On November 21, 2016, ALJ Theodore R. Essex issued the public version of Order No. 21 (dated November 10, 2016) granting Complainant AAVN, Inc.’s (“AAVN”) motion for summary determination that Respondent Pradip Overseas Ltd. (“Pradip”) has violated Section 337 in Certain Woven Textile Fabrics and Products Containing Same (Inv. No. 337-TA-976).

By way of background, this investigation is based on a complaint filed by AAVN alleging violation of Section 337 in the importation into the U.S. and sale of certain woven textile fabrics and products containing same that infringe one or more claims of U.S. Patent No. 9,131,790. AAVN also alleged in a second amended complaint violations of Section 337 based upon false advertising claims. See our October 5, 2015 and December 17, 2015 posts for more details on the complaint and Notice of Investigation, respectively.

According to the Order, AAVN argued that Pradip violated Section 337 through false advertising of the thread counts of its woven textile fabrics in violation of the Lanham Act, that a general exclusion order (“GEO”) is warranted, and that the bond be set at 100% during the Presidential Review period. The Commission Investigative Staff (“OUII”) supported the motion; Pradip did not file response. ALJ Essex had previously granted a request by Pradip’s counsel to withdraw as counsel because Pradip had terminated their representation in this investigation, and further, Pradip represented that “it will not seek new counsel or participate in the remainder of the investigation.”

ALJ Essex found that Pradip admitted to importing the accused woven textile fabrics and products containing same (including bedding products, such as Pradip’s “Westwood 900 Thread Count Sheets” and “Chantilly 600 Thread Count Sheet Set”) into the U.S. The ALJ also found that Pradip submitted to the jurisdiction of the Commission by appearing and participating in the investigation before withdrawing through its counsel.

ALJ Essex also found that AAVN satisfied the five elements of a false advertising claim. The evidence showed that independent testing under the relevant ASTM Standard for measuring thread count demonstrated that Pradip’s products have “grossly inflated” thread counts (800 thread count or 650 thread count, where evidence showed the thread count is actually 250 and 407, respectively), thus satisfying the first element—false or misleading statement. Second, the ALJ found actual deception in connection with Pradip’s thread count claims. Third, ALJ Essex found that thread count is an important indicator of fabric quality for consumers in making purchasing decisions, satisfying the materiality requirement. Fourth, the ALJ found that Pradip has placed its accused products in interstate commerce. Fifth, ALJ Essex found that the injury element was satisfied through evidence showing that AAVN lost sales to competitors, including Pradip, that sold woven textile fabric products with misleading thread counts at lower prices.

As to remedy, the ALJ agreed with AAVN and the OUII that a GEO is warranted due to (1) a widespread pattern of unauthorized use (e.g., through the manufacture and import of “high thread count CVC products” with falsely-advertised thread counts by companies based out of India, Pakistan, and China), and (2) the difficulty in identifying the sources of the falsely-advertised goods. In addition, ALJ Essex found that without any information to set a bond based on price differential, a bond of 100% would be appropriate.