By: Yury Kalish and Vishal Khatri – While it is well understood that the ITC can issue an exclusion order to stop the importation of articles found to infringe a patent, it is not as well known that such orders can also prevent certain domestic activities.  A recent Commission opinion highlights how Limited Exclusion Orders (“LEOs”) and Cease and Desist Orders (“CDOs”) can be used to prevent the importation of replacement parts for domestic service and repair activities, and the sale of articles already existing in domestic inventory.  In re Certain Robotic Vacuum Cleaning Devices and Components Thereof Such As Spare Parts, Inv. No. 337-TA-1057, Comm’n Op. (February 1, 2019).

In this investigation, the Complainant iRobot prevailed and the ALJ recommended the issuance of an LEO covering certain robotic vacuum cleaning devices and components thereof that are imported, sold for importation, and/or sold after importation by Respondents Hoover, bObsweep, and SSSIT.  The ALJ also recommended the issuance of a CDO against Hoover.

The Limited Exclusion Order

The ALJ suggested that the LEO include a certification provision and expressly exclude from the scope of the order certain products identified in a Joint Stipulation between the parties.  In their briefing to the Commission, Respondents argued that the LEO should also expressly carve out certain products similar to those found by the ALJ to be non-infringing and permit the importation of replacement parts.  iRobot argued that the carve out should not include the non-adjudicated products or the replacement parts.

With respect to the non-adjudicated products, the Commission agreed with iRobot that several products suggested by the Respondents for the inclusion in the carve out were not adjudicated and therefore should not be specifically excluded by the LEO.  The Commission also rejected Respondents’ request for the carve out of replacement parts, noting that such requests have been granted in other investigations “when unopposed, in view of the public interest, or upon some showing of a need for service and repair.”  The Commission found that none of those conditions are present here.

Finally, the Commission listed three avenues available to the Respondents to determine whether these non-adjudicated products and replacement parts are covered by the LEO: “Respondents may seek an advisory opinion or file a petition for a modification proceeding from the Commission, or a Part 177 ruling from CBP, regarding whether an article is subject to the exclusion order.”  (see, e.g., 19 C.F.R. §§ 210.76, 210.79; 19 C.F.R. Part 177).  As we recently highlighted (here), such post-investigation efforts can be complex and time consuming.

The Cease and Desist Order

The ALJ also recommended the issuance of a CDO against Hoover, but not against the other Respondents.  The ALJ explained that while Hoover maintained a commercially significant inventory of the accused products, there was no evidence that bObsweep’s inventory was commercially significant, and iRobot did not even seek a CDO against SSSIT.  Before the Commission, iRobot argued that both Hoover and bObsweep have a commercially significant inventory, and therefore a CDO should be issued against both of these Respondents.  The Respondents argued that a CDO should not be issued against any of them – not even against Hoover – because the ALJ’s conclusion about the commercial significance of Hoover’s inventory was based in part on counting non-infringing products.

As an initial matter, the Commission explained that it is authorized to issue a CDO as a remedy for a violation of Section 337 and that CDOs are generally issued when “the respondents maintain commercially significant inventories in the United States or have significant domestic operations that could undercut the remedy provided by an exclusion order.”  However, as we previously discussed (here), all of the Commissioners “[do] not adopt the view that the inventory needs to be ‘commercially significant’ in order to issue a cease and desist order.”

Upon review, the Commission determined that, even considering the inventory of infringing products only, Hoover’s inventory was commercially significant.  For bObsweep, the Commission disagreed with the ALJ finding and concluded that there was evidence demonstrating that bObsweep had a commercially significant inventory.

Takeaway

The Commission’s opinion in this investigation highlights how the ITC can impact a respondent’s activities beyond just importation of infringing articles.  Their orders can extend to domestic inventories and can even impact domestic service and repair activities – something that respondents should be aware of at the outset of an investigation.  Although the Commission noted alternative mechanisms for clearing non-adjudicated products and replacement parts, these mechanisms can be costly and difficult to navigate, highlighting the importance of bringing all available design modifications to the attention of the ITC during the pendency of the investigation.

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Vishal Khatri is an intellectual property lawyer with more than 15 years of experience representing clients in high stakes, bet-the-company patent litigation and procurement matters around the world. He routinely represents clients in matters before U.S. district courts, the United States International Trade Commission (ITC), and the United States Patent and Trademark Office (USPTO), including Inter Partes Review (IPR) proceedings before the Patent Trial and Appeal Board (PTAB).