In Section 337 investigations before the International Trade Commission (Commission or ITC), exclusion orders are a powerful form of relief whereby the Commission directs US Customs and Border Protection (US Customs) to exclude articles found to infringe a valid patent from entry into the United States. When issuance of an exclusion order looms as a possibility, respondents (i.e., alleged infringers) are faced with the question of whether to redesign their next generation products to avoid infringement. A successful design around ensures the unimpeded flow of a respondent's products in the market. However, respondents should carefully consider the timing of a design around and its introduction into an ITC proceeding in order to prevent delays in the next generation product's entry into the market. If not introduced at the proper time, next generation products will not automatically be considered in Commission investigations.
In Certain Mobile Telephones and Wireless Communication Devices Featuring Digital Cameras, and Components Thereof, Inv. No. 337-TA-703, Complainant Eastman Kodak Co. (Kodak) filed a complaint at the ITC against Respondents Research In Motion, Inc. (RIM) and Apple, Inc. (Apple) alleging that RIM and Apple infringed a Kodak patent directed to digital cameras. In his Initial Determination (ID), the Administrative Law Judge (ALJ) found that Kodak's patent was invalid as obvious and determined that there was no violation of Section 337. Shortly thereafter, the Commission issued a notice determining to review the ALJ's ID in its entirety. In the notice, the Commission modified the judge's construction of several key claims and remanded the case to the ALJ to reassess whether the patent was still invalid under the new construction.
During the remand proceedings, RIM filed a motion pursuant to Commission Rule 210.15 to supplement the record to confirm that RIM's next generation products were within the category of products the Commission previously found not to infringe one claim of the asserted patent. Specifically, RIM maintained that the Commission's prior proceedings were directed at particular models of RIM's camera-enabled devices that will no longer be imported or sold in the United States. Instead, RIM stated that it would be importing and selling in the United States only new camera-enabled devices, which incorporate the same functionality that the Commission already found not to literally infringe one claim of the asserted patent. RIM argued that application of a potential exclusion order directed at RIM's prior devices to RIM's new non-infringing devices would disrupt legitimate trade and adversely affect RIM's operations in the United States. RIM requested that its new products be added to the record and be subject to the determination on remand. In the alternative, RIM requested a ruling that its new products were outside the scope of the investigation and thus not subject to any potential exclusion order. RIM asserted that the Commission requires a complainant to prove infringement by new products or they will be deemed outside the scope of any exclusion order.
In an order dated December 27, 2011, the ALJ denied RIM's request to supplement the record to add its new products. The Order is available online. The ALJ held that RIM's new smartphones would not be automatically considered to be equivalent to RIM products already found not to infringe Kodak's patent. The ALJ stated that RIM's motion was speculative because Kodak did not argue that RIM's new products should be subject to the remand determination in the investigation. Moreover, he ruled that RIM's new products were clearly within the scope of the investigation because the Notice of Investigation (NOI) explicitly provided that the scope of the investigation included "mobile telephones featuring digital cameras." The ALJ noted that there was no actual dispute to resolve and that deciding RIM's hypothetical argument would be a waste of scarce judicial resources.
Finally, the ALJ found that RIM's request to supplement the record was not appropriate because alternative procedures exist to address the same issue. The ALJ wrote that RIM should instead request an advisory opinion under Commission Rule 210.79 as to whether the importation of its new products would violate any Commission order that ultimately issues in the case. Commission Rule 210.79 on advisory opinions states:
Upon request of any person, the Commission may, upon such investigation as it deems necessary, issue an advisory opinion as to whether any person's proposed course of action or conduct would violate a Commission exclusion order, cease and desist order, or consent order. The Commission will consider whether the issuance of such an advisory opinion would facilitate the enforcement of section 337 of the Tariff Act of 1930, would be in the public interest, and would benefit consumers and competitive conditions in the United States, and whether the person has a compelling business need for the advice and has framed his request as fully and accurately as possible.
The ALJ noted that US Customs also offers a procedure by which a party may request a ruling as to whether a specific transaction would violate a Commission exclusion order administered by US Customs. See 19 C.F.R. § 177.1. In this ex parte procedure, a respondent submits written information to the Intellectual Property Rights Branch (IPRB) of US Customs, explaining why a particular design-around product is not within the scope of a Commission exclusion order.
Respondents should raise the issue of next generation products early in Commission investigations and be sure that the ALJ considers the new products during the original hearing to avoid delaying a next generation product's entry into the market.
Examples of design around decisions issued in other Section 337 proceedings:
- Inv. No. 337-TA-383, Certain Hardware Logic Emulations Systems and Components Thereof – The Commission addressed whether redesign products can be imported before the redesign is adjudicated and found to be non-infringing. The Commission ruled that redesigned products will not be allowed to be imported into the United States until after such redesigns are adjudicated and found to be non-infringing.
- Inv. No. 337-TA-510, Certain Systems for Detecting or Removing Viruses or Worms, Components Thereof, and Products Containing Same – Respondent's original network security devices were found to infringe the asserted patent. However, respondent additionally presented a new product that allegedly designed around the asserted patent, and the ALJ considered the new product in his Initial Determination, finding respondent's new redesign product to be non-infringing. Because the respondent brought in its new design-around product prior to the enforcement proceedings in the investigation, respondent was able to market the redesign as a new and improved version of the asserted patent's invention after the finalization of the Commission determination.
- Inv. No. 337-TA-503, Certain Automated Mechanical Transmissions for Medium-Duty and Heavy-Duty Trucks – Respondents were found to infringe complainant's patent by importation of automated transmissions for heavy duty trucks. After the Commission's ruling, respondents began importing redesigned transmissions that they maintained were outside the scope of the exclusion order. Respondents also maintained that US Customs would exceed its authority if it excluded from importation respondents' redesigned products. However, in an open letter to US Customs, the Secretary of the Commission made it clear that redesigned products were to be excluded from entry into the United States unless and until either US Customs or the Commission made a definitive ruling that the redesigned products did not infringe. Shortly thereafter, the Court of International Trade (CIT) issued a preliminary injunction compelling US Customs to exclude the redesigned transmissions pending resolution of the advisory opinion proceedings. The Commission ALJ eventually issued an advisory opinion holding that respondents' redesigned products did not infringe.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.