United States: ITC May Enforce A Consent Order Against A Party To An Investigation When The Party Aids A Third Party’s Importation Of Products In Violation Of The Consent Order

In uPI Semiconductor Corp. v. International Trade Commission, Nos. 13-1157, -1159 (Fed. Cir. Sept. 25, 2014), the Federal Circuit affirmed the ITC's determination that uPI Semiconductor Corp. ("uPI") violated a Consent Order regarding formerly accused products, affirmed the ITC's modified penalty for the violation, reversed the ITC's determination of no violation regarding uPI's post-Consent Order products, and remanded for further proceedings.

uPI and Richtek Technology Corp. and Richtek USA, Inc. (collectively "Richtek") design and sell DC-DC controllers, which convert direct current from one voltage to another. uPI was founded by former Richtek employees. uPI's chips are imported into the United States either directly or as incorporated into downstream devices.

Richtek filed a complaint with the ITC, alleging that uPI misappropriated Richtek's trade secrets and accusing uPI of importing products infringing Richtek's patents, including U.S. Patent Nos. 7,315,190 ("the '190 patent"); 6,414,470 ("the 470 patent"); and 7,132,717 ("the '717 patent"). After the evidentiary hearing, uPI moved to terminate the investigation by offering to enter into a Consent Order that, among other things, prohibited uPI from importing, selling, or offering for sale, or knowingly aiding, abetting, encouraging, participating in, or inducing the importation, sale, offers for sale, or use of products infringing certain claims of the '190, '470, and '717 patents or products using Richtek's asserted trade secrets. The ALJ entered the Consent Order over Richtek's objection.

Approximately one year after entry of the Consent Order, Richtek filed an Enforcement Complaint alleging that uPI violated the Consent Order. The ALJ entered an Enforcement Initial Determination ("EID") that considered both the products accused in the prior investigation ("the formerly accused products") and products allegedly developed and produced after entry of the Consent Order
("the post-Consent Order products"). The ALJ found that the formerly accused products infringed the '190, '470, and '717 patents, and also incorporated Richtek's trade secrets, and that the post-Consent Order products infringed the '470 and '717 patents but were independently developed and not produced using Richtek's trade secrets. The EID also assessed a civil penalty, finding that a violation of the Consent Order had occurred for seventy-five days. The full Commission reviewed the EID and sustained the ALJ's findings of violation only with respect to the formerly accused products with respect to Richtek's trade secrets and the '190 patent, and reduced the number of days of violation to sixty-two. With regard to the newly identified post-Consent Order products, the ITC found no violation. Both uPI and Richtek appealed.

"The Consent Order prohibits uPI from knowingly aiding or abetting the importation of DC-DC controllers produced using or containing Richtek trade secrets or infringing Richtek patents, 'or products containing [the] same.' The Commission had statutory authority to assess a civil penalty against uPI for its violation of the Consent Order's knowingly aiding or abetting provision." Slip op. at 13.

On appeal, the Federal Circuit first considered uPI's argument that the Consent Order did not bar the importation of products by third parties with respect to the formerly accused products. The Court rejected uPI's argument that, because the investigation ended with a Consent Order rather than a general exclusion order, there could be no liability for importation by third parties even if uPI aided or abetted that importation. The Court stated that substantial evidence supported the ITC's finding that uPI's post-Consent Order upstream sales were linked to subsequent downstream importation or sale of the formerly accused products and also that uPI knowingly aided and abetted those imports or sales. The Court noted that the ITC considered the testimony of uPI's experts in determining the lag time before any violation of the Consent Order occurred and also noted that uPI did not argue that a longer lag time should be adopted on appeal. The Court then examined the evidence from uPI, including spreadsheets and testimony, demonstrating that uPI sold the formerly accused products to downstream customers after the Consent Order issued, and the Court concluded that uPI knew the contract manufacturers were importing downstream products into the United States. The Court found that uPI had not contested this evidence, but rather that uPI argued that the evidence did not link post-Consent Order sales to downstream imports into the United States. The Court rejected this argument, finding that the ITC's reliance on post-Consent Order sales, post-Consent Order downstream importation, and the testimony of uPI's executives "reasonably support[ed] the Commission's finding that uPI violated the knowingly aiding or abetting provision of the Consent Order." Slip op. at 13. The Court next explained that its decision in "Kyocera [Wireless Corp. v. International Trade Commission, 545 F.3d 1340 (Fed. Cir. 2008),] does not prohibit the Commission from enforcing the Consent Order in accordance with its terms, although the Commission did not impose an exclusion order." Slip op. at 13. The Court found that the Consent Order prohibited uPI from aiding and abetting importation of DC-DC controllers produced using Richtek's trade secrets or infringing Richtek's patents, "or products containing [the] same." Id. The Court thus held that the ITC had statutory authority to assess penalties for violations of the Consent Order's knowingly aiding or abetting provisions.

The Court next considered uPI's contention that the ITC improperly imposed liability for direct infringement of the '190 patent. The Court explained that uPI did not challenge the ITC's finding that the formerly accused products practiced each element of each asserted claim of the '190 patent. The Court determined, however, that "[t]he record makes clear [that] the Commission did not find direct infringement," but rather the ITC imposed liability based on the sale of infringing downstream products that incorporate uPI upstream products, which "constitutes a violation of the Consent Order's knowingly aiding and abetting provision." Id. at 14.

The Court then reduced the total number of penalty days based on the ITC's concession that it erred in not reducing the number of days after invalidation of the '470 patent on reexamination.

The Court next turned to Richtek's appeals. The Court first observed that the ITC's findings that the formerly accused products incorporated Richtek's trade secrets were not disputed. The Court determined, however, that "[t]he record as a whole does not support with substantial evidence the Commission's finding that uPI's post-Consent Order products were not produced using Richtek trade secrets." Id. at 16. The Court explained that merely stating "that the post-Consent Order products could have been independently developed is not evidence of independent development itself." Id. at 17. Based on the findings of a number of similar features appearing in both the formerly accused products and the post-Consent Order products, the Court concluded that the post-Consent Order products were "not consistent with independent development." Id. at 18-19. Accordingly, the Court reversed the ITC's determination that uPI had not violated the Consent Order with respect to the post-Consent Order products and remanded for further proceedings.

Judges: Newman (author), Moore, Chen

[Appealed from ITC]

This article previously appeared in Last Month at the Federal Circuit, October 2014

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.

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