National Products Inc. (NPI), a US company based out of Seattle, filed a complaint with the U.S. International Trade Commission (USITC) against Chinese companies claiming possible patent infringement. NPI is known for manufacturing and distributing mounting apparatuses for holding portable electronic devices known as RAM® Mounts.
The 2017 complaint, Investigation No. 337-TA-1086, prompted an investigation into 10 different Chinese companies 1 (Respondents) claiming they violated the Tariff Act of 1930 (Act) by infringing on six of NPI’s patents and one of its trademarks. All 10 Chinese companies were found to be in default and on June 20, 2018 NPI sought a determination by an USITC administrative law judge (ALJ) that the Respondents had violated Section 337 of the Act. In addition, NPI requested that the ALJ recommend a general exclusion order (GEO). A GEO prevents any infringing articles from entering the. United States, regardless of the source.
On November 28, 2018, the ALJ made a determination granting part of NPI’s motion, specifically ruling that the Respondents violated Section 337 by infringing on multiple patents and trademarks.
In addition, the ALJ initially recommended that the Commission enter a GEO on six of NPI’s patents. The ALJ did not recommend a GEO for one of the patents because the ALJ did not find that there was induced infringement. However, this finding by the ALJ was later reversed by the USITC and handed back to the ALJ for review. The ALJ ultimately found that all seven patents were infringed upon.
Judges and courts will find a party in default if the party or parties fail to respond to the complaint and/or notice of investigation in the manner prescribed by law. A finding of default against a non-responsive party will not be made if the party can show cause why it should not be found in default.
In this case, the ALJ found the Respondents to be in default for failing to respond to the investigation or show cause as to why they failed to respond to the investigation.
Issuing a GEO
Section 337 of the Act grants the USITC the authority to issue a GEO when there is no party contesting the investigation. Violations are established by substantial, reliable, and probative evidence.
The ALJ found that the seven patent infringement violations were established by substantial, reliable and probative evidence. Thus, the ALJ recommended that the USITC issue a GEO.
USITC’s view on a GEO
The USITC adopted the ALJ’s recommendation which was laid out in the ALJ’s recommended determination. The USITC made its decision after weighing a variety of factors in addition to the ALJ’s recommendation.
First, the USITC agreed with NPI that a limited exclusion order would be insufficient because the infringing products are sold on the internet and in a manner, which made it difficult to identify who is selling them; and NPI has been unsuccessful in its attempts to mitigate the infringements.
The USITC also found that a limiting exclusion order would be insufficient because the Respondents or other infringers could simply circumvent the order by selling bootlegged products through an anonymous seller. In further evidence of this, the USITC found that the infringing products were often shipped in packaging that lacked any manufacturing identification, order details lacked identifying information and sellers of the products frequently changed their names and locations to avoid detection.
Consequently, the ease with which companies can change their names and locations rendered NPI’s prevention efforts futile and allowed the number of infringers to continue to grow. Most importantly, the USITC found that Respondents themselves had shipped the infringing products in discreet packaging that failed to list manufacturing details or sellers’ details; there are multiple sources of infringing products; and it is impossible for NPI to identify all possible sources of infringing products.
Other Commission Considerations
In addition to the likelihood and frequency of infringement the USITC took into consideration the public welfare and the bond for importation.
For public welfare, the USITC analyzed the effect that issuing a GEO could have on the health and welfare of the public. For instance, if the good that is being infringed on is an essential good (such as food, water, etc.), and there are limited or no other competitors in the market, then the Commission will be less likely to issue a GEO and may look at other alternatives such as a limited exclusion order.
In determining a bond rate for importation of the infringing products during the period of review, the USITC usually looks at the price of the product being infringed as sold by the complaining party and the infringing party’s price. However, the Commission will issue a 100 percent bond rate when there is no reliable price information available.
In this case, the ITC concluded that a mount for cellphones and other electronic devices is not essential to the health and welfare of the public and that the bond rate should be set at 100% because there was no reliable price information.
Effect of a GEO
A GEO is an effective legal tool that the USITC will utilize to prevent widespread patent and trademark infringement. The most substantial impact a GEO has on a product is blanket protection against importation of infringing products by parties and non-parties. In this case, the USITC decided that any product that infringes on one or more of NPI’s patents and trademarks is prevented from entering the United States for consumption.
The U.S. International Trade Commission disputes are complex, difficult to manage, and can have serious implications for both international and domestic companies. If your business is involved in disputes before the USITC or impacted by its decisions, let the experienced attorneys at Whitcomb, Selinsky Law, P.C. advise and guide you. Please call (303) 534-1958 or complete a contact form on our website.
1 Shenzhen Chengshuo Technology Co., Ltd., d/b/a WUPP (“WUPP”) of Zhejiang, China; Foshan City Qishi
Sporting Goods,Technology Co., Ltd. (“N-Star”), Guangzhou Kean Products Co., Ltd. (“Kean”), Gangzhou
Kaicheng Metal Produce Co. (“ZJMOTO”), Shenzhen Smilin Electronic Technology, Co., Ltd. (“Smilin”),
and Shenzhen New Dream Intelligent Plastic, Co. (“New Dream”), Ltd., all of Guangdong, China; Chengdu
MWUPP Technology Co., Ltd. (“MWUPP”) of Sichuan Province, China; and Shenzhen Yingxue Technology
Co., Ltd., d/b/a Yingxue Tech. (“Yingxue Technology”), Shenzhen Shunsihang Technology Co., Ltd., d/b/a
BlueFire (“BlueFire”), and Prolech Electronics Limited (“Prolech”), all of Shenzhen, China