Protest 2720-15-100602; U.S. International Trade Commission; General Exclusion Order; Investigation No. 337-TA-723; Certain Inkjet Ink Cartridges with Printheads and Components Thereof

HQ H266381 January 12, 2016 OT:RR:BSTC:IPR H266381 WMW CATEGORY: 19 U.S.C. § 1337; Unfair Competition Ms. Elva Muneton Director of Electronics Center of Excellence & Expertise U.S. Customs and Border Protection One World Trade Center, Suite 705 Long Beach, CA 90831 Attn: Tami Simmons, Import Specialist (Pembina, ND) RE: Protest 2720-15-100602; U.S. International Trade Commission; General Exclusion Order; Investigation No. 337-TA-723; Certain Inkjet Ink Cartridges with Printheads and Components Thereof Dear Ms. Muneton: This is in response to the application for further review of the above-referenced protest filed by Ninestar Technology Company, Ltd. (“Protestant”) challenging the exclusion of certain ink cartridges, ink jet supplies and inkjet cartridges refused entry for consumption at the port of Los Angeles International Airport based on the above-referenced general exclusion orders issued by the U.S. International Trade Commission (“ITC” or “Commission”). Investigation 337-TA-723 ITC Inv. No. 337-TA-723 was instituted based on a complaint filed by Hewlett-Packard Company of California; Hewlett-Packard Development Company L.P. of California (“HP”), which named seven companies located in China, Taiwan, Hong Kong, and the United States, as respondents to the investigation. See Administrative Law Judge’s (“ALJ”) Final Initial and Recommended Determination (“ID”) at 1 (dated June 10, 2011). The ALJ found a violation of section 337 of the Tariff Act of 1930, as amended, which was affirmed in part by the Commission on review. See Certain Ink Cartridges and Components Thereof, Inv. No. 337-TA-723, Commission Opinion (“ITC CO”) at 1 (dated October 24, 2011). The Commission decided to provide relief in the form of a general exclusion order that bars the entry for consumption into the United States of ink cartridges that infringe claims 1-10 of U.S. Patent No. 6,234,598; claims 1-6 and 8-17 of U.S. Patent No. 6,309,053; claims 1-6 and 8-12 of U.S. Patent No. 6,398,347; claims 1-15 of U.S. Patent No. 6,481,817; and claims 9-16 of U.S. Patent No. 6,402,279. Id. at 1; 723 General Exclusion Order (“723 GEO”) (dated October 24, 2011). Subsequent to the issuance of the 723 GEO, U.S. Customs and Border Protection (“CBP”) excluded from entry articles of Protestant, resulting in the ITC, on June 11, 2015, issuing a seizure and forfeiture order against Protestant pursuant to 19 U.S.C. § 1337(i). FACTS: On June 2, 2015, CBP officials at the port of Long Beach issued a notice to Protestant indicating that a shipment of ink cartridges and inkjet cartridges, models HP60/75, was excluded from entry for consumption because the articles in question were subject to the 723 GEO. See CBP Exclusion Notice (June 2, 1015). On June 26, 2015, pursuant to 19 U.S.C. § 1514, as implemented by 19 C.F.R. Part 174, through counsel, Protestant timely filed a protest challenging the exclusion and claiming the excluded articles were not subject to the 723 GEO. Specifically, Protestant argues that the excluded articles are not covered by the relevant patent claims because they have been permissibly repaired after undergoing a patent exhausting first sale in the United States. See Protest, at 6. (June 26, 2015). Protestant does not contest that the excluded articles practice the patents at issue in the 723 GEO. Instead, Protestant states that all of the excluded articles were originally purchased and collected in the United States and as such implicates the defense of patent exhaustion. Id. These articles were collected by [Clover Environmental Solutions or Printronic Corp]. Id. Protestant has submitted affidavits from the sourcing companies as well as proof of payment to these companies. Id at 20-22. Protestant claims that the cartridges were then exported to another facility where they were cleaned and repaired. Id at 7. The process used to repair the cartridges in question is as follows: the cartridge is cleaned externally as well as internally to remove all remaining ink. The cartridge is then refilled with new ink and the outlets are sealed. The original chip is reset to reflect the filled status. The cartridge is then tested and re-labeled]. Id. This protest was given the reference number 2720-15-100602 by CBP. On July 9, 2015, Protestant submitted additional evidence regarding the protest., including financial documentation supporting the purchase of the empty cartridges from the sourcing companies, [Clover Environmental Solutions and Printronic Corp.], as well as information regarding the process Ninestar utilizes to ensure that empty cartridges arriving from the United States are kept separate from empty cartridges from other locations. See E-Mail from Gary Hnath, Attorney, Mayer Brown LLP, to William Wittwer, Attorney-Advisor, U.S. Customs and Border Protection (July 9, 2015). On October 22, 2015, Protestant sent another email containing additional supplemental information for this protest. This email contained declarations from the Protestant and the sourcing companies regarding internal processes as well as financial documentation. See E-Mail from Gary Hnath, Attorney, Mayer Brown LLP, to William Wittwer, Attorney-Advisor, U.S. Customs and Border Protection (October 22, 2015). ISSUE: The issue presented is whether the patent rights in the refurbished ink cartridges and inkjet cartridges of the excluded shipment have been exhausted by a first sale and have been permissibly repaired and consequentially whether they are subject to the ITC’s general exclusion order in Investigation No. 337-TA-723. LAW AND ANALYSIS: Pursuant to the Tariff Act of 1930, the ITC has authority to conduct investigations into imported articles that allegedly infringe United States patents and impose remedies if the accused products are found to be infringing. See 19 U.S.C. § 1337(a)(1)(B), (b)(1), (d), (f). Specifically, 19 U.S.C. § 1337(d) provides the Commission authority to direct the exclusion from entry of articles found to be infringing. Moreover, when the Commission determines that there has been a violation of section 337, it may issue two types of exclusion orders: a limited exclusion order and/or a general exclusion order. See Fuji Photo Film Co., Ltd. v. U.S. Int’l Trade Comm’n, 474 F.3d 1281, 1286 (Fed. Cir. 2007); see also Certain Ink Cartridges and Components Thereof, Inv. No. 337-TA-565, Commission Opinion (October 19, 2007). Both types of orders direct CBP to bar the infringing products from entering the country. See Yingbin-Nature (Guangdong) Wood Indus. Co. v. U.S. Int’l Trade Comm’n, 535 F.3d 1322, 1330 (Fed Cir. 2008). A limited exclusion order is “limited” in that it only applies to the specific parties before the Commission in the investigation. Id. In contrast, a general exclusion order bars importation of the infringing products by everyone, regardless of whether they were respondents in the Commission’s investigation. Id. A general exclusion order is appropriate if two exceptional circumstances apply. See Kyocera Wireless Corp. v. U.S. Int’l Trade Comm’n, 545 F.3d 1340, 1356. A general exclusion order may only be issued if (1) “necessary to prevent circumvention of a limited exclusion order,” or (2) “there is a pattern of violation of this section and it is difficult to identify the source of infringing products.” 19 U.S.C. § 1337(d)(2); see also Kyocera, 545 F.3d at 1356 (“If a complainant wishes to obtain an exclusion order operative against articles of non-respondents, it must seek a GEO by satisfying the heightened burdens of §§ 1337(d)(2)(A) and (B).”). Additionally, a seizure and forfeiture order issued under 19 U.S.C. § 1337(i) directs CBP to seize and forfeit articles imported in violation of an exclusion order when the importer previously had articles denied entry and received notice that seizure and forfeiture would result from any future attempt to import covered articles. The issuance of a general exclusion order by the ITC binds named parties and non-named parties alike and shifts to would-be importers, “as a condition of entry, the burden of establishing noninfringement.” Hyundai Electronics Industries Co. v. U.S. Int’l Trade Comm’n, 899 F.2d 1204, 1210 (Fed. Cir. 1990). Accordingly, the burden is on Protestant to establish that the cartridges at issue are not covered by one or more of the claims from the patents listed in the 723 GEO. The Protestant does not claim that the cartridges do not practice the claims of the patents in question rather that the patent rights have been exhausted due to a qualifying first sale. The Protestant also claims that the excluded products are the result of permissible repair. Patent infringement determinations for utility patents entail two steps. The first step is to interpret the meaning and scope of the patent claims asserted to be infringed. The second step is to compare the properly construed claims to the accused device. See Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc), aff’d, 517 U.S. 370 (1996). The first step is a question of law; the second step is a question of fact. See Freedman Seating Co. v. American Seating Company, 420 F.3d 1350, 1357 (Fed. Cir. 2005). In patent law, there are two types of infringement: direct and indirect infringement. One variety of direct infringement is literal infringement. Literal infringement is when every limitation recited in a claim is found in the accused device. See Strattec Security Corp. v. General Automotive Specialty Co., 126 F.3d 1411, 1418 (Fed. Cir. 1997); see also Digital Biometrics, Inc. v. Identix, Inc., 149 F.3d 1335, 1349 (Fed. Circ. 1998) (“An accused device cannot infringe, as a matter of law, if even a single limitation is not satisfied.”). However, a dependent claim cannot be found to infringe if the independent claim from which it depends is not found to infringe. See Becton Dickinson & Co. v. C.R. Bard Inc., 922 F.2d 792 (Fed. Cir. 1990) (“The holding of noninfringement of claim 1 applies as well to all claims dependent on claim 1.”). “The longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008). As such, the “sale of [a patented article] exhausts the monopoly in that article and the patentee may not thereafter, by virtue of his patent, control the use or disposition of the article.” United States v. Univis Lens Co., 316 U.S. 241, 250 (1942). Moreover, the Court of Appeals for the Federal Circuit (“Federal Circuit”) has stated that the unrestricted sale of a patented article, by or with the authority of the patentee, exhausts the patentee’s right to control further sale and use of that article by enforcing the patent under which it was first sold. Jazz Photo Corp. v. ITC, 264 F.3d 1094, 1105 (Fed. Cir. 2001). However, the Federal Circuit added that “when a patented device has been lawfully sold in the United States, subsequent purchasers inherit the same immunity under the doctrine of patent exhaustion.” Id. In other words, “United States patent rights are not exhausted by products of foreign provenance” and an accused infringer or U.S. importer of record seeking to invoke the protection of the first sale doctrine must establish that an authorized first sale of the patented article occurred within the United States. Id. at 1105. The party raising the affirmative defense has the burden establishing it by a preponderance of the evidence. Jazz Photo at 1102. The ITC, in a different context, has provided that this affirmative defense must be proven on an article-by-article basis. See Commission Opinion, In the Matter of Certain Ink Cartridges and Components Thereof, Inv. No. 337-TA-565, Consolidated Enforcement Proceeding and Enforcement Proceeding II at 18, 2009 ITC LEXIS 1773 (dated September 24, 2009). However, the Federal Circuit, in the context of a protest challenging a Customs exclusion from entry pursuant to a Section 337 exclusion order, held that an importer may carry its burden through presentation of circumstantial evidence. Jazz Photo Corp. v. United States, 439 F.3d 1344, 1351 (Fed. Cir. 2006) (“To be sure, Jazz did not present direct evidence that each of the subject LFFPs [lens-fitted film packages] processed using Photo Recycling's shells were first sold in the United States; Jazz's case is circumstantial. However, Jazz may carry its burden by presenting its case based upon circumstantial evidence. Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986) (citing Michalic v. Cleveland Tankers, Inc., 364 U.S. 325, 330, 81 S. Ct. 6, 5 L. Ed. 2d 20 (1960)) ("It is hornbook law that direct evidence of a fact is not necessary. 'Circumstantial evidence is not only sufficient, but may also be more certain, satisfying and persuasive than direct evidence.'"). For example, in Jazz Photo, the president of Photo Recycling presented general evidence showing that the photo shells being recycled were collected from the locations which they were originally purchased, but was unable account for each photo shell. Id. at 1350-1351. The Federal Circuit required that “Jazz must meet its evidentiary burden through factual evidence establishing first sale that goes beyond the mere fact that the shells were obtained in the United States.” Id. at 1352. This testimony was found sufficient by the trial court and the Federal Circuit found that the burden had been met. Therefore, the burden is upon the Protestant to establish that the articles in question were subject to such an exhausting first sale. Certain rights accompany the purchase of a patented article, one of them being the right of repair. As stated by the Supreme Court, “replacement of individual unpatented parts ... is no more than the lawful right of the owner to repair his property.” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 346 (1961). The Federal Circuit additionally stated that “infringement will occur only when there is a complete ‘reconstruction’ of the device.” Kendall Co. v. Progressive Medical Tech., 85 F.3d 1570, 1574 (Fed. Cir. 1996) (citing Aro, 365 U.S. at 346). Accordingly, the burden is on the Protestant to show that the devices at issue have been the subject of permissible repair and not a complete reconstruction of the device. PROTESTANT’S ARGUMENT Protestant does not contest that the products in question practice the patents at issue in the 723 GEO rather that the products are original inkjet cartridges sold by HP which have been refurbished for sale. To establish the original sale of the ink and inkjet cartridges in question, Protestant outlines the three steps taken between the original sales of the printer cartridges to subsequent purchase by the Protestant. The first step is the initial sale in the United States of the cartridge to the individual consumer, either directly from HP or through a third party. Protestant notes that HP only sells the HP 60/75 model ink cartridges in the United States, Canada, Australia and New Zealand. Given the relative low cost for each individual ink cartridge, Protestant argues that it would not make economic sense for a consumer within the United States to purchase an ink cartridge from another country, when a lower cost option is available for purchase in the United States. At this time, this office does not have any evidence that this is not the case with ink cartridge sales. The second step is the disposal of the used cartridge by the original purchaser of the ink cartridge. The consumer then has multiple options for disposal, to discard the ink cartridge in the garbage or to return it to a recycling location. Protestant argues that there is no economic benefit for the consumer to recycling the used cartridge, there does not seem to be a reason for the empty containers to be shipped outside of the country; rather consumers would avail themselves of the closest available recycling center. Protestant states that this would be the easiest and most economically reasonable action to take for a consumer wishing to recycle their empty ink cartridges. At this time, this office does not have any evidence that would indicate that empty ink cartridges originally sold outside of the United States are being imported. The third step is for a United States collector, such as [Clover Environmental Solutions or Printronic Corp.], to collect the empty cartridges from the various recycling centers in the United States. The collectors will then separate the various model numbers and give the empty cartridges a sellable status. The collectors will then sell these empty cartridges to the Protestant. The collectors that supply the empty cartridges to the Protestant have supplied signed statements certifying that the sold empty cartridges were collected in the United States. Payment information between Protestant and the collectors has also been provided. From the information provided, it would appear that the excluded articles were indeed originally purchased within the United States. Statements have been provided by the collectors that describe the industry knowledge regarding empty ink cartridge collection, which is that empty ink cartridges collected in the United States were more likely than not originally sold in the United States. This description of industry practice is similar to the industry practices of the disposable camera shells at issue in Jazz Photo, which was found by the Federal circuit to satisfy the evidentiary burden. At this time, CBP does not have any evidence that would call into question the veracity of the statements submitted by the collectors. Additionally, there are no serial numbers or other markings from the original manufacturer placed or imprinted on the ink cartridges to assist in the determination of where an ink cartridge was originally sold. Given the difficulty in obtaining an original receipt or bill of sale from each of the original customers of the ink cartridges, the certifications and receipts of sale from the collectors is sufficient to support a finding that that the cartridges were originally purchased in the United States. Protestant then describes the process used to restore the ink cartridges at issue. Each of the cartridges is cleaned, the remaining ink is cleaned from inside of the empty cartridge, is refilled, has its outlets sealed, has its original chip reset and is relabeled. Protestant has also supplied documentation describing the steps taken to ensure that empty United States sourced cartridges are kept separate from other empty cartridges. The process detailed by the Protestant makes the printer cartridges usable by replacing the parts necessary for function of the product, namely the ink that was used previously. The original ink cartridge is still recognizable as such after undergoing the refurbishment process and therefore would fall under permissible repair. HOLDING: Based on the record before this office, protestant has established by a preponderance of the evidence that the model HP 60/75 ink cartridges and inkjet cartridges were permissibly repaired and that they do not fall within the scope of the 723 GEO issued by the ITC. Therefore, the protest challenging exclusion from entry is GRANTED. In accordance with the Protest/Petition Processing Handbook (CIS HB, December 2007), you are to mail this decision, together with the Customs Form 19, to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision, Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Charles R. Steuart Chief, Intellectual Property Branch