On August 15, 2017, the International Trade Commission (“Commission”) issued its opinion in the consolidated enforcement and rescission proceeding stemming from the underlying investigation in Certain Beverage Brewing Capsules, Components Thereof, and Products Containing the Same (Inv. No. 337-TA-929). In the opinion, the Commission determined to (i) reverse the finding in ALJ Theodore R. Essex’s enforcement initial determination (“EID”) that the remedial orders in the underlying investigation cannot be enforced due to a lack of domestic industry; (ii) find that the complainants had failed to show that the respondents possessed the intent necessary to violate the remedial orders; (iii) decline to rescind the remedial orders; and (iv) terminate the consolidated enforcement and rescission proceeding.

By way of background, the underlying investigation is based on an August 4, 2014 complaint filed by Adrian Rivera and Adrian Rivera Maynez Enterprises, Inc. (collectively, “ARM”) alleging violation of Section 337 in the importation into the U.S. and sale of certain beverage brewing capsules, components thereof, and products containing the same that infringe one or more claims of U.S. Patent No. 8,720,320 (the ’320 patent). See our August 6, 2014 and September 11, 2014 posts for more details on the complaint and Notice of Investigation, respectively. On March 17, 2016, the Commission issued its final determination in the underlying investigation and issued a limited exclusion order (“LEO”) and cease-and-desist orders (“CDOs”) directed at Eko Brands, LLC and other respondents based on their infringement of claims 8 and 19 of the ’320 patent.

On June 1, 2016, ARM filed a complaint requesting that the Commission institute a formal enforcement proceeding under Commission Rule 210.75(b) to investigate alleged violations of the LEO and CDOs by Eko Brands, LLC and Espresso Supply, Inc. (collectively, “Eko”). See our June 6, 2016 post for more details. The Commission instituted a formal enforcement proceeding on July 1, 2016. On September 12, 2016, Eko petitioned the Commission to rescind the remedial orders based on, inter alia, a district court’s summary judgment that Eko’s products do not infringe the ’320 patent. On November 25, 2016, the Commission instituted a rescission proceeding, delegated the proceeding to ALJ Essex, and consolidated the rescission proceeding with the enforcement proceeding. On March 27, 2017, ALJ Essex issued the EID in the consolidated enforcement and rescission proceeding, finding that the LEO and CDOs cannot be enforced due to a lack of a domestic industry, and a recommended determination recommending that the Commission rescind the remedial orders based on the district court’s summary judgment of non-infringement. See our March 29, 2017 post for more details. ARM and the Commission Investigative Staff timely petitioned for review of the EID. On May 11, 2017, the Commission determined to review the EID.

In its August 15, 2017 opinion, the Commission first addressed the EID’s finding that the LEO and CDOs could not be enforced because ARM had allegedly failed to show that it satisfied the technical prong of the domestic industry requirement. The EID had found that, because the ’320 patent claim that the ALJ had analysed for purposes of ARM’s satisfaction of the technical prong in the underlying investigation had subsequently been found invalid by the Commission in its final determination, ARM had not shown that it satisfied the domestic industry requirement. In the Commission’s August 15, 2017 opinion, the Commission reversed the EID on this point, finding that because Eko had defaulted in the underlying investigation, the facts alleged against it in the underlying complaint—including ARM’s satisfaction of the technical prong as to additional claims (which were not found invalid by the Commission)—were presumed to be true. Thus, despite the Commission’s finding in its final determination in the underlying investigation that the claim that the ALJ had analysed for purposes of the technical prong was invalid, ARM still satisfied the domestic industry requirement and thus the LEO and CDOs could be enforced.

The Commission next addressed the issue of whether ARM had adequately shown that Eko had violated the LEO and CDOs through Eko’s alleged indirect infringement of certain claims of the ’320 patent. ARM argued that Eko must have had the necessary intent to indirectly infringe because Eko had continued to import and sell products that are structurally identical to the products that ARM had alleged were infringing in the underlying investigation, where Eko had defaulted. Eko argued that, based on the above-referenced district court action where the district court had found on summary judgment that Eko’s products do not infringe the ’320 patent, Eko reasonably believed that its products did not infringe the asserted claims of the ’320 patent, despite Eko’s previous default in the underlying ITC investigation. The Commission agreed with Eko that the district court’s summary judgment ruling supported Eko’s position that it lacked the necessary intent to induce or contribute to infringement of the ’320 patent, and thus the Commission found that Eko had not violated the LEO and CDOs based on indirect infringement of the ’320 patent. The Commission rejected ARM’s argument that Eko’s default in the underlying investigation compelled a finding that Eko intended to induce or contribute to infringement of the ’320 patent in connection with the enforcement proceeding.

Despite finding that ARM had failed to show that Eko indirectly infringed the ’320 patent in violation of the LEO and CDOs, the Commission determined not to actually rescind the LEO and CDOs based on the district court’s judgment of non-infringement, as ALJ Essex had recommended. Instead, the Commission found that the LEO and CDOs were justified based on Elko’s default in the underlying investigation, and the conditions relating to that default had not changed despite the subsequent district court ruling of non-infringement. The Commission also distinguished prior cases where ITC remedial orders had been rescinded based on a district court’s finding that the subject patent was invalid, as opposed to not infringed.

Accordingly, the Commission determined to keep the existing LEO and CDOs in place but to find that Eko had not violated such orders in this instance. The Commission then terminated the consolidated enforcement and rescission proceeding.