29
Jul
By Eric Schweibenz
On July 21, 2011, ALJ E. James Gildea issued the public version of an Initial Determination (“ID”) (dated July 12, 2011) granting Complainant Georgia-Pacific Consumer Products LP’s (“Georgia-Pacific”) motion for summary determination that defaulting Respondents Stefco Industries, Inc. and Cellynne Corporation (collectively, “Stefco”) and defaulting Respondent NetPak Elektronik Plastik ve Kozmetik Sanayi Ve Ticaret Ltd. (“NetPak”) (Stefco and Netpak collectively, the “Defaulting Respondents”) have violated Section 337 in Certain Electronic Paper Towel Dispensing Devices and Components Thereof (Inv. No. 337-TA-718).  The ALJ also recommended that the Commission issue general exclusion orders and cease and desist orders and impose a bond of 100 percent on the Defaulting Respondents.

By way of background, the Commission instituted this investigation on May 17, 2010 based on Georgia-Pacific’s complaint of April 19, 2010.  See our May 17, 2010 post for more details.  On February 9, 2011, Georgia-Pacific filed a motion for summary determination that the Defaulting Respondents had violated Section 337 in connection with the importation, sale for importation, or sale within the U.S. after importation of certain electronic paper towel dispensing devices and components thereof that infringe certain claims of U.S. Patent Nos. 6,871,815 (the ‘815 patent), 7,017,856 (the ‘856 patent), 7,182,289 (the ‘289 patent), and 7,387,274 (the ‘274 patent) (collectively, the “asserted patents”). 

In particular, Georgia-Pacific argued in its motion for summary determination that the undisputed facts show that (i) Stefco’s 92004 Electronic Roll Towel Dispenser (the “Stefco Dispenser”) and NetPak’s Carpex Touchless Paper Towel Dispenser and Paradigm Emerald Dispenser (the “NetPak Dispensers”) (collectively, the “Accused Products”) were sold for importation, imported, or sold after importation in the U.S.; (ii) the Accused Products infringe one or more of claims 4-7 of the ‘815 patent, claims 8-22 of the ‘865 patent, claims 1-3 of the ‘289 patent, and claims 4-22 of the ‘274 patent, each of which is valid and enforceable; (iii) there is a domestic industry relating to articles protected by these patents; and (iv) a general exclusion order is necessary because there is a motivation for manufacturers and distributors to circumvent a limited exclusion order and because there is a pattern of violation of Section 337 coupled with a difficulty identifying the source of infringing products.

According to the ID, on February 22, 2011, the Commission Investigative Staff (“OUII”) filed a response supporting Georgia-Pacific’s motion.  OUII argued that summary determination was warranted because there are no disputed material facts.  OUII agreed that a general exclusion order should issue with respect to the asserted patent claims.  However, OUII disputed Georgia-Pacific’s assertions to the extent that Georgia-Pacific had suggested that any of the other Respondents in the investigation acknowledged infringement by entering into consent orders.  OUII argued that consent orders are an alternative to a finding on violation and therefore it is inappropriate and misleading for Georgia-Pacific to alleged that fourteen Respondents admitted to infringement just because they entered into consent orders.

The ‘815 patent is titled “Static Build Up Control in Electronic Dispensing Systems” and discloses paper dispensers that incorporate ways to dissipate static charges to a local ground.  The ‘856 patent is titled “Static Build-Up Control in Dispensing System” and concerns a method of grounding a dispenser.  The ‘289 patent is titled “Static Build-Up Control in Dispensing System” and discloses a paper dispensing apparatus that feeds continuously from one roll of paper to another, has a proximity sensor, and is able to dissipate static charges to a local ground such as a high impedance wall surface on which the dispenser has been mounted.  The ‘274 patent is also titled “Static Build-Up Control in Dispensing System,” and discloses a method of grounding a dispenser.

In the ID, ALJ Gildea first determined that since Georgia-Pacific was seeking a general exclusion order rather than a limited exclusion order, he could not presume the facts alleged in the complaint to be true.  Rather, under the circumstances, Georgia-Pacific had the burden of establishing a violation of Section 337 “by substantial, reliable, and probative evidence.”

ALJ Gildea next found that Georgia-Pacific had succeeded in showing by substantial, reliable, and probative evidence that the Defaulting Respondents sell for importation, import, or sell after importation into the U.S., articles that are accused in the investigation.  In particular, ALJ Gildea found that there was undisputed evidence showing that Georgia-Pacific had been able to purchase representative Accused Products in the U.S.

Infringement

With respect to infringement, ALJ Gildea first noted that “[c]laim construction for the asserted patents is not at issue in this Investigation,” citing his Order No. 24.  See our November 16, 2010 post for more details on Order No. 24.  The ALJ then proceeded to determine whether there was substantial, reliable, and probative evidence to show that the Accused Products infringe the various asserted claims based on the claims’ plain and ordinary meaning.

The ALJ determined upon examination that there was indeed undisputed substantial, reliable, and probative evidence that the Accused Products infringe asserted claims 4-7 of the ‘815 patent.  He also found that it was undisputed that there was substantial, reliable, and probative evidence to show that the Accused Products infringe asserted claims 8-22 of the ‘856 patent.  ALJ Gildea further found that it was undisputed that there was substantial, reliable, and probative evidence to show that the Accused Products infringe asserted claims 1-3 of the ‘289 patent.  Lastly, the ALJ found that it was undisputed that there was substantial, reliable, and probative evidence to show that the Accused Products infringe asserted claims 4-22 of the ‘274 patent.

Validity

As to validity, ALJ Gildea stated that the asserted patents are presumed valid and that no party has challenged the validity or enforceability of the asserted patents.  He therefore concluded that “validity and enforceability are not in issue.”

Domestic Industry

With respect to domestic industry, ALJ Gildea found that it was undisputed that Georgia-Pacific has made significant investments in research and development for the domestic industry products that it asserts practice certain claims of the asserted patents.  He further found that Georgia-Pacific’s other investments in at least plant and equipment, testing, quality control, repair and technical support for the same domestic industry products further support Georgia-Pacific’s assertions with respect to domestic industry.

As to the technical prong, ALJ Gildea found that there was undisputed, substantial, reliable and probative evidence that Georgia-Pacific’s enMotion®, Water Resistant enMotion®, enMotion® Recessed, Impulse8®, Impulse10®, goRag®, Cormatic®, SofPull® Automated, and Marathon® dispensers practice at least claim 4 of the ‘815 patent, claim 15 of the ‘856 patent, claim 1 of the ‘289 patent, and claim 4 of the ‘274 patent.  Accordingly, he found that Georgia-Pacific had satisfied both the economic prong and the technical prong of the domestic industry requirement.

Conclusion on Violation

In view of the above, ALJ Gildea determined that the undisputed substantial, reliable, and probative evidence showed that the Defaulting Respondents had violated Section 337 in connection with the importation into the U.S., sale for importation, or sale within the U.S. after importation of certain electronic paper towel dispensing devices and components thereof by reason of infringement of one or more of claims 4-7 of the ‘815 patent, claims 8-22 of the ‘856 patent, claims 1-3 of the ‘289 patent, and claims 4-22 of the ‘274 patent, each of which is valid and enforceable, and that Georgia-Pacific had established a domestic industry that practices the asserted patents.

Remedy and Bonding

With respect to remedy, ALJ Gildea recommended that if the Commission finds a violation of Section 337, general exclusion orders and cease and desist orders would be appropriate.  He also recommended that a 100 percent bond be imposed during the Presidential review period for the Accused Products of the Defaulting Respondents but that no bond be imposed against any non-Respondents in the event that a general exclusion order issues.

ALJ Gildea found that a general exclusion order is necessary to prevent circumvention of a limited exclusion order and that there is a pattern of violation of the asserted patents and it is difficult to identify the source of infringing products.  In particular, ALJ Gildea found that “conditions are ripe for circumvention of a limited exclusion order” because those already in the market of paper towel dispensers could adapt dispensers to practice the asserted patents without any difficulty or expense and those wishing to newly enter the market would also find low entry barriers. 

The ALJ further found that there was a pattern of violation of the asserted patents by the Defaulting Respondents, Respondent Jet Power, the Respondents terminated by consent order, and certain non-Respondents. 

ALJ Gildea also found that the evidence supported a finding that it is difficult to identify the source of infringing products.  The ALJ noted that Georgia-Pacific had been unable to obtain samples of dispensers that are likely to infringe and thus could not establish a sufficient basis to pursue litigation to determine manufacturer information. Georgia-Pacific had also been unable to determine the manufacturer based on a visual inspection of dispensers displayed at trade shows or in public areas.  According to the Georgia-Pacific, the dispensers are normally secured to the wall and have a locked outer cover.  Moreover, they are not typically branded with a manufacturer’s name.  Also, Georgia-Pacific had presented some evidence that distributors are reluctant to identify manufacturing sources and may even be actively deceptive about their manufacturing activities. 

Accordingly, ALJ Gildea recommended that the Commission issue general exclusion orders to remedy the Section 337 violations that have occurred with respect to the asserted patents.  He also recommended that the Commission issue cease and desist orders against domestic Defaulting Respondents Stefco Industries, Inc. and Cellynne Corporation.

As to bonding, ALJ Gildea recommended that the Commission impose a bond of 100 percent for the importation of the Accused Products of the Defaulting Respondents but that no bond should be imposed with respect to products of non-Respondents in the event that a general exclusion order issues.  With respect to the Defaulting Respondents, Georgia-Pacific had argued that a bond of 100 percent should be set because (i) it is not possible to set a bond based upon the difference of sales price between the patented domestic product and the Accused Products, and (ii) there is no applicable royalty rate because Georgia-Pacific has never licensed the asserted patents.  OUII further argued that the record lacked sufficiently reliable information as to pricing and therefore bond should be set at 100 percent, and also pointed out that the Commission has previously set bonds at 100 percent for Respondents in default.  Accordingly, ALJ Gildea recommended a 100 percent bond for the Accused Products of the Defaulting Respondents.  However, with respect to the products of non-Respondents, ALJ Gildea recommended that no bond be imposed because Georgia-Pacific had not set forth any information showing that a price differential would not be calculable with respect to the products of non-Respondents.