By: Levent Hergüner and David Maiorana – A recent initial determination (“ID”) from the ITC resulted in a general exclusion order for products infringing several patents belonging to Complainant National Products Inc. (“NPI”).  Certain Mounting Apparatuses For Holding Portable Electronic Devices And Components Thereof, Inv. No. 337-TA-1086, Order 15 (November 28, 2018).  All named respondents were found in default, and none contested NPI’s allegations.  Accordingly, ALJ Bullock concluded that domestic industry existed and a violation of section 337 occurred with respect to four out of five NPI patents.

NPI satisfied both the economic prong and the technical prong required to establish domestic industry.  To satisfy the economic prong, NPI established that it made significant investments in plant and equipment because the company manufactures all of its products in the United States.  NPI also established a significant employment of labor and capital because the company employs approximately 374 people within the United States.  To satisfy the technical prong, NPI provided claim charts, physical products, and testimony from its expert.  Additionally, the company showed its products are designed, developed, and sold in the United States through various retail channels.  Finding no evidence to contradict NPI’s assertions, ALJ Bullock concluded NPI satisfied both prongs required to establish domestic industry under section 337.

Although ALJ Bullock granted summary determination for four patents, he denied NPI’s motion for the fifth patent because there was no evidence that direct infringement had occurred.  NPI had argued its patent was indirectly infringed, but ALJ Bullock stated that direct infringement must be established for a claim of indirect infringement to prevail.  Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1272 (Fed. Cir. 2004).  The ALJ could not find evidence of direct infringement because the facts did not show U.S. consumers used the accused products.  NPI asserted that third-party resellers and e-commerce websites sold the accused products or replicas.  The ALJ determined that the supporting evidence reflected single sales of unused products or a clear indication that the products would ship from outside the United States.  He found this information insufficient to establish domestic consumer use.  He also did not believe evidence of replicas was probative of infringement because it did not involve the actual accused product.  Accordingly, ALJ Bullock denied NPI’s motion with respect to the fifth patent.

With respect to the other four patents, ALJ Bullock determined a general exclusion order was appropriate for the products that did infringe NPI’s patents.  A general exclusion order is appropriate when (a) a general exclusion from entry of articles is necessary to prevent circumvention of an exclusion order limited to products of named respondents; or (b) there is a widespread pattern of violation of Section 337 and it is difficult to identify the source of infringing products.  ALJ Bullock determined that both factors were met.  He found that circumvention of a limited exclusion order was a concern because several of the accused products provided no information as to their brand or manufacturer.  Further, the sellers frequently changed their names or removed listings to avoid detection.  The ALJ also found a widespread pattern of unauthorized use.  Specifically, the accused products were shipped in packaging that did not identify the manufacturers or sellers, and many other infringing products were available for purchase online.  The ALJ emphasized that the anonymity involved made it near impossible to identify the source of infringing products.  Accordingly, ALJ Bullock concluded a general exclusion order that encompassed the infringing products was appropriate.

Takeaway

 This decision highlights the ITC’s process for identifying domestic industry and granting a general exclusion order.  Continuous practice of patent-protected products within the United States can help satisfy both the economic and technical prongs of section 337’s domestic industry requirement.  Respondents that infringe such products are likely to face general exclusion orders if they do not make their identities apparent.  Further, this decision serves as a reminder that a finding of indirect infringement requires evidence of direct infringement, even if the respondents do not contest the allegations.

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Dave Maiorana is a trial lawyer with a notable combination of significant experience as a USPTO examiner along with 20 years litigating complex intellectual property matters. He has represented clients as both plaintiffs and defendants around the country and in the ITC. Dave has experience in diverse technology areas, including teeth whitening, diapers, fem care products, self-inflating tires, oxygen concentrators, flash memory, and digital cameras.