Protest 2720-15-101484; U.S. International Trade Commission; General Exclusion Order; Investigation Nos. 337-TA-723 and 337-TA-829; Certain Inkjet Ink Cartridges with Printheads and Components Thereof

HQ H272054 May 17, 2016 OT:RR:BSTC:IPR H272054 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 2720-15-101484; U.S. International Trade Commission; General Exclusion Order; Investigation Nos. 337-TA-723 and 337-TA-829; 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 Billiontree Technology USA Inc. (“Protestant”) challenging the exclusion of certain ink cartridges, ink jet supplies and inkjet cartridges refused entry for consumption as well as the seizure of certain toner cartridges 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). Investigation 337-TA-829 The Commission instituted this investigation on February 27, 2012, based on a complaint filed by Canon, Inc. of Tokyo, Japan; Canon U.S.A., Inc. of Lake Success, New York; and Canon Virginia, Inc. of Newport News, Virginia (collectively, “Canon”). See 77 Fed. Reg. 11586 (Feb. 27, 2012). The complaint alleged violations of section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337) by reason of infringement of various claims of U.S. Patent Nos. 5,903,803 (“the ‘803 patent”) and 6,128,454 (“the ‘454 patent”). The Commission’s notice of investigation named numerous respondents, and during the course of the investigation several of the respondents were found to be in default, or were terminated due to consent orders, or were the subject of withdrawn allegations. Eventually, the only parties remaining active in this investigation were Canon and the Investigative Attorney (“IA”). On February 28, 2013, the Administrative Law Judge (“ALJ”) issued his final initial determination (“ID”), finding that the asserted patents were infringed by the accused toner cartridge products. See ID at 128 (February 28, 2013). On March 25, 2013, the Commission determined not to review the ID. On June 28, 2013 the ITC issued the GEO. On May 29, 2015, the ITC issued a seizure and forfeiture order with respect to importation of articles covered under the GEO by Protestant. FACTS: On August 6, 2015, CBP officials at the port of Long Beach issued a notice to Protestant indicating that a shipment of ink cartridges, model 60XLC, was excluded from entry for consumption because the articles in question were subject to the 723 GEO. See CBP Exclusion Notice (August 6, 1015). On September 11, 2015, CBP officials at the port of Long Beach issued a notice to Protestant indicating that a shipment of toner cartridges, was seized because the articles in question were subject to the 829 GEO and a seizure and forfeiture order issued by the ITC. See CBP Seizure Notice (September 11, 1015). On December 15, 2015, pursuant to 19 U.S.C. § 1514, as implemented by 19 C.F.R. Part 174, Protestant timely filed a protest challenging the exclusion and claimed the excluded articles were not subject to the 723 GEO. Specifically, Protestant argues that the excluded articles are remanufactured toner cartridges whose cores were originally purchased in the United States. See Protest, at 1. (December 15, 2015). Protestant does not contest that the excluded articles practice the patents at issue in the 723 GEO. This protest was given the reference number 2720-15-101484 by CBP. There are a limited number of protestable actions taken by CBP, pursuant to 19 U.S.C. § 1514, as implemented by 19 C.F.R. Part 174, these actions do not include seizure of goods based upon a seizure and forfeiture order. As such, a protest is not the appropriate mechanism to seek redress, rather a petition to be filed with the local Fines, Penalties & Forfeitures officer as clearly stated in the seizure notice. On January 12, 2016, Protestant submitted additional evidence regarding the protest. including invoices from the sale of ink cartridges from Protest to [*********************],bills of lading and a brief statement regarding the fact that Protestant’s business is in empty ink cartridge collection in the United States. See E-Mail from Jonathon, Billiontree Technology USA Inc., to William Wittwer, Attorney-Advisor, U.S. Customs and Border Protection (January 12, 2016). Protestant sent additional pictures of the remanufacturing facility on January 18, 2016. See E-Mail from Jonathon, Billiontree Technology USA Inc., to William Wittwer, Attorney-Advisor, U.S. Customs and Border Protection (January 18, 2016). 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 Nos. 337-TA-723. Additionally, the issue presented is whether the decision by CBP to seize merchandise pursuant to a seizure and forfeitur order issued by the Commission constitutes a protestable event for purposes of section 514 of the Tariff Act of 1930, as amended. 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 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 ink cartridges. Section 514 of the Tariff Act of 1930, as amended (19 U.S.C. § 1514) provides in pertinent part that certain enumerated “decisions of the Customs Service . . . shall be final and conclusive upon all persons (including the United States and any officer thereof) unless a protest is filed in accordance with this section.” 19 U.S.C. § 1514(a). The enumerated decisions set forth in section 514 include “the exclusion of merchandise from entry or delivery . . . under any provision of the customs laws, except a decision appealable under section 1337 of this title.” See also 19 C.F.R. Part 174. The agency decision challenged by the application for further review of the instant protest concerns the seizure of merchandise. A decision by CBP to seize merchandise is not a protestable event as defined by section 514. Cf. H&H Wholesale services, Inc. v. United States, 437 F. Supp. 2d 1335 (Ct. Int’l Trade 2006) (An exclusion must occur before it can be protested; if only a seizure occurred the Court of International Trade has no jurisdiction). As such, a protest is not the appropriate mechanism to seek redress in the particular circumstances of this case. Rather, a petition should be filed with the Fines, Penalties & Forfeitures Office, Los Angeles, as stated in the seizure notice. 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 states that it is in the business of collecting empty ink cartridges in the United States. Other than its own assertion, Protestant has not supplied any evidence to support the claim that the cartridges were originally sold in the United States. Protestant has not supplied any information regarding the methods it uses to collect the cartridges in question. The only evidence submitted by Protestant is some invoices describing sales from Protestant to a third party, [************************] (“third party”). It is unclear from the documentation provided the relationship between Protestant and the third party. Accordingly, Protestant has failed to meet its burden to show that the ink cartridges were originally purchased in the United States. Protestant has not supplied any information regarding the process used to remanufacture the cartridges in question. It is unclear as to whether Protestant is the party involved in the remanufacturing process. Protestant has not supplied any evidence which describes the manner in which the empty ink cartridges are made fit for reuse. Protestant has not detailed any of the steps taken to ensure that ink cartridges sourced from the United States are kept separate from ink cartridges sourced from outside of the United States. The information provided by Protestant has been insufficient to show that the ink cartridges in question have been permissibly repaired. HOLDING: Protestant’s model HP 60XLC ink 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 conformity with the foregoing, the protest as it relates to the seizure of goods falling within the scope of the 829 GEO 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