Further to our July 20, 2011 post, on August 2, 2011, the International Trade Commission issued its opinion with respect to remedy, public interest, and bonding in Certain Foam Footwear (Inv. No. 337-TA-567).
By way of background, Complainant Crocs, Inc. (“Crocs”) filed a complaint with the ITC naming eleven respondents, alleging violations of Section 337 by infringement of U.S. Patent Nos. 6,993,858 (the ‘858 patent) and D517,789 (the ’789 patent) and the Crocs trade dress. All respondents except Double Diamond Distribution Ltd. and Effervescent, Inc. (collectively, the “Respondents”) were terminated from the investigation. On April 11, 2008, ALJ Bullock issued an initial determination finding no violation of Section 337 by reason of invalidity of the ‘858 patent and non-infringement/non-satisfaction of the technical prong of the domestic industry requirement concerning the ‘789 patent. ALJ Bullock made no findings regarding the enforceability of the ‘858 and ‘789 patents. On July 25, 2008, the ITC affirmed ALJ Bullock’s initial determination with certain modifications and clarifications. Crocs appealed the ITC decision and on February 24, 2010, the Federal Circuit overturned the ITC’s findings regarding invalidity of the ‘858 patent and non-infringement/non-satisfaction of the technical prong of the domestic industry requirement concerning the ‘789 patent, remanding the investigation for a determination of infringement and any appropriate remedies. See our February 24, 2010 post for more details.
On February 9, 2011, ALJ Charles E. Bullock issued a remand ID (“ID”) determining that Respondents had not shown by clear and convincing evidence that the ‘858 patent and the ’789 patent are unenforceable due to inequitable conduct. See our April 1, 2011 post for more details. On April 25, 2011, the ITC determined not to review the remand ID and found a violation of Section 337. Specifically, the ITC found a violation of Section 337 by Double Diamond and Effervescent with respect to the ‘858 patent and a violation of section 337 by Holey Soles with respect to the ‘789 patent. The ITC requested written submissions on the issues of remedy, public interest, and bonding from the parties and interested non-parties. See our April 27, 2011 post for more details. In accordance with the ITC’s request Crocs, Double Diamond, Effervescent, and the Commission Investigative Attorney (“OUII”) submitted briefs regarding remedy, public interest, and bonding. Holey Soles made no submissions.
As to remedy, the ITC agreed with ALJ Bullock’s recommendation that a general exclusion order should issue. The ITC reasoned that there is a pattern of violation with regard to the foam footwear at issue and it is difficult to identify the source of the infringing goods. Specifically, the ITC determined that Crocs had identified over 60 non-respondents practicing the ‘858 and ‘789 patents and that those non-respondents were using established chains for distribution. In addition, the opinion explained that many of those sales were made over the Internet and that there is widespread copying of molds for the footwear. The ITC also agreed with the ALJ that cease and desist orders were warranted as to the Respondents. The opinion indicated that such an order was warranted because the Respondents maintain a significant number of infringing shoes in U.S. inventory and those inventories have a significant value.
With regard to public interest, the ITC agreed with OUII and Effervescent that any issued remedial order would not be contrary to the public interest since U.S. demand for foam footwear can be met by other entities, including Crocs, as well as by non-infringing alternatives.
As to bonding, because evidence of exact price differences between each of the Respondents’ products and Crocs’ products was available, the ITC determined that separate bonds should be set for each Respondent. In proportion to those respective price differences, the ITC set bond at $0.00 per infringing pair of shoes for Double Diamond, $0.01 per infringing pair of shoes for Holey Soles, and $0.05 per pair of infringing shoes for Effervescent. Because a large number of non-respondents import infringing footwear at unknown sales prices, some well below Crocs sales price, the ITC determined that a 100% bond should be entered for all infringing non-respondent products during the period of Presidential Review.