By Eric Schweibenz
Further to our September 24 post, on October 7, 2009, Chief ALJ Paul J. Luckern issued the public version of the Enforcement Initial Determination (“EID”) in Certain R-134a Coolant (Otherwise Known as 1,1,1,2-Tetrafluoroethane) (Inv. No. 337-TA-623).  In the EID, ALJ Luckern determined that enforcement Respondent Sinochem Environmental Protection Chemicals (Taicang) Co., Ltd. (“Sinochem”) did not violate the Consent Order issued by the Commission on September 11, 2008.  ALJ Luckern also determined that no enforcement measures are appropriate should the Commission find a violation of the Consent Order.

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.