If the petitioner was previously found in violation of Section 337 and requests a determination that it is no longer in violation, or requests modification or rescission of an order issued pursuant to Section 337(d), (e), (f), (g), or (i), the burden of proof is on the petitioner.  See 19 C.F.R. § 210.76(a)(2).

A public hearing on the petition may be held either before the Commission, or before an ALJ who then issues a recommended determination (RD) to the Commission.  After considering the information placed on the record, the Commission will take such action as it deems appropriate.  See 19 C.F.R. § 210.76(b).  Importantly, there are no statutory or regulatory time limits on Rule 210.76 proceedings.  In certain cases, a Commission order modifying an exclusion order may be appealed to the Federal Circuit.  See, e.g., Allied Corp. v. ITC, 850 F.2d 1573, 1579-80 (Fed. Cir. 1988).

In addition, under Rule 210.77, the Commission may, in the event of a temporary emergency with formal enforcement proceedings pending, immediately modify or rescind a prior order without hearing or notice.  Such immediate action would be taken when necessary to prevent the violation of a Commission order and when “subsequent action by the Commission would not adequately repair substantial harm caused by such violation.”  19 C.F.R. § 210.77(a).  However, before taking such action, the Commission must consider the effect of such action on “the public health and welfare, competitive conditions in the U.S. economy, the production of like or directly competitive articles in the United States, and U.S. consumers.”  19 C.F.R. § 210.77(b).

There have been several examples of modification proceedings in practice.  For instance, in Certain Steel Rod Treating Apparatus and Components Thereof (Inv. No. 337-TA-97), the Commission invoked its power under Section 337(h) to modify or rescind orders due to changed conditions.  In that investigation, the Commission had issued an exclusion order based in part on the finding that the subject patent was valid.  Thereafter, respondents successfully argued in district court that the patent was invalid and unenforceable.  As a result, the Commission revoked the exclusion order.

Likewise, in Certain Composite Wear Components and Welding Products Containing Same (Inv. No. 337-TA-644), the Commission recently temporarily rescinded its limited exclusion order and cease and desist order against respondents pending resolution of the validity of the subject patent by the Federal Circuit.  The patent had been declared invalid by a district court in a declaratory judgment action brought by respondents.  See our January 20, 2011 and February 14, 2011 posts for more details.

The Commission may not, however, modify the remedy while parallel litigation is still pending in district court.  For example, in Certain Integrated Repeaters, Switches, Transceivers and Products Containing Same (Inv. No. 337-TA-435), the Commission did not delay issuing a limited exclusion order when there was a concurrent district court action involving the subject patent, noting that “the Commission’s rules provide adequate means for modification of an exclusion order if and when that should become necessary.”  Comm’n Op. on Remedy, Public Interest and Bonding at 22 (Aug. 16, 2002).

Design-arounds frequently give rise to modification proceedings.  For example, in Certain Amorphous Metals and Amorphous Metal Articles (Inv. No. 337-TA-143), the Commission had commenced Section 337 proceedings against several importers of steel products to determine whether the processes used to make the imported products would infringe a patent held by Allied Corporation.  That investigation led to the issuance of a general exclusion order for the importation or sale of amorphous metal articles or alloys made by the infringing processes.  The Commission then granted petitions for advisory opinion proceedings filed by respondents who sought advice that the importation of articles made by their “newly-developed” processes would not violate the exclusion order.  The Commission also sua sponte initiated exclusion order modification proceedings, which were consolidated with the advisory opinion proceedings for hearing.  The presiding ALJ issued an initial advisory opinion (IAO) and RD that the new processes did not infringe Allied’s patent, and recommended modification of the exclusion order.  Allied petitioned the Commission to review the ALJ’s IAO and RD.  Upon review, the Commission issued an advisory opinion supplementing the ALJ’s IAO, as well as an order modifying the exclusion order.  The modified order set out procedures to be followed by those desiring to import articles covered by the order, which included:  (1) petitioning the Commission to institute further proceedings as appropriate to determine whether the amorphous metal articles sought to be imported fall outside the scope of the order and therefore allowed entry into the U.S., and (2) certifying to the U.S. Customs Service that the articles sought to be imported were manufactured by a process that the Commission determined to be outside the scope of the order.  On appeal, the Federal Circuit affirmed the Commission’s modified exclusion order, but held that the advisory opinion was not a final determination and thus not reviewable.  Allied Corp., 850 F.2d at 1578-80.

Similarly, in Certain Wire Electrical Discharge Machining Apparatus and Components Thereof (Inv. No. 337-TA-290), the Commission had instituted formal enforcement proceedings to determine whether respondents’ newly-designed wire electrical discharge machining apparatus infringed certain claims of complainant’s patent, in violation of earlier cease and desist orders.  Those proceedings were terminated on respondents’ motion after a district court granted partial summary judgment that the newly-designed apparatus did not infringe the claims of the patent covered by the Commission’s cease and desist orders.  See Notice of Termination of Formal Enforcement Proceeding, 55 Fed. Reg. 51356 (1990).

Additional examples of “changed conditions of fact or law” giving rise to modification proceedings are set forth below:

In Certain Miniature Plug-In Blade Fuses (Inv. No. 337-TA-114), the Commission had issued a general exclusion order for imported miniature plug-in blade fuses having a “product configuration and/or packaging” that simulated complainant’s trade dress.  Thirteen years later, a German company not involved in the original investigation challenged the validity of complainant’s trademark registrations in district court, successfully arguing that the individual features of complainant’s fuse housing and the overall configuration of those features were functional, thus rendering the registrations invalid and unenforceable.  The Commission instituted a modification proceeding sua sponte and solicited submissions from interested persons and entities, but did not hold a public hearing or delegate the proceeding to an ALJ.  Having found that the conditions which led to the general exclusion order no longer exist, the Commission modified the order by deleting the reference to product configuration.  See Notice of Exclusion Order Modification (Mar. 20, 2002).

In Certain Novelty Glasses (Inv. No. 337-TA-55), the Commission had conducted an investigation of the alleged unauthorized importation of certain novelty beverage glasses that infringed complainants’ trademarks and trade dress, finding a violation of Section 337 and issuing an exclusion order.  The exclusion order required complainants to report to the Commission, on a semi-annual basis, whether complainants were continuing to use the subject trade dress.  When complainants failed to submit the required reports, the Commission ordered complainants to show cause why the exclusion order should not be rescinded pursuant to Interim Rule 211.57.  Thereafter, the Commission modified the exclusion order to state that, if complainants fail in the future to timely comply with the reporting requirement, and if they also fail to submit the required information within thirty days of receiving written notice from the Commission that the reporting requirement has been violated, then the Commission may rescind the exclusion order without further notice or proceedings.  See Comm’n Notice of Modified Exclusion Order, 57 Fed. Reg. 12339 (1992).

In Certain Plastic Encapsulated Integrated Circuits (Inv. No. 337-TA-315), the Commission had issued a limited exclusion order and cease and desist orders upon finding a violation of Section 337 in the unlicensed importation of circuits manufactured by an infringing process.  The orders did not explicitly cover licensed products, and the limited exclusion order allowed entry of products that the manufacturer or importer certified were covered by a license.  The cease and desist orders contained quarterly reporting requirements.  Complainant Texas Instruments (TI) petitioned for modification of the orders, asking the Commission to decide the dollar amount of patented product respondent Analog could import under a limited license Analog had acquired when it purchased a cross-licensee (PMI) of TI.  Pursuant to Interim Rule 211.57, the Commission provisionally accepted TI’s position that Analog could only sell up to the amount of PMI’s sales of licensed plastic encapsulated integrated circuits at the time of its acquisition ($15 million), and published a notice in the Federal Register setting a schedule for responses.  Analog and the Commission Investigative Staff argued in opposition that, under the cross-license, Analog could sell patented product up to the amount of PMI’s sales of all licensed products at the time of acquisition, or $94 million.  The Commission decided in favor of Analog, but agreed with TI that the reporting provision in the cease and desist orders should be modified to ensure that Analog’s sales do not exceed the $94 million ceiling.  See Modified Order to Cease and Desist (July 2, 1993).

In Certain Hardware Logic Emulation Systems and Components Thereof (Inv. No. 337-TA-383), complainant Quickturn had filed a motion for temporary relief simultaneously with its complaint, which was provisionally accepted by the Commission.  The ALJ subsequently issued an initial determination granting Quickturn’s motion, which was adopted by the Commission.  The Commission determined that a temporary limited exclusion order and a temporary cease and desist order directed to respondents was the appropriate form of temporary relief, and that bond would be set at 43% of the entered value of the imported articles.  Quickturn later petitioned the Commission under Rule 210.76 for an increase in respondents’ TEO bond rate from 43% to 180% of entered value of the subject emulation systems in light of the entered values that respondents had declared to the U.S. Customs Service, arguing that evidence gathered during the permanent relief phase of the investigation revealed that the TEO bond rate established during the temporary relief phase was inadequate to protect Quickturn from injury.  The Commission amended the temporary exclusion order to increase the TEO bond rate to 180% when the entered value did not equal the transaction value as defined in 19 C.F.R. § 152.103.  See Comm’n Op. on Pet. to Modify Temporary Relief Bond (Sept. 27, 1997).

The first report to be prepared by the ITC in connection with the ‘514 investigation will (i) describe the principal types of reported intellectual property rights (“IPR”) infringement in China; (ii) describe China’s indigenous innovation policies; and (iii) outline analytical frameworks for determining the quantitative effects of the infringement and indigenous innovation policies on the U.S. economy as a whole and on sectors of the U.S. economy, including lost U.S. jobs.  The ITC is scheduled to deliver the first report by November 19, 2010.

The second report to be prepared by the ITC in connection with the ‘519 investigation  will (i) describe the size and scope of reported IPR infringement in China; (ii) provide a quantitative analysis of the effect of reported IPR infringement in China on the U.S. economy and U.S. jobs, including  on a sectoral basis, as well as potential effects on sales, profits, royalties, and license fees of U.S. firms globally, to the extent primary data can be collected; and (iii) discuss actual, potential, and reported effects of China’s indigenous innovation policies on the U.S. economy and U.S. jobs, and quantify these effects, to the extent feasible.  The ITC is scheduled to deliver the second report by May 2, 2011.

At the June 15, 2010 hearing, the ITC received testimony from the following witnesses: Professor Lee Branstetter of Carnegie Mellon University; Professor C. Fritz Foley of Harvard Business School; Bruce Lehman, Chairman and President of the International Intellectual Property Institute; Professor Daniel Chow of Ohio State University, Moritz College of Law; Professor Peter K. Yu of Drake University Law School, Intellectual Property Law Center; Calman Cohen, President of the Emergency Committee for American Trade; Jeremie Waterman, Senior Director for Greater China for the U.S. Chamber of Commerce; Christian Murck, President of the American Chamber of Commerce; Shaun Donnelly, Senior Director of International Business Policy for the National Association of Manufacturers; Robert W. Holleyman, II, President and CEO of the Business Software Alliance;  John Gantz, Chief Research Officer for IDC; and together John Neuffer, Vice President for Global Policy for the Information Technology Industry Council, and Mark Bohannon, General Counsel and Senior Vice President on Public Policy for the Software & Information Industry Association.

At the June 16, 2010 hearing, the ITC received testimony from the following witnesses: James D’Addario, Chairman and CEO of D’Addario & Company, Inc.; Chris Israel, Managing Partner for PCT Government Relations; Michael Schlesinger, Co-founder of the International Intellectual Property Alliance; and Stephen Canner, Vice President of the U.S. Council of International Business.

By way of background, on April 17, 2007, Tessera, Inc. (“Tessera”) filed a complaint alleging violations of Section 337 in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain semiconductor chips with minimized chip package size or products containing the same by reason of infringement of U.S. Patent Nos. 6,433,419 (“the ‘419 patent”) and 5,852,326 (“the ‘326 patent”).  The complaint named Spansion, Inc. and Spansion, LLC (collectively, “Spansion”), Freescale Semiconductor, Inc. (“Freescale”), ATI Technologies, Ulc. , ST Microelectronics N.V., and Qualcomm Inc. (“Qualcomm”) (collectively, “Appellants”) as respondents.  On May 21, 2007 the Commission instituted an investigation (Inv. No. 337-TA-605).  An evidentiary hearing was held, and on December 1, 2008 ALJ Theodore R. Essex issued an Initial Determination (“ID”).  In the ID, ALJ Essex found no violation of Section 337 with respect to the ‘419 and ‘326 patents.  ALJ Essex also determined that the patents were not indefinite under 35 U.S.C. § 112, ¶ 2, and not anticipated under 35 U.S.C. § 102.

On December 15, 2008, the Commission determined to review the ID in part, specifically, (1) whether Appellants’ accused devices directly infringe the asserted claims of the ‘419 and ‘326 patents, and (2) whether Tessera waived any argument that the accused products indirectly infringe the ‘419 patent.  On May 20, 2009, the Commission issued a Final Determination reversing the ALJ’s determination that Appellants did not infringe asserted claims 1-11, 14, 15, 19, and 22-24 of the ‘419 patent and claims 1, 2, 6, 12, 16-19, 21, 24-26, and 29 of the ‘326 patent.  The Commission also reversed the ALJ’s determination that Tessera had waived any argument that the accused products indirectly infringe the ‘419 patent and determined that Appellants contributorily infringed the ‘419 patent.  All of ALJ Essex’s remaining determinations, including those concerning claim construction, domestic industry, and validity were adopted by the Commission.  With respect to remedy, the Commission issued a limited exclusion order (“LEO”), prohibiting the unlicensed entry of Appellants’ infringing semiconductor chips with limited chip package size and products incorporating those chips that are manufactured abroad.  In addition, the Commission issued cease and desist orders against Qualcomm, Freescale, and Spansion.

According to Appellants’ opening and reply briefs to the Federal Circuit, four primary issues are raised on appeal.  First, Appellants assert that the ITC improperly concluded that the accused semiconductor packages possess the movement claimed by the ‘419 and ‘326 patent.  Specifically, Appellants assert that Tessera’s expert testimony was unreliable and should not be accorded evidentiary value because movement of the baseline package, a claimed element of the patents-in-suit, was measured using finite element modeling, based on numerous assumptions and, therefore, does not accurately represent whether the actual product infringes the asserted claims.

Second, Appellants argue that the ITC mistakenly read limitations into the claims of the asserted patents in order to find the terms “moveable” terminals or “movement” of terminals definite under 35 U.S.C. § 112, ¶ 2.

Third, Appellants assert that even if found liable for infringement, the Commission’s issuance of a LEO was in error, as the ITC did not meaningfully consider the public interest in its decision to grant injunctive relief.  Appellants argue that the public welfare is not served by enforcing Tessera’s patents, which were found invalid by the PTO’s Central Reexamination Unit.

Fourth, Appellants argue that the ITC’s decision and orders prohibiting contributory infringement of the ‘419 patent should be vacated because once Tessera and Motorola, Inc. (“Motorola”), an initial party to this action, entered into a licensing agreement, there was no act of direct infringement as required to establish liability for contributory infringement.

With respect to Appellants’ first argument, the Commission asserts in its brief that Tessera’s use of finite element analysis was based upon “realistic input parameters” and a “solid theoretical foundation” and, therefore, could be used to accurately determine the amount of movement in the accused package.  Further, the Commission notes that the language of the ‘419 and ‘326 patent only requires an accused package to be “capable” of movement, and that Tessera’s direct-loading test showed this, notwithstanding any differences between Tessera’s finite element models and printed circuit boards in actual use.

Regarding Appellants’ second issue, the Commission asserts that the term moveable is rendered definite by the ‘419 and ‘326 patent’s intrinsic evidence.  Similarly, the Commission contends that one skilled in the art would understand the meaning of the term as shown by prior adjudications before Judge Wilken (U.S. District Court for the N.D. Cal.) finding the term “movement,” as used in the ‘326 patent, not indefinite.

In response to Appellants’ third argument, the Commission asserts that the on-going PTO reexamination proceedings should not be considered on appeal, as its decision to grant exclusionary relief was neither arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.

Finally, in response to the Appellants’ contributory infringement arguments, the Commission asserts that it is not clear what effect, if any, Motorola’s dismissal from the case after the Commission issued its final determination would have on an analysis of contributory infringement.  Further, the Commission argues that because Appellants have not exhausted all available administrative remedies concerning this issue, the Commission should hear new questions raised by the Motorola settlement before Appellants can seek judicial review.

In its intervenor brief, Tessera argues, as does the Commission, that its direct-loading tests showed that Appellants’ packaging exhibited the movement limitations claimed in the asserted patents, thereby proving infringement.  Additionally, Tessera relies on Judge Wilken’s claim construction, referenced above, and subsequent Commission decisions adopting Judge Wilken’s reasoning to assert that the claim term “movement” is not indefinite as used in the ‘419 and ‘326 patents.  Tessera also maintains that the Commission’s decision to grant exclusionary relief properly considered the effect of the ongoing PTO reexamination proceedings on the public welfare.

With regard to contributory infringement of the ‘419 patent, Tessera asserts that because Appellants design their packages to be mounted to a printed circuit board and specifically instruct their customers as to how to attach the packages, a direct infringer exists and the Commission’s determination of contributory infringement should be upheld, notwithstanding the Motorola settlement agreement.

* Christopher Ricciuti is a summer associate at Oblon Spivak

By way of background, the Complainant in this investigation is John Mezzalingua Associates, Inc. d/b/a PPC, Inc. (“PPC”) and the Respondents are Fu Ching Technical Industry Co. Ltd., Gem Electronics, Inc. (collectively, the “Active Respondents”), Hanjiang Fei Yu Electronics Equipment Factory, Zhongguang Electronics, Yangzhou Zhongguang Electronics Co., Ltd., and Yangzhou Zhongguang Foreign Trade Co., Ltd. (collectively, the “Defaulting Respondents”).  The investigation was instituted on May 30, 2008.  On October 13, 2009, ALJ Gildea issued his Initial Determination (“ID”) finding, inter alia, that the Defaulting Respondents were in violation of Section 337 by reason of infringement of U.S. Patent Nos. 5,470,257, 6,558,194, D519,076, and D440,539 (the ‘539 patent).  See our November 10, 2009 post for more details.

On December 14, 2009, the International Trade Commission (the “Commission”) issued a notice determining to review the ID in part.  On review, the Commission considered, inter alia, whether PPC had satisfied the domestic industry requirement with respect to the ‘539 patent.  On March 31, 2010, the Commission vacated ALJ Gildea’s finding that PPC had established a domestic industry with respect to the ‘539 patent and issued an order remanding the portion of the investigation relating to the ‘539 patent to ALJ Gildea for further proceedings.  See our April 1, 2010 and April 16, 2010 posts for more details.

According to the May 27 notice, ALJ Gildea held in his RID that PPC has not established a domestic industry with respect to the ‘539 patent, and therefore, there has been no violation of Section 337 by Defaulting Respondents in connection with the importation into the U.S., sale for importation, or sale within the U.S. after importation of certain coaxial cable connectors by reason of infringement of the ‘539 patent.

The notice issued by ALJ Gildea released only pages 1-2 of the RID.  We will provide additional information once the public version of the RID is issued in its entirety

The investigation is based on a May 3, 2010 complaint and a May 24, 2010 letter supplementing the complaint filed by Blumberg Industries, Inc. d/b/a Fine Art Lamps of Miami Lakes, Florida, alleging violation of Section 337 in the importation into the U.S. and sale of decorative lighting fixtures that allegedly infringe U.S. Patent No. D570,038, U.S. Copyright Registration Nos. VA 1-399-618 and VA 1-415-353, and U.S. Trademark Registration Nos. 3,703,710, 3,703,711, 3,700,479, and 3,700,480.  See our May 6, 2010 post for more details.

According to the Notice of Investigation, the ITC has identified Lights & More, Inc. of San Juan, Puerto Rico as the sole respondent in this investigation.

Further, Anne Goalwin of the Office of Unfair Import Investigations is identified in the Notice of Investigation as the Investigative Attorney assigned to handle this investigation.

Lastly, Chief ALJ Paul J. Luckern issued a notice indicating that ALJ Theodore R. Essex will be the presiding Administrative Law Judge in this investigation.

By way of background, on October 15, 2007, Funai Electric Co., Ltd. and Funai Corporation (collectively, “Funai”) filed a complaint alleging violations of Section 337 through importation or sale of certain digital televisions that infringed several claims of U.S. Patent Nos. 6,115,074 (“the ‘074 patent”) and 5,329,369 (“the ‘369 patent”).  The complaint named Vizio, Inc., AmTran Technology Co., Ltd., TPV Technology Ltd., TPV International, Inc., Top Victory Electronics Co., Ltd., and Envision Peripherals, Inc. (collectively, “Appellants”) as respondents.

On November 15, 2007, the Commission instituted an investigation (Inv. No. 337-TA-617).  ALJ Carl C. Charneski held an evidentiary hearing in August 2008 and issued an Initial Determination (“ID”) on November 17, 2008.  In his ID, ALJ Charneski found a violation of Section 337 with respect to the ‘074 patent and concluded that the asserted claims of the ‘074 patent were not invalid and infringed by both Appellants’ legacy and work-around products.  ALJ Charneski found no violation with respect to the ‘369 patent.

The ’074 patent relates to apparatuses and methods by which television decoder devices identify and assemble specific “channel map information” carried in an MPEG compatible datastream in order to decode a digital television user’s selected program in a digital transmission.  The asserted claims of the ‘074 patent relate to the replication of this “channel map information.”  In the ID, ALJ Charneski construed the claim term “channel map information” to include at a minimum 4 specific data fields (program number, PCR_PID, elementary_PID, and stream_type) and that in order for the claimed apparatus to operate under an MPEG standard, certain Program Map Table (“PMT”) information must also be used.

On February 11, 2009, the Commission determined to review the ID in part.  On April 10, 2009, the Commission issued a Final Determination overturning ALJ Charneski’s finding of direct infringement by testing as to some respondents, but otherwise affirming ALJ Charneski’s findings with respect to infringement and validity.  The Commission also accepted ALJ Charneski’s recommendations concerning remedy, which included the issuance of a limited exclusion order and cease-and-desist orders.  Appellants then timely filed an appeal to the Federal Circuit.

On appeal, in an opinion written by Judge Dyk, the Federal Circuit first addressed three issues of claim construction.  The first issue was whether “channel map information” must replicate the four specific data fields named in ALJ Charneski’s ID and by the Commission.  Appellants argued that only one of the four data fields was required.  The Federal Circuit concluded that, based on intrinsic evidence and the understanding of one of ordinary skill in the art, the claims reciting “MPEG compatible channel map information” referred to the MPEG-2 standard.  These claims thus required associating the program with all of the identifiers conveyed in the MPEG-2 program map information that are necessary to constitute a program, specifically all four minimum data fields identified by ALJ Charneski and the Commission.

The second claim construction issue considered was whether the claims precluded the use of information other than “channel map information,” particularly whether they precluded the use of the MPEG PMT (i.e., the data used for decoding in the prior art).  Appellants argued that the patentees had disavowed any and all use of the PMT during prosecution of the ‘074 patent.  The Federal Circuit found that the cited statements from the ‘074 patent’s prosecution history merely explained the benefits of the patented invention over the prior art, namely, that it did not require the use of the MPEG PMT.  Thus, the Federal Circuit agreed with the Commission, concluding that there had been no broad disclaimer of any and all use of the PMT, only a disclaimer of systems that required the use of the MPEG PMT.

The third claim construction issue addressed was whether the claims required that the device and method be capable of utilizing the “channel map information,” or whether mere receipt and storage of the “channel map information” is sufficient.  The Federal Circuit agreed with appellants that the “channel map information” must be capable of being used.  Funai argued that even if the “channel map information” must be used for decoding, only some, not all, of the data need be suitable for use.  The Federal Circuit disagreed, finding that all 4 minimum data fields of the “channel map information” must be suitable for use in decoding.

Using this claim construction, the Federal Circuit affirmed the Commission’s determination that the asserted claims were not invalid.

With regard to infringement, the Federal Circuit found that although Appellants’ legacy products infringed under the adopted claim construction, Appellants’ work-around products did not.  The Federal Circuit concluded that the work-around products did not convert all the necessary “channel map information” into a useable format, and thus did not meet the requirements identified in the construction of the third claim construction issue discussed above.  The Federal Circuit found no infringement by the work-around products, reversing the Commission’s determination in that respect and remanding.

In dissent, Judge Clevenger disagreed with the majority’s finding of non-infringement with regard to the work-around products.  Judge Clevenger stated that the third claim construction issue identified by the majority was not raised by the parties, and thus was not appealed.  Therefore, Judge Clevenger expressed his opinion that, as that issue was not properly before the Federal Circuit, it should instead affirm.

By way of background, the ITC instituted an investigation in February 2003 based on a complaint filed by Deere alleging that Bourdeau and other Deere dealers unlawfully imported and sold Deere’s European-version harvesters in the U.S. in violation of Section 337’s prohibition against importation of products “produced by the owner of the United States trademark or with its consent, but not authorized for sale in the United States,” often called “gray market goods.”  In May 2004, the ITC determined there were material differences between Deere’s North American version and European version harvesters, supporting a finding of trademark infringement and thus a general exclusion order.

In March 2006, the Federal Circuit vacated-in-part and remanded the ITC’s decision based on the additional requirement that Deere also show that all or substantially all of its authorized domestic products (North American version) are materially different from the accused gray market goods (European version).  On remand, in December 2006, the ALJ issued an initial determination of infringement, finding that the original record showed that Deere did not authorize the sales of the European version in the U.S., that new evidence of alleged Deere financing of the European version sold by its dealers did not show authorization, and that the number of sales Bourdeau alleged were authorized was in any event so small that “substantially all” of Deere’s authorized U.S. sales were of the North American version.

In August 2008, the ITC reversed the ALJ, finding substantial evidence that Deere’s U.S. and European dealers had apparent authority to sell the European version, that Deere itself sold and/or facilitated the sale of the European version in the U.S., and that not “all or substantially all” of the authorized harvesters sold in the U.S. were the North American version.  The ITC noted that since the total number of authorized sales of the North American version in the U.S. was approximately only 4400, the introduction of even a small number of the European version could cause substantial consumer confusion.  The ITC then found such confusion based on its determination that at least 141 European version harvesters sold in the U.S. were sold by official Deere dealers.  The ITC considered 141 to be a “substantial quantity” of nonconforming goods because it constituted 40 to 57% of the 247 to 347 European version harvesters sold in the U.S. by both official and independent (in some cases, accused) dealers.  Importantly, the ITC did not use as its denominator the total number of authorized harvesters sold in the U.S., which would have been the number of authorized North American version harvesters (4400) plus the number of authorized European version harvesters (141), or 4541.

In the current appeal, Deere argued that (1) the ITC incorrectly determined the number of authorized European version harvesters sold in the U.S., and (2) even using the numerator that the ITC found, the ITC erred in applying the “all of substantially all” test by using 247 to 347 as the denominator instead of 4541; the latter results in only 3.1% of the authorized harvesters sold in the U.S. being of the European version, which Deere asserts is an insignificant number under the test.

The Federal Circuit found that substantial evidence supported the numerator determined by the ITC.  In particular, the court found, contrary to Deere’s arguments, that (a) sales by official Deere dealers of the European version in the U.S. were authorized based on buyers’ reasonable belief given Deere’s actions that such sales were authorized; (b) substantial evidence supports the ITC’s finding that Deere’s official dealers, including its official European dealers, had apparent authority to sell the European version; (c) the ITC did not err in including sales by Deere’s official European dealers in the U.S. in its calculation; and (d) Deere had an opportunity to introduce evidence regarding authorization of its official European dealer sales.

With respect to Deere’s denominator argument, the Federal Circuit agreed that the ITC misapplied the “all or substantially all” test, and that the denominator should have been total authorized sales in the U.S. in accordance with the court’s remand instructions, not the total European version sales in the U.S.  Using the ratio dictated by its remand instructions as well as the ITC’s lower-end and upper-end findings, the court concluded that a total of 3.1 to 3.4% of the authorized harvesters sold in the U.S. were the European version, or conversely that 96.6 to 96.9% of the authorized harvesters sold in the U.S. were the North American version.  The court observed that those figures may be insubstantial, but that is for the ITC to determine on remand based on all of the relevant facts, noting that “[t]he cutoff as to what is to be considered ‘substantially all’ is a question of fact.”

Judge Newman concurred in the remand but dissented-in-part from the majority’s holding that the importation and sales of the European version were deemed to be authorized by Deere, stating that “it is incorrect to hold that the infringing sales are ‘authorized’ by a concoction of ‘apparent authority’” because to do so “improperly requires the trademark owner to prove that it tried and was unable to impose restrictions on its independent official dealers in the United States and overseas.”

The complaint alleges that MicroJet Technology Co., Ltd. of Taiwan (“MicroJet”), Asia Pacific Microsystems, Inc. of Taiwan (“APM”), Mipo Technology Limited of Hong Kong, Mipo Science & Technology Co., Ltd. of China, Mextec d/b/a Mipo America Ltd. of Miami, Florida, SinoTime Technologies, Inc. d/b/a All Colors of Miami, Florida, and PTC Holdings Limited of Hong Kong (“PTC”) (collectively “proposed respondents”), have engaged in violations of Section 337 through the unlicensed importation into the United States, the sale for importation, and/or the sale within the United States after importation of the accused products that infringe one or more claims of United States Patent Nos. 6,234,598 (“the ’598 patent”), 6,309,053 (“the ’053 patent”), 6,398,347 (“the ’347 patent”), 6,412,917 (“the ’917 patent”), 6,481,817 (“the ’817 patent”), and 6,402,279 (“the ’279 patent”) (collectively, the “HP Patents”).

According to the complaint, the “technology and products at issue generally relate to thermal inkjet printing devices, and more particularly to inkjet ink cartridges that include a component portion, known as a printhead.”  Specifically, (1) the ‘598 patent “primarily relates to an inkjet printhead, having a large number of ink ejectors, that reduces the number of interconnections needed to energize heater resistors (that power the ink ejectors) by using shared electrical ground returns,” (2) the ‘053 patent “primarily relates to inkjet printheads that include heater resistors that fire an ink drop when selected,” (3) the ‘347 patent “relates to uniformly energized heater resistors in an inkjet printhead,” (4) the ‘917 patent “relates to a narrow inkjet printhead having efficient FET drive circuits that are configured to compensate for parasitic resistances of power traces,” and (5) the ‘817 and ‘279 patents “relate[ ] to the transfer of drop generator activation information from a printer to a print cartridge to eject ink onto a print medium based on the image to be printed.”

In the complaint, HP alleges that MicroJet and/or APM manufacture infringing ink cartridges, and the remaining proposed respondents import those products into the United States, sell them for importation into the United States, and/or sell them after they have been imported into the United States.  HP further alleges that at least MicroJet and/or APM are contributory infringers of the HP Patents because their products are not staple articles or commodities, but rather are known to be particularly adapted for use in practicing the inventions of the HP Patents.  The complaint specifically identifies the following as infringing products:  Mipo’s HP 57-compatible color ink cartridge (product code MP 57 – C6657A) and HP 28-compatible color ink cartridge (product code MP 28 – C8728A); PTC’s HP 21-compatible black ink cartridge (product codes HC 21; HC 21XL – C9351) and HP 22-compatible color ink cartridges (product codes HC 22XL – C9352).

As to the technical prong of the domestic industry requirement, the complaint asserts that ink cartridges from the following HP product families practice the asserted claims of the HP Patents:  HP 21, HP 22, HP 27, HP 28, HP 54, HP 56, HP 57, HP 58, and HP 59.  Examples of specific ink cartridges from these product families include: (i) the C6657A, C8728A, C9352A, C9352C, C9352D, and CB278A color ink cartridges; (ii) the C6656A, C8727A, C9351A, C9351C, C9351D, and CB334A black ink cartridges and (iii) the C9359A, and CC6658A photo print cartridges.

With respect to the economic prong of the domestic industry, the complaint alleges that HP has conducted and continues to conduct activities with respect to the design and development, manufacturing administration and control, sourcing, packaging, distribution, warranty and returns, and sales and marketing activities relating to the domestic industry products.  The complaint further alleges that HP has made and/or continues to make significant U.S. investments in the facilities, labor, equipment and/or capital to support these activities, as well as significant investments in the exploitation of the HP Patents.

Regarding related litigation, HP asserts in the complaint that on May 20, 2010, HP and HPDC filed a complaint against proposed respondents in the U.S. District Court for the Northern District of California relating to the same HP Patents in Case No. CV-10-2175-HRL.  The complaint also identifies that on March 5, 2010, HP filed a complaint with the ITC against the several of the same proposed respondents, and that HP moved to terminate the Investigation based on a withdrawal of the March 5, 2010 complaint.  See our March 8, 2010 post.  HP also identified that it filed on March 5, 2010, and then voluntarily dismissed on May 20, 2010, a complaint against several of the same proposed respondents in the U.S. District Court for the Northern District of California relating to the same HP Patents in Case No. CV-I0-00965-EMC.

As to potential remedy, HP requests that the Commission issue a permanent general exclusion order (or, in the alternative, a permanent limited exclusion order), and permanent cease and desist orders directed to the proposed respondents.