exhibit I. Indeed, in one final

agency decision (from CBP Savannah, dated Jan. 23, 2018), CBP acknowledges BMW’s

provision of consent to LKQ, but CBP IPR HQ, without any basis, claims that the BMW consent
letter is “not retroactive” and therefore the grilles seized are still counterfeit. However, in a

second final agency decision (from CBP Savannah, dated Feb. 01, 2018), CBP fails to even

acknowledge BMW’s consent to LKQ’s importation activities and, therefore, maintains it

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original position that LKQ’s goods are counterfeit. See Exhibit C. Thus, some of the Repair

Grilles for BMW vehicles fall into Seizure Category 1 while others fall into Seizure Category 4.

CBP’s (conflicting) responses to receipt of the BMW letter providing consent for the importation

of LKQ’s Repair Grilles are arbitrary, capricious, an abuse of discretion, and otherwise not in

accordance with law, and as such are subject to reversal under 5 U.S.C. § 706(2)(A).

67. As to the one grille seized on the basis of Ford Mark U.S. Reg. No. 2,067,346,

CBP now admits that the goods and services for which the mark was registered (i.e., “dart
boards”) is inapposite to the Repair Grilles to which CBP attempted to forfeit on the basis of the

mark. Despite admitting that this Ford Mark cannot be used to substantiate a seizure or

forfeiture of LKQ’s Repair Grilles, CBP nonetheless still refuses to release the Repair Grille

absent LKQ’s agreeing to CBP’s inequitable and unjustified conditions. See Exhibit C. CBP’s

continued detention of LKQ goods that CBP admits do not violate any trademark rights is

arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law, and as

such is subject to reversal under 5 U.S.C. § 706(2)(A).

68. For at least the following reasons, further resort to the administrative process by

LKQ would be futile: (1) CBP has issued a final agency action on more than one of LKQ’s

petitions; (2) each of the petitions in response to the Cases are largely identical; (3) the findings

and conclusions in each of the final agency actions are largely identical—except when they are

completely contradictory; (4) the legal questions at issue in the Cases are largely identical; and

(5) the opinions issued in regards to the legality of the grilles was issued by the Chief of CBP

IPR HQ.

69. CBP’s regulations state that acceptance of a remission offer constitutes an accord

and satisfaction, and thus a waiver of any legal defenses the asserted violator may have in a

subsequent lawsuit. CBP’s administrative process presents LKQ with no choice at all—LKQ
may either (1) seek a heavily conditioned remittance of the property, and pay storage costs and

“remission amounts” in excess of the value of the goods, and waive any legal defense it may

have; (2) expose itself to costly litigation and potentially forfeiture of the goods in order to assert

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those legal defenses in a challenge to the applicability of the particular seizure; or (3) ignore the

seizures and continue to import lawful Repair Grilles that are subject to seizure by CBP.

70. The result of the administrative process is that CBP may continually seize goods

that CBP admits do not violate the Tariff Act and offer only a conditional release upon LKQ

paying substantial storage fees and a “remission amount” in excess of the value of the goods and

LKQ agreeing to a waiver of rights, all while continually refusing to address LKQ’s arguments

or the plain facts of the Cases. As such, further resort to the administrative process would be
futile for these reasons as well.

71. Finally, the seizure process undertaken by CBP in this case embodies an

unconstitutional transfer of judicial power to decide claims of private right between private

parties without party consent, a determination of legal rights or penalties by jury, access to valid

and meaningful legal recourse, or adequate Article III supervision, and as such is illegal under

the law.

72. Furthermore, CBP has violated LKQ’s due process rights by detaining and then

seizing LKQ’s lawful Repair Grilles based solely on input from direct competitors of LKQ

without providing LKQ a meaningful opportunity to defend itself from accusations of trademark

infringement. Despite knowledge of the Keystone Cases, LKQ’s lawful business practices for

several years, the functionality doctrine, and the right to repair doctrine (and, with regard to Ford

and Chrysler, with full knowledge of LKQ’s design patent license rights covering the Repair

Grilles at issue) each of the Automakers (except BMW) refused to provide consent to CBP for

LKQ’s importation of the Repair Grilles, and instead those Automakers “advised [CBP] that use

of their protected mark was not authorized to be applied to the seized merchandise,” resulting in

the detention and eventual seizure of LKQ’s Repair Grilles. See Exhibit C. In this manner, the

Automakers have abetted the CBP-Automakers Grille Monopoly Campaign by using an


executive agency to collaterally attack a competitor—at the government’s and LKQ’s substantial

cost, and not their own. Ford and Chrysler have even been exacting substantial revenue

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simultaneously through a license agreement; and, in the case of Ford, by additionally requiring

LKQ to pay half of the legal fees in enforcement actions relating to those licensed design patents.

73. LKQ’s due process rights have been further violated by the detention and seizure

process because CBP officials are employees of the executive branch, and are therefore beholden

to the policy objectives of the President and can apply those policy objectives in a manner that is

arbitrary and capricious. LKQ’s legal rights must be adjudicated by independent and impartial

Article III judges with full access to a jury trial, as guaranteed by the Seventh Amendment to the
Constitution. To find otherwise, without CBP having provided LKQ an impartial and

meaningful opportunity to defend itself on the merits of its case, violates the due process

protections guaranteed under the United States Constitution.

74. As such, the determination of trademark infringement is a matter for Article III

courts, where LKQ is entitled to a trial on the merits and where a jury acts as fact finder. CBP,

in blindly taking its marching orders from the Automakers while pursuing its CBP-Automakers

Grille Monopoly Campaign without regard to the evidence or arguments that LKQ has raised,

has unlawfully detained LKQ’s merchandise upon a determination of illegality without

consulting LKQ or offering it an opportunity to meaningfully defend itself. Furthermore, CBP

has ignored LKQ at every opportunity and has taken positions contrary to the facts and the law.

Additionally, when confronted with ironclad proof that LKQ’s merchandise is lawful, CBP has

attempted to extort LKQ to pay a “reduced penalty” and “storage fees” that in many cases exceed

the value of the property and to waive its rights in the matter, to get CBP to release the goods

that CBP admits are not counterfeit and do not infringe of the recorded marks of the Automakers.

75. Based on the ongoing detention and seizure of LKQ’s Repair Grilles, as well as

communications with CBP officials from Ports other than Savannah, Long Beach, and

Minnesota, LKQ believes that thousands of its Repair Grilles currently being manufactured and

en route to ports in the United States will be subjected to detention, seizure, or forfeiture.

Furthermore, based on the detention, seizure, and declaration of its Repair Grilles as counterfeit,

LKQ believes that its hard-won reputation in the industry and the extensive goodwill that it has

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developed in its products will be irreparably harmed as the result of CBP’s activities and LKQ’s

inability to fill the orders of important customers.

76. Consequently, the detention, seizure, and forfeiture of LKQ’s products will

continue, as will the damage to LKQ’s business reputation and goodwill developed in its

products unless CBP is temporarily and permanently enjoined from detaining, seizing, forfeiting,

defacing, and/or destroying LKQ’s Repair Grilles.

COUNT I:
VIOLATION OF APA 15 U.S.C. § 706(2)(A) AS TO
THE DETENTION AND SEIZURE OF LKQ’S LAWFUL REPAIR GRILLES
77. LKQ realleges and incorporates by reference the preceding paragraphs of this

Complaint, as if set forth fully herein.

78. Under the APA, 5 U.S.C. § 706(2)(A), this Court is required to hold unlawful

and set aside any agency action that is “arbitrary, capricious, an abuse of discretion or

otherwise not in accordance with law.” An order is arbitrary and capricious if it is unsupported

by substantial evidence or if the decision is contrary to the law.

79. The detention and seizure of LKQ’s Repair Grilles in the Cases and the issuance

of CBP’s final agency decisions in response to LKQ’s petitions beginning on January 17, 2018,

constitutes “agency action” under the APA. 5 U.S.C. § 551(13).

80. The detentions, seizure, and impending forfeiture of LKQ’s Repair Grilles under

19 U.S.C. § 1526(e) and/or 15 U.S.C. § 1124 is arbitrary, capricious, an abuse of discretion,

unsupported by substantial evidence, and contrary to law because (a) the trademark doctrine of

functionality renders the Recorded Marks inapplicable to LKQ’s Repair Grilles in the

aftermarket parts market; and (b) the Repair Grilles are authorized by law under the repair

doctrine.

81. In light of the trademark doctrines of functionality and the right to repair, the

detention, seizure, and impending forfeiture of LKQ’s Repair Grilles in the Cases is unlawful

under APA § 706(2)(A) and must be reversed.

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COUNT II:
VIOLATION OF APA 15 U.S.C. § 706(2)(A) AS TO
CBP’S ERRONEOUS INTERPRETATION OF THE
DESIGN PATENT LICENSE AGREEMENTS
82. LKQ realleges and incorporates by reference the preceding paragraphs of this

Complaint, as if set forth fully herein.

83. Under the APA, 5 U.S.C. § 706(2)(A), this Court is required to hold unlawful and

set aside any agency action that is “arbitrary, capricious, an abuse of discretion or otherwise not

in accordance with law.” An agency’s action is arbitrary and capricious if it is unsupported by

substantial evidence or if the decision is contrary to the law.

84. CBP’s interpretation and application of the extent of LKQ’s design patent license

agreements with Automakers Ford and Chrysler as set forth in CBP’s final agency decisions in

response to LKQ’s petitions beginning on January 17, 2018, constitutes “agency action” under

the APA. 5 U.S.C. § 551(13).

85. CBP’s findings that LKQ’s Repair Grilles are either counterfeit or infringe the

Automakers’ trademark rights when the designs at issue are licensed under the confidential

design patent license agreement are arbitrary, capricious, unsupported by substantial evidence,

and contrary to law because CBP has ignored the plain text of the license agreements and the

tenets of design patent law, and CBP has, instead, blindly accepted only a list of part numbers

alleged by licensor Automakers Ford and Chrysler to constitute the scope of the licenses.

86. Because Automakers Ford and Chrysler have authorized LKQ to manufacture,

import, and sell the seized Repair Grilles, pursuant to the terms of LKQ’s confidential design

patent license agreements, LKQ’s Repair Grilles, by law, cannot be counterfeit of the trademarks

embodying the licensed designs. CBP’s erroneous and arbitrary interpretation of the confidential

design patent license agreements to which LKQ is a party, and CBP’s resulting detention,

seizure, and impending forfeiture of LKQ’s licensed Repair Grilles, is therefore unlawful under

APA § 706(2)(A) and must be reversed.

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COUNT III:
VIOLATION OF APA 15 U.S.C. § 706(2)(A) AS TO
CBP’S ERRONEOUS INTERPRETATION OF THE LANHAM ACT
87. LKQ realleges and incorporates by reference the preceding paragraphs of this

Complaint, as if set forth fully herein.

88. Under the APA, 5 U.S.C. § 706(2)(A), this Court is required to hold unlawful and

set aside any agency action that is “arbitrary, capricious, an abuse of discretion or otherwise not

in accordance with law.” An order is arbitrary and capricious if it is unsupported by substantial

evidence or if the decision is contrary to the law.

89. CBP’s interpretation and application of the Lanham Act, including 15 U.S.C.

§§ 1124, as set forth in CBP’s final agency decisions in response to LKQ’s petitions beginning

on January 17, 2018, constitutes “agency action” under the APA. 5 U.S.C. § 551(13).

90. CBP’s findings that LKQ’s Repair Grilles are either counterfeit or infringe the

Automakers’ trademark rights under the Lanham Act are arbitrary, capricious, an abuse of

discretion, unsupported by substantial evidence, and contrary to law because CBP has reduced

the fact-intensive, multi-factored, judicially-recognized test to a question of strict liability based

upon the facial similarity between LKQ’s Repair Grille and the indicated Recorded Trademark in

the eyes of a CBP Official. The decisions issued by CBP IPR HQ are arbitrary, capricious,

unsupported by substantial evidence, and contrary to law because the Chief of CBP IPR HQ

refused to consider LKQ’s arguments, evidence, defenses, and facts, and the findings for

confusion were based upon nothing more than circular argumentation that because CBP believed

LKQ’s Repair Grilles were counterfeit, they were also, inherently, confusingly similar.

91. CBP’s interpretation of the Lanham act as applied to LKQ’s Repair Grilles is

therefore unlawful under APA § 706(2)(A) and must be reversed.

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COUNT IV:
VIOLATION OF APA 15 U.S.C. § 706(2)(A) AS TO
CBP’S INEQUITABLE AND UNLAWFUL IMPOSITION OF CONDITIONS FOR THE
RELEASE OF LKQ’S ADMITTEDLY-LAWFUL REPAIR GRILLES
92. LKQ realleges and incorporates by reference the preceding paragraphs of this

Complaint, as if set forth fully herein.

93. Under the APA, 5 U.S.C. § 706(2)(A), this Court is required to hold unlawful and

set aside any final agency action that is “arbitrary, capricious, an abuse of discretion or otherwise

not in accordance with law.” An order is arbitrary and capricious if it is unsupported by

substantial evidence or if the decision is contrary to the law.

94. CBP’s decision to impose conditions on the release of Repair Grilles that CBP

acknowledges were illegally detained and seized, contrary to 15 U.S.C. §§ 1124 and 1127, as set

forth in CBP’s final agency decisions in response to LKQ’s petitions beginning on January 17,

2018, constitutes “agency action” under the APA. 5 U.S.C. § 551(13).

95. CBP’s findings that LKQ’s admittedly-lawful Repair Grilles can only be released

on condition that LKQ (1) pay storage fees on the improperly detained Repair Grilles, (2) pay a

“remittance cost” of 10% of the value of the improperly detained Repair Grilles, and (3) sign a

hold harmless agreement whereby LKQ must “release and forever discharge … from any and all

actions … damages, claims, and/or demands whatsoever in law or equity” are arbitrary,

capricious, an abuse of discretion, unsupported by substantial evidence, and contrary to law

because LKQ’s importation of Repair Grilles violated no law, CBP has admitted that there is no

basis for the seizures, and there is neither regulatory nor statutory support for CBP’s imposition

of inequitable conditions. CBP’s conditioning of the release of LKQ’s Repair Grilles is

therefore, arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law,

and as such is subject to reversal under 5 U.S.C. § 706(2)(A).

96. CBP’s imposition of conditions on the release of LKQ’s Repair Grilles is

therefore unlawful under APA § 706(2)(A) and must be reversed.

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COUNT V:
VIOLATION OF APA 15 U.S.C. § 706(2)(A) AS TO
CBP’S SEIZURE OF LKQ’S REPAIR GRILLES FOR WHICH THERE IS NO VALID
BASIS FOR SEIZURE
97. LKQ realleges and incorporates by reference the preceding paragraphs of this

Complaint, as if set forth fully herein.

98. Under the APA, 5 U.S.C. § 706(2)(A), this Court is required to hold unlawful and

set aside any final agency action that is “arbitrary, capricious, an abuse of discretion or otherwise

not in accordance with law.” An order is arbitrary and capricious if it is unsupported by

substantial evidence or if the decision is contrary to the law.

99. CBP’s seizure of LKQ goods for which there is no valid basis for seizure—

including instances where CBP has acknowledged there is no basis for the part’s seizure—

constitutes “agency action” under the APA. 5 U.S.C. § 551(13).

100. CBP’s findings that LKQ’s Repair Grilles are subject to seizure when there is no

valid legal basis for seizure is, arbitrary, capricious, an abuse of discretion, and otherwise not in

accordance with law, and as such is subject to reversal under 5 U.S.C. § 706(2)(A).

101. CBP’s seizure of LKQ’s Repair Grilles for which there is no basis under the law

is therefore unlawful under APA § 706(2)(A) and must be reversed.

COUNT VI:
CBP HAS LEVIED EXCESSIVE FINES BY WAY OF SEIZURES ON LKQ

102. LKQ realleges and incorporates by reference the preceding paragraphs of this

Complaint, as if set forth fully herein.

103. Under the Excessive Fines clause of the Eight Amendment to the United States

Constitution, the United States may not impose a fine, including by way of seizure, disproportional

to the offense committed. See United States v. Bajakajian, 524 U.S. 321 (1998). Because LKQ’s

Repair Goods are not counterfeit, do not infringe the Recorded Trademarks, and many are made

pursuant to license agreements with the owners of the correspondingly indicated Recorded

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Trademarks, LKQ has not committed any offense. Therefore, any seizure of LKQ’s Repair Grilles

is unconstitutional as excessive under the Eight Amendment to the United States Constitution.

104. Further, CBP itself acknowledges that in many instances LKQ has not committed

any offense, yet still demands that LKQ pay a 10% “remission amount” and the storage fees

accrued on the illegally seized Repair Grilles—a further excessive fine disproportional both to the

value of the goods and the offense committed, especially in light of the acknowledgement of CBP

that LKQ has committed no offense in regards to these Repair Grilles. Accordingly, penalties of
any amount—including the requirement by CBP that LKQ pay excessive storage fees and

“remission amounts” on the Repair Grilles—and CBP’s seizure of Repair Grilles that CBP

acknowledges do not violate the law are unconstitutionally excessive under the Eighth Amendment

to the United States Constitution and must therefore be set aside.

COUNT VII:
CBP HAS VIOLATED LKQ’S DUE PROCESS RIGHTS

105. LKQ realleges and incorporates by reference the preceding paragraphs of this

Complaint, as if set forth fully herein.

106. The Fifth Amendment of the United States Constitution guarantees that no person

shall be deprived of “life, liberty, or property” without the due process of law. Any action taken by

the United States with respect to “persons” must comport with fundamental fairness. LKQ is a
“person” within the meaning of the Due Process clause.

107. CBP’s actions require LKQ to decide whether to continue accruing seizures and

disproportionately large storage fees by continuing to manufacture and import lawful Repair

Grilles (many of which LKQ already pays significant licensing fees to Ford and Chrysler), or to

subject itself, its employees, and its customers to the risk of lost profits or even being forced to shut

down significant portions of its business and ceasing to compete with the Automakers in the

aftermarket repair parts market.

108. LKQ’s Repair Grilles are not only authorized by the confidential design patent

license agreements that LKQ has entered into with Ford and Chrysler, but the Repair Grilles are

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also authorized as a matter of law due to the trademark doctrines of functionality and the right of

repair, necessitating a finding that the Recorded Trademarks cannot be applied against LKQ’s

Repair Grilles or be used to preclude LKQ from doing business in the aftermarket repair parts

market.

109. Furthermore, CBP’s application of the Tariff Act converts the definition of

counterfeit found in the Lanham Act from the judicially balanced and fact intensive determination

of a likelihood of confusion on the part of relevant consumers to one of strict liability based on the
physical appearance of a good in the eyes of a United States CBP Officer. This application of the

Lanham Act is contrary to the statute and the law, and allows CBP, without any judicial

determination or the oversight of an Article III court or jury, to penalize innocent parties, such as

LKQ.

110. Accordingly, CBP’s continuing erroneous application of the Tariff Act is

fundamentally unfair and a violation of the Due Process clause of the Fifth Amendment to the

Constitution.

PRAYER FOR RELIEF


WHEREFORE, LKQ prays for relief as follows:

A. A judgment declaring that CBP’s detention, seizure, and impending forfeiture of

LKQ’s Repair Grilles under 19 U.S.C. § 1526(e) and/or 15 U.S.C. § 1124 is arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law because LKQ’s Repair Grilles

are not counterfeit and do not infringe any Automaker’s trademark rights;

B. A judgment declaring that CBP’s detention, seizure, and impending forfeiture of

LKQ’s Repair Grilles under 19 U.S.C. § 1526(e) and/or 15 U.S.C. § 1124 violates LKQ’s Fifth

and Eighth Amendment rights guaranteed under the United States Constitution;

C. The entry of preliminary relief pending final resolution of this action, LKQ

having no adequate remedy at law and suffering irreparable injury, granting release of any

detained, seized, or imminently-to-be-forfeited Repair Grilles of LKQ based on the Recorded

Trademarks as set forth in the Cases and the waiver of any storage fees and costs involved in the

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unwarranted seizures;

D. The entry of a permanent injunction, LKQ having no adequate remedy at law and

suffering irreparable injury as a result of the unconstitutional detentions, seizures, and forfeitures

of its Repair Grilles, enjoining Defendant CBP from further enforcing 19 U.S.C. § 1526(e)

and/or 15 U.S.C. § 1124 against LKQ for Repair Grilles that are not counterfeit or otherwise

infringe an Automaker’s trademark rights;

E. An order that LKQ be awarded damages in an amount to be determined in the


course of litigation;

F. A judgment declaring that all currently seized and imminently-to-be-forfeited

Repair Grilles are not counterfeit and do not infringe any of the Recorded Trademarks, and

therefore CBP’s actions are arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law;

G. A judgment declaring that any future detentions, seizures, or forfeitures of LKQ’s

Repair Grilles on the part of CBP under 19 U.S.C. § 1526(e) and/or 15 U.S.C. § 1124 is contra to

law and, in light of this Court’s ruling in this matter, would be arbitrary, capricious, an abuse of

discretion, and not in accordance with law;

H. An order that Defendant must provide and pay for corrective action;

I. Award LKQ its reasonable attorneys’ fees pursuant to 42 U.S.C. § 1988;

J. Pursuant to 15. U.S.C. § 1116, an order that Defendant must file with this Court

and serve on LKQ within thirty (30) days issuance of an Order, a report in writing and under

oath setting forth in detail the manner and form in which Defendants have complied with the

Order; and

K. Such other and further relief, including costs, as this Court may deem just and

proper.

DEMAND FOR JURY TRIAL

In accordance with Federal Rule of Civil Procedure 38(b), LKQ demands a trial by

jury on all issues so triable.

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Respectfully submitted,

ROSS ARONSTAM & MORITZ LLP

Of Counsel: /s/ Benjamin J. Schladweiler


Benjamin J. Schladweiler (#4601)
Barry F. Irwin, P.C. 100 S. West Street, Suite 400
Reid P. Huefner Wilmington, DE 19801
Chris Eggert (302) 576-1600
IRWIN IP LLC bschladweiler@ramllp.com
1333 Burr Ridge Parkway, Suite 200
Burr Ridge, IL 60527 Counsel for Plaintiffs LKQ Corporation and
(630) 756-3101 Keystone Automotive Industries, Inc.
birwin@irwinip.com
rhuefner@irwinip.com
ceggert@irwinip.com

Dated: February 7, 2018

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