By: Chris Liu and Ryan McCrum – In a recently issued initial determination, the ITC granted summary determination on violation and recommended issuance of a general exclusion order (“GEO”) against respondents after finding that a limited exclusion order (“LEO”) would likely be circumvented, and it was difficult to identify the source of infringing goods due to a widespread pattern of violation.  Certain Child Resistant Closures With Slider Devices Having A User Actuated Insertable Torpedo For Selectively Opening The Closures and Slider Devices Thereof, Inv. 337-TA-1171, Order No. 12 (April 21, 2020).  ALJ Cheney also recommended issuance of an LEO against the defaulting respondents because the conditions precedent for limited exclusion orders had been satisfied.

In recommending a GEO, ALJ Cheney first considered the respondents’ likelihood of circumventing a LEO using corporate alter egos.  Based on the existence of multiple shams or non-existent entities and respondents’ past conduct, ALJ Cheney found that respondents likely will use different corporate names and addresses to circumvent exclusion orders limited to specific corporate entities.  He also considered the barriers to entry into the market.  When the barriers are low, entities can easily “shed named corporate form and immediately begin operating as a different entity.”  After considering the low cost of manufacturing in Asia, and the lack of identifying markings on the products which would connect the infringing articles to respondents, ALJ Cheney concluded that a GEO would prevent such new entities from circumventing more limited orders.

Next, citing Section 337(d)(2)(B), ALJ Cheney justified the issuance of a GEO because there is a pattern of violation of section 337 and it is difficult to identify the source of infringing goods.  According to ALJ Cheney, the widespread pattern of violation is found, for example, on the online marketplace Alibaba.com, where non-parties’ products identical to domestic industry products protected by the asserted patents are listed for sale.  All the Alibaba listings’ advertising of “FDA” certification demonstrated their intention for importation into the United States, and respondents’ actions showed that the infringing products were actually brought into the United States at least through trade shows.

Finally, before the conclusion of his circumvention analysis, ALJ Cheney found the evidence supported that identifying the source of imported zipper closures is difficult because they can be incorporated into finished goods without any identification of source.  ALJ Cheney also found evidence showing the quick change and removal of Alibaba URL links, making it even harder to identify the source of infringing goods.

Takeaway

 This initial determination is a reminder that an additional showing is necessary to obtain a GEO at the ITC but in the right circumstances a complainant can be successful.  Here the ITC has demonstrated its willingness to issue a GEO when complainant establishes substantial, reliable, and probative evidence that (1) a pattern of violation of Section 337 by sources that are difficult to identify exists, and (2) respondents are likely to circumvent an LEO using corporate alter egos, by setting up new companies at little cost, or both.  Similar to other recently issued GEOs, the existence of online merchants selling hard-to-identify inexpensive items through e-commerce websites in large quantities is an important factor favoring the issuance of a GEO.

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Ryan McCrum, who co-chairs the Firm's intellectual property ITC practice, has nearly 20 years of experience handling high-stakes patent litigation. He has led teams from the initial filing of a complaint all the way through jury and bench trials. He has extensive experience examining witnesses of all types at trial, arguing claim construction and summary judgment hearings, and handling matters through appeal.