Protest 2720-15-100985; U.S. International Trade Commission; General Exclusion Order; Investigation No. 337-TA-723; Certain Inkjet Ink Cartridges with Printheads and Components Thereof

HQ H270324 March 18, 2016 OT:RR:BSTC:IPR H270324 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 RE: Protest 2720-15-100985; 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 Easy Group LLC. (“Protestant”) challenging the exclusion from entry for consumption of certain ink cartridges, ink jet supplies and inkjet cartridges determined by the port to fall within the scope of the above-referenced general exclusion orders issued by the U.S. International Trade Commission (“ITC” or “Commission”). As an initial matter, to protect confidential business information all information surrounded by brackets will be redacted from any published decision presented to the general public. Protestant has advised that the disclosure of certain information relative to this matter should be considered confidential. Based on our review of the matter we have concluded that the information in question is eligible for confidential treatment under 19 C.F.R. § 103.12; accordingly, we have granted the request for confidentiality. See also 6 C.F.R. part 5. Appropriate steps will therefore be taken to ensure that the information remains confidential and, to this end, the bracketed portions of the text will be redacted from any published versions of this decision. A public version of this decision is enclosed for your files. However, protestant should note that U.S. Customs and Border Protection will be guided in this regard by the laws relating to confidentiality and disclosure, to include the Freedom of Information Act (FOIA), as amended (5 U.S.C. § 552), the Trade Secrets Act (FOIA) (18 U.S.C. § 1905) and/or the Privacy Act of 1974, as amended (5 U.S.C. § 552a). Moreover, the provisions of the FOIA, the TSA and the Privacy Act will prevail in any conflict concerning the confidentiality and disclosure of information. Accordingly, any information submitted in connection with this matter will be disclosed, if requested, where, e.g., it is administratively determined that the information is not protected by the TSA, the Privacy Act or an exemption of the FOIA. Investigation 337-TA-723 ITC Inv. No. 337-TA-723 (“723 GEO”) was instituted based on a complaint filed by Hewlett-Packard Company of California; Hewlett-Packard Development Company L.P. of California (“HP”), which named 7 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 (dated October 24, 2011). Subsequent to the issuance of the 723 GEO, U.S. Customs and Border Protection (“CBP”) excluded from entry ink cartridges of Protestant, for which the ITC, on October 6, 2015, issued a seizure and forfeiture order against Protestant pursuant to 19 U.S.C. § 1337(i). FACTS: On July 16, 2015, CBP officials at the port of Los Angeles issued a notice to Protestant indicating that a shipment of ink cartridges and inkjet cartridges, models HP61XL, was excluded from entry for consumption because the articles in question were covered by the 723 GEO. See CBP Exclusion Notice (listing the date of denial of entry as July 17, 2015). On August 31, 2015, pursuant to 19 U.S.C. § 1514(c), as implemented by 19 C.F.R. Part 174, through counsel, Protestant timely filed a protest challenging the exclusion and the determination that the excluded articles fell within the scope of the 723 GEO. Specifically, Protestant argues that the excluded products are not subject to the 723 GEO and that the excluded property was permissibly repaired and subject to an exhausting first sale under U.S. patent law. See Protest, at 3. (August 31, 2015). Protestant does not contest that the excluded articles practice that patents at issue in the 723 GEO. Protestant states that all of the excluded articles were U.S. origin empties. Id. A statement from the remanufacturer, [**********************], was submitted along with the protest. See Vendor Statement (August 3, 2015). This statement states that Protestant purchased the cartridges at issue from the remanufacturer [**********************], who purchased their empty cartridges from two sources [**********************] and [**********************] Id at 5-6. Purchase orders from [**********************], to [**********************] and from [**********************] to [**********************] were also provided. Id. The remanufacturer subsequently stated that their supplier, [**********************], purchased their empty cartridges from [**********************], along with an order confirmation. Id at 7. The remanufacturer also stated that their supplier [**********************] purchased their empty cartridges from [**********************], along with a purchase order. Id at 8. The process used to repair the cartridges in question is as follows: the empty cartridge is placed in a printer to test its quality. The cartridge and printhead are cleaned. All HP logos are removed from the cartridge. The ink is refilled. The cartridge is tested for quality control. The cartridge is sealed and marked “remanufactured ink cartridge”. A safety clip is then attached. The ink cartridges are then packed into plastic bags and placed into master cartons. Id at 1-4. This protest was given the reference number 2720-15-100985 by CBP. On October 12, 2015, Protestant sent an email in response to a request from CBP for additional documentation to support the claims made in the initial protest, signed affidavits from suppliers, proof of payment from the Protestant to its suppliers, and a description of the steps taken to ensure that any empty cartridges purportedly originally purchased in the United States are kept separate from other cartridges purchased outside of the United States. See E-Mail from Doug Frymer, Attorney, to William Wittwer, Attorney-Advisor, U.S. Customs and Border Protection (October 12, 2015). Protestant declined to submit any of the requested documentation, affirming that it had already submitted the vendor statement and that it did not have a relationship with the other entities involved to obtain supporting documentation. Id. On October 22, 2015, Protestant sent an email in response to a second request from CBP for the additional documentation described above. See E-Mail from Doug Frymer, Attorney, to William Wittwer, Attorney-Advisor, U.S. Customs and Border Protection (October 22, 2015). Protestant described the various interactions between itself and various CBP personnel. Id. Protestant did not supply any of the requested documentation. ISSUE: The issue presented is whether the patent rights practiced by the refurbished ink cartridges and inkjet cartridges of the excluded shipment have been exhausted by a first sale and thereby fall within the scope of 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 829 GEO. The Protestant does not claim that the cartridges do not practice the claims of the patents in question rather that the cartridges were originally purchased in the United States and have been remanufactured. 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 ink cartridges at issue have been the subject of permissible repair and not a complete reconstruction of the toner cartridges. 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. Protestant relies upon the statement made by the remanufacturer to establish that the cartridges in question were originally purchased in the United States. The manufacturer describes two separate supply chains it uses to obtain the cartridges sold to Protestant. In each case, the manufacturer purchases the cartridges from a supplier that purchases the cartridges from a United States based entity. Protestant has not supplied any information regarding the first sale of the inkjet cartridges in the United States or even the collection of the empty inkjet cartridges in the United States. An invoice from the remanufacturer to Protestant was provided, however no accompanying proof of payment was provided. No invoices for the sale of empty inkjet cartridges of proofs of payment have been provided between the remanufacturer and its suppliers. One order confirmation was provided showing the purchase of goods from a United States entity to a supplier was provided. The other documents provided are purchase orders that have no indication that a sale had been completed or that payment had been made. The only evidence put forth by Protestant regarding the source of the inkjet cartridges in question is a statement from an unnamed person at the remanufacturing facility. No identifiable person at any of the entities involved in the supply of inkjet cartridges has supplied a statement affirming the facts alleged by the manufacturer. This is insufficient to meet the evidentiary burden carried by Protestant to establish that a patent exhausting first sale has been effected. Protestant then describes the process used to restore the ink cartridges at issue. Each of the cartridges is cleaned, identifying HP marks are removed, and the ink is refilled, is relabeled, and packaged. Protestant has not detailed any steps from the six entities participating in the supply chain taken to ensure that the inkjet cartridges, allegedly sourced from the United States, are not co-mingled with inkjet cartridges sourced from other countries. 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. However, without a procedure to segregate goods purchased or collected in the United States from other countries it is impossible for CBP to determine whether the inkjet cartridges at issue were originally purchased in the United States. HOLDING: Protestant’s model HP 61XL ink cartridges and inkjet cartridges were properly considered to fall within the scope of the 723 GEO issued by the ITC. Therefore, the protest challenging exclusion from entry is DENIED. 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