On November 30, 2012, ALJ David P. Shaw issued the public version of the Enforcement Initial Determination (“EID”) (dated June 8, 2012) in Certain DC-DC Controllers and Products Containing Same (Inv. No. 337-TA-698).

By way of background, the Commission instituted this enforcement proceeding on September 6, 2011 based on an enforcement complaint filed by Richtek Technology Corp. and Richtek USA, Inc. (collectively, “Richtek”).  The enforcement complaint alleged that Respondents uPI Semiconductor Corp. (“uPI”) and Sapphire Technology Limited (“Sapphire”) had violated consent orders that issued in the underlying investigation on August 13, 2010.  The alleged violations included the continued importing, offering for sale, and selling for importation of DC-DC controllers that infringe one or more claims of U.S. Patent Nos. 7,315,190 (the ‘190 patent); 6,414,470 (the ‘470 patent); and 7,132,717 (the ‘717 patent) and/or that make use of certain misappropriated Richtek trade secrets.  See our July 25, 2011 and September 5, 2011 posts for more details.  On March 20, 2012, ALJ Shaw issued an initial determination granting a joint motion to terminate the enforcement proceeding as to Sapphire based on a settlement agreement.  See our March 22, 2012 post for more details.

In the EID, ALJ Shaw found that uPI had violated the August 13, 2010 consent order in connection with the importation of certain DC-DC controllers and downstream products containing DC-DC controllers.  Accordingly, he recommended, inter alia, that the Commission impose a civil penalty of $750,000 against uPI.

Importation

ALJ Shaw found that the importation requirement had been met both through uPI’s direct sales of DC-DC controllers and through the importation of downstream products manufactured by non-Respondent third parties that incorporated uPI’s formerly accused DC-DC controllers.  The ALJ first found that many of the importations of formerly accused controllers in downstream products had been done pursuant to agreements negotiated between Richtek and the third party downstream sellers, and thus had been done with Richtek’s consent.  And to the extent that the importation of downstream products had been done with Richtek’s consent, such importation did not constitute a violation of the uPI consent order.  ALJ Shaw found, however, that while many of the downstream products fell within the terms of Richtek’s agreements with the third parties, there was also evidence that some downstream importations were not covered by any such agreement and thus did in fact constitute a violation of the uPI consent order.

Additionally, ALJ Shaw found that Richtek had shown that certain other downstream products contained DC-DC controllers that had been developed by uPI after the consent order went into effect on August 13, 2010.  The ALJ found that to the extent that these newly-developed controllers infringed Richtek’s patents or were derived from misappropriated Richtek trade secrets, they would also constitute a violation of the uPI consent order.

Patent Infringement

The ‘190 patent relates to a Pulse Width Modulation (PWM) circuit capable of receiving an external programming signal without any extra pin.  In the original investigation, Richtek had asserted claims 1-11 and 26-27 against each of the Respondents.  In the enforcement proceeding, the parties disputed the meaning of the claim term “programming unit.”  Richtek and the Commission Investigative Staff (“OUII”) argued that the term simply meant “a unit that programs,” while uPI argued that the term was actually a means-plus-function term that needed to be interpreted pursuant to 35 U.S.C. § 112, ¶ 6 (even though it did not contain the word “means”).  ALJ Shaw agreed with Richtek and OUII and found that the term meant “a unit that programs.”

ALJ Shaw then found that Richtek had shown that uPI’s accused products directly infringe all asserted claims of the ‘190 patent.  The ALJ found that, standing alone, the accused chips did not directly infringe the asserted claims of the ‘190 patent because not all required elements of the asserted claims reside within the actual chips.  However, since the chips are never used without being connected to at least two MOSFET circuits, the chips infringe the asserted claims of the ‘190 patent when incorporated into an evaluation board or into one of the accused downstream products.

ALJ Shaw next found that uPI did not contributorily infringe the ‘190 patent because it sells the accused chips outside the U.S. for assembly into downstream products outside the U.S., and thus its activities do not constitute a violation of 35 U.S.C. § 271(c).  With respect to induced infringement, ALJ Shaw found that while there was evidence that uPI had instructed its customers on infringing uses of its chips, there was also evidence that uPI had engaged in good faith efforts to prevent its customers from importing and/or selling such infringing products in the U.S. (as opposed to overseas).

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The ‘470 patent relates generally to a multi-phase DC-to-DC converter, and more particularly to an apparatus and method for balancing the channel currents in a multi-phase DC-to-DC converter.  Richtek had asserted claims 29 and 34 in the original investigation.  In the enforcement proceeding, the parties disputed the meanings of the claim terms “converter” and “multi-input pulse width modulator.”  ALJ Shaw construed “converter” to mean “a circuit capable of converting electricity at one DC voltage level to electricity at another DC voltage level,” as advocated by Richtek and OUII.  ALJ Shaw construed “multi-input pulse width modulator” to mean “circuit with more than one pair of inputs that outputs a pulse width modulated signal,” as advocated by OUII.

ALJ Shaw next found that certain of uPI’s formerly accused DC-DC controllers directly infringe claims 29 and 34 of the ‘470 patent.  He also found that certain of uPI’s newly developed chips infringe these claims.  Thus, any imports, sales for importation, or sales after importation of these chips, or of downstream products containing these chips, would be a violation of the uPI consent order.

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The ‘717 patent relates to a power metal oxide semiconductor transistor layout, and more particularly to a power metal oxide semiconductor transistor layout with a low output resistance and a high current limit.  In the underlying investigation, Richtek had asserted claims 1-3 and 6-9 against each Respondent.  In the enforcement proceeding, the parties disputed the meaning of the claim term “meshwork of conductive lead.”  ALJ Shaw construed this term to mean “a netlike pattern or arrangement of conductive lead,” as advocated by Richtek.

ALJ Shaw next found that certain of uPI’s formerly accused DC-DC controllers directly infringe claims 1-3 and 6-9 of the ‘717 patent.  He also found that certain of uPI’s newly developed controllers infringe these claims in the same manner as the formerly accused products.

Trade Secret Misappropriation

In the underlying investigation, Richtek had accused uPI of misappropriating a total of seventeen trade secrets that Richtek used to develop, market, and manufacture DC-DC controllers for customers in the U.S.  In the enforcement proceeding, Richtek continued to assert three technical trade secrets against uPI:  (1) Trade Secret 11 (Richtek’s circuit schematics and symbol libraries); (2) Trade Secret 12 (Richtek’s circuit layouts and layout files); and (3) Trade Secret 13(a) (Richtek’s ECS.ini files).  The details of these trade secrets are redacted from the public version of the EID.

In the uPI consent order, uPI agreed not to challenge the validity of Richtek’s trade secrets.  However, uPI argued that it had developed its products independently of Richtek—in some cases from publicly available information.

In the EID, ALJ Shaw found that each of the asserted trade secrets was genuine and derived economic value from being kept concealed from the general public.  The ALJ also found that the record contained sufficient evidence that Richtek had made reasonable efforts to preserve the secrecy of its trade secrets.

ALJ Shaw then found that there was sufficient evidence to establish that uPI employees had used Richtek’s trade secrets to design uPI’s first DC-DC controllers.  According to the EID, the weight of the evidence suggested that uPI product families accused in the original investigation were created with the assistance of misappropriated Richtek trade secrets.  Thus, any importation, sale for importation, or sale after importation of these formerly accused products by uPI after August 13, 2010 constituted a violation of the uPI consent order unless done with uPI’s consent.

With respect to new products developed after the consent order went into effect, however, ALJ Shaw found that uPI had taken steps that were sufficient to ensure that these later products were not contaminated by unlawfully obtained material.  Accordingly, the ALJ found that uPI’s newly developed products were not derived from Richtek’s trade secrets and did not violate the uPI consent order on this basis when imported or sold in the U.S.

Remedy

With respect to remedy, ALJ Shaw recommended a modification of the existing uPI consent order to reflect the fact that uPI has acquired new parent companies over the course of the enforcement proceeding.  In particular, ALJ Shaw recommend that the consent order be modified so as to apply to “uPI and its affiliated companies, including but not limited to its parents, subsidiaries, affiliates and related companies.”

ALJ Shaw additionally recommended that, if the Commission finds that uPI has violated the consent order, the Commission should impose a civil penalty equal to $10,000 times the number of days on which an importation or sale occurred in violation of the consent order.  The ALJ noted that the maximum daily penalty available under 19 U.S.C. § 1337(f)(2) is $100,000 or twice the domestic value of the articles entered or sold on such day in violation of a consent order.  However, he found that it would not be appropriate to impose the maximum penalty in this case, and that $10,000 per day would be appropriate.  In particular, the ALJ found that uPI had made certain good faith voluntary efforts to meet the terms of the consent order, including obtaining opinions of counsel, obtaining contractual agreements from distributors not to ship the formerly accused products or downstream products containing them into the U.S., setting up a “new circuit development project” designed to remove the influence of misappropriated trade secrets, and terminating all U.S. sales activities.  Moreover, the six-factor EPROMs test weighed in favor of lowering the penalty against uPI.  Thus, a reduction of the recommended penalty to 10% of the maximum amount was appropriate.

ALJ Shaw further found that there was evidence of a maximum of 75 days “on which an importation of articles, or their sale, occur[red] in violation of the order.”  Accordingly, he recommended a total civil penalty of $750,000.  The ALJ noted that this amount would eliminate any benefit that uPI may have received from downstream sales in violation of the consent order and would be a powerful deterrent to ensure a “sufficiently vigilant posture” towards complying with consent orders in the future.

Lastly, ALJ Shaw recommended denial of Richtek’s request for a general exclusion order, a limited exclusion order, and/or a cease and desist order.  The ALJ found that the existing consent order—with the modification discussed above—was already sufficient.