15
Nov
By Eric Schweibenz
Further to our August 31, 2011 post, on November 9, 2011, ALJ Robert K. Rogers, Jr. issued the public version of the Initial Determination (“ID”) (dated August 31, 2011) denying a motion by Complainants Thompson/Center Arms Company, Inc. and Smith & Wesson Corp. (the “Complainants”) for temporary relief in Certain Muzzle-Loading Firearms and Components Thereof (Inv. No. 337-TA-777).  

While the investigation involves multiple patents and numerous respondents, Complainants moved for temporary relief only against Respondents Traditional Sporting Goods, Inc., d/b/a Traditions Sporting Firearms and Ardesa, S.A., d/b/a Ardesa Firearms (the “Respondents”) in connection with U.S. Patent No. 7,814,694 (the ‘694 patent).  According to the ID, the ‘694 patent generally relates to a muzzle-loading firearm with a removable breech plug having a sealing element.

The motion for temporary relief was, in accordance with ITC precedent, analyzed under Federal Circuit guidelines for granting preliminary injunctions.  Specifically, ALJ Rogers assessed (1) the likelihood of the patentee’s success on the merits; (2) irreparable harm if the motion is not granted; (3) the balance of hardships between the parties; and (4) the public interest.

Likelihood of Success

ALJ Rogers first construed certain terms from claims 1, 10 and 11 of the ‘694 patent to determine likelihood of success.  Based on the construction, ALJ Rogers found that Respondents’ anticipation and obviousness arguments did not raise substantial questions of invalidity.

For alleged infringement of claims 1 and 11 of the ‘694 patent, the issue revolved around whether the accused Vortek rifle contained a “deformable seal element” and whether that seal element has a “stepped initial portion.”  ALJ Rogers determined that the evidence supports a finding that the Vortek rifle does, indeed, contain a deformable seal element.  He also found, however, that the seal element does not have a stepped initial portion and, therefore, Respondents had raised a substantial question of infringement.

Infringement of claim 10 hinged on the existence of a “seal element” and a nose portion of the breech plug.  Based on the analysis of claims 1 and 11 of the ‘694 patent, ALJ Rogers determined that the rifle has a seal element and also found it contained a nose portion of the breech plug.  Accordingly, ALJ Rogers determined that the Complainants demonstrated a likelihood of success on the merits regarding infringement of claim 10 of the ‘694 patent by the accelerator breech plug used with the Vortek rifle. 

Turning to the domestic industry analysis, ALJ Rogers determined that the unrebutted evidence supported a finding that both the technical and economic prongs have been satisfied.

Irreparable Harm

Complainants argued irreparable harm based on (1) price erosion; (2) exclusivity erosion; (3) loss of goodwill and reputation; and (4) unquantifiable lost sales and market share.  Complainants argued that the competition forced a lowering of prices, and in order to compete, Complainants were forced to put patented technology in lower-end models.

Respondents argued price erosion is compensable, Complainants cite no case law supporting “exclusivity erosion,” the loss of market share is speculative, and offered no evidence of lost sales.

ALJ Rogers found Complainants failed to prove price erosion and, even if they had, they failed to show causation.  ALJ Rogers also rejected the “exclusivity erosion” theory, finding it unsupported by statute or case law.  ALJ Rogers further determined that the loss of goodwill and reduced investment due to infringement to be speculative.

Balancing of Hardships

Because ALJ Rogers did not find a likelihood of success, he analyzed the balance of hardships only in the event that the Commission found a likelihood of success and irreparable harm on review.  ALJ Rogers found the balance of hardship favored neither Complainants nor Respondents.

Public Interest

Because ALJ Rogers did not find a likelihood of success or irreparable harm, he analyzed the public interest only in case the Commission found a likelihood of success and irreparable harm on review.  ALJ Rogers found that muzzle-loading firearms are not the type of products that implicate a critical public interest, so this factor would not preclude issuance of a temporary exclusion order.

Bond

On the issue of bond, ALJ Rogers determined that because Complainants did not demonstrate both of the first two preliminary injunction factors, bond is unnecessary.  ALJ Rogers did, however, conduct an analysis of bond in the event that the Commission determined on review that Complainants are entitled to a temporary exclusion order, but the bond amount was redacted from the public version of the ID.
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