On July 10, 2014, the International Trade Commission (“the Commission”) issued the public version of its opinion in Certain Cases For Portable Electronic Devices (Inv. Nos. 337-TA-867/861).

By way of background, the Commission instituted Inv. No. 337-TA-861 based on a complaint filed by Speculative Product Design, LLC (“Speck”) alleging violations of Section 337 by reason of infringement of various claims of U.S. Patent No. 8,204,561 (the ‘561 patent) by several respondents.  See our November 16, 2012 post for more details.  The Commission instituted Inv. No. 337-TA-867 based on a second complaint filed by Speck alleging violations of Section 337 by reason of infringement of various claims of the ‘561 patent by additional respondents.  See our January 29, 2013 post for more details.  The two investigations were consolidated on January 31, 2013.  All of the respondents that participated in the consolidated investigation were terminated from the investigation based upon consent order stipulations, settlement agreements, or withdrawal of the complaint. 

On August 19, 2013, Speck filed a motion for summary determination that it has satisfied the domestic industry requirement under Sections 337(a)(3)(A), (B), and (C) (not including licensing).  The Commission Investigative Staff (“OUII”) filed a response in support of Speck’s motion.  On September 10, 2013, ALJ Pender issued an ID granting Speck’s motion in part, finding that Speck established a domestic industry for the ‘561 patent under Section 337(a)(3)(C).  See our October 30, 2013 post for more information.  On November 15, 2013, Speck filed a motion for summary determination with respect to defaulting respondents.  OUII filed a response in support of Speck’s motion and on February 21, 2014, ALJ Pender issued the final ID granting the motion and recommending the issuance of a general exclusion order (“GEO”) and the imposition of a bond of 100 percent of entered value during the Presidential review period.  See our March 11, 2014 post for more details on the public version of this ID.  On April 8, 2014, the Commission issued a notice of its determination not to review ALJ Pender’s finding of violation, and solicited submissions on remedy, the public interest, and bonding. 

General Exclusion Order

According to the Opinion, the Commission determined that the requirements for issuing a GEO under Section 337(d)(2)(A) and (d)(2)(B) had been met.  With respect to prong (a) “prevent[ing] circumvention” of a limited exclusion order (“LEO”), the Commission found that the defaulting respondents customarily engage in business practices that necessitated a GEO in order to prevent the circumvention of an LEO.  Specifically, the Commission noted that the respondents could easily circumvent an LEO by selling infringing goods online.  Additionally, the Commission found that, as the barrier to entering the protective case manufacturing market is low and foreign manufacturing operations can change their names and distribution patterns, respondents have, or are capable of, changing their names, facilities, or corporate structures to avoid detection.  The Commission found that Speck also met its burden to show that issuing a GEO is necessary because the evidence showed a widespread pattern of infringement by respondents and non-respondents and because it is difficult to identify the source of the infringing products.  Accordingly, the Commission adopted ALJ Pender’s recommendation and determined to issue a GEO in this investigation.  Under the GEO, cases for portable electronic devices covered by claims 4, 5, 9, and 11 of the ‘561 patent are excluded from entry into the United States for consumption, entry for consumption from a foreign-trade zone, or withdrawal from a warehouse for consumption, for the remaining term of the ‘561 patent, except under license of the patent owner or as provided by law.

According to the Opinion, terminated Respondent Superior Communications, Inc. (“Superior”) filed a submission stating that if the Commission issued a GEO, it should “either (i) exempt the products imported by and for Superior from the scope of the order, or (ii) include a provision enabling third parties such as Superior to certify that their products do not infringe Speck’s ‘561 Patent.”  Specifically, Superior argued that ALJ Pender’s termination of Superior due to Speck’s motion to withdraw the complaint and terminate the investigation as to Superior based on Superior ceasing to import the accused DualTek line of cases had deprived Superior of its ability to offer its defense at the Commission.  Superior also noted that during a conference call with ALJ Pender it requested that ALJ Pender provide a carve-out for Superior’s products in his recommended remedy, and that ALJ Pender rejected this request.  

Speck filed a reply submission urging the Commission to reject Superior’s request for a carve-out because: (1) the exemption sought by Superior is overbroad and would permit Superior to import infringing products of its own; (2) the exemption would impermissibly include products that Superior concealed from Speck during the investigation; (3) Superior did not seek review of the ALJ’s ID terminating Superior from the investigation; (4) Superior will not be prejudiced by a GEO because Superior has twice previously challenged the validity of the ‘561 patent and lost before the Patent Office; and (5) Customs can readily identify infringing products, including those that Superior may attempt to import, and that existing procedural safeguards prevent seizure of noninfringing product. 

OUII also filed a reply submission contending that the Commission should not provide a carve-out for Superior’s products.  OUII argued that Superior had not established compelling facts or cited to legal precedent to support its request for a “carve-out.”  OUII, however, did recommend that the Commission include a certification provision to provide Customs and third parties with the ability to certify that their products are noninfringing, which would reduce the burden on Customs when it is not immediately clear whether an imported product infringes the ‘561 patent.

The Commission declined to include a carve-out provision for Superior’s products finding that Superior had not shown that a carve-out was necessary or appropriate.  The Commission noted that the Commission’s rules provide procedures that allowed Superior to contest ALJ Pender’s ruling terminating Superior from the investigation, but that Superior failed to use these established procedures and therefore waived its right to challenge ALJ Pender’s ruling.  The Commission also decided to include a certification provision in the GEO in order to reduce the burden on Customs in enforcing the GEO and to alleviate concerns that noninfringing products will be prevented from entering the United States. 

The Public Interest

According to the Opinion, Speck argued that none of the public interest factors warranted denying a GEO.  Speck also noted that no party raised any public interest concerns during the investigation.  The IA also determined that a GEO would have a minimal impact on competitive conditions in the U.S. economy and the production of like or directly competitive articles in the United States. 

The Commission found, based on the evidence of record, that issuing a GEO would not harm the public interest.  The Commission noted that there is no evidence that Speck and its legitimate competitors cannot meet the domestic demand for protective cases and that the record does not indicate that issuing a GEO would have any potential adverse impact on the public health and welfare, competitive conditions in the U.S. economy, or U.S. production. 

Bond

According to the Opinion, ALJ Pender recommended that if the Commission imposed a remedy following a finding of violation, it should set the bond in the amount of 100 percent of the entered value during the Presidential review period.  The Commission agreed with ALJ Pender’s recommendation, noting that the pricing variability, along with the number of accused products, made it difficult to reliably compare the price of the infringing products to the price of Speck’s domestic industry products.  The Commission noted that when it is difficult or impossible to calculate a bond based on price differentials, particularly where respondents have failed to provide discovery, the Commission has set the bond in the amount of 100 percent of the entered value of the infringing product.  Accordingly the Commission determined to set the bond in the amount of 100 percent of the entered value of infringing cases for portable electronic devices during the Presidential review period.