ITC 337 Quarterly Insider Q1 2020

As with the rest of the word, coronavirus issues were top of mind at the ITC in Q1.  On March 18, the Commission cancelled all hearings scheduled between then and mid-May. This has resulted in a number of cases being put on extended timelines, which is certainly not surprising.  In-person events at the ITC are expected to track the Federal government’s guidance in the weeks and months to come.

Another aspect of Commission practice affected is paper copy filings. Paper filings are no longer permitted and everything is being done electronically via EDIS. The Commission’s most up-to-date guidance on its handling of the global pandemic can be found here.

In terms of substance, the Federal Circuit issued an opinion in one of Comcast’s long-running disputes with Rovi that confirmed the Commission can exclude imported components that indirectly infringe a complainant’s patents. At the Commission level, Judge Elliot’s finding of default in the 1159 Investigation was quite notable due to the severity of the sanction. This decision is being reviewed by the Commission and it will be interesting to see how the Commission rules. Judge Elliot, for his part, found the respondents deliberately destroyed potentially relevant information. As a result, Judge Elliot held that the respondents should be held in default and subject to an exclusion order. Judge Elliot issued his decision prior to trial.

In Investigation No. 337-TA-1082 (Certain Gas Spring Nailers and Components Thereof), the Commission issued a confidential opinion supporting a limited exclusion order, and a cease and desist order, based on the judge’s finding of patent infringement in a Remand Initial Determination.  The public Commission Opinion has not been published.

The Commission also issued opinions in Investigation Nos. 1100 and 1130 that just became public. These opinions will be covered in Q2.

Motion for Summary Determination Granted on Two Redesigns Included Within Scope of Investigation

In the Matter of CERTAIN POWERED COVER PLATES , Inv. No. 337-TA-1124, Remand Initial Determination (Jan. 30, 2020)

Before: Judge McNamara

Practice Tips and Insights:

Although complainant did not assert claims against certain redesigns, Judge McNamara determined that the products were properly within the scope of the investigation, given that the respondent imported those products and produced evidence in discovery concerning the redesigns. Judge McNamara further found that complainants had foregone an opportunity to amend their complaint to add claims against the redesigns and had failed to put forth evidence regarding their alleged infringement. Complainants should be cautious to carefully review all products on which information is produced in discovery and to quickly amend their complaints if there appear to be additional infringing products.

Holding and Status:

Respondent’s Motion for Summary Determination was granted with respect to two redesigns. A decision has not been reached with respect to the accused products.

Case Background:

The 1124 Investigation is based on alleged patent infringement by powered cover plate redesign models. The respondent asserted the standard defense of non-infringement as to several claims.

In October 2019, the Commission issued an Order (“Remand Order”) remanding the Initial Determination’s finding that Respondent Enstant Technology Co., Ltd.’s (“Enstant”) Motion for Summary Determination of Non-Infringement of U.S. Patent No. 9,882,361 by Redesign Models P0001 and P002 was rendered moot by granting certain motions in limine excluding evidence of the redesigns. The Remand Order ordered Judge McNamara to issue a written decision on the Redesign MSD, orally granted during a teleconference. On remand, Judge McNamara affirmed the earlier holding.

Notable Disputed Issues and Related Points of Law:

Redesigns within the Scope of the Investigation: Judge McNamara held that respondent’s redesigns were within the scope of the investigation because they fell within the scope of the Notive of Investigation (NOI) and respondent imported samples of the redesigns into the United States. Evidence of each redesign sample being sold at least once was also present, properly placing the products within the Commission’s jurisdiction.

Redesigns Are Fixed and Not Hypothetical: Because respondent: (1) produced physical samples of the redesigns in discovery; (2) imported the redesigned products into the United States; and (3) sold samples of the redesigns, Judge McNamara rejected complainant’s argument that the redesigns were merely “hypothetical” as not “ready for release and sale as commercial products.” In rejecting this argument, Judge McNamara noted that readiness for sale as a commercial product was not a bar to the Commission’s consideration of a product.

Discovery: Although the complainant did not act with respect to the redesigns prior to the respondent’s Motion for Summary Determination (MSD), Judge McNamara found that the products were properly within the scope of the investigation because information about the products was produced in discovery and Complainant had an opportunity to present evidence regarding the redesigns at the hearing. In particular, Judge McNamara found that sketches provided by respondent of the redesign were sufficient to allow complainant to amend its complaint to allege the redesigns infringed additional patents. Moreover, complainant later responded to samples of the products by providing infringement charts for some patents, but not another. Complainant’s expert also declined an opportunity to opine on the redesigns during his deposition.

No Infringement: After affirming that the redesigns were properly considered in the investigation, Judge McNamara affirmed the earlier finding that there was no evidence of literal infringement or infringement through equivalents, as the redesigns failed to include required design elements in the asserted patent. Accordingly, respondent’s MSD with respect to the redesigns was granted.

Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Bonding

In the Matter of CERTAIN WIRELESS MESH NETWORKING PRODUCTS AND RELATED COMPONENTS THEREOF , Inv. No. 337-TA-1131, Initial Determination (Jan. 10, 2020)

Before: Judge Lord

Practice Tips and Insights :

This was mostly a run-of-the-mill patent infringement dispute with a licensing-based domestic industry. However, an interesting point regarding the timing of the domestic industry inquiry was raised by the parties. Namely, the parties disputed whether a third party’s products were “too old.” The Judge determined that a domestic industry can be based on products that are discontinued prior to the filing of the complaint.

Holding and Status :

Neither of the two asserted patents were found to be infringed. No claims of the ’893 patent were found invalid, but claims 1, 2, 9, and 10 of the ’708 patent were found invalid. There was no violation for either asserted patent because, although the technical prong of the domestic injury requirement was satisfied for claims 1, 2, and 10 of the ’708 patent, the economic prong was not satisfied with respect to any domestic industry product under either patent, and there was no infringement.

Case Background :

The investigation is based on alleged violations of section 337 of the Tariff Act of 1930. Two asserted patents remained in the investigation following termination of certain asserted claims: U.S. Patent No. 6,914,893 (“the ’893 patent”) and U.S. Patent No. 8,964,708 (“the ’708 patent”).

Notable Disputed Issues and Related Points of Law :

Indirect infringement: Complainant SIPCO argued that Respondent Analog indirectly infringed the asserted claims of the ’708 patent by inducing Emerson and others to infringe the asserted claims using accused Emerson products. Indirect infringement requires showing that the asserted claims are directly infringed by someone else, which Judge Lord held SIPCO had not successfully shown. Similarly, Judge Lord found that SIPCO failed to show underlying direct infringement of the ’893 patent. With no showing of direct infringement, Complainant’s indirect infringement claims failed.

Domestic industry (technical prong): The technical prong of the domestic industry requirement requires the existence of a physical embodiment of the patented invention. Under the asserted claims of the ’893 patent, this physical embodiment must be a system of devices in a network. Complainant SIPCO relied on evidence of Honeywell (a licensee) networks, but Respondents argued this evidence was “too old.” Judge Lord disagreed that there is a temporal requirement for the economic prong and found that “a domestic industry can exist at the time of the complaint even when the domestic industry products have been discontinued.” Despite this, Judge Lord found that the technical prong of the domestic industry for the ’893 patent was not satisfied because the Honeywell products referenced did not practice the “scalable address” limitation.

Domestic industry (economic prong): Complainant SIPCO alleged that it satisfied the economic prong of the domestic industry requirements with its own licensing expenditures. Specifically, in support of economic prong subparagraphs (A), (B), and (C), SIPCO pointed to facilities it uses to conduct its licensing operations, activities of the employees in its licensing operations, and licensing agreements covering at least one of the asserted patents with approximately 100 companies, respectively. Because SIPCO failed to tie these expenditures to a domestic industry product, they did not and could not satisfy the economic prong requirements.

Scope of exclusion order: Respondent Emerson argued that the exclusion order should be limited to infringing articles and should exclude sales to current SIPCO licensees. Respondent Analog took a similar position: any exclusion order should be limited to the violating products of named respondents and must be narrowly tailored because SIPCO had a history of misleading conduct. Judge Lord did not agree with Respondents’ arguments to limit an exclusion order, if one were to issue, as this would “deprive SIPCO of the full relief to which it is entitled.”

Cease and desist order: Complainant SIPCO argued that a cease and desist order was necessary to provide a complete remedy because Respondents or their proxies maintained “commercially significant inventories of infringing products.” Respondents argued that complainant failed to show a commercially significant inventory of imported, infringing products. The Judge noted that the respondent “is in the best position to identify items in its inventory that are not imported or infringing.” Page 168 of the Initial Determination (ID)is missing from the public record, but it appears that a Cease and Desist Order (CDO) was likely recommended in at least some form if the Commission reverses on violation.

Bond: Complainant SIPCO argued that a bond of 100% was necessary for its entire portfolio of over 60 patents. Respondents disputed that SIPCO’s royalty rate for the entire portfolio does not reflect the value of the assert patents. Rather, Respondents argued that SIPCO’s royalty rates should be applied pro rata, amounting to a rate of 0.1% or 0.05%. Judge Lord agreed that SIPCO’s proposed bond rate was inappropriate and recommended that, if any bond is imposed, it be at the rate of 0.1% or 0.05%, depending on the number of patents for which a violation is found.

No Violation of NPE’s Allegedly Standard Essential Patents

In the Matter of CERTAIN LTE- AND 3G-COMPLIANT CELLULAR COMMUNICATIONS DEVICES , Initial Determination (Mar. 9, 2018)

Before: Judge McNamara

Practice Tips and Insights:

Complainant’s asserted patents were alleged to be standard essential, and thus infringed by the standard-compliant accused products and practiced by the standard-compliant Domestic Industry products. Respondents successfully attacked the essentiality of the asserted patents, heading off one of Complainant’s infringement theories and technical Domestic Industry theories. Respondents defending against infringement allegations of allegedly standard essential patents at the Commission should be prepared to challenge the essentiality of the asserted patents in addition to whether the accused products and Domestic Industry products meet the limitations of the asserted claims

Holding and Status:

No violation of Section 337 was found. Complainant failed to prove that any of the accused products or the Domestic Industry products practice any of the asserted claims of the three asserted patents. Complainant has petitioned for Commission Review. Respondents have requested review of certain aspects of the Initial Determination, contingent on Complainant’s petition being granted.

Case Background:

The 1138 Investigation is based on alleged patent infringement. In its complaint, INVT SPE LLC (INVT), a non-practicing entity, asserted three patents it alleged are essential to the 3G and LTE mobile standards against Apple and various HTC and ZTE entities. The accused products include Apple, HTC, and ZTE mobile phones and tablets. The alleged Domestic Industry products include licensed Samsung mobile phones. The respondents asserted standard defenses of non-infringement, invalidity, and no domestic industry.

Notable Disputed Issues and Related Points of Law:

Infringement: Complainant argued that the accused products infringe the asserted claims because the accused products are compliant with the 3G and LTE standards and the asserted claims read on those standards, i.e. are standard essential. For two of the asserted patents, the judge found that an encoding feature of the 3G and LTE standards operates in a fundamentally different way than the “encoding” as recited in the asserted claims. With respect to the third asserted patent, Complainant’s expert testified that an element of the asserted claim is standard-essential because the accused products are “capable” of meeting the element. Essentiality, however, and infringement by extension, cannot be established by showing that a standard is merely capable of meeting a claim. Accordingly, the judge found that compliance with the standards was insufficient to demonstrate that the accused products infringed. Complainant failed to otherwise prove that the accused products infringe the asserted claims.

Domestic Industry (technical prong): Complainant alleged that the Domestic Industry products practice the asserted claims for the same reasons the accused products infringe—because they are compliant with the relevant standards. Complainant failed to prove that the asserted claims were standard essential, however, and therefore the judge found that compliance with the standards was insufficient to show that the Domestic Industry products practice the asserted claims. Complainant failed to otherwise prove that the Domestic Industry products practice the asserted claims.

Domestic Industry (economic prong): Complainant’s domestic industry products included licensed Samsung Galaxy phones and tablets. Respondents argued that the licensed Samsung Galaxy phones and tablets were not the relevant articles for purposes of the Domestic Industry analysis, but rather the relevant articles were the System-on-Chips (SoCs) incorporated into the phones and tablets. The judge rejected Respondents’ argument and found that the Samsung phones and tablets were the relevant articles, and thus Samsung’s activities supporting those products were properly considered in the economic Domestic Industry analysis. The Notice of Institution encompassed devices “which enable LTE and/or 3G data transfer and communications,” and Respondents did not dispute that the Samsung phones and tablets perform that function. Additionally, the SoCs were essential components of the Domestic Industry products, sold in commerce only to be incorporated into the phones and tablets. Thus, the phones and tablets were the relevant articles considering the “realities of the marketplace.”

Unclean Hands: Respondents argued that Complainant was barred from obtaining relief at the Commission because Complainant failed to meet its FRAND obligations with respect to the asserted patents. The judge rejected Respondents’ argument because Complainant’s alleged misconduct lacked any connection to infringement. None of the asserted patents were found to be essential and thus were not subject to FRAND obligations; the unclean hands defense was inapplicable.

Judge Elliot finds no violation due to findings of invalidity

In the Matter of CERTAIN MULTI-STAGE FUEL VAPOR CANISTER SYSTEMS AND ACTIVATED CARBON COMPONENTS THEREOF , Inv. No. 337-TA-1140, Initial Determination (Jan. 28, 2020)

Before: Judge Elliot

Practice Tips and Insights:

The respondents were successful in invalidating the asserted claims. However, the judge noted that the respondents’ invalidity theories covered more than the asserted claims. For non-asserted claims, the judge did not render an opinion. Respondents cannot get an invalidity finding for claims that are not asserted for infringement purposes or relied upon for domestic industry purposes.

Holding and Status:

The asserted patent was found to be infringed but the judge found no violation because he found the asserted claims were invalid as anticipated and/or obvious. He also found certain asserted claims were indefinite.

Case Background:

This Section 337 Investigation is based on alleged patent infringement. The named respondents asserted standard defenses of non-infringement, invalidity, and no domestic industry.

The respondents MAHLE and Nagamine disputed the importation requirement had been met but Judge Elliot disagreed and found that there was evidence that each Respondent had either sold an accused product for importation, or sold an accused product after importation.

Notable Disputed Issues and Related Points of Law:

Infringement: Respondents presented several arguments to contest whether Complainant’s expert testing was reliable such that it showed infringement of claimed adsorption values. Among these arguments, Respondents argued that the methods used by the expert to test the accused products were not available to a person of ordinary skill in the art at the priority date of the patent. Judge Elliot dismissed that argument as having no bearing on the reliability of the testing, adding that he would hope any testifying expert would use the most accurate or reliable techniques available to them to determine a critical characteristic to a claim for patent infringement. In addition, Respondents argued that the preponderance of the evidence standard requires Complainants to show that there is a greater than 50% likelihood that an accused product infringes. Taking the expert’s data at face value, only 1 of 2 samples for three accused products had been shown to meet the disputed claim limitation, and is therefore insufficient under the preponderance of evidence standard. Judge Elliot dismissed this argument as the results from both samples consisted of an average, and when looking at the individual data, 2 of the 19 results for each sample did not meet the claimed limitation.

Domestic Industry (technical prong): When analyzing whether Complainants’ domestic industry products satisfied the technical prong, Judge Elliot considered certain inconsistencies between Complainant’s expert testimony during the hearing and a summary table discussed during that testimony. For example, the summary table stated that certain claims were not met by certain products, whereas in the question and answer which followed during the hearing, Complainant’s expert testified that those products did practice the claims in question. Considering this conflict, Judge Elliot disregarded the summary table as unreliable and focused solely on the testimony from the subsequent question and answers. In addition, testimony from Respondents’ expert also lacked clarity such that Judge Elliot was unable to determine with specificity which models the expert alleged did not satisfy the technical prong.

Patent Exhaustion: Respondents raised patent exhaustion as a defense on the basis that Complainant sold to one of the respondents a product which substantially embodied the asserted patent, and that product was used in a larger accused product. Judge Elliot found no patent exhaustion on the basis that the exhaustion only existed with respect to the product sold, and not the larger product in which it might have ended up. Complainant’s theory of infringement did not encompass the product sold to the respondent at issue.

Remedy: While Judge Elliot found the asserted patent to be invalid, he recommend that a limited exclusion order be granted should the Commission find a violation. Respondents had argued for a delay and grandfather clause to the exclusion order based on public interest, but Judge Elliot held that as the Commission had not directed him to make findings based on public interest, he declined to determine whether such delay or grandfather clause was warranted. Judge Elliot also recommended a cease and desist order with respect to one of the respondents based on commercially significant inventory in the US, and a 100% bond during the presidential review period, if a violation were found.

Invalidity and Unenforceability: The invalidity and unenforceability analyses were fairly straightforward from a substantive law standpoint. However, there were some procedural comments that were notable. Particularly, Judge Elliot explained that patent exhaustion was neither a theory of invalidity nor unenforceability, but was addressed for convenience. Additionally, Judge Elliot refused to provide an opinion on invalidity theories that covered unasserted claims because doing otherwise would be rendering an improper advisory opinion.

Motion for Summary Determination Denied Because of Disputed Issues of Fact and a Disputed Legal Issue of First Impression

In the Matter of CERTAIN BOTULINUM TOXIN PRODUCTS, PROCESSES FOR MANUFACTURING OR RELATING TO SAME AND CERTAIN PRODUCTS CONTAINING SAME , Inv. No. 337-TA-1145, Order No. 35 Denying Complainants Allergan plc, Allergan, Inc., and Medytox Inc.’s Motion for Partial Summary Determination (January 23, 2020)

Before: Judge Shaw

Practice Tips and Insights:

A judge is unlikely to grant summary determination in favor of Complainants where there are disputed issues of fact, particularly where Complainants fail to present clear evidence regarding investment and value added specifically directed to the United States market. Furthermore, failure to address relevant legal authority that creates a potential legal issue of first impression also precludes summary determination.

Holding and Status:

Judge Shaw held that Complainants were not entitled to summary determination because there were contested legal issues of first impression, and disputed facts relating to “nearly the entire domestic industry issue in this investigation.”

Order Background:

The instant order denied Complainants’ motion for partial summary determination on the domestic industry requirement.

Notable Disputed Issues and Related Points of Law:

Disputed Questions of Fact Preclude Summary Determination: The judge noted that granting Complainants’ motion would require resolving contested issues of fact in Complainants’ favor. Specifically, Complainants failed (1) to examine the value added to Botox in the United States, (2) to specify whether the itemized equipment and investments in labor and capital were used only for Botox.

Failure to Address Legal Authority Cited by Respondents: The judge also noted Complainants’ failure to address a Commission opinion raised by Respondents in their opposition. Respondents cited Certain Carburetors and Prods. Containing Such Carburetors, Inv. No. 337-TA-1123, Comm’n Op. (Oct. 28, 2019) in support of the argument that Complainants must compare investments made by Allergan with those made by Medytox, and investments made domestically with those made abroad. Complainants failed to conduct such an analysis and did not indicate whether they believed such an analysis was applicable.

Motion for Partial Termination Granted Because Complainants Did Not Have Standing to Sue

In the Matter of CERTAIN VEHICLE SECURITY AND REMOTE CONVENIENCE SYSTEMS AND COMPONENTS THEREOF , Inv. No. 337-TA-1152, Order No. 18, Initial Determination Granting Respondents’ Motion for Partial Termination (January 9, 2020)

Before: Judge Lord

Practice Tips and Insights:

Prior to filing its complaint, a complainant should confirm that the evidence showing ownership of the asserted patent(s) and the exhibits to establish standing clearly and unmistakably show actual transfer of ownership of the asserted patent(s) to the complainant. Any errors in patent ownership should be corrected immediately in a motion seeking to amend the complaint.

Holding and Status:

Complainant Directed could not establish standing to sue with respect to two patents because (1) the contractual language of the asset purchase agreement merely indicated that the actual transfer of the asserted patents was to occur in the future and thus, the agreement conveyed no actual rights to the patents at issue; and (2) Directed did not amend its complaint to allege that the assignment of patents recorded at the Canadian Patent Office (“CPA”) proved its ownership of the subjected patents.

Order Background:

The instant order grants Respondents’ motion for partial termination with respect to two patents for lack of Complainants’ standing to sue.

Notable Disputed Issues and Related Points of Law:

Burden To Establish Standing Is On Complainant: The Commission’s rules and federal law require that a complainant show that it has the necessary interest in an asserted patent to establish standing to sue. Indeed, standing cannot be waived and may be raised at any stage of the litigation. Judge Lord granted Respondents’ motion for partial termination because of the prejudice to Respondents, who were not placed on notice of the CPA recordation until after the close of discovery. Additionally, Judge Lord took into account the public interest and explained that the public interest would not be served by permitting an amendment to allege new grounds for satisfying the standing requirement two weeks before the evidentiary hearing.

Discovery Sanctions Imposed for Various Procedural Missteps

In the Matter of CERTAIN REPLACEMENT AUTOMOTIVE SERVICE AND COLLISION PARTS AND COMPONENTS THEREOF , Inv. No. 337-TA-1160, Order Nos. 16 and 21 Granting in Part Complainant Hyundai’s Motion to Compel and Granting Hyundai’s Motion to Strike Witness Statements. (July 24, 2019)

Before: Judge Bullock

Practice Tips and Insights:

This decision shows the importance of involving outside counsel early in the discovery process and the importance of a formal litigation hold policy, so that the parties can satisfy the judge that they fulfilled all of discovery obligations in the event of a discovery dispute.

Holding and Status:

Judge Bullock ordered Respondent and its counsel to file declarations attesting to fulfillment of their discovery obligations; allowed Complainant to take depositions (via letters rogatory) after the close of discovery; and struck the testimony of Respondent’s undisclosed rebuttal witnesses.

Order Background:

The instant orders arose from certain litigation missteps, resulting in the production of documents after the close of fact discovery.

Notable Disputed Issues and Related Points of Law:

Failure to Implement a Litigation Hold: Respondent represented that it had produced all responsive, non-privileged documents in its possession, custody, or control. However, because Respondent had failed to implement a formal litigation hold, the judge ordered Respondent and its attorneys to submit declarations affirming that no documents had been destroyed, purposefully or accidentally, since the beginning of the Investigation.

Document Production Managed Without Attorney Supervision: The judge found that it was improper for counsel for Respondent to rely solely on Respondent’s owner, who was not an attorney, to determine what documents were responsive. The judge ordered counsel for Respondent to submit a declaration attesting that all responsive, non-privileged documents were produced.

Documents Produced After the Close of Fact Discovery and the Filing of a Motion to Compel: After fact discovery closed and the Complainant had filed the instant motion to compel, Respondent produced an additional 59,854 documents. In its reply, Complainant asked to reopen discovery so that it could depose individuals whose relationships to Respondent were revealed in the new documents. The judge held that Complainant was entitled to discovery and that requiring it to make the request in a new motion to compel would waste judicial resources.

Deposition of Non-Employee Individuals Abroad: Complainant sought to depose two individuals tangentially involved with Respondent as de facto employees. The judge held that Complainant was entitled to depose these individuals only as non-employees. Complainant would need to move that the judge recommend the U.S. District Court for the District of Columbia issue letters rogatory to depose these individuals abroad.

Failure to Disclose Witnesses: Respondent failed to file a tentative list of witnesses it intended to call at trial, as required by the procedural schedule. Respondent also failed to follow Ground Rule 2, which requires the filing of a motion to modify the procedural schedule. When Respondent offered rebuttal witnesses in response to allegedly new and allegedly false testimony offered by Complainant, the judge struck the witnesses, criticizing Respondent for choosing “to seek forgiveness, instead of ask[ing] for permission”; the judge noted that Respondent could present its position by cross-examining Complainant’s witness.

“Mere Importers” Cannot Satisfy the Domestic Industry Requirement Even in Non-Patent Cases

In the Matter of CERTAIN FOODSERVICE EQUIPMENT AND COMPONENTS THEREOF , Inv. No. 337-TA-1166, Order No. 17, Denying Staff’s Motion for SD (Feb. 25, 2020)

Before: Judge Lord

Practice Tips and Insights:

ITC judges are fairly consistent in warning that opposed summary determination motions are difficult to win given the proximity to trial. This case is a good reminder of that mantra because despite the support of the OUII Staff on the issue of the economic prong not being met, summary determination was denied.

Additionally, the domestic industry dispute here is interesting because it is for a trade secret case. The respondents and OUII Staff argued in part that to satisfy the domestic industry requirement in non-patent cases, there must be a “significant industry.” The judge disagreed and said the proper inquiry is whether “there is enough significant value added domestically to the domestic industry products to show Complainants are not mere importers.” This is another non-patent case that could form the basis for significant future precedent because it addresses domestic industry issues that have been relatively unchallenged in the Commission’s past We are watching it closely.

Holding and Status:

The respondents and the OUII Staff filed motions for summary determination that there was no domestic industry. Judge Lord found there were material issues of fact for trial.

Notable Disputed Issues and Related Points of Law:

Domestic Industry (trade secrets): The respondents and the OUII Staff argued that the complainants cannot satisfy the domestic industry requirement because there was not a “significant domestic industry” and because all relied-upon expenditures were merely marketing expenditures. The judge confirmed that for trade secret cases (like patent cases) the rule that marketing activities cannot form the sole basis for a domestic industry applies. Nevertheless, the judge found that the respondents and the Staff were applying the wrong domestic industry standard and some of the relied-upon activities may be shown at trial to be non-marketing activities. The inquiry the judge intends to apply at the hearing and beyond is whether “there is enough significant value added domestically to the domestic industry products to show complainants are not mere importers.”

Do Not Destroy Documents When a Potential Dispute Looms, Certainly Not After the Duty to Preserve Is Triggered

In the Matter of CERTAIN LITHIUM ION BATTERIES, BATTERY CELLS, BATTERY MODULES, BATTERY PACKS, COMPONENTS THEREOF, AND PROCESSES THEREFOR , Inv. No. 337-TA-1159, Initial Determination (Feb. 14, 2020)

Before: Judge Elliot

Practice Tips and Insights:

A deliberate search for documents relevant to an on-going dispute for the purpose of destroying such documents is sanctionable and may warrant a default judgment against the offending party.

Holding and Status:

Respondents were found to be in default because the spoliated evidence had direct relevance, or at least “might have been” relevant, to almost all aspects of the allegations in the complaint. As a result of respondents’ actions, the Judge found complainant’s ability to pursue its case and the court’s “ability to oversee a fair and timely investigation on the merits have been significantly prejudiced. The evidence overwhelmingly shows this prejudice was the result of acts committed with bad faith, with the intent to create this exact impairment.”

Case Background:

The 1159 Investigation is based on alleged misappropriation of trade secrets. Specifically, Complainant (“LG”) alleged that Respondents (“SKI”) misappropriated a number of LG’s Trade Secrets directed to the design, development and manufacture of electric vehicle (“EV”) batteries. The allegations further stated that SKI did so by conspiring with then-LG employees—who have since moved to SKI—to transfer LG’s Trade Secrets, including proprietary manufacturing processes and systems for the production of EV batteries.

In the course of discovery, LG identified production deficiencies based, in part, upon a spreadsheet produced by SKI that allegedly showed “a deliberate effort to locate and destroy documents central” to the investigation. According to LG, the spreadsheet was located in the recycling bin of a former LG, now-SKI employee. The spreadsheet identifies itself as a list of “documents extracted” based on a keyword search for those documents “that can be misleading due to their titles if accessed externally.” LG also noted the metadata for the spreadsheet indicated that it was created days after LG sent a cease and desist letter to SKI.

Granting the ensuing motion to compel, Judge Elliot ordered a detailed forensic examination. In part, the Order directed SKI to search for and produce any documents relating to LG or the investigation that may have been deleted—as the spreadsheet strongly suggested had occurred—and provide updates to LG while also allowing an LG outside expert to observe the process.

SKI’s attempts to address that Order, and subsequent related disputes led LG to file a motion for sanctions and default for alleged violation of Judge Elliot’s Order as well as alleged spoliation of evidence.

Judge Elliot concluded that the developed record showed that “SKI both actively and passively destroyed documents.” For example, the day after, and indeed in response to, the news of the investigation, an SKI employee sent an email, instructing the recipients to “[d]elete every material related to the rival company from every single individual’s PC, mail storage archives and team rooms. ASAP. Make sure to especially scrutinize SKBA. PCs may even be subject to seizure and examination. Delete this email after completing this directive.” Additional evidence showed that no efforts were made to remediate these instructions. Nor were any attempt to recover such deleted documents from the recycle bins which would have kept the deleted documents for 30 days.

Notable Points of Law:

Clear and convincing evidence of bad-faith spoliation and prejudice to the opposing party results in a sanction of dismissal or default.

General Exclusion Order Recommended In Investigation Against Multiple Defaulting Respondents Found to Infringe Certification Trademark

In the Matter of CERTAIN FOOD PROCESSING EQUIPMENT AND PACKAGING THEREOF , Inv. No. 337-TA-1161, Initial Determination (Feb. 18, 2020)

Before: Judge Shaw

Practice Tips and Insights:

The judges continue to be willing to recommend general exclusion orders in trademark cases when there is difficulty in identifying the importers and manufacturers of infringing products in investigations where the respondents default Accordingly, filing a Section 337 complainant can be a cost-effective way of obtaining broad relief against multiple small infringers.

Holding and Status:

Judge Shaw found that multiple defaulting respondents imported products with false certification marks and that this widespread infringement injured Complainant SSI through loss of licensing fees and damage to its reputation. Judge Shaw further found that a general exclusion order was appropriate given a widespread pattern of infringement and difficulty in identifying the manufacturers and importers of the infringing products.

Case Background:

The 1161 Investigation is based on alleged common law trademark infringement. The named respondents defaulted. Given the widespread pattern of infringement by multiple small respondents and the difficulty in identifying the manufacturers and importers of the products bearing the false certifications, Judge Shaw recommended the issuance of a general exclusion order and 100% bond if any respondent attempted to import products during the Presidential Review Period.

Notable Points of Law:

General Exclusion Order: A general exclusion order is appropriate in investigations involving numerous small importers and manufacturers of products bearing infringing certification marks where it is difficult to identify both the importers and the manufacturers.

Injury to Domestic Industry: in a common law trademark infringement case based upon a certification mark, injury was shown through loss of licensing fees and harm to the goodwill of the trademark owner due to the use of fake certifications of compliance trademarks.

ITC’s Jurisdiction Over Components that Indirectly Infringe Affirmed

Comcast Corp. v. Int’l Trade Comm’n, Nos. 2018-1450, 2018-1653, 2018-1667 (Fed. Cir. Mar. 2, 2020) (on appeal from Inv. No. 337-TA-1001)

Before: Federal Circuit (Newman, Reyna, and Hughes)

Practice Tips and Insights:

The Federal Circuit reminded us that imported components found to indirectly infringe asserted patents can be excluded by the Commission.

Holding and Status:

The Federal Circuit affirmed the Commission’s determination that a limited exclusion order for indirectly infringing components was within the Commission’s discretion.

Case Background:

Rovi filed a 337 complaint alleging a violation of Section 337 by certain imported set-top boxes. The complaint alleged that the set-top boxes infringed patents directed to an interactive television program guide system for remote access to television programs when the imported boxes were used on a domestic network. The judge determined that the set-top boxes were indirectly infringing and therefore should be excluded from importation because the asserted patents were not invalid. The Commission affirmed.

Notable Disputed Issues and Related Points of Law:

Indirect Infringement: One of the primary appeal arguments was that the Commission had no basis for excluding the imported set-top boxes because they do not infringe at the time of importation. The appellants stated that the alleged indirect infringement was “unrelated to the article’s importation” and therefore the Commission has no authority to exclude the set-top boxes. The Federal Circuit disagreed. Particularly, the Federal Circuit confirmed that “Section 337 applies to articles that infringe after importation.”

Importation: Comcast argued that it was not an “importer” of the set-top boxes because only ARRIS or Technicolor were importers of record. The Federal Circuit disagreed. Instead, the Federal Circuit found that Comcast “requires ARRIS and Technicolor to handle importation formalities, such as fees, documentation, licenses, and regulatory approvals.” Based on this evidence, the Federal Circuit held that Comcast was “sufficiently involved” in the importation process in order to be considered an importer and subject to the Commission’s exclusion order.

Limited Exclusion Order: ARRIS and Technicolor were named respondents that were found not to infringe the asserted patents because they were liable for neither indirect nor direct infringement. Nevertheless, the Commission’s exclusion order applied to set-top boxes these respondents import on behalf of Comcast. ARRIS and Technicolor argued on appeal that it was improper to subject them to an exclusion order when they were found to not infringe. But, because the remedy was limited to boxes imported on behalf of Comcast, the Federal Circuit held that “the limited exclusion order is within the Commission’s discretion as reasonably related to stopping the unlawful infringement.”

The Commission’s response to the coronavirus outbreak is certainly notable.  The Commission remains open for business, but various precautions are being taken to assure social distancing and other safety measures are maintained.  Cases scheduled for hearing between March and May have been pushed back.  The situation is fluid and we will be watching to see when in-person events can resume. The Commission’s most up to date guidance on its handling of the global pandemic can be found here

The Court of International Trade currently has an interesting dispute in Writgen vs. Department of Homeland Security (Case No. 20-00027). There, Writgen had purported design arounds that allegedly fall outside the scope of a limited exclusion order. Those design arounds, however, were blocked by customs and Writgen’s custom protests were also denied. Writgen filed a complaint with CIT seeking release of its design around products for importation. Customs is arguing that the CIT does not have jurisdiction to overrule customs’ decisions on protests.

The Quarterly Numbers

Event	Amount
New Institutions	7 (1189-1195)
Judge Initial Determinations	8 (1131, 1140, 1124- remand, 1142, 1161, 1138, 1133, 1154)
Holdings of No Violation in ID	5 (1131, 1140, 1124, 1138, 1154)
Holdings of Violation in ID	3 (1142, 1161, 1133)
Commission Opinions (reviewing IDs)	4 (1100, 1139, 1082, 1130)
Holdings of No Remedy by Commission	0
Holdings of Remedy by Commission	4 (1100, 1139, 1082, 1130)
Exclusion Orders	4 (1125, 1100, 1082, 1130)

Instituted Investigations

The Merits by ID

Commission Review

Commission Review- Remedy v. No Remedy

Comparative Success Rates—current (through end of December)