Section 337 Update - Enforcement of Remedial Orders Issued in ITC Section 337 Proceedings

Welcome to the November issue of the Section 337 Update. This newsletter is designed to provide you with practical updates and developments on Section 337 proceedings before the U.S. International Trade Commission.

The U.S. International Trade Commission (“ITC”) recently instituted a formal enforcement proceeding with respect to the limited exclusion order and cease and desist orders issued in Certain Digital Televisions and Certain Products Containing Same and Methods of Using Same, Inv. No. 337-TA-617.  The catalyst for the enforcement proceeding was a ruling by U.S. Customs and Border Protection  (“CBP”), finding that redesigned products of certain respondents to the underlying investigation do not fall within the scope of the remedial orders issued at the conclusion of that investigation.  The notice of institution of the enforcement proceeding is available online.  Complainants Funai Electric Co., Ltd. and Funai Corporation (collectively “Funai”), who sought institution of the enforcement proceeding, also made an unsuccessful attempt to seek relief from the U.S. Court of International Trade (“CIT”).

The underlying investigation was instituted based on a complaint filed by Funai alleging violations of Section 337 of the Tariff Act of 1930, as amended, in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain digital televisions and certain products containing the same by reason of infringement of, inter alia, U.S. Patent No. 6,115,074 (the “‘074 patent”).  There were many named respondents, including Vizio, Inc., Amtran Technology Co., Ltd. (collectively “Vizio”), TPV International (USA), Inc., and Envision Peripherals, Inc. (collectively “TPV”).  On April 10, 2009, the ITC found a violation of Section 337 by reason of infringement of claims 1, 5, and 23 of the ‘074 patent and it issued relief in the form of a limited exclusion order and cease and desist orders.  The limited exclusion order directs CPB to exclude from importation into the United States, all products that infringe the ‘074 patent and that are manufactured abroad by or on behalf of the respondents or any affiliated company.

After the issuance of the orders, Vizio and TPV attempted to redesign their products around the ‘074 patent and requested that CBP rule that the redesigned products would not infringe the ‘074 patent.  In July 2009, CBP issued a ruling that the redesigned products were not infringing and, as such, were not prohibited from importation into the United States under the ITC exclusion order.  CBP withdrew the July ruling, but proceeded to issue another ruling the following month holding that the limited exclusion order does not cover certain semiconductor chip samples submitted by Vizio and TPV.  As a result of CBP’s ruling, Vizio asserts that all current models of its televisions may be imported.

In response to CBP’s ruling, Funai filed a complaint seeking institution of a formal enforcement proceeding under Commission Rule 210.75, 19 C.F.R. 210.75, alleging that Vizio and TPV are violating the remedial orders by virtue of their importation of the redesigned products.  Funai’s complaint requested that the ITC take temporary emergency action to modify its remedial orders to indicate that the redesigned products are presumed to infringe the ‘074 patent.  The ITC denied this request, stating that it does not yet have sufficient information to determine whether the respondents are currently violating the remedial orders.  The enforcement proceeding before the ITC is currently ongoing and is targeted to be resolved by September 27, 2010.

As mentioned above, Funai also sought relief from the CIT.   Funai brought an action against CBP seeking, among other things, to enjoin CBP from allowing importation of the redesigned products, asserting that whether a product is covered by an exclusion order is within the sole authority of the ITC.  On October 6, 2009, the CIT granted CBP’s motion to dismiss Funai’s complaint.  Although the judge stated that he believes that such actions should be subject to the jurisdiction of the CIT, he held that, under the current state of the law, the CIT does not have subject matter jurisdiction under 28 U.S.C. § 1581(h) or (i).  The CIT’s decision is available online.  Notably, in other situations, the CIT has exercised jurisdiction in cases involving enforcement of ITC exclusion orders (see below).   

28 U.S.C. § 1581(h) states that the CIT “shall have exclusive jurisdiction of any civil action commenced to review, prior to the importation of the goods involved, a ruling issued by the Secretary of Treasury” relating to customs “but only if the party commencing the civil action demonstrates to the court that he would be irreparably harmed unless given an opportunity to obtain judicial review prior to such importation.”  28 U.S.C. § 1581(i) provides that the CIT shall also have exclusive jurisdiction over civil actions commenced against the United States arising from any law providing for such things as revenue from imports, tariffs, embargoes and administration of such matters.

Currently, there is a proposed bill, the “United States Court of International Trade Improvement Act,” that could more definitively address whether the CIT has subject matter jurisdiction in cases such as that of Funai.  The bill is available online.  The proposed bill would strike the irreparable harm requirement of 28 U.S.C. § 1581(h), requiring instead that “the party commencing the civil action demonstrate[] to the court that there is good cause for the party to be given an opportunity to obtain judicial review prior to such importation.”  The proposed bill would also add to 28 U.S.C. § 1581(i) that the CIT would be given exclusive jurisdiction of a civil action commenced against the United States arising out of any law providing for “any prohibition or condition on the importation or exportation of merchandise.”

It should also be noted that the ITC 's rules provide respondents with an alternative to seeking a determination of non-infringement from CBP before importation.  Under 19 C.F.R. § 210.79, a respondent subject to an exclusion order may seek an advisory opinion from the ITC as to whether its proposed course of action or conduct would be in violation of an issued remedial order.

CIT Opinions Related to Section 337 Exclusion Orders

Below please find examples of other CIT cases relating to the enforcement by CBP of ITC exclusion orders.

• Eaton Corp. v. United States, CIT No. 05-00487 (2005), sub nom. Certain Automated Mechanical Transmission Systems for Medium-Duty and Heavy-Duty Trucks and Components Thereof, Inv. No. 337-TA-503.  The CIT issued preliminary injunctive relief barring CBP from permitting importation of certain redesigned products until it could be determined whether the redesigned products were also infringing subject to the ITC exclusion order.  In reaching its decision, the court held that it did not have subject-matter jurisdiction under 28 U.S.C. § 1581(h) and further held that it did not need to determine whether the CIT had jurisdiction under 28 U.S.C. § 1581(i) to rule on the merits of preliminary injunctive relief.  The CIT opinion is available online.  The ITC ultimately held the redesigned products did not infringe the patent-in-suit and therefore did not fall within the scope of the issued remedial orders.

• Jazz Photo Corp. v. United States, CIT No. 04-00494 (2004),  Jazz Photo Corporation (“Jazz”) commenced litigation before the CIT in 2004 to contest CBP’s denial of an administrative protest filed by Jazz.  Jazz had filed the protest in response to a ruling by CBP that two of Jazz’s shipments were excluded from importation by exclusion orders issued by the ITC against Jazz in Certain Lens-Fitted Film Packages, Inv. No. 337-TA-406.  The CIT had jurisdiction under 28 U.S.C. § 1581(a), which provides the CIT with “exclusive jurisdiction of any civil action commenced to contest the denial of a protest….”  The CIT held that certain products fell outside the scope of the exclusion orders on account of satisfying the “first sale” criteria.  The CIT opinion is available online.  The CIT’s judgment was affirmed by the Federal Circuit in 2006.
 

We will periodically provide you updates on developments relating to Section 337 litigation.  If you have any questions or for further information, please feel free to contact Charles Schill at 202.429.8162; Alice Kipel at 202.429.6743; or Steve Barber at 202.429.6430.  (Special thanks to Tiffany Miller for her assistance in helping to prepare this update.)