ITC Issues Opinion On Remedy, Public Interest, and Bonding In Certain Electric Paper Towel Dispensing Devices And Components Thereof (337-TA-718)
Further to our December 5, 2011 post, on January 20, 2012, the International Trade Commission issued its opinion with respect to remedy, public interest, and bonding in Certain Electric Paper Towel Dispensing Devices And Components Thereof (Inv. No. 337-TA-718).
By way of background, Complainant Georgia-Pacific Consumer Products LP of Atlanta, Georgia (“Georgia-Pacific”) filed a complaint with the ITC naming seventeen Respondents, alleging violations of Section 337 by infringement of claims 4-7 of U.S. Patent No. 6,871,815; claims 8-22 of U.S. Patent No. 7,017,856; claims 1-3 of U.S. Patent No. 7,182,289; and claims 4-22 of U.S. Patent No. 7,387,274. All Respondents except Stefco Industries, Inc. (“Stefco”), Cellynne Corporation (“Cellynne”), and NetPak Elektronik Plastik ve Kozmetik Sanayi Ve Ticaret Ltd. (“NetPak”) were terminated from the investigation by consent order. On December 30, 2010, ALJ Gildea issued an Initial Determination (“ID”) finding Stefco, Cellynne, and NetPak in default. The ITC determined not to review the ALJ’s determination.
On July 21, 2011, ALJ Gildea issued the public version of an ID (dated July 12, 2011) granting Georgia-Pacific’s motion for summary determination that defaulting Respondents Stefco, Cellynne, and NetPak (collectively, the “Defaulting Respondents”) violated Section 337. The ALJ also recommended that the ITC issue general exclusion orders and cease and desist orders and impose a bond of 100 percent on the Defaulting Respondents. See our July 29, 2011 post for more details. On August 19, 2011, the ITC determined not to review the ALJ’s determination and requested briefing on remedy, the public interest, and bonding. Only Georgia-Pacific and the Commission investigative attorney (“OUII”) timely filed submissions.
As to remedy, the ITC agreed with ALJ Gildea’s recommendation that a general exclusion order should issue. The ITC reasoned that there is both a likelihood of circumvention of a limited exclusion order, in violation of Section 337(d)(2)(A), and that there is “(i) a pattern of violation and (ii) difficulty in identifying the source of the products,” in violation of Section 337(d)(2)(B). Specifically, with respect to the “likelihood of circumvention” analysis, the ITC determined that infringing products can be made easily and at a low cost using well-established distribution channels, “in which molds for manufacturing infringing products may be resold and/or noninfringing molds may be retooled at low cost.” With respect to the “pattern of violation” analysis, the ITC determined that Georgia-Pacific had identified “four nonrespondents that also may infringe the asserted patents, and identified 21 other nonrespondents that may infringe and could enter the market.” In addition, the opinion explained that many of the products are often sold unlabeled, making it difficult to identify the source of the infringing goods. The ITC also agreed with the ALJ that cease and desist orders were warranted as to Respondents Stefco and Cellynne because both maintain significant domestic inventories of infringing dispensers.
The ITC further agreed with Georgia-Pacific and the OUII that a general exclusion order and cease and desist orders would not harm the public interest because there was no evidence that U.S. demand for the dispensers cannot be met by Georgia-Pacific or by the sale of non-infringing alternatives offered by Respondents and other nonrespondent distributors.
Finally, as to bond, the ITC determined that because Georgia-Pacific leases its dispensers while most Respondents and nonrespondents sell their dispensers, it is impossible to calculate a bond based upon a set price differential between the product made by the domestic industry and the lower price of the infringing imported product. The ITC also determined that a reasonable royalty rate could not be established for the infringing imported product because each Respondent in the investigation who did not default was terminated by consent order. Accordingly, a bond set at 100 percent of the entered value for any electronic paper towel dispenser covered by the general exclusion order and cease and desist orders was determined to be appropriate during the period of Presidential review.
