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October 21, 2016

ITC Section 337 Update – October 21, 2016


Commission Suspends ‘939 Investigation Enforcement Pending PTAB Result - On July 21, 2016, the International Trade Commission (“the Commission”) issued a notice that it had found a violation of Section 337 in Certain Cinema Systems and Components Thereof, Inv. No. 337-TA-939Though the Commission issued remedial orders on the offending imports, the orders are suspended with respect to certain claims pending a final outcome by the United States Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”).  On August 23, the Commission released a public version of its opinion in the case where it discusses its rationale for this novel decision.

In this investigation, RealD, Inc. alleged that imports of certain three-dimensional cinema systems and parts thereof were in violation of Section 337, and named MasterImage as the respondent.  The Commission found that RealD had proven that MasterImage’s products infringed the asserted claims of three patents – the ’455 patent, the ’296 patent, and the ’934 patent.  The Commission decided that an exclusion order prohibiting the importation of the infringing articles and cease and desist orders directed at MasterImage constituted an appropriate remedy.  On April 14, 2016, PTAB issued a final written decision finding certain claims of the ’934 patent unpatentable, a decision that RealD intends to appeal.  Despite its own finding of violation regarding the’934 patent, “[i]n view of the PTAB’s Final Written Decision finding certain claims of the ’934 patent unpatentable, the Commission has determined to suspend the enforcement of the limited exclusion order and cease and desist orders as to claims. . . of the ’934 patent pending final resolution of the PTAB’s Final Written Decision.”

The Commission provided some insight in its August opinion.  The Commission found that while it is not barred by the legal doctrine of issue preclusion from rendering a Section 337 determination on the ’934 patent, the Commission nonetheless has “broad discretion” to select appropriate remedies.  Given the “advanced posture” of the PTAB proceeding and the fact that MasterImage’s products “will be subject to immediate exclusion even if relief is suspended as to the ’934 patent,” the Commission exercised its discretion to suspend enforcement of the remedial order as to the ’934 patent. – by Elizabeth Owerbach   

Commission Decides To Review Sanctions Order – On September 29, 2016, the Commission determined to review a sanctions order issued by Administrative Law Judge MaryJoan McNamara in Certain Light-Emitting Diode Products, Inv. No. 337-TA-947 against Respondents Feit Electric Inc., USA, Feit Electric Inc., and Feit Xiamen (collectively “Feit”).  The sanctions order arose out of a July 13, 2015 motion to compel filed by the Complainant, Cree, Inc., to require Feit to produce certain testing documents and to provide full and complete answers to certain interrogatories.  Judge McNamara granted the motion to compel on September 9, 2015, and ordered that Feit provide a declaration confirming that all responsive testing documents within Feit’s possession, custody, or control “have been produced to Complainant,” and that it also provide “written and verified interrogatory responses.”  On September 28, 2015, Cree filed a motion to enforce Judge McNamara’s September 9, 2015 Order, which Judge McNamara also granted – ordering Feit to provide “any remaining documents, unequivocal declarations, and interrogatory responses” called for under the September 9 Order.  Judge McNamara also warned Feit that she was considering “whether to issue an order to show cause for monetary or other sanctions.”

After the two orders were entered, Feit produced 1,000 pages of documents just before the start of an evidentiary hearing.  Cree moved for sanctions, and the Staff’s recommendation was that sanctions be imposed.  Judge McNamara found that these documents showed that certain of Feit’s representatives or witnesses submitted declarations that they did not have the required knowledge to make or that were false, and that they also raised questions about other material statements of fact made during discovery.

Judge McNamara ordered sanctions on October 19 and 20, 2015, which she endorsed in her Sanctions Order.  Those sanctions included: (1) the ability of Cree to use the newly produced documents for cross-examination without limitation or rebuttal, (2) monetary sanctions to cover Cree’s discovery motions and its review of the newly produced documents to prepare a report to the ALJ, (3) finding that whether Feit falsely advertised certain accused products by marking them with the ENERGY STAR label should be taken as established, (4) precluding Feit from introducing certain evidence or testimony to support non-infringement, and (5) awarding reasonable costs of Staff in connection with certain of the discovery motions.  A decision on the Commission’s review of the Sanctions Order is expected by November 29, 2016. – by Kevin Dinan

Commission Reverses Suspension Of Steel Investigation, Case Will Continue - On August 16, 2016, the Commission reversed an Initial Determination issued by the presiding Administrative Law Judge that suspended the Section 337 investigation on Certain Carbon And Alloy Steel Products, Inv. No. 337-TA-1002.  Our previous report on the ALJ’s ID is available here.

The Commission examined the interplay between unfair competition investigations under Section 337 and antidumping and countervailing duty investigations conducted by the U.S. Department of Commerce.  The Commission predicated its reversal of the ALJ’s ID by explaining that “the ALJ operated without the benefit of the Commission’s interpretation of paragraph (b)(3)” of the Section 337 statute and “a later-submitted letter from the Secretary of the U.S. Department of Commerce to the Commission concerning pending antidumping and countervailing duty investigations.”  The letter from Commerce Secretary Penny Pritzker identified two ongoing investigations of steel products before her agency, but represented only that those cases “potentially could come within the scope of the Commission’s investigation.” 

The Commission explained that the ALJ offered two reasons for suspending the Section 337 investigation.  First, the ALJ suspended the investigation to allow the Commission to provide what was characterized as statutorily required notice to Commerce.  In reversing that aspect of the ALJ’s ID, the Commission found that “there is no statutory basis for suspending an investigation based upon the absence of notification to the Secretary of Commerce.” 

Second, the ALJ suspended the investigation “‘because of the pendency of proceedings before the Secretary of Commerce.’”  The Commission reversed and explained that the record contains “no allegation that the present investigation is ‘based solely’ on ‘alleged acts and effects which are within the purview’ of the antidumping and countervailing duty laws.”  The Commission found that paragraph (b)(3) of the Section 337 statute provides the agency with broad discretion “in deciding what to do so long as a Section 337 investigation does not sound entirely in matters under the antidumping or countervailing duty laws.” 

The Commission “determined that suspension of the investigation under the present circumstances is inappropriate” because there is only an “at most tangential” relationship between “the unfair acts and methods of competition alleged by complainant” and “the purview of the United States antidumping or countervailing duty laws.”  The Commission found “no overlapping antidumping or countervailing duty investigations pending before [Commerce] that would affect the alleged unfair acts involved in the present investigation, and no indication that any such proceedings will be commenced at [Commerce].” 

The Commission also rejected the respondents’ general argument that “‘AD/CVD proceedings and determinations are woven inextricably into the fabric of Complainant’s core case” and that “the antitrust and false designation of origin claims should be dismissed because they ‘fail to state a prima facie case for anything beyond AD/CVD claims.’”  The Commission also found an absence of record evidence “that suspension of the investigation would achieve efficiencies or avoid undue burdens that would not outweigh the benefits gained by continuing the investigation.”

The Commission’s Opinion restarts the investigation and paves the way for continued discovery and motions practice.  For example, Respondents file motions to terminate the U.S. Steel’s Price Fixing and False Designation Of Origin claims on August 26 and September 9, respectively.  And in a case that has already seen several respondents fail to respond to the complaint and to discovery responses, the extent to which any participating respondents submit to the broad methods of discovery available in Section 337 investigations (e.g., plant tours, depositions, written discovery) going forward will be worth watching. – by Patrick Togni

King & Spalding Hosts ITCTLA Luncheon with Dee Lord. - On September 7, the International Trade Commission Trial Lawyers Association held a Luncheon with the Honorable Dee Lord, hosted by King & Spalding.  An Administrative Law Judge, Judge Lord has ruled in several recent high profile Section 337 cases, including Certain Carbon And Alloy Steel Products, Inv. No. 337-TA-1002.  The luncheon was an interactive Q&A, with Judge Lord sharing her perspective on Section 337 proceedings.  Judge Lord offered candid advice about discerning what claims to plead and motions to file in Section 337 litigation, as well as her practice tips for witness treatment, direct testimony, cross examination, and discovery.