In Certain Two-Way Global Satellite Communication Devices, System and Components Thereof, Inv. No. 337-TA-854, the US International Trade Commission (Commission or ITC) imposed a civil penalty on respondents in the amount of $6,242,500.00 for a consent order violation, reminding parties of the risks they may face if they fail to comply with the Commission’s remedial orders.
The ITC has broad authority to enforce its remedial orders. Enforcement proceedings are one route that the ITC or complainants can take to enforce ITC exclusion, cease and desist, and consent orders. Enforcement proceedings can be either informal or formal. See 19 C.F.R. § 210.75. To start informal enforcement proceedings, a complainant can request that the ITC, through the Office of Unfair Import Investigations, investigate possible violations. Through informal proceedings, the ITC can issue orders to ensure compliance with its remedial orders. Alternatively, or if informal enforcement proceedings do not resolve the matter, a complainant can file a formal enforcement proceeding, which will be assigned to an Administrative Law Judge (ALJ).
One avenue for enforcement is the imposition of civil penalties. The Commission has the discretion to impose a civil penalty that is appropriate for the circumstances. For each day that a respondent imports or sells a product in violation of a cease and desist order, the Commission may assess a civil penalty. 19 U.S.S. § 1337(f)(2). To determine the appropriate penalty, the ITC traditionally analyzes six 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. Certain Erasable Programmable Read Only Memories (EPROMS), Inv. No. 337-TA-276 (Enforcement), Comm’n Op. at 23-24, 26.
An enforcement proceeding does not necessarily lead to civil penalties. The ITC may instead modify remedial orders to prevent further violations, bring a civil action in district court requesting a civil penalty or mandatory injunction, or revoke a cease and desist order or consent order and direct that the covered products be excluded from entry into the United States.
In the enforcement proceeding in Certain Two-Way Global Satellite Communications Devices, Inv. No. 337-TA-854, the Commission determined to impose a civil penalty on respondents in the amount of $6,242,500.00. The underlying investigation had been terminated based on entry of a consent order. An enforcement proceeding was instituted based on an enforcement complaint filed by BriarTeK IP, Inc., which alleged violations of the consent order by DeLorme Publishing Company and DeLorme InReach LLC (collectively, DeLorme) in the continued practice of prohibited activities, such as selling or offering for sale within the United States the accused two-way global satellite communication devices, systems, or components thereof.
The ALJ issued an enforcement initial determination (EID) finding a violation of the consent order. The ALJ’s EID is available online. The ALJ found that DeLorme had violated the consent order with respect to the sale after importation of accused components of the InReach 1.5 device, but found no violation of the consent order with respect to the InReach SE device and to activation of InReach devices after the effective date of the consent order, where those devices had been sold prior to the effective date of the consent order. The ALJ found that enforcement measures were appropriate, and recommended a civil penalty of $637,500.
On review, the Commission determined that the ALJ erred in finding no induced infringement, and therefore no violation of the consent order, with respect to the accused InReach SE devices. Specifically, the Commission found that both the specific intent and direct infringement prongs of induced infringement were met by DeLorme importing components, incorporating them into domestically-assembled InReach SE devices, and then selling the devices to end users via distributors with instructions to use the devices in an infringing manner. With regard to specific intent, the Commission noted that DeLorme’s “business model is predicated on the activation and use of the InReach SE devices by end users” and that DeLorme was aware, or at least willfully blind to the fact, that it was inducing the end users to infringe. Accordingly, the Commission found that DeLorme’s conduct “constitutes a violation of the consent order for InReach SE devices sold after the effective date of the consent order.” The Commission Opinion is available online.
Regarding the enforcement measures recommended by the ALJ, both BriarTek and the Commission Investigative Staff asserted that the Commission should impose a substantial penalty, and should consider the cost of the subscription fees in addition to the cost of the devices. The Commission ultimately determined to modify the ALJ’s recommended enforcement measure after considering the six factors. Specifically, the Commission found that a combined cost of the device and subscription should be considered, and that evidence supported a finding of bad faith on the part of DeLorme. DeLorme had not sought a written opinion of counsel or a Commission advisory opinion, and continued to sell violative devices after institution of the enforcement proceeding and even after issuance of the ALJ’s EID finding a violation. As such, the Commission imposed a civil penalty of $6,242,500.00 based on an amount of $27,500 a day over 227 days of violation.
- In addition to pursuing enforcement of an ITC exclusion order, a complainant can take affirmative steps to inform purchasers and potential purchases of articles subject to exclusion.
- A respondent should have a strategy in place for preserving its business before the ITC renders a final determination in an enforcement proceeding. The respondent should inform customers and potential customers of which products are unaffected by an exclusion order.
- While importers seeking quick guidance regarding ITC exclusion orders may seek rulings on exclusion orders from US Customs and Border Protection (CBP), CBP rulings are not binding at the ITC, and an importer might receive a favorable ruling from CBP yet still face an ITC enforcement proceeding and sanctions.
FOR OTHER CASES ADDRESSING SECTION 337 ENFORCEMENT PROCEEDINGS
- uPI Semiconductor Corp. v. International Trade Commission, Nos. 13-1157, -1159 (Fed. Cir. 2014) – The Federal Circuit held that the ITC may enforce a consent order against a party to an investigation when the party aids a third party’s importation of products in violation of the consent order. The Court rejected enforcement respondent’s argument that because the investigation ended with a consent order rather than a general exclusion order, there could be no liability for importation by third parties even if enforcement respondent aided or abetted that importation. The Court stated that substantial evidence supported the ITC’s finding that enforcement respondent’s post-consent order upstream sales were linked to the subsequent downstream importation or sale of the formerly accused products, and also that enforcement respondent knowingly aided and abetted those imports or sales. The Federal Circuit decision is available online.
- Inv. No. 337-TA-565, Certain Ink Cartridges and Components Thereof – The ALJ issued an EID determining that the enforcement respondents violated cease and desist and consent orders, and recommended the maximum civil penalty against the seven respondents, an amount exceeding $30 million. The Commission ultimately reduced the penalty amount for one group of respondents, thereby imposing total penalties of over $20 million. Enforcement respondents were found to have violated the cease and desist order in bad faith because respondents were aware of steps that should have been taken to avoid violation, but chose to ignore such steps. Additionally, enforcement respondents relied solely on their management and in-house personnel to determine which products were subject to the cease and desist order, without consulting the ITC for clarification or seeking advice from legal counsel. The Commission Notice is available online.
- Inv. No. 337-TA-406, Certain Lens-Fitted Film Packages– The Commission determined to levy civil penalties against enforcement respondents for violation of a cease and desist order. Further, the Commission determined not to issue a new cease and desist order or exclusion order. The Commission imposed a civil penalty of over $13 million against enforcement respondents.The Commission Opinion is available online.