On November 8, 2012, the International Trade Commission (the “Commission”) issued the public version of its opinion on remedy, public interest, and bonding in Certain Lighting Control Devices Including Dimmer Switches and Parts Thereof (IV) (Inv. No. 337-TA-776). 

By way of background, the investigation is based on a complaint filed by Lutron Electronics Co., Inc. (“Lutron”) alleging violation of Section 337 in the importation into the U.S. and sale of dimmer switches that infringe U.S. Patent Nos. 5,248,919 (the ‘919 patent) and 5,637,930 (the ‘930 patent).  See our June 13, 2011 post for more details. 

ALJ Essex’s initial determination (“ID”) granted-in-part Lutron’s motion for summary determination based on the remaining respondents being in default.  The ID concluded that all defaulting respondents met the importation requirement and that each of the defaulting respondents’ accused products infringed at least one claim of both asserted patents.  As explained in our October 19, 2012 post, the Commission issued a Notice indicating that it determined to vacate all portions of the ID relating to the ‘919 patent as moot because the patent expired.  The Commission determined not to review the remainder of the ID. 

Based on the notice, the Commission also determined to issue both:  (i) a general exclusion order (“GEO”) prohibiting the unlicensed entry of lighting control devices including dimmer switches and parts thereof that infringe certain claims of the ‘930 patent; and (ii) cease and desist orders prohibiting Respondents from importing, selling, marketing, advertising, distributing, offering for sale, transferring (except for exportation), and soliciting U.S. agents or distributors for, dimmer switches that infringe certain claims of the ‘930 patent.  The Commission further determined that a bond in the amount of 100% is required during the Presidential review period. We now provide additional details.

According to the opinion, in the ID the ALJ recommended a limited exclusion order (“LEO”) rather than a GEO because he did not find it necessary to prevent circumvention of an LEO, or that there is a pattern of violation of Section 337 where it is difficult to identify the source of the infringing products.  However, the Commission considered additional evidence and arguments provided by Lutron in favor of a GEO.  Specifically, Lutron asserted that previous Commission investigations related to the same subject matter (see Inv. Nos. 337-TA-599, 337-TA-676, and Inv. Nos. 681) “have not deterred a steady stream of infringers from entering the U.S. market” and that the numerous entrants and potential entrants demonstrate the necessity of a GEO.  Lutron provided evidence (not available when argued previously to the ALJ) of 21 actual infringing entities and 12 potential entrants into the market, asserting that this large number necessitates a GEO in order to prevent Lutron from coming back to the Commission “for a fifth, sixth, or seventh time to seek the remedy it deserves.”

The Commission Investigative Staff (“OUII”) agreed with the ALJ and argued that an LEO is sufficient in this case as there is no demonstration of evasive activity or particularly low barriers to entry into the U.S. market that usually warrant a GEO.

The Commission found Lutron’s evidence to satisfy both provisions of Section 337(d)(2) necessary to issue a GEO against defaulting respondents.  The Commission was particularly persuaded by Lutron’s evidence “showing significant and increasing demand for infringing products, widespread U.S. marketing and distribution networks with multiple intermediaries, a large number of non-respondent foreign manufacturers/distributors, and frequent name change for foreign manufacturers/distributors.”  The Commission also determined that the barrier for entering the dimmer switch market is relatively low, contrary to OUII’s argument.  In addition, the Commission found that the ALJ misstated Section 337(d)(2) and used an improper evidentiary standard.  Specifically, the ALJ was looking for “a pattern of circumvention,” when only “circumvention” is required, and the Commission determined that circumvention was proved by Lutron’s evidence of parties violating the consent orders from the previous investigations.

Lutron also argued that cease and desist orders against respondents with a “commercially significant inventory” in the United States should be issued, and provided evidence in relation to Respondents Elemental, American Top, Big Deal, and Zheijiang Yuelong.  OUII agreed that cease and desist orders against these respondents would be appropriate.

Lutron and OUII agreed with the ALJ’s recommendations that there were no public interest concerns that would preclude entry of the remedies recommended by the ALJ and that a 100% bond is appropriate because none of the respondents participated in discovery to allow a realistic price determination or allocation of a royalty rate.  The Commission agreed on these issues as well, stating “there will be no negative impact on public health, safety, and welfare” and that a 100% bond is appropriate in circumstances such as this were “reliable information is unavailable due to the inability to conduct discovery of defaulting respondents.” 

Therefore, the Commission determined to issue a GEO, cease and desist orders against particular defaulting respondents, and a 100% bond on covered products.  With this opinion, the investigation has been terminated.