Further to our July 19, 2013 post, on July 30, 2013, Chief ALJ Charles E. Bullock issued the public version of the Initial Determination (“ID”) (dated July 17, 2013) in Certain Ink Application Devices and Components Thereof and Methods of Using the Same (Inv. No. 337-TA-832).

By way of background, this investigation is based on a January 13, 2012 complaint filed by MT. Derm GmbH (“MT. Derm”) of Germany and Nouveau Cosmetique USA, Inc. (“Nouveau”) of Orlando, Florida, (collectively “Complainants”) alleging a violation of Section 337 in the importation into the U.S. and sale of certain ink application devices and components thereof that infringe one or more claims of U.S. Patent No. 6,505,530 (the ‘530 patent).  The remaining Respondent in the investigation is T-Tech Tattoo Device, Inc. (“T-Tech”) of Ontario, Canada.  See our March 2, 2012 post for more details on this investigation.

According to the ID, Complainants alleged that T-Tech induced and contributed to the direct infringement of claims 1-3, 7, 8, 19, and 20 of the ‘530 patent by T-Tech’s customers. Specifically, Complainants alleged that the use of two combinations of equipment resulted in the infringement of the ‘530 patent: (1) the use of a Cheyenne Hawk Tattoo Machine and T-Tech’s EZ Needle Cartridge and (2) the use of a Conventional Tattoo Machine and T-Tech’s EZ grip, drive bar, and EZ Needle Cartridge. With few exceptions, T-Tech either admitted or did not dispute that the combinations of devices practiced each element of the claims. Rather, according to the ID, T-Tech repeatedly stated that Complainants were monopolizing the tattoo needle cartridge market in the US and that T-Tech sells its EZ Needle cartridges and EZ grips to undermine this monopoly.  T-Tech further did not dispute that it induced its customers to infringe.  Accordingly, ALJ Bullock determined that the relevant combinations met every limitation of apparatus claims 1-3, 7, and 8, and therefore infringed these claims of the ‘530 patent. As to method claims 19 and 20, the ALJ determined that no proof had been provided that these combinations were actually used in a way to infringe the method claims in the US.

ALJ Bullock thus granted Complainants’ motion for summary determination as to the induced infringement of claims 1-3, 7 and 8 by both combinations. The ALJ also granted the motion for summary determination as to the contributory infringement of these claims with respect to the combination of the EZ needle cartridge with a Cheyenne Hawk tattoo machine. As to the contributory infringement allegations involving the use of a Conventional Tattoo Machine and T-Tech’s EZ grip, drive bar, and EZ Needle Cartridge, the ALJ found issues of material fact as to substantial non-infringing uses and thus did not grant summary determination as to this issue.

With respect to validity, ALJ Bullock had previously found that T-Tech had waived the defense of invalidity.  See our March 29, 2013 post for more details on this ruling.

As to domestic industry, T-Tech did not dispute the technical prong, arguing only that Complainants did not meet the economic prong because MT. Derm’s products are made in Germany, and are not designed, developed, or manufactured in the US.  Further, T-Tech argued, that Nouveau only does marketing and sales, adding that its training class is only for marketing and sales and that its training classroom is not a “plant” required by the economic prong. 

In contrast, Complainants argued that they met the economic prong by leasing a facility in Orlando for customer and product support, sales, and training; investing in equipment for education, training, and customer support relating to the ‘530 patent; investing in labor costs associated with sales, customer education, product support and training; investing in the exploitation of the ‘530 patent by maintaining a training academy; and investing in research and development in the creation of the removable tattoo color to be used in conjunction with the patented tattoo application devices and equipment.  

The Commission Investigative Staff (OUII) supported Complainants, arguing that they had identified domestic expenditures directly related to the exploitation of the ‘530 patent that were sufficient to satisfy the economic prong.

In the ID, ALJ Bullock determined that Complainants practiced the patented invention by use of the Cheyenne Hawk Tattoo machine combined with the Cheyenne Hawk Needle cartridge and by use of the Nouveau Contour PMU device combined with Nouveau Contour needle cartridge.  Further, the ALJ agreed that Complainants had made a substantial investment in the exploitation of the ‘530 patent. Specifically, the ALJ determined that Nouveau’s operations are exclusively dedicated to the patented articles and that much of its costs, expenses, and investments can be apportioned to the industry defined by the ‘530 patent.  Further, the Nouveau Contour Academy is licensed by the state of Florida, providing courses in the proper use of Complainants domestic industry products.  The ALJ also determined that Nouveau works with licensed distribution partners that employ personnel who train users in the proper use of Complainants’ domestic industry products and that state regulations require certification, thus the cost associated with running the accredited teaching facility constitutes an investment in domestic industry.  Accordingly, ALJ Bullock granted summary determination as to the establishment of a domestic industry under prong (C), determining Complainants had made a substantial investment in exploitation, including engineering, research and development, or licensing.  The ALJ denied summary determination as to the remaining prongs.

ALJ Bullock concluded that a violation of Section 337 had occurred as to claims 1-3, 7, 8 of the ‘530 patent, recommended a limited exclusion order, and a bond of 100% during the presidential review period.

Additionally, in the ID, ALJ Bullock determined that T-Tech was in default.  Previously, on April 19, 2013, the ALJ ordered T-Tech to show cause as to why it should not be found in default for failing to comply with “numerous pretrial deadlines.” Complainant argued T-Tech had “effectively ceased participating” in the investigation by failing to submit an exhibit list, to serve any proposed exhibits, to serve any proposed witness statements, to file a prehearing statement, to file a prehearing brief, to respond to Complainants’ request for an estimated cross-examination time, to respond to Complainants efforts to arrange a settlement conference, and to arrange for a mutually acceptable translator. The OUII supported Complainant.  T-Tech responded that Mr. Xiao’s permanent resident card had expired and he would not be able to travel from Canada to the US; that T-Tech was unable to afford an attorney; and that, while Mr. Xiao tried to comply with investigation requirements, he now understood he “cannot be competent for his job.”  ALJ Bullock agreed with Complainants and the OUII, finding T-Tech in default.  The ALJ noted that it would be unfair to allow T-Tech to unabashedly and repeatedly violate established rules and procedures simply because T-Tech appeared pro se.  Hence, the ALJ determined that T-Tech was in default, and had therefore waived its right to appear, be served with documents, and to contest the allegations at issue in the investigation.