By way of background, the ITC issued its Final Determination on September 24, 2007 finding that a representative AATI voltage regulator infringed claims 2, 3 and 34 of Complainant Linear Technology Corporation’s (“Linear”) U.S. Patent No. 6,580,258 (the ‘258 patent).  The ITC issued an LEO directed to AATI with respect to voltage regulators covered by the asserted claims.  Linear thereafter filed a complaint requesting that the ITC institute a formal enforcement proceeding against AATI for alleged violation of the LEO.  On October 1, 2008, the ITC issued a Notice of Institution of Formal Enforcement Proceeding.  A tutorial was held in the enforcement proceeding on January 5 and an evidentiary hearing was held on January 11-13, 2010.

The only claim term in dispute in the enforcement proceeding is the word “OFF” that appears in claims 2 and 34 of the ‘258 patent.  Linear and the Commission Investigative Staff (“OUII”) argued that the plain and ordinary meaning of the term in the context of the patent is “driven to conduct only an insignificant amount of current.”  AATI proposed that the term should be construed to mean “rendered non-conducting,” and further argued that Linear should be prevented from asserting that “OFF” has a meaning contrary to that which Linear argued to the Federal Circuit in litigation involving a related patent under the equitable doctrine of judicial estoppel.  ALJ Charneski rejected AATI’s judicial estoppel argument, stating that AATI had not shown that Linear’s earlier representations are inconsistent with its current arguments, and adopted the construction proposed by Linear and OUII.

Linear accused AATI of direct infringement of claims 2 and 34 of the ‘258 patent, as well as induced and contributory infringement, and alleged that the importation, sale for importation, or sale after importation of the accused products violated the LEO issued in the underlying investigation.  Linear accused a number of AATI voltage regulators, of which the parties stipulated that the AAT2158 is representative.  ALJ Charneski’s infringement analysis focused primarily on whether transistors in the accused products turn “OFF” in accordance with claims 2 and 34.

In the EID, ALJ Charneski found that the accused products literally infringe the asserted claims because their drive circuitry causes at least one of the transistors to enter a high impedance state by biasing the transistor at a non-zero gate-to-source voltage of approximately 560 millivolts, which is too small to create a significant inversion layer within the transistor, and so current flow is restricted to the “insignificant” amount of 20 microamps or less, which is indicative of a transistor in the claimed OFF state.  ALJ Charneski further found that if “OFF” were construed to mean “non-conducting” such that an “insignificant” amount of current flow was deemed outside the literal scope of the claims, the accused products would nonetheless infringe under the doctrine of equivalents because the differences between the accused products and the claimed invention would be insubstantial.

ALJ Charneski also found in the EID that AATI induced infringement based on its instructions to customers to use the imported accused products in ways that infringe the asserted claims, and that there is strong circumstantial evidence that such infringement by end users occurs.  For example, AATI created datasheets and demo boards for each accused product to teach customers how the products work and how to configure them with external components, such as external capacitors required to use the products in an infringing manner.  With respect to the intent required for induced infringement, ALJ Charneski observed that AATI has been on notice of its infringing activities at least since Linear filed its complaint in the underlying investigation in February 2006, and that despite the ITC’s and the Federal Circuit’s findings of infringement, AATI continued to provide datasheets and demo boards to customers in order to induce others to infringe.  ALJ Charneski also noted that AATI did not produce an opinion of counsel on non-infringement, which is a factor indicating the requisite intent.

With respect to contributory infringement, ALJ Charneski found in the EID that the accused products are not staples of commerce and that they lack any substantial non-infringing use.

Linear and OUII argued that AATI should be barred from raising invalidity in the enforcement proceeding under principles of res judicata.  ALJ Charneski disagreed, finding that AATI was entitled to argue that Linear’s claim construction would render the asserted claims invalid because the term “OFF” was not an issue in earlier proceedings, and it is only because Linear has accused a new set of products in the enforcement proceeding that the term “OFF” must now be construed in order to address AATI’s non-infringement assertions.

AATI raised indefiniteness and lack of enablement as grounds for invalidity if the ALJ adopted Linear’s and OUII’s proposed claim construction.  With respect to indefiniteness, AATI argued that the asserted claims are invalid because “a person of skill in the art would not be able to determine the boundary between ‘insignificant’ and ‘not significant’ current,” and because the term “insignificant” is inherently vague.  ALJ Charneski disagreed on the grounds that (1) the term “insignificant,” as well as an example of insignificant current, is contained in the specification of U.S. Patent No. 5,408,150 (the ‘150 patent), which AATI’s expert did not include in his opinion on claim construction even though the ‘105 patent is incorporated in its entirety into the ‘258 specification; and (2) a determination of whether a current is insignificant within the context of the asserted claims is not defined numerically, but by the operation of a circuit and the characteristics of the transistors used therein.

Regarding lack of enablement, AATI argued that the asserted claims are invalid because “a person of ordinary skill in the art would not be able to practice the full scope of those claims without undue experimentation” because “the ‘258 patent does not teach a person of ordinary skill in the art how to build a switching voltage regulator in which one transistor remains conducting in the second state of circuit operation, or in which one transistor is maintained at an immediate gate voltage between VIN and ground.”  ALJ Charneski again disagreed, stating that AATI’s argument is based on its faulty claim construction that does not allow a transistor to be “OFF” if it still conducts some current, unless it is apparently unintended leakage current.

Linear requested the issuance of a cease-and-desist order and modification of the LEO “in any manner that would assist in the prevention of the unfair practices.”  OUII opposed modification of the LEO, but supported the issuance of a cease-and-desist order.  ALJ Charneski did not recommend modifying the LEO, as “it is unclear . . . how any modification to the order would assist in its enforcement.”  ALJ Charneski found that AATI maintained a commercially significant inventory based on AATI’s stipulation that its domestic inventory at the time of the hearing consisted of approximately 5,800 sample stock, 75,000 engineering parts and 45 engineering semiconductor wafers, coupled with the fact that some products subject to the LEO ship first to AATI in the United States for further distribution (e.g., one shipment originating from AATI in California contained approximately 33,000 demo boards and 1,000,000 finished parts from a family of products that were the subject of the underlying investigation).  Accordingly, ALJ Charneski recommended the issuance of a cease-and-desist order that extends to all products covered by the LEO.

By way of background, the Commission instituted the violation phase of the investigation on March 22, 2006 based on a complaint filed by Linear Technology Corporation (“Linear”) of Milpitas, California, naming Advanced Analogic Technologies, Inc. (“AATI”) of Sunnyvale, California as the sole respondent. On September 24, 2007, the Commission issued its Final Determination on the question of violation finding that certain AATI products infringed claims 2, 3, and 34 of U.S. Patent No. 6,580,258.  The Commission also issued a limited exclusion order directed toward AATI.  Linear thereafter filed a complaint requesting that the Commission institute a formal enforcement proceeding against AATI for alleged violation of the limited exclusion order.  On October 1, 2008, the Commission issued its Notice of Institution of Formal Enforcement Proceeding against AATI “to determine whether AATI is in violation of the Commission’s limited exclusion order issued in the investigation, and what, if any, enforcement measures are appropriate.”

ALJ Charneski’s March 18, 2010 EID is confidential, and we will provide additional information once the public version of the EID issues.

By way of background, INEOS Fluor Holdings Ltd., INEOS Fluor Ltd. and INEOS Fluor Americas LLC (collectively, “INEOS”) filed a complaint in December 2007 alleging violations of Section 337 by several respondents including Sinochem in the importation into the U.S., the sale for importation, and the sale within the U.S. after importation of certain R-134a coolant (otherwise known as 1,1,1,2-tetrafluoroethane) by reason of infringement of certain patents, including U.S. Patent No. 5,559,276.  See our April 6 post for more details.  On August 15, 2008, the Sinochem respondents moved for partial termination of the investigation based on the entry of a Consent Order specific to their “old” process for manufacture of R-134a coolant.  On August 20, 2008, the ALJ issued an initial determination (“ID”) granting the motion and terminating the investigation with respect to the “old” process.  The Commission determined not to review the ALJ’s ID and issued a Consent Order on September 11, 2008.  On December 12, 2008, INEOS filed a complaint, requesting that the Commission institute a formal enforcement proceeding to investigate an alleged violation of the Consent Order relating to the “old” process.  On February 18, 2009, the Commission issued a notice instituting a formal enforcement proceeding.

According to the EID, INEOS alleged a violation of the Consent Order occurred when Sinochem and Stoner, Inc. (“Stoner”), entered into a sales contract for the purchase of R-134a manufactured using Sinochem’s “old” process.  This shipment was imported into the U.S. on September 11, 2008.  INEOS argued, that the shipment was delivered “DDP (Delivery Duty Paid) Quarryville,” and thus Sinochem was responsible for the shipment until it actually reached Stoner on September 15, 2008, after the issuance of the September 11 Consent Order.

In the EID, ALJ Luckern determined that the contract between Sinochem and Stoner required “[t]he goods remain the property of the Seller until the complete payment of the price…”  The EID also cited bank records, showing a transfer of the purchase price occurring on August 18, 2008.  Based on this contract language, and the bank records, ALJ Luckern determined that all actions taken by Sinochem with respect to the shipment were completed in August 2008.  ALJ Luckern further determined that no actions could have been taken by Sinochem to cancel or alter the shipment after August 19, 2008.  Thus, INEOS had not established a violation of the Consent Order.

Citing a second alleged violation of the Consent Order, INEOS argued that the Consent Order required Sinochem to convert its facility in China to the manufacture of R-134a by a “new” process, and that Sinochem had failed to do so.  ALJ Luckern determined that conversion of Sinochem’s facilities to the “new” process was only mentioned in the Consent Order’s “WHEREAS clause”, and was not recited in the “operative provisions of the Order.”  The EID also stated that this omission was not viewed as a mere oversight.  Therefore, ALJ Luckern additionally determined that Sinochem’s failure to convert its facility in China to the “new” process, did not constitute a violation of the Consent Order.

Regarding remedy, ALJ Luckern determined that after the September 11, 2008 date of the Consent Order, Sinochem ceased all relevant U.S. sales activity; required all relevant documents with it’s clients to include statements that any products from Sinochem cannot be sold or resold to the U.S.; and decided not to participate in an “AHR” trade exhibition in January of 2009.  The EID also noted that the Commission recently found that claim 1 of the ‘276 patent was invalid.  Based on the foregoing, ALJ Luckern denied INEOS’s request for the issuance of a permanent limited exclusion order and a cease and desist order against Sinochem.

As neither the accused shipment nor the failure of Sinochem to convert to the “new” process violated the Consent Order in issue, ALJ Luckern determined no monetary penalties were warranted.  The ALJ’s recommendation noted that even if a violation of the Consent Order in issue had arguably occurred, the record lacked any evidence of bad faith or intent on the part of Sinochem, harm to the public, or any significant benefit to Sinochem.

By way of background, INEOS Fluor Holdings Ltd., INEOS Fluor Ltd. and INEOS Fluor Americas LLC (collectively, “INEOS”) filed a complaint in December 2007 alleging violations of Section 337 by several respondents including Sinochem in the importation into the U.S., the sale for importation, and the sale within the U.S. after importation of certain R-134a coolant (otherwise known as 1,1,1,2-tetrafluoroethane) by reason of infringement of certain patents, including U.S. Patent No. 5,559,276.  See our April 6 post for more details.  On August 15, 2008, the Sinochem respondents moved for partial termination of the investigation based on the entry of a consent order specific to their “old” process for manufacture of R-134a coolant.  On August 20, 2008, the ALJ issued an initial determination (“ID”) granting the motion and terminating the investigation with respect to the “old” process.  The Commission determined not to review the ALJ’s ID and issued a Consent Order on September 11, 2008.  On December 12, 2008, INEOS filed a complaint, requesting that the Commission institute a formal enforcement proceeding to investigate an alleged violation of the Consent Order relating to the “old” process.  On February 18, 2009, the Commission issued a notice instituting a formal enforcement proceeding.

In the September 21 notice, ALJ Luckern determined that Sinochem “did not violate the Consent Order issued by the Commission on September 11, 2008” and “no enforcement measures are appropriate should the Commission find a violation of said Consent Order.”

The notice issued by ALJ Luckern released only the title page, conclusions of law and the order in connection with the EID.  We will provide additional information once the public version of the EID is issued in its entirety.

The ED found that certain Respondents violated a Limited Exclusion Order, a General Exclusion Order and a Cease and Desist Order issued by the Commission on October 19, 2007.  The Respondents at issue were Ninestar Technology Co. Ltd. and Ninestar Technology Company Ltd. (collectively, “Ninestar”), Town Sky Inc., Mipo International, Ltd. and Mipo America, Ltd. (collectively, “Mipo”), Ribbon Tree (USA) Inc. and Apex Distributing, Inc.

ALJ Luckern found that Ninestar and Town Sky should be found jointly and severally liable for any violations.  Likewise, he held Mipo jointly and severally liable as well as Ribbon Tree and Apex.  Mipo and Ribbon Tree were found in default.  Based on evidence presented by Epson, ALJ Luckern found that the defaulting respondents had violated the Exclusion Orders and recommended imposition of the maximum civil penalty of $100,000 per day or double the value of goods at issue on the day in question.  This amounted to $9.7 million for Mipo and $700,000 for Ribbon Tree.

Ninestar contested the enforcement proceedings.  Ninestar argued that its Fifth Amendment due process rights would be violated if the Orders were applied to remanufactured, as opposed to new, ink cartridges.  ALJ Luckern rejected this challenge, holding that Ninestar was on notice that any ink cartridge covered by the patent claims were subject to the General Exclusion Order.  ALJ Luckern also rejected Ninestar’s affirmative defense of lack of jurisdiction and found that Ninestar had waived its affirmative defenses of permissible repair, invalidity, and inequity of enforcement while reexamination proceedings and an appeal are pending.

Turning to the appropriate penalty, ALJ Luckern analyzed the six so-called EPROMs factors: (1) the good or bad faith of the respondent, (2) the injury to the public, (3) the respondent’s ability to pay, (4) the extent to which the respondent has benefited from its violations, (5) the need to vindicate the authority of the Commission, and (6) the public interest.  ALJ Luckern found all factors weighed against Ninestar.  Of particular interest, ALJ Luckern found that Ninestar “made no effort to comply with the Commission’s orders in this investigation” as evidenced by their continued sale of remanufactured cartridges until at least June 2008.  Further, ALJ Luckern noted that, once importation was made almost impossible due to Customs enforcement, Ninestar continued to unload cartridges under the guise of filling prearranged conditional orders.

Based on Ninestar’s “egregious” violations of the cease and desist order, ALJ Luckern recommended the maximum civil penalty of the greater of $100,000 per day or double the value of goods at issue on the day in question for a total of $20,504,974.16.

ALJ Luckern determined that the Ninestar and Town Sky compatible and remanufactured cartridges at issue are “covered products” under the Cease and Desist Order issued against it by the Commission on October 19, 2007.  ALJ Luckern also determined that Ninestar and Town Sky failed to meet their burden to demonstrate their affirmative defenses and were “jointly and severally liable for violations of the Cease and Desist Orders in the amount of $20,504,974.16.”

ALJ Luckern further determined that Mipo International, Mipo America, Ribbon Tree USA, and Apex sold compatible and remanufactured cartridges that were “covered products” under the Cease and Desist Order issued by the Commission.  ALJ Luckern also determined that the record supports imposition of a $9,700,000 civil penalty against Mipo International and Mipo America for violation of the Cease and Desist Order issued against Mipo America.  Additionally, ALJ Luckern found that the record supports imposition of a $700,000 civil penalty against Ribbon Tree and Apex for violation of the Cease and Desist Order issued against them by the Commission.