The ITC Expands its Method to Issuing Stop and Desist Orders

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The ITC Expands its Approach to Issuing Cease and Desist Orders

The U.S. International Trade Commission (“ITC”) is an important venue for Intellectual Property owners seeking to enforce their rights against imported infringing products under 19 U.S.C. § 1337 (“Section 337”). IP owners often focus on obtaining Limited Exclusion Orders (or in certain circumstances, General Exclusion Orders) from the ITC. IP owners should not, however, overlook the importance of obtaining Cease and Desist Orders (“CDOs”) given the ITC’s recent willingness to issue CDOs in a broader range of circumstances.

CDOs prevent respondents from marketing, selling, advertising, or distributing infringing products already inside the United States at the time a violation is found. CDOs also provide for significant civil penalties of up to $100,000, or twice the value of the infringing products, for each day a respondent is in violation of the CDO. Subsection (f)(1) of Section 337 gives the ITC authority to issue a CDO against a respondent who is determined to have violated Section 337. Subsection (g)(1) of Section 337 gives the ITC authority to issue a CDO against a respondent who failed to appear in the investigation and is found to be in default.

For many years, the ITC required proof that a respondent had a “commercially significant inventory” in the United States of imported, infringing products before it would issue a CDO. That began to change in 2016, when the ITC recognized that the “commercially significant inventory” requirement might no longer be sufficient to protect an IP Owner’s interests.(1) Trade and commerce have changed significantly since the ITC began applying the “commercially significant inventory” standard. The increase in e-commerce and the reduction in barriers to international trade have allowed more companies easier access to the U.S. markets, while making it more difficult for IP Owners to stop companies from distributing infringing products in U.S. marketplaces.

In 2017, the ITC broadened its inquiry to consider not only whether a respondent had a “commercially significant inventory” of infringing products in the United States, but also to determine whether there are “significant domestic operations” in the United Stated related to the infringing product.(2) The focus, it said, should be whether a CDO “is necessary to address the violation found in the investigation so as not to undercut the relief provided by the exclusion order.”(3)

When a respondent refuses to participate in an investigation, however, it can be difficult to ascertain whether a respondent has a “commercially significant inventory” or “significant domestic operations” in the United States. This is particularly true for foreign respondents that use online marketplaces such as amazon.com, eBay.com, and alibaba.com that provide a certain level of anonymity. Noting the difficulties presented by these circumstances, the ITC has recognized that online sales via platforms, such as Amazon, are domestic operations that can undercut the effectiveness of exclusion orders. Two cases in particular, Certain Hand Dryers and Housing for Hand Dryers, Inv. No. 337-TA-1015 and Certain Height-Adjustable Desk Platforms and Components Thereof, Inv. No. 337-TA-1125, demonstrate the ITC’s recent willingness to infer that a non-participating respondent has a “commercially significant inventory” or “significant domestic operations” in the United States with regard to the infringing products and issue CDOs in a broader range of circumstances.(4) Key facts that supported the issuance of CDOs in some of these investigations included:

  • the infringing products were sold on Amazon.com and other online retailers
  • the websites listed the number of units sold and the number of units remaining in inventory
  • the websites advertised “next day delivery” for the infringing products
  • the websites advertised that the infringing products were “fulfilled by Amazon.com” or “shipped from Amazon.com”
  • the infringing products were delivered within 2-3 days
  • low shipping costs
  • tracking information showing that the infringing products were shipped from amazon.com fulfillment centers or other locations in the United States

These facts provided the ITC sufficient basis to infer that the respondents had commercially significant inventories or significant domestic operations in the United States related to the infringing products, such that a CDO was necessary to prevent the respondents from undercutting the relief provided by an exclusion order.

Takeaway

Many IP owners are drawn to the ITC as a possible venue for resolving infringement disputes due to the ITC’s ability to quickly issue powerful Exclusion Orders. While this is a good reason to consider the ITC as a venue for resolving infringement disputes, IP Owners should not overlook the importance of obtaining CDOs and the ITC’s expansion of the circumstances under which a CDO can now be obtained.

(1) See Certain Dental Implants, Inv. No. 337-TA-934.

(2) See Certain Arrowheads With Deploying Blades and Components Thereof & Packaging Therefor, Inv. No. 337-TA-977.

(3) See Id.

(4) Other investigations of interest on this issue are: Certain Three-Dimensional Cinema Systems and Components Thereof, Inv. No. 337-TA-939; Certain Electric Skin Care Devices, Brushes and Chargers Therefore, and Kits Containing the Same, Inv. No. 337-TA-959.; Certain Mobile Device Holders and Components Thereof, Inv. No. 33t-TA-1028; Certain Industrial Automation Sys. and Components Thereof Including Control Sys., Controllers, Visualization Hardware, Motion and Motor Control Sys., Networking Equipment, Safely Devices, and Power Supplies, Inv. No. 337­ TA-1074; Certain Earpiece Devices and Components Thereof, Inv. No. 337-TA- 1121.