On July 2, 2014, the International Trade Commission (“the Commission”) issued the public version of its opinion in the enforcement proceeding in Certain Two-Way Global Satellite Communication Devices, System and Components Thereof  (Inv. No. 337-TA-854) determining to impose a civil penalty on Respondents in the amount of $6,242,500.00

By way of background, the Commission instituted the underlying investigation on September 18, 2012 based on BriarTek IP, Inc.’s (“BriarTek”) complaint of August 17, 2012.  See our September 19, 2012 post for more details.  On March 15, 2013, former ALJ Robert K. Rogers, Jr. granted a motion by DeLorme Publishing Co., Inc. and DeLorme InReach, LLC (collectively, “DeLorme”) to terminate the investigation and for entry of a proposed consent order (“the consent order”).  See our March 19, 2013 post for more details.  In the consent order, DeLorme agreed that it would not import or sell two-way global satellite communication devices, systems, or components thereof that infringe BriarTek’s U.S. Patent No. 7,991,380 (the ‘380 patent) after April 1, 2013.  On April 10, 2013, BriarTek filed an enforcement complaint alleging that DeLorme violated the consent order.  See our April 11, 2013 post for more details.

In the enforcement initial determination (“EID”), ALJ Dee Lord found that DeLorme had violated the consent order with respect to its sale after importation of accused components of the InReach 1.5 device, but found no violation of the consent order with respect to the InReach SE device and to activation of InReach devices after the effective date of the consent order, where those devices had been sold prior to the effective date of the consent order.  ALJ Lord further found that enforcement measures are appropriate for DeLorme’s violation of the consent order, and recommended a civil penalty of $637,500.

As reported in our June 13, 2014 post, on review, the Commission determined to reverse-in-part and vacate-in-part the EID’s findings.  We now provide the details of the Commission’s opinion.

As an initial point, although the Commission adopted the ALJ’s findings with regard to direct infringement of the InReach 1.5 devices, the Commission vacated portions of the EID where the ALJ relied on Akamai Techs, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012) because the Supreme Court subsequently reversed the Federal Circuit Akamai decision in Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct. 2111 (2014).

According to the opinion, the Commission determined that the ALJ erred in finding no induced infringement, and therefore no violation of the Consent Order, with respect to the accused InReach SE devices.  Specifically, the Commission disagreed with the ALJ’s “component comparison test” and found that both the specific intent and direct infringement prongs of induced infringement were met by DeLorme importing components, incorporating them into domestically-assembled InReach SE devices, and then selling the devices to end users via distributors with instructions to use the devices in an infringing manner.  With regard to specific intent, the Commission noted that DeLorme’s “business model is predicated on the activation and use of the InReach SE devices by the end users” and that DeLorme was aware, or at least willfully blind to the fact, that it was inducing the end users to infringe the ‘380 patent.  The Commission determined that the record established direct infringement of the asserted claims with respect to the InReach SE devices through use of the accused system by an end user, as set forth under Centillion Data Systems, LLC v. Qwest Communications Int’l, Inc., 631 F.3d 1279 (Fed. Cir. 2011).  As such, DeLorme’s conduct “constitutes a violation of the Consent Order for InReach SE devices sold after the effective date of the Consent Order.”

The Commission also reviewed violation of the Consent Order with regard to InReach 1.5 and SE devices sold before, and activated after, the effective date of the Consent Order.  According to the opinion, ALJ Lord erroneously failed to distinguish between infringement and violation of the Consent Order.  The Commission reversed the ALJ’s finding of no induced infringement with respect to both devices, since DeLorme’s activation activity, combined with the end user’s direct infringement, established induced infringement.  However, since this activation activity did not involve any post-Consent Order sale of imported components, the Commission affirmed the ALJ’s ultimate determination of no violation of the Consent Order.

With regard to the enforcement measures recommended by the ALJ, the ALJ’s recommendation was for $637,500 ($12,500 per day for 51 days of violation).  DeLorme argued that a nominal penalty of one dollar a day would be appropriate.  However, both BriarTek and the Commission Investigative Staff (“OUII”) asserted that the Commission should impose a substantial penalty, and should consider the cost of the subscription fees in addition to the cost of the devices.  After considering the factors of good or bad faith, injury to BriarTek, DeLorme’s ability to pay, benefit to DeLorme (in terminating the proceeding and profits made by violation), vindicating the Commission’s authority, and the public interest, the Commission determined to modify the ALJ’s recommended enforcement measure.  Of particular interest, the Commission held that a combined cost of the device and subscription should be considered, and that the evidence supported a finding of bad faith by DeLorme’s violation of the consent order.  Accordingly, the Commission determined to impose a civil penalty of $6,242,500.00 based on an amount of $27,500 a day over 227 days of violation.