By Eric Schweibenz
On November 19, 2010, ALJ Carl C. Charneski issued the public version of Order No. 14 granting Complainant Farouk System, Inc.’s (“FSI”) motion for summary determination of violation of Section 337 and recommended determination on remedy and bonding (dated March 10, 2009) in Certain Hair Irons and Packaging Thereof (Inv. No. 337-TA-637).

By way of background, on March 14, 2008, the Commission instituted the investigation naming the following respondents:  CHI Systems Singapore Pte. Ltd. of Singapore (“CHI Systems”); Princess Silk, LLC of Lake Forest, California (“Princess Silk”); Kamashi International of Hong Kong, China (“Kamashi”); Mount Rise, Ltd. of Dongguan, China (“Mount Rise”); and Dongguan Fumeikang Electrical Technology Co., Ltd. of Dongguan, China (“Dongguan Fumeikang”).  Dongguan Fumeikang and Princess Silk were terminated from the investigation via consent order on May 21, 2008 and December 4, 2008, respectively.  On January 30, 2009, ALJ Charneski granted FSI’s motion (Order No. 13) to find Mount Rise, Kamashi, and CHI Systems in default for failure to respond to the complaint and Notice of Investigation.

FSI sought a general exclusion order and a 100% bond against the only respondents remaining in the investigation -- Mount Rise, Kamashi, and CHI Systems (collectively, “Respondents”) -- in its filing entitled “Motion for Summary Determination on the Economic Prong of the Domestic Industry Requirement, Section 337 Violation and Remedy.”  The Commission Investigative Staff (“OUII”) is the only party to file a response to FSI’s motion, which it supports, arguing that there is no genuine issue of material fact with respect to the validity and infringement of FSI’s asserted registered trademark, or with respect to satisfaction of both the technical and economic prongs of the domestic industry requirement.  The OUII similarly supported issuance of a general exclusion order and a 100% bond.

ALJ Charneski concluded that there was no genuine issue of material fact regarding either the technical or economic prong of the domestic industry requirement.  Regarding the technical prong, ALJ Charneski determined that it was undisputed that the asserted trademark in this investigation is CHI, which FSI used on all of its hair irons and hair iron packages since 2002, which it sold in the millions of units.  ALJ Charneski likewise determined that the economic prong was satisfied through evidence showing significant investment in plant and equipment, significant employment of labor and capital, and substantial investment in engineering, research and development related hair irons protected by the CHI mark.

ALJ Charneski also concluded that the importation requirement was satisfied, determining that there is evidence that Respondents import hair irons into the U.S., and noting that importation is not a contested issue in any event.

With respect to infringement, ALJ Charneski determined that Respondents’ accused products infringed the asserted trademark, finding specifically that (a) the asserted CHI trademark was valid and enforceable; (b) the marks used by Respondents are identical to the CHI trademark; (c) Respondents portrayed their products as CHI products in order to mislead consumers; (d) FSI sells its products through a network of authorized hair salons, whereas Respondents use online auctions and Internet advertisements, but there is no evidence that these different manners of marketing and distribution channels prevent consumer confusion as to the origin of Respondents’ products; and (e) consumers, the bulk of whom use FSI hair irons at home, do not exercise the care required to distinguish FSI products from those using the CHI mark in an unauthorized manner.

Regarding remedy, ALJ Charneski recommended issuance of a general exclusion order on the grounds that the evidence shows a pattern of infringement (e.g., FSI has brought numerous infringement lawsuits in domestic court, and has monitored numerous Internet web sites -- including eBay -- and found thousands of unauthorized offers to sell FSI branded hair irons), and because it is difficult to identify the source of the infringing products.  On the question of bonding, ALJ Charneski recommended that the bond for importation be set at 100% given the lack of reliable price information due at least in part to the failure of Respondents to appear, or in any way participate in, the investigation.