On July 14, 2009, Chief ALJ Paul J. Luckern issued the public version of the April 17, 2009 Enforcement Initial Determination (“ED”) in Certain Ink Cartridges and Components Thereof (337-TA-565).  See our April 21 post.  The underlying investigation was requested by Complainants Seiko Epson Corporation, Epson America, Inc., and Epson Portland Inc. (“Epson”).

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.