United States: Penalties For Violating A Consent Order Can Be Costly

In In the Matter of Certain Dimmable Comp Act Fluorescent Lamps and Products Containing Same, 333-TA-830 (ITC January 10, 2014), ALJ Pender found enforcement measures were appropriate for Respondent's violation of a consent order for the sale of certain dimmable compact fluorescent bulbs. The ALJ accordingly determined that Respondent owed $20,000 in civil penalties. While the Enforcement Initial Determination was issued several years ago, a public version was only recently made available.


The enforcement proceeding stemmed from a February 22, 2012 investigation of Respondent MaxLite's alleged section 337 violations for the sale of certain dimmable compact fluorescent lamps. The investigation resulted in a Consent Order dated July 25, 2012, which provided that Respondent would not import, sell, or offer to sell within the U.S. any products that infringe Complainant Neptun's patent. The Consent Order further provided that Respondent was precluded from challenging the validity or enforceability of said patent, and would become null and void when the patent expired on October 13, 2013.

On April 24, 2013, the Commission instituted proceedings to determine whether Respondent's single day sale of CFL bulbs violated the Consent Order. Respondent had disabled the products in its computer system so that they could not be sold, told marketing and sales people not to sell the products, and quarantined its inventory of accused CFL bulbs after the Consent Order was issued. Nevertheless, a single day accidental re-sale of returned bulbs took place. After Respondent admitted that the CFL bulbs infringed Complainant's patent, ALJ Pender found a Consent Order violation had occurred and determined enforcement measures were necessary.

Pursuant to 19 C.F.R. § 210.75(b)(4), the Commission may take up to three measures when a Consent Order violation occurs: (i) modify the consent order in any manner necessary to prevent the unfair practices; (ii) seek to recover civil penalties for the breach of the consent order and obtain an injunction incorporating appropriate relief; and (iii) revoke the consent order and exclude the entry of articles into the U.S.

ALJ Pender found that modification of the Consent Order was not necessary because the parties agreed on its interpretation. The ALJ also held against the issuance of a limited exclusion order, as it would provide no more of a remedy than the outstanding Consent Order. Thus, the ALJ determined that civil penalties were the only appropriate remedy for Respondent's violation of the Consent Order.

Calculation of Civil Penalties

Civil penalties are mandatory for violations of ITC consent orders issued under 19 U.S.C. § 1337(f)(2), which provides for penalties "of not more than the greater of $100,000 or twice the domestic value of the articles entered or sold on such day in violation of the order." ALJ Pender underlined that although legislative history suggests the penalty of $100,000 per day is intended for most violations, lesser penalties are also permitted. He did find a daily penalty appropriate because twice the value of the bulbs sold would not sufficiently deter future violations.

The ITC considers six factors to determine the appropriate civil penalty: "(1) the good or bad faith of the respondent; (2) any injury due to the infringement; (3) the respondent's ability to pay the assessed penalty; (4) the extent to which the respondent benefitted from its violations; (5) the need to vindicate the authority of the Commission; and (6) the public interest." Ninestar Tech. Co. Ltd. v. International Trade Comm'n, Slip Op. No 2009-1649 at 9 (Fed. Cir. Feb. 8, 2012); Certain Erasable Programmable Read Only Memories, Inv. No. 337-TA-372, Comm'n Op. at 23-24, 26 (July 19, 1991).

Reviewing these factors, ALJ Pender found that Respondent did not act with bad faith because it had taken several measures to prevent any sale and sought to have the products returned as soon as it learned they were sold. The ALJ also noted that Complainant did not present any evidence of injury and there was no evidence that Respondent, who was profitable enough to pay even the largest fine, had benefitted from the sale. ALJ Pender then highlighted the need to vindicate ITC authority as a serious concern, but believed issuing a penalty above the sale price on de minimus imports was effective at doing so. Finally, he found no evidence that a reduced civil penalty would raise public interest concerns. Accordingly, the ALJ held a civil penalty of $20,000 was appropriate.


Respondents should avoid violating consent orders because they could face several enforcement measures as a result. Such measures include modification of the consent order, issuance of exclusion orders, and imposing of civil penalties up to twice the sales or $100,000. This case reflects that even de minimus violations of a Consent Order can prove costly, and resulting civil penalties can exceed the cost of the violating sale.

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