Downstream Remedy at the ITC: The Continuing Applicability of the EPROMs Analysis

CarAppreciation to the Federal Circuit Bar Association October 2016 Newsletter, a publication of the Federal Circuit Bar Association, for this limited use.

To remedy violations of Section 337 of the Trade Act of 1930, as amended (“Section 337”), the U.S. International Trade Commission (“ITC” or “Commission”) “shall” issue an exclusion order barring the importation of infringing articles.[1]  The default remedy is a limited exclusion order (“LEO”) directed to the infringing imported products of named respondents.[2]  However, before an LEO can be issued, the appropriate scope of the remedy and the effect of the remedy on the four public interest factors identified in the statute must be determined.[3]  A critical part of the analysis regarding the proper scope of an ITC exclusion order has long been whether an order should cover downstream products.  Historically, investigations involving downstream products containing an infringing component (e.g., a computer containing an infringing chip) warranted a special nine-factor test (the “EPROMs analysis”) to determine whether the LEO should reach downstream products.  Following the Federal Circuit’s decision in Kyocera Wireless Corp. v. U.S. Int’l Trade Comm’n,[4] the continuing applicability of the EPROMs analysis has been unclear.  To date, the Commission has not definitively addressed the continued viability of the EPROMs test.  This article analyzes the current state of EPROMs analysis, including decisions by the current Administrative Law Judges, and its continuing potential applicability in Section 337 investigations.

Background

The Commission first applied the EPROMs test in Inv. No. 337-TA-276 (“EPROMs”) to “balance the complainant’s interest in obtaining complete protection from all infringing imports by means of exclusion of downstream products against the inherent potential of the LEO to disrupt legitimate trade. . . .”[5]  In the EPROMs investigation, the Commission evaluated whether to exclude Respondent Hyundai’s downstream products that ranged from personal computers to automobiles that incorporated infringing Hyundai-manufactured EPROMs.  The Commission applied nine factors[6] in determining that the LEO should not reach downstream Hyundai automobiles because such exclusion “per se is excessive, and would not significantly increase the relief afforded complainant.”[7]

Until 2008, a complainant could obtain relief against downstream products imported by both named respondents and unnamed third parties.  However, the Federal Circuit’s decision in Kyocera held that an LEO cannot reach downstream products of non-respondents.[8]  Thus, if a complainant now seeks to exclude downstream products based on an infringing component, downstream parties must be respondents in the investigation.

ALJ EPROMs Decisions post-Kyocera

Since the Kyocera decision, Administrative Law Judges have wrestled with whether the EPROMs analysis still applies when determining whether or not to exclude downstream products of named respondents.  Of the current slate of ALJs, Judges Shaw, Essex, Bullock, and Lord have issued decisions concerning the applicability and validity of the EPROMs test, while it appears that Judges Pender and McNamara have not yet had the opportunity to conclusively weigh in on the issue.

Judge Shaw has applied the EPROMs test in several investigations.[9]  In fact, in Inv. Nos. 337-TA-781 and 337-TA-784, Judge Shaw recommended that LEOs not reach respondents’ downstream products based on the EPROMs analysis.  However, both investigations were terminated prior to Commission review.

Judge Essex has issued contrasting decisions, applying the test in one investigation, but finding the analysis to be no longer necessary in another investigation.[10]  Judge Essex has also stated that he does not view the EPROMs test as having been overturned:  “In looking at Kyocera, and I’ve read that one a lot and I read EPROMs, and I don’t see that EPROMs has been specifically overturned in any way.  I don’t see that either in the [Federal] Circuit’s decision or in any of the subsequent Commission actions.”[11]

Similarly, Chief Judge Bullock has issued decisions both indicating that the EPROMs analysis may or may not still be required.[12]  Chief Judge Bullock’s Order in Inv. No. 337-TA-893 highlights the uncertain state of the analysis:  “In the absence of clear guidance from the Commission (or Federal Circuit) as to whether the EPROMs factors may still be a consideration for the downstream products of named Respondents, the undersigned declines to prevent a party from introducing evidence or argument regarding the same.”[13]

Judge Lord has echoed Chief Judge Bullock’s view that, until the Commission provides guidance regarding the analysis, it would be inappropriate to exclude evidence relating to the factors.[14]    Judge Lord also noted in Inv. No. 337-TA-910, where the Commission had delegated public interest, that some EPROMs-related evidence might also be relevant to the public interest analysis.[15]

Commission Uncertainty

As both Chief Judge Bullock and Judge Lord have recently noted, there is a lack of clear guidance as to whether the EPROMs analysis should still apply in downstream remedy analysis.  In support of the proposition that Kyocera eliminated the analysis in its entirety, certain Judges and parties have pointed to the Commission’s decision granting downstream relief without consideration of the EPROMs factors in Inv. No. 337-TA-661.[16]  However, the Commission has issued at least one opinion adopting recommended remedy determinations where the assigned Judge performed an EPROMs analysis.[17]  In that decision, the Commission explicitly noted that, because the remedial orders in that investigation applied only to the downstream products of a named respondent, the orders “do not run afoul of the Federal Circuit’s holding in Kyocera.”[18]

Conclusion

Until the Commission conclusively rules on the continued vitality of the EPROMs analysis, and given the potential relevancy of certain EPROMs factors to the public interest analysis, downstream respondents likely should continue to offer EPROMs-related evidence where the exclusion of downstream products is sought, especially in investigations in which the public interest analysis has been delegated to the Judge.

 

The views expressed in this article are the authors’ alone. They to do not represent the views of the firm or any of its clients, and should not be attributed to the Federal Circuit Bar Association or any other affiliates.


[1] See 19 U.S.C. § 1337(d)(1).

[2] See Kyocera Wireless Corp. v. U.S. Int’l Trade Comm’n, 545 F.3d 1340, 1356 (Fed. Cir. 2008) (citing 19 U.S.C. § 1337(d)(2)) (“Kyocera”).

[3] See 19 U.S.C. § 1337(d)(1) (“[The Commission] shall direct that the articles concerned. . .be excluded from entry into the United States, unless, after considering the effect of such exclusion on the [1] public health and welfare, [2] competitive conditions in the United States economy, [3] the production of like or directly competitive articles in the United States, and [4] United States consumers, it finds that such articles should not be excluded from entry.”)

[4] Kyocera, 545 F.3d 1340, 1358.

[5]Certain Erasable Programmable Read-Only Memories (EPROM), Inv. No. 337-TA-276, USITC Pub. No. 2196 at 125 (May 1989), aff’d sub nom. Hyundai Elec. Indus. Co. v. U.S. Int’l Trade Comm’n, 899 F.2d 1204 (Fed. Cir. 1990).

[6] The non-exhaustive factors include:

  1. the value of the infringing articles compared to the value of the downstream products in which they are incorporated;
  2. the identity of the manufacturer of the downstream products;
  3. the incremental value to the complainant of the exclusion of downstream products;
  4. the incremental detriment to respondents of the exclusion of downstream products;
  5. the burdens imposed on third parties resulting from exclusion of downstream products;
  6. the availability of alternative downstream products which do not contain the infringing articles;
  7. the likelihood that the downstream products actually contain the infringing articles and are thereby subject to exclusion;
  8. the opportunity for evasion of an exclusion order which does not include downstream products; and
  9. the enforceability of an order by Customs.

[7] Id. at 127-128.

[8] Kyocera, 545 F.3d at 1358.

[9] See, e.g., Certain Microprocessors, Components Thereof, and Products Containing the Same, Inv. No. 337-TA-781, Initial Determination at 377-383 (Dec. 14, 2012);  Certain Light-Emitting Diodes and Products Containing the Same, Inv. No. 337-TA-784, Recommended Determination on Remedy and Bonding at 9-12 (July 23, 2012); Certain Audiovisual Components and Products Containing Same, Inv. No. 337-TA-837, Recommended Determination at 5-6 (July 31, 2013) (“the Federal Circuit’s opinion in Kyocera does not reach the question of whether the Commission should consider the EPROMs factors…”); Certain Graphics Processing Chips, Systems on a Chip, and Products Containing the Same, Inv. No. 337-TA-941, Recommended Determination on Remedy and Bonding at 5-9 (Jan. 5, 2016).

[10] Compare Certain Semiconductor Chips and Products Containing Same, Inv. No. 337-TA-753, Initial Determination and Recommended Determination on Remedy and Bond at 372 (Mar. 2, 2012) (applying most EPROMs factors), with Certain Computers and Computer Peripheral Devices and Components Thereof and Products Containing the Same, Inv. No. 337-TA-841, Initial Determination and Recommended Determination on Remedy and Bond at 162 (Aug. 2, 2013) (“The ALJ disagrees with Respondents’ assertion that an EPROMs analysis is warranted.  Respondents provide no basis for arguing that the EPROMs analysis is necessary in light of Kyocera and Certain Semiconductor Chips, [Inv. No.] 337-TA-661. . . .”).

[11] Certain Radio Frequency Integrated Circuits and Devices Containing Same, Inv. No. 337-TA-848, Hearing Tr. 10:25 – 11:3 (Aug. 17, 2012).

[12] Compare Certain Static Random Access Memories and Products Containing Same, Inv. No. 337-TA-792, Initial Determination and Recommended Determination on Remedy and Bond at 62 (Oct. 25, 2012) (recommending downstream remedy without analyzing the EPROMs factors), with Certain Flash Memory Chips and Products Containing Same, Inv. No. 337-TA-893, Order No. 51 at 3 (Sept. 29, 2014) (denying motions in limine to preclude respondents from introducing testimony or argument with respect to the EPROMs factors).

[13] Order No. 51 at 3 (Sept. 29, 2014)

[14] See Certain Television Sets, Television Receivers, Television Tuners, and Components Thereof, Inv. No. 337-TA-910, Order No. 57 at 2 (Nov. 21, 2014) (“I agree with Chief ALJ Bullock that there is no clear precedent on this issue and it would thus be inappropriate to preemptively exclude [EPROMS] evidence.”).

[15] See id. at 2-3 (“Moreover, the Notice of Investigation directs me to take evidence and hear arguments with respect to the public interest in this investigation, and some of the evidence that Complainant seeks to exclude may be relevant to the statutory public interest factors even if I do not conduct an analysis based on the EPROMs factors.”).

[16] Certain Semiconductors Chips Having Synchronous Dynamic Random Access Memory Controllers and Products Containing Same, Inv. No. 337-TA-661, Comm’n Op. (Aug. 10, 2010).

[17] See Certain Liquid Crystal Display Modules, Products Containing Same, and Methods for Using the Same, Inv. No. 337-TA-634, Comm’n Op. at 4-5 (Nov. 24, 2009).

[18] Id. at 5 n.3.