ITC Finds That a “Pattern of Circumvention” is not Required Under Section 337(d)(2) to Obtain a General Exclusion Order

The International Trade Commission (the “ITC”) recently issued its opinion in Certain Lighting Control Devices Including Dimmer Switches and Parts Thereof (IV), Inv. No. 337-TA-776. The ITC opinion addressed whether the complainant had established the facts necessary for a finding of circumvention of a Limited Exclusion Order to justify the issuance of a General Exclusion Order. The ITC ultimately issued the General Exclusion Order sought by the complainant, disagreeing with the findings of the Administrative Law Judge and the recommendation of the Commission Investigative Staff.

As a background point, a Limited Exclusion Order is limited to those products specifically brought to the ITC’s attention as violative of Section 337, which addresses unfair practices in the import trade and especially for enforcing U.S. intellectual property rights at the border. A General Exclusion Order may issue against all infringing articles whether or not they were included in the ITC’s investigation.

The Section 337 investigation at issue stemmed from a complaint by Lutron Electronics Co., Inc. (“Lutron”) relating to the importation and sale of electric dimmer switches that infringe Lutron’s U.S. Patents. Administrative Law Judge Essex’s initial determination granted Lutron’s motion for summary determination in part as the respondents were in default. Specifically, Judge Essex found that the defaulting respondents met the importation requirement and that their accused products infringed at least one claim of the two Lutron patents at issue.

Judge Essex recommended the issuance of a Limited Exclusion Order rather than a General Exclusion Order, reasoning that a General Exclusion Order under Section 337(d)(2) was not the appropriate remedy unless a complainant established a “pattern of circumvention” of a Limited Exclusion Order. The Commission Investigative Staff agreed with Judge Essex that a Limited Exclusion Order sufficed.

Despite these conclusions, Lutron continued to argue that a General Exclusion Order was warranted and that it was the only remedy providing permanent relief. Lutron maintained that previous ITC investigations relating to the products at issue had proven ineffective, as non-respondent infringers had since entered the market. As a result, Lutron argued that a Limited Exclusion Order would have little long term effect and required it to file additional complaints. In support of its argument, Lutron submitted additional evidence to the ITC that had not yet become available when it argued before Judge Essex. Specifically, Lutron provided the names of twenty-one (21) new infringers who had entered the U.S. market and also identified numerous potential entrants.

Ultimately, the ITC was persuaded by Lutron’s arguments and found that the evidence satisfied the requirements of Section 337(d)(2) relating to the issuance of a General Exclusion Order. In doing so, the ITC found Lutron had presented compelling evidence of an increased demand for the infringing products, along with a large and growing number of non-respondent foreign manufacturers intent on marketing and distributing the infringing products in the US. Also, the ITC accepted Lutron’s arguments that these infringers and potential infringers were not easily identifiable as they engaged in frequent name changes and used numerous intermediaries. The ITC ultimately disagreed with the Commission Investigative Staff’s conclusion that the barrier for entering the relevant market is relatively low, and found that Judge Essex had used the incorrect evidentiary standard and misinterpreted Section 337(d)(2) by requiring a “pattern of circumvention” as opposed to “circumvention.”

The ITC’s decision here seemingly bodes well for complainants in Section 337 actions, given the Commission’s finding that a complainant need not prove a “pattern of circumvention,” but rather, “circumvention,” to establish grounds for issuance of a General Exclusion Order.

Gibbons will continue to monitor developments in this important area of ITC law.

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