Protest 2720-16-100577; U.S. International Trade Commission; General Exclusion Order; Investigation Nos. 337-TA-691; Certain Inkjet Ink Cartridges and Components Thereof

HQ H283478 June 26, 2017 OT:RR:BSTC:IPR H283478 WMW CATEGORY: 19 U.S.C. § 1337; Unfair Competition Mr. Amando Taboada Director of Machinery Center of Excellence & Expertise U.S. Customs and Border Protection 109 Shiloh Dr., Ste 300 Laredo, TX 78045 Attn: William Kaufman, Import Specialist (Buffalo, NY) RE: Protest 2720-16-100577; U.S. International Trade Commission; General Exclusion Order; Investigation Nos. 337-TA-691; Certain Inkjet Ink Cartridges and Components Thereof Dear Mr. Taboada: This is in response to the application for further review of the above-referenced protest filed by Portland Trade Services. (“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 based on the above-referenced general exclusion orders issued by the U.S. International Trade Commission (“ITC” or “Commission”). 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 (TSA) (18 U.S.C. § 1905) and/or the Privacy Act of 1974, as amended (5 U.S.C. § 552a). Investigation 337-TA-691 ITC Inv. No 337-TA-691 (“691 GEO”) was instituted based on a complaint filed by Hewlett-Packard of Palo Alto, California (“HP”), which named 11 companies located in China and the United States, as respondents to the investigation. See Protest, page 1 (dated September 23, 2009). 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-691, Commission Opinion (“ITC CO1”) at 1 (dated January 28, 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 claim 6 and 9 of U.S. Patent No. 6,089,687 and claims 1, 5, and 6 of U.S. Patent No. 6,264,301. Id. at 1; 691 General Exclusion Order (dated January 28, 2011). FACTS: On March 22, 2016, CBP officials at the port of Los Angeles issued a notice to Protestant indicating that a shipment of ink cartridges was excluded from entry for consumption because the articles in question were subject to the 691 GEO. See CBP Exclusion Notice (March 22, 2016). On April 22, 2016, 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 691 GEO. Specifically, Protestant argues that the excluded articles have been permissibly repaired and as such the patents practiced by these articles have been exhausted. To support this argument, Protestant has submitted documentation from the collectors, invoices and bills of lading between the collectors and the remanufacturer, invoices and bills of lading between Protestant and remanufacturer, descriptions of the process used to remanufacture the articles in question and steps taken to ensure that these cartridges are kept separate from those sourced outside of the United States. This protest was given the reference number 2720-16-100577 by CBP. The protest was received by the Office of Rulings and Regulations on December 6, 2016. On May 9, 2017, Protestant submitted their request for confidential treatment of certain information submitted with their protest. See E-Mail from George Ho, Leader Expedite to William Kaufman, Senior Import Specialist, U.S. Customs and Border Protection (May 9, 2017). ISSUE: The issues presented are 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-691 or whether the products in question practice the patent claims underlying the same exclusion order. 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 claim that a portion of the cartridges do not practice the claims of the patents in question as well as the fact that the remainder of 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. PROTESTANT’S ARGUMENT Protestant does not contest that the ink cartridges belonging to the remanufactured cartridge category practice the patents at issue in the 691 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 first identified the sources of these cartridges as having come from [***************], which collect used ink cartridges from their customers who originally purchased the cartridges in the United States. These cartridges were then exported to [*************] in China for cleaning and refilling. [******************], then ensure that the remanufactured cartridges are sent to Protestant here in the United States. Protestant has submitted various statements and invoices which relate to the cartridges at issue as they move through the remanufacturing process. 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. See Jazz Photo, at 1351. (In Jazz Photo, collection in the United States provided circumstantial evidence to support the assertion that the camera shells were first sold 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. Namely that the cartridges are kept sorted by brand, region, series and model number and that the model numbers are all for cartridges originally sold in the United States. 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: With the receipt of accompanying evidence, Protestant has demonstrated that the cartridges in question were permissibly repaired and therefore do not fall within the scope of the 691 exclusion order 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