ITC Finds No Violation of Consent Order and Remands Order Regarding Sanctions in Certain Blowers (337-TA-1217)

On March 14, 2022, the ITC issued a notice of its determination finding no violation of a consent order by Respondents East West Manufacturing, LLC and East West Industries (collectively, “East West”) in Certain Blowers and Components Thereof (Inv. No. 337-TA-1217), and an order remanding the ALJ’s Order No. 36 regarding sanctions in the subsequent enforcement proceeding.

By way of background, the underlying investigation was based on a complaint filed by Regal Beloit America, Inc. (“Regal”) alleging a violation of section 337 by East West in the importation/sale of certain blowers and components thereof used by gas water heater manufacturers that infringe U.S. Patent No. 8,079,834 (“the ’834 patent”).  On October 22, 2020, the ALJ issued an initial determination terminating the investigation based on a proposed consent order, which the Commission entered on November 12, 2020.  In an enforcement complaint, Regal alleged that East West violated the consent order through the importation/sale of a redesigned blower that is virtually identical to the original blower that East West acknowledged infringed the ’834 patent and is covered by the consent order.  The enforcement proceeding was instituted on February 16, 2021.  See our February 4, 2021 and February 18, 2021 posts for more details regarding the enforcement complaint and Notice of Investigation.

On December 14, 2021, ALJ MaryJoan McNamara issued an enforcement initial determination (“EID”) finding no violation of the consent order because East West’s redesigned blower does not literally infringe the claims of the ’834 patent, particularly in light of the purpose and structure of a gasket that is part of and integrated into the redesigned blower.  The EID also addressed “whether Regal and its Counsel or East West and its Counsel should be sanctioned pursuant to Commission Rule 210.4(d)(2), or for violation of any other Commission Rules that are equivalent to Fed. R. Civ. P. 11, that hold parties to the duty of candor and good faith during a Commission proceeding.”  One of the actions scrutinized by the ALJ was Regal’s counsel’s removal of the aforementioned gasket—which was “instrumental in infringement/non-infringement arguments”—from the redesigned blower in the enforcement complaint such that “Regal did not represent accurately [East West]’s Redesigned PDV Blower either in its narrative or in certain photographs attached to its Complaint.”  The EID stated that “[w]hile neither Regal nor East West is being sanctioned with monetary sanctions, the outcome hinged, at least in part, on listening to the testimony of the lawyers with respect to their interactions before and after the enforcement complaint was filed, and an analysis of the strict legal application of Commission Rule 210.4(d)(2).”  ALJ McNamara also issued Order No. 36 which denied East West’s motion for monetary sanctions, but ordered Regal to correct potentially misleading portions of the enforcement complaint.  See our January 10, 2022 post for more details regarding the EID.

According to the notice, the Commission bifurcated its review of Order No. 36 from the EID.  Upon review of the record and the parties’ submissions, the Commission affirmed (with modifications) the EID’s finding that East West did not violate the consent order.  The Commission also remanded Order No. 36 to the ALJ for a revised order regarding sanctions, and will consider Order No. 36 in the separate sanctions proceeding.  According to the remand order, the ALJ must “specify and explain whether she intends that the directives issued to Regal that are set out in Order 36—a warning and a direction to redact all misrepresentations in the Enforcement Complaint—constitute nonmonetary sanctions under 19 C.F.R. § 210.4(c) and (d); and, if so, to (1) specify whether the directives in Order 36 were issued pursuant to 19 C.F.R. § 210.4(d)(1)(i) or (ii); and (2) identify the attorneys, law firms, or parties that have violated 19 C.F.R. 210.4(c) or are responsible for the violation, and to whom the sanctions apply.”  Commissioner Schmidtlein did not join the majority’s determination to remand the sanctions issue, stating that there was “no need” for further clarification and that she would have affirmed ALJ McNamara’s order.