On July 10, 2014, the Commission issued a General Exclusion Order (GEO) in Certain Cases for Portable Electronic Devices, Inv. Nos. 337-TA-876/861, banning the importation of imitations of Complainant Speck’s CandyShell cases for mobile devices. The Commission concluded that a GEO was warranted, because a limited exclusion order (LEO) targeting particular respondents could easily be circumvented through the use of fake names and other evasive importation practices. The Commission set the bond during the Presidential Review period at 100% of entered value of the unlicensed, infringing cases.
Complainant Speculative Product Design, LLC (“Speck”) filed two complaints accusing multiple respondents from the U.S. and China of infringing U.S. Patent No. 8,204,561 (“the ’561 patent”) by importing imitations of Speck’s CandyShell cases for mobile devices. The Commission instituted and consolidated the investigations on January 31, 2014.
All respondents participating in the consolidated investigation were terminated based on settlement agreements, consent order stipulations, or by withdrawal of the complaint. A number of Chinese respondents who did not participate in the Investigation were found in default.
In a final initial determination (“ID”) dated February 21, 2014, the presiding ALJ found a violation by the defaulting respondents, and recommended issuance of a GEO with a 100% bond during the Presidential review period. On review, the Commission issued the GEO and set the bond at 100% of entered value of the infringing products. The Commission also determined that terminated respondent Superior was not entitled to a carve-out provision from the GEO.
The Commission may issue a GEO if the facts of the case satisfy the two-pronged test set forth in 19 U.S.C. § 1337(d)(2):
(2) The authority of the Commission to order an exclusion from entry of articles shall be limited to persons determined by the Commission to be violating this section unless the Commission determines that—
(A) a general exclusion from entry of articles is necessary to prevent circumvention of an exclusion order limited to products of named persons; or
(B) there is a pattern of violation of this section and it is difficult to identify the source of infringing products
19 U.S.C. § 1337(d)(2) (emphasis added). Here, because the Commission found that both prongs were met, it issued a GEO.
The Commission held that the defaulting respondents had engaged in business practices that could circumvent a limited exclusion order (LEO). The Commission relied on the ALJ’s findings that: (1) most of the infringing products originate in southern China and are sold by companies using fake names and addresses; (2) manufacturers can easily change their names and distribution patterns; (3) accused products can also be sold online by unnamed parties; and (4) the market for protective cases has low barriers to entry. Thus, the Commission found that an LEO could be easily circumvented, satisfying the first prong of § 1337(d)(2).
The Commission also found a widespread pattern of infringement and difficulty identifying the source of the infringement. Anonymous selling over the Internet makes it difficult to identify the source of an infringing product. Speck also offered evidence that a large number of foreign companies copy and infringe Speck’s patented designs, with at least 150 product imitations and 90 companies in China producing imitations. Based on these factors, the Commission found that the second portion of the § 1337(d)(2) test was satisfied.
Because the ALJ terminated it from the Investigation, respondent Superior requested a carve-out for its products from the GEO. Superior ceased importation of the accused products while the Investigation was ongoing. Complainant Speck then filed a motion, opposed by Superior, to withdraw its complaint with respect to Superior. The ALJ granted Speck’s motion, and Superior did not file a petition for review.
Respondent Superior then requested the carve-out of its products from the GEO, because it was not able to offer its defenses to the Commission once terminated. To support its claim, Superior relied on Certain Power Supply Controllers, Inv. No. 337-TA-541, Comm’n Op. (Aug. 11, 2006) and Certain Laminated Floor Panels, Inv. No. 337-TA-545, Comm’n Op. at 29-30 (Jan. 24, 2007). The Commission, however, distinguished those cases and rejected Superior’s request for a carve-out.
In Certain Power Supply Controllers, the Commission held that a complainant’s unilateral motion to terminate products from an investigation may necessitate a carve-out. In that investigation, the complainant unilaterally terminated some of respondent’s accused products from the investigation, but not others. When the Commission issued an LEO for the accused products still in the investigation, it carved out the terminated products.
In the Speck investigation, the Commission noted that, unlike Certain Power Supply Controllers, Superior’s decision to cease importation of the accused products caused Speck to withdraw its complaint. According to the Commission, because Superior’s action “contributed to and indeed caused Speck to file the motion,” it could not seek a carve-out from the GEO for those products.
In Certain Laminated Floor Panels, the Commission granted a carve-out for respondents based on the recommendation of the complainant, in addition to the ALJ and the Staff. By contrast, in the Speck investigation, Speck did not agree to the carve-out sought by Superior. Thus, the Commission found Certain Laminated Floor Panels inapplicable.
The Commission also stated that Superior waived its ability to challenge its termination from the investigation by the ALJ. Superior could have contested the ALJ’s ruling by filing a petition for Commission review under 19 C.F.R. § 210.43(a), but did not.