By: Yury Kalish and Blaney Harper – A recent opinion by the Commission highlights the risk for defaulting at the ITC. The Commission reversed the ALJ’s finding of a violation as to the participating respondents but maintained that the defaulting respondent was in violation of Section 337 based on the allegations in the complaint. In re Certain LED Lighting Devices, LED Power Supplies, And Components Thereof, Inv. No. 337-TA-1081 (Jul. 23, 2019) (“Opinion”).
Philips Lighting North America and Philips Lighting Holding B.V. (“Complainants”) alleged multiple respondents violated Section 337 by importing LED devices that infringed Complainants’ patents. While most respondents participated in the investigation, MSi Lighting, Inc. failed to respond and the Commission found them in default. After ALJ Lord issued her final ID finding a violation of Section 337, the Commission determined to review some of its findings, including infringement and the economic prong of the domestic industry requirement. On review, the Commission concluded that Complainants failed to show infringement by the Respondents and took no position on the economic prong of domestic industry. Accordingly, the Commission concluded there was no violation of Section 337, with respect to the participating Respondents.
The Commission’s reversal did not apply to defaulting respondent, MSi Lighting. Treatment of defaulting respondents at the ITC is covered by Section 337(g)(1) which requires the Commission to “presume the facts in the complaint to be true.” Therefore, the Commission presumed as true Phillips’ allegations in the complaint that MSi Lighting infringed the patent asserted against it, and that Philips established both the technical and economic prongs of the domestic industry requirement with respect to MSi Lighting. They further found “that there is no evidence that the issuance of an LEO and CDO against MSi Lighting will have a negative impact” on any public interest factor. The Commission therefore determined to issue an LEO and a CDO against MSi Lighting.
The second issue analyzed by the Commission was the bond amount for conditional entry of MSi Lighting’s imported articles during the 60-day period of Presidential review. On supplemental briefing for Commission’s review, the Complainants argued that the bond should be set for 3-5% for participating respondents, and 100% for MSi Lighting. There was some disagreement regarding whether to impose a 100% bond as the Commission has typically done for defaulting respondents or whether to apply the information used to establish an appropriate bond amount for the participating respondents to the defaulting respondent. The Commission ultimately decided to rely on the information related to the other respondents and concluded that the appropriate bond rate to apply against MSi Lighting was 3% of the entered value of the infringing devices.
As we have previously highlighted (here) a strategy that involves defaulting at the ITC can be risky. In this case, the ITC ultimately determined the products of the participating respondents did not infringe. But, under Section 337(g)(1), the ITC was obligated to presume facts alleged in the complaint to be true with respect to the defaulting respondent so MSi Lighting did not benefit from the further evidentiary findings and the ITC issued an LEO and a CDO against them.