REMEDIES IN THE U.S. INTERNATIONAL TRADE COMMISSION...

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CDX-0000

REMEDIES IN THE U.S. INTERNATIONAL TRADE COMMISSION

October 10, 2012

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This presentation addresses the remedies potentially available to patentees (called “complainants”) in investigations instituted by the United States International Trade Commission pursuant to 19 U.S.C.

1337 of the Tariff Act. We will cover:

Exclusion Orders

Cease and Desist Orders

Bonding

The Presidential Review Process

Enforcement

Appeals

A time line of the typical remedies process in the ITC

Introduction

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What Triggers the Right to A Remedy?

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(B) The importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that –

(i) infringe a valid and enforceable United States patent or a valid and enforceable United States copyright registered under title 17; or

(ii) are made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable United States patent.

Source: 19 U.S.C.

1337 (a)(1)(B)

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Remedies in the ITC Generally

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There are two types of relief that may be available to complainants:

An Exclusion Order

A Cease and Desist Order

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Exclusion Orders

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(d) Exclusion of articles from entry (1) If the Commission determines, as a result of an investigation under this section, that there

is a violation of this section, it shall direct that the articles concerned, imported by any person violating the provision of this section, be excluded from entry into the United States, unless, after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers, it finds that such articles should not be excluded from entry. The Commission shall notify the Secretary of the Treasury of its action under this subsection directing such exclusion from entry, and upon receipt of such notice, the Secretary shall, through the proper officers, refuse such entry.

(2) The authority of the Commission to order an exclusion from entry of articles shall be

limited to persons determined by the Commission to be violating this section unless the Commission determines that—

(A) a general exclusion from entry of articles is necessary to prevent circumvention of an

exclusion order limited to products of named persons; or (B) there is a pattern of violation of this section and it is difficult to identify the source of

infringing products. Source: 19 U.S.C. § 1337 (d)

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Exclusion Orders

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From the statute, we see that there are two types of exclusion orders that may be available to complainants:

A Limited Exclusion Order

A General Exclusion Order

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Exclusion Orders

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A Limited Exclusion Order (LEO) Applies to Only the Respondents Found to be in Violation

A General Exclusion Order (GEO) Is “Good Against the World”

Products Imported for Use by the U.S. with the Authorization or Consent of the Government are Not Subject to Exclusion Orders

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Limited Exclusion Orders

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An LEO Prohibits the Importation of Only the Named Respondents’ Infringing Products

This is the typical remedy granted by the ITC

Many patentees ask only for an LEO in their complaints

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Sample LEO Language

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337-TA-604 (Sucralose Sweeteners) Limited Exclusion Order

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Sample LEO Language

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337-TA-604 (Sucralose Sweeteners) Limited Exclusion Order (cont’d)

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General Exclusion Orders

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GEOs are available only if the complainant can meet “the heightened burdens” of 19 USC

1337(d)(2); see Kyocera

Wireless Corp. v. U.S. Intern. Trade Comm’n, 545 F.3d 1340 (Fed. Cir. 2008).

A GEO will issue only if (A) it is necessary to prevent circumvention of an exclusion order limited to products of named persons; or (B) there is a pattern of violation and it is difficult to identify the source of infringing products. 19 USC

1337(d)(2).

GEOs are thus available only in limited circumstances, see In the Matter of Certain Laser Bar Code Scanners And Scan Engines, Components Thereof And Products Containing Same, Inv. No. 337-TA-551 (June 14, 2007).

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There has not been any definitive statement from the Federal Circuit or the ITC about what constitutes “circumvention” of an LEO:

Generally, it is (1) an inability to prevent significant importation of infringing products; or (2) a change in importation methods in an attempt to avoid an LEO.

But non-respondent manufacturers that continue to import products incorporating infringing products do not circumvent an exclusion order merely by continuing their pre-existing practice. 337-TA-602 (GPS Devices).

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For the “pattern of violation” prong, the ITC has historically applied the “Spray Pump Factors” to determine whether a GEO is appropriate (In the Matter of Certain Airless Paint Spray Pumps, Inv. No. 337-TA-90).

The Spray Pump factors were codified as part of 19 USC § 1337(d)(2); accordingly, they are not separate from, or in addition to, the statute.

Under this prong, the ITC held in Spray Pumps that a patentee must show:

“both a widespread pattern of unauthorized use of its patented invention” and “certain business conditions from which one might reasonably infer that foreign manufacturers other than the respondents to the investigation may attempt to enter the U.S. market with infringing articles.”

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Spray Pump Factors:

“a widespread pattern of unauthorized use of the patented invention”

– a Commission determination of unauthorized importation into the United States of infringing articles by numerous foreign manufacturers;

– the tendency of foreign infringement suits based upon foreign patents which correspond to the domestic patent at issue; and

– other evidence which demonstrates a history of unauthorized foreign use of the patented invention.

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Spray Pump Factors (cont’d): “business conditions exist from which one might reasonably infer that foreign manufacturers other than the respondents to the investigation may attempt to enter the U.S. market with infringing articles” – an established market for the patented product in the United

States and conditions of the world market; – the availability of marketing and distribution networks in the United

States for potential foreign manufacturers; – the cost to foreign entrepreneurs of building a facility capable of

producing the patented article; – the number of foreign manufacturers whose facilities could be

retooled to produce the patented article; or – the cost to foreign manufacturers of retooling their facility to

produce the patented article.

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Examples of GEOs That Have Issued:

337-TA-184: a GEO issued prohibiting importation of all infringing foam earplugs (factors: ease of manufacture, likelihood any imported product would be infringing, and evidence of attempts by named respondents to import through a non-named importer company).

337-TA-167: a GEO issued prohibiting importation of single-handle bathroom faucets (factors: substantial foreign capacity existed and little time or capital was required to begin production).

337-TA-285: a GEO issued prohibiting importation of self-activating glow necklaces (chemiluminescent compositions) (factors: substantial U.S. demand for products; well-known technology; simple manufacturing process; low start-up costs; and no barriers to entry into the U.S. market).

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Examples of GEOs That Have Issued (cont’d):

337-TA-406: a GEO issued prohibiting importation of all infringing single-use cameras (lens-fitted film packages) (factors: widespread pattern of unauthorized use; business conditions showed likelihood of further attempts to enter U.S. market by others; ease of manufacture; established distribution channel in the U.S.).

337-TA-416: a GEO issued prohibiting importation of compact folding scissors (factors: widespread pattern of unauthorized use; difficulty in determining source of infringing products; favorable market in U.S. for products would likely encourage others to attempt to enter market).

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Other Examples of GEOs That Have Issued:

337-TA-324: acid-washed denim jeans

337-TA-422: two-handle centerset faucets

337-TA-424: gray-market cigarettes

337-TA-500: purple protective gloves

337-TA-492: plastic grocery bags

337-TA-522: ink markers with distinctive shape & color (“Sharpies®”)

337-TA-528: foam masking tape

337-TA-545: laminated floor panels

337-TA-637: hair irons

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Trends Regarding the Issuance of GEOs:

generally stand-alone products (not incorporated into end-products);

easy to manufacture;

start-up costs not prohibitive;

typically purchased directly by end-users;

infringement is not difficult to ascertain.

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Exclusion Orders – Downstream Products

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An Important Issue is Whether An Exclusion Order Should Cover “Downstream Products:”

A “downstream product” is a product that incorporates the infringing product as a component of the downstream product.

Downstream products can be a respondent’s own downstream products, and/or downstream products of others.

Example: the infringing product was a computer chip; the downstream products were motherboards and computers, see 337-TA-276 (EPROMs – the ITC issued a LEO excluding chips, and circuit boards containing chips, but not personal computers).

Example: the infringing product was wheels; the downstream product was roller luggage (337-TA-44; both products excluded).

Example: the infringing product was LEDs; the downstream products were packaged LEDs and boards containing LEDs, as well as larger devices such as traffic lights and cell phones (337-TA-556; only the first category of downstream products excluded).

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Prior to 2008, most complainants sought exclusion orders covering downstream products.

The ITC would issue LEOs covering downstream products regardless of whether the downstream product makers/sellers were named as respondents if complainant met the so-called “EPROMs Factors” directed to downstream products.

This placed great pressure on named respondents to settle, in order to protect their customers’ business (and therefore their own business).

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In October 2008, the Federal Circuit struck down the ITC’s practice of issuing LEOs covering downstream products of companies not named as respondents.

Kyocera Wireless v. USITC, 545 F.3d 1340 (Fed. Cir. 2008).

See also Epistar Corp. v. USITC, 566 F.3d 1321 (Fed. Cir. 2009) (vacating exclusion order issued prior to Kyocera decision).

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Kyocera Case:

Facts: Broadcom brought an ITC investigation based on patents covering baseband processors used for power savings in handheld devices.

Broadcom named only Qualcomm as a respondent.

The accused chips were widely used in mobile phones and PDAs.

Broadcom knew the identity of the handset makers that used the Qualcomm chips, but did not name any of them as respondents.

The ITC found a violation of Section 337 and issued an LEO barring not only Qualcomm chips and chipsets, but also any “handheld wireless communications devices, including cellular telephone handsets and PDAs” containing Qualcomm chips/chipsets.

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Kyocera Case (cont’d):

Qualcomm and numerous third parties affected by the LEO appealed the scope of the LEO.

The Federal Circuit held that the ITC has “no statutory authority to issue an LEO against downstream products of non-respondents.”

“If a complainant wishes to obtain an exclusion order operative against articles of non-respondents, it must seek a GEO [and satisfy] the heightened burdens” thereof.

Broadcom “chose to forego the full advantage of an LEO’s statutory scope by not naming known downstream respondents. Broadcom also chose to forego the burden of proving the extra statutory requirements for a GEO.”

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Kyocera Case (cont’d):

Summary: Section 337 “permits exclusion of the imports of non-respondents only via a general exclusion order, and then too, only by satisfying the heightened requirements of 1337(d)(2)(A) or (B).* The statute permits LEOs to exclude only the violating products of named respondents.”

* “The authority of the Commission to order an exclusion from entry of articles shall be limited to persons determined by the Commission to be violating this section unless the Commission determines that:

(A) a general exclusion from entry of articles is necessary to prevent circumvention of an exclusion order limited to products of named persons; or

(B) there is a pattern of violation of this section and it is difficult to identify the source of infringing products.”

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The ITC historically also considered whether to exclude downstream products in the context of a GEO, applying the so-called “EPROMs factors”*…

* “The Commission may, in issuing exclusion orders, whether general or limited, balance the complainant's interests in obtaining complete protection from all infringing imports by means of exclusion of downstream products against the inherent potential of even a limited exclusion order, when extended to downstream products, to disrupt legitimate trade in products which were not themselves the subject of a finding of violation of Section 337.” 337-TA-276 (EPROMs)

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. . . but in Light of the Kyocera Decision, the ITC has Held That the EPROMs Factors Are Not a Substitute for the Statutory Test for Determining Whether to Issue a GEO:

337-TA-602 (GPS Devices, Jan. 27, 2009): “complainants assert that the EPROMs factors support the issuance of a GEO because these factors incorporate an inquiry into the potential for circumvention of an exclusion order, an inquiry that is closely tied to the required showing for [a GEO]. . . . Complainants’ reliance on the . . . EPROMs analysis . . . is misplaced. The EPROMs factors have been traditionally used in cases involving limited exclusion orders extending to downstream products, and the Commission finds these factors no longer relevant in the case of non-respondents’ products in light of the Kyocera decision.”

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The EPROMs factors may still be relevant in determining whether an LEO should cover a named respondent’s downstream products:

337-TA-634 (Liquid Crystal Display Modules): “to determine whether an exclusion order should extend to a respondent's downstream products, the Commission has applied the test first articulated in” EPROMs.

In LCD Modules, the Commission entered a LEO that excluded Samsung’s LCD modules as well as all Samsung-branded TVs and monitors containing such modules (downstream products).

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The EPROMs factors:

(1) The value of the infringing articles compared to the value of the downstream products in which they are incorporated; (2) The identity of the manufacturer of the downstream products (i.e., are the downstream products manufactured by the party found to have committed the unfair act, or by third parties); (3) The incremental value to the complainant of the exclusion of downstream products; (4) The incremental detriment to respondents of the exclusion of downstream products; (5) The burdens imposed on third parties resulting from exclusion of downstream products; (6) The availability of alternative downstream products which do not contain the infringing articles; (7) The likelihood that the downstream products actually contain the infringing articles and are thereby subject to the exclusion; (8) The opportunity for evasion of an exclusion order which does not include downstream products; and (9) The enforceability of an order by U.S. Customs.

EPROMs at 124-126.

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Conclusion concerning downstream products:

for all practical purposes, the era of exclusion orders covering downstream products of non-named respondents is over, but a named respondent may still have its downstream products excluded if the EPROM factors are met.

Complainants now routinely name downstream product manufacturers/importers in the complaint as respondents.

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Sample Exclusion Orders Since Kyocera

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In GPS Devices (337-TA-602), the ITC held that the complainants were not entitled to a GEO because there was no evidence that “there is a pattern of violation of this section and it is difficult to identify the source of infringing products. To the contrary, complainants conceded that the manufacturers of downstream products . . . are readily identifiable.” Thus, an LEO was issued.

In Ground Fault Circuit Interrupters (337-TA-615), the ITC held complainants were not entitled to a GEO (reversing the ALJ). The ITC criticized the complainants for only addressing the Spray Pump factors and not focusing on the language of the statute (19 U.S.C.

1337(d)(2)) (“while the Commission has in the past considered analysis based on the Spray Pumps factors when evaluating whether the statutory criteria are satisfied, we now focus principally on the statutory language itself in light of recent Federal Circuit decisions”). Noting that the complainants showed it was relatively easy to enter the market, the ITC held that fact was not enough to show that an LEO against the named respondents was not a sufficient remedy.

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Sample Exclusion Orders Since Kyocera

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In Semiconductor Chips Having Synchronous DRAM Controllers (337-TA-661), the ITC did not accept Rambus’ argument that a GEO was necessary because a LEO would be easily circumvented. The ITC said that there must be actual evidence of such circumvention, not mere possibilities. Also, the fact that Rambus named 16 downstream purchasers in its complaint belied its argument that it was difficult to identify the source of infringing product. The ITC entered a LEO.

In both Liquid Crystal Display Modules (337-TA-634) and Liquid Crystal Display Devices (337-TA-631), the ITC entered a LEO directed to modules and the named respondents’ downstream products containing such modules.

In Semiconductor Chips with Minimized Chip Package Size (337-TA-605), the ITC refused Tessera’s request to enter a “tailored” GEO. There was no evidence of “circumvention” (the pre-existing practice of incorporating chips into downstream products overseas cannot be the basis for circumvention). Further, Tessera was able to identify numerous downstream manufacturers in its briefs, and thus could have named those entities in the complaint or brought another complaint. Thus, the ITC entered a LEO.

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Exclusion Order Chart

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BROADEST GEO that excludes:

(1) all infringing products (regardless of source); and

(2) downstream products incorporating infringing products

BROAD GEO that excludes:

(1) all infringing products (regardless of source) but not downstream products

NARROW LEO that excludes:

(1) all infringing products of named respondents only

Never been Issued?

Rare but possible depending on type of infringing product and 19 U.S.C.

1337(d)(2)

Most common form of relief historically and especially in light of

Kyocera

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In addition to exclusion orders, the ITC has the power to issue “cease and desist” orders directed to domestic respondents.

Cease and desist orders are aimed at preventing the sale, distribution, marketing, advertising, and solicitation of infringing products already in the U.S.

Cease and desist orders, when issued, are only directed at named respondents over which the ITC has personal jurisdiction.

Cease and desist orders generally issue to discourage a respondent from “stock-piling” inventory in the U.S. in anticipation of an exclusion order issuing.

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Factors in determining whether a Cease and Desist Order should issue:

Does a respondent have domestic-based activities?

Does that respondent have “commercially significant” inventories of infringing products?

“Commercially significant” is a relatively low bar for the complainant to hurdle; in one investigation, a single product in inventory was considered commercially significant in order for a cease and desist order to issue.

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Cease and desist orders normally do not prevent the following:

Continued manufacture of the infringing products in the U.S.

Exportation of infringing products, including products in inventory.

Sales in the U.S. by non-related third parties.

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Sample Cease & Desist Order

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337-TA-413 (Rare-Earth Magnets): ORDER TO CEASE AND DESIST

IT IS HEREBY ORDERED THAT Respondent cease and desist from conducting any of the following activities in the United States: importing, selling, marketing, advertising distributing, offering for sale, transferring (except for exportation), or soliciting U.S. agents or distributors for certain rare earth magnets and magnetic materials in violation of Section 337 of the Tariff Act of 1930, as amended, 19 USC

1337.

I. (Definitions) "Respondent" shall mean Harvard Industrial America, Inc., 470 Nibus Street, Brea, California, 92621. "Person" shall mean an individual, or any nongovernmental partnership, firm, association, corporation, or other legal or business entity other than the Respondent or its majority owned or controlled subsidiaries, their successors, or assigns. "United States" shall mean the fifty states, the District of Columbia, and Puerto Rico. "Covered Product" shall mean rare earth magnets and magnetic materials that infringe one or more of the following claims of one or more of the following patents: claims 1, 4, 5, 8, 9, and 11 of U.S. Letters Patent 4,851,058 [etc.]

The terms "import" and "importation" refer to entry for consumption, entry for consumption from a foreign-trade zone, and withdrawal from warehouse for consumption under the Customs Laws of the United States.

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Sample Cease & Desist Order

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II. (Applicability) The provisions of this Order shall apply to Respondent and any of its principals, stockholders, officers, directors, employees, agents, licenses, distributors controlled (whether by stock ownership or otherwise) and/or majority owned business entities, successors, and assigns, and to each of them, insofar as they are engaging in conduct prohibited by Section III, infra, for, with, or otherwise on behalf of Respondent. III. (Conduct Prohibited) The following conduct of the Respondent in the United States is prohibited by the Order. The Respondent shall not: (A) import or sell for importation into the United States covered product except under license of the patent owner; (B) market, distribute, offer for sale, sell, or otherwise transfer (except for exportation) in the United States imported covered product except under license of the patent owner; (C) advertise imported covered product except under license of the patent owner; (D) solicit U.S. agents or distributors for imported covered product except under license of the patent owner; or (B) aid or abet other entities in the importation, sale for importation, sale after importation, transfer, or distribution of covered product, except under license of the patent owner.

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Remedies and the Public Interest

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In determining remedies, the ITC is required to consult with and seek the advice of the Department of Health and Human Services, the Justice Department, the Federal Trade Commission, and any other agencies it considers appropriate.

The purpose is to determine the effect its remedial actions will have on “the public health and welfare, competitive conditions in the U.S. economy, the production of like or directly competitive articles in the U.S., and U.S. consumers.” 19 C.F.R.

210.50(a)(2).

Generally, the ITC has deemed exclusion orders and/or cease and desist orders to be consistent with the public interest. The rare exceptions have been in instances where there was not suitable substitutions available in the U.S. (examples: high-quality acceleration tubes for atomic research in the U.S.; hospital beds for burn patients).

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Bonding

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Following the ITC’s Order on Remedies, the named respondents may continue with importation (in the case of an exclusion order) and/or continued sale in the U.S. (in the case of a cease and desist order) of infringing products only by posting a bond.

The bond period is the 60-day Presidential Review period (discussed next) following the ITC’s Remedy Order.

The purpose of the bond is to “protect the complainant from any injury” during the Presidential Review Period. 19 U.S.C.

1337(j)(3).

The ITC determines the bond amount.

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Bonding

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Factors the ITC considers in determining the amount of bond:

Whether the infringing products are being sold at less than the price of the complainant’s competing product;

What the complainant has accepted as a royalty in licensing the patent-in-suit, as evidence of an established royalty.

In the absence of reliable price data, or when there is not sufficient evidence of an established royalty for the patent, the ITC will frequently set the bond at 100% of the value of the infringing product.

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Presidential Review

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19 U.S.C.

1337(j)(2) provides for Presidential review of ITC orders granting exclusion and cease and desist orders.

The President may disapprove of an ITC-ordered remedy only for “policy reasons.” Id.

The Presidential Review period runs for 60 days following issuance of the ITC Remedial Orders.

If the 60-day period expires without action by the President, the Remedial Orders of the ITC become “final,” the affected respondents may no longer import or sell under the bond, and the bond amount is forfeited to complainant.

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Presidential Review

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The “Presidential” Review is conducted by a “Trade Policy Committee” led by the General Counsel of the U.S. Trade Representative, and includes representatives from various agencies and Executive Offices, including the Secretaries of State, Treasury, Defense, Interior, Agriculture, Commerce, Labor, the Attorney General, the Assistant to the President for Economic Affairs, and the Executive Director on the Council for on International Economic Policy.

The Trade Policy Committee advises the President as to what action, if any, he should take.

The current GC of the USTR is Timothy Reif.

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Presidential Review

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The review begins by an inter-agency section 337 committee that reviews the ITC’s determination and record and issues a policy report setting forth a recommendation.

If the policy paper is approved by the Trade Policy Staff Committee, it is forwarded to the USTR for recommendation to the President.

If there is disagreement among the Staff Committee, it is reviewed by a Trade Policy Review Group of subcabinet officials.

If that is unsuccessful, the Trade Policy Committee itself will get involved.

The Trade Policy Committee and/or the USTR may solicit comments from interested parties.

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Presidential Review

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Lobbying during the Presidential Review Period is common.

The lobbying typically takes the form of non-party officials from the relevant industry and members of the legislative and executive branches of the government presenting arguments to the Trade Policy Committee members.

The parties lobby those persons to present the arguments on their behalf.

Example: in 337-TA-194 (Aramid Fibers), the complainant met with USTR officials, White House staff, and all members of Congress in the districts where the complainant had businesses.

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Presidential Review

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The President has Disapproved Remedies in Only Five Investigations:

337-TA-29 (Stainless Steel Pipe): The ITC excluded Japanese importation of welded stainless steel pipe. President Carter disapproved the exclusion order because of concerns the order would adversely impact U.S.-Japan relations.

337-TA-82 (Headboxes): The ITC issued a GEO against importation of multi-ply headboxes. President Reagan disapproved the GEO on the grounds that it was unnecessarily broad, and stated that an LEO could adequately protect the patentee.

337-TA-99 (Panel Inserts): The President disapproved of a cease and desist order preventing domestic purchasers from using infringing products on the ground that it was not in compliance with U.S. international obligations (e.g., GATT).

337-TA-165 (Alkaline Batteries): The President disapproved of the GEO in this investigation because the Executive Branch was in the process of reviewing its policy on gray market importations.

337-TA-242 (DRAMs): The ITC issued an LEO against all Samsung 64 or 256 kb DRAMs, and any computers, fax machines, switching equipment or printers containing such DRAMs. President Reagan disapproved of the order on the ground it would have a disruptive effect on legitimate trade in the U.S. In response, the ITC narrowed the LEO to only Samsung DRAMs and Samsung products containing such DRAMs.

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Enforcement

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Final ITC orders may be enforced by the ITC, by the Customs Service, and/or by federal district courts.

Final exclusion orders are enforced by Customs at all U.S. ports of entry.

Cease and desist orders are enforced by the ITC, either by assessing civil penalties for violation thereof, or by seeking injunctive relief in federal district court (see 19 U.S.C.

1337(f)).

The ITC may also order seizure and forfeiture of goods found to violate an exclusion order if there was a previous attempt to import the goods after issuance of the exclusion order and the Secretary of the Treasury had given written notice of the exclusion order and a warning that seizure and forfeiture would occur (see 19 U.S.C. § 1337(i)).

Complainants regularly assist Customs in policing exclusion and cease and desist orders.

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Enforcement Proceedings

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Enforcement proceedings may be both informal and formal.

Pursuant to 19 CFR

210.75(a), informal proceedings involve the OUII, working on behalf of the ITC, identifying possible violation of any ITC orders. The ITC may handle the matters through correspondence with the offending entity or through additional orders. The complainant often works with the OUII to bring possible violations to its attention and assist in collecting information.

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19 CFR

210.75(b) allows a complainant to bring formal enforcement proceedings by filing a complaint with the ITC that sets forth “alleged violations of any exclusion order, cease and desist order, or consent order.”

Enforcement proceedings are similar to initial investigations but:

the proceedings are conducted on an expedited basis (for example, the respondent must answer the complaint within 15 days of being served);

certain defenses may be barred by claim preclusion;

The ITC itself may conduct a hearing, or delegate the hearing to an ALJ;

if the latter, the ALJ issues an “ED” (enforcement determination) which may recommend the ITC enforce or modify the original exclusion order and may also recommend the imposition of sanctions;

the ITC will issue its ruling upon conclusion of the proceedings.

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If the ITC determines a cease and desist order has been violated, the ITC may assess a civil penalty of $100,000 (or twice the value of the goods, whichever is higher) for each day the order is violated. 19 U.S.C.

1337(f).

The penalty is payable to the U.S. and is enforceable in federal district court.

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The ITC considers the following factors in deciding whether to impose a monetary penalty:

the good or bad faith of respondent;

the injury to the public;

the respondent’s ability to pay;

the extent to which the respondent has benefited from the violations;

the need to vindicate the authority of the ITC; and

the public interest.

See 337-TA-435 (Integrated Repeaters, Switches, Tranceivers); San Huan New Material High Tech. v. USITC, 161 F.3d 1347 (Fed. Cir. 1998).

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The ITC has imposed monetary penalties in the millions of dollars.

See 337-TA-435 (Integrated Repeaters, Switches, Tranceivers): penalty of $2.32M for violation of cease and desist order; collected upon filing complaint in district court for enforcement of penalty (USTIC v. DuPuy, No. CV 00-9469 (C.D. Cal. 2000).

337-TA-276 (EPROMs): ITC penalty of $2.6M for violating cease and desist order.

337-TA565 (Ink-Jet Cartridges): ALJ Luckern recommended a penalty of $20.5M for violations of a cease and desist order. The ITC reduced this to $11.1M.

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Appeals

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Final Determinations of the ITC are appealable to the Federal Circuit.

When the ITC decides in favor of the complainant and issues a remedial order, the ITC’s determination is not final until expiration of the 60-day Presidential Review period.

An appeal must be filed within 60 days of finality.

Respondents may file a motion with the Federal Circuit upon appeal seeking an order staying any relief pending appeal, but the Federal Circuit rarely grants such motions.

To file a motion to stay at the Federal Circuit, the movant must either first move the ITC to stay the order, or show that such a motion would be fruitless.

A respondent may, however, immediately appeal a decision by the ITC not to stay an exclusion order pending appeal.

The Federal Circuit may dismiss as moot any appeal when the patent-in-suit will expire during the pendency of the appeal.

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General Timeline of Events

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ALJ’s Initial Determination

the Merits

ITC Determines Whether to

Review Some or All of the ALJ’s

ID

If the ITC Does not Review – the ID Becomes the Final Decision of

the ITC

If the ITC Does Review – the ITC Asks for Briefing

on Specific Issues and

Remedy Issues

The ITC may ask for

Briefing on Remedies

The ITC Issues Remedial Orders

The ITC’s Final Determination on the Merits and Remedial

Orders

Presidential Review Period

Deadline for Filing Appeal

60 days

No

Yes

approx. 60 days

60 days

60 days

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