OT:RR:BSTC:IPR H270695 WMW
Mr. Michael A. Pearson
Kirkland Ellis, LLP
655 Fifteenth Street, N.W.
Washington, DC 20005
RE: Ruling Request; U.S. International Trade Commission; General Exclusion Order; Investigation No. 337-TA-829; Certain Toner Cartridges and Components Thereof
Dear Mr. Pearson:
This is in reply to your letter dated November 13, 2015, on behalf of Clover Technologies Group LLC. (“Clover”), in which you requested a ruling, pursuant to 19 C.F.R. Part 177, as to whether certain of Clover’s remanufactured toner cartridges and remanufactured drum units are subject to the general exclusion order (“918 order”) resulting from the 337-TA-918 investigation by the U.S. International Trade Commission (“ITC” or “Commission”) because they are permissible repairs of Canon cartridges and drum units first sold in the United States and therefore do not infringe any of the patents at issue in the 918 order. Samples of Clover’s remanufactured drums and cartridges were included with the ruling request. We regret the delay in responding.
Clover 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, Clover 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).
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.
FACTS:
The Commission instituted investigation 337-TA-918 on June 6, 2014, based on a complaint filed by Canon Inc., Canon U.S.A., Inc., and Canon Virginia, Inc. (“Canon”). See 79 Fed. Reg. 33777 (June 12, 2014). Canon 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. 8,280,278 (“the ‘278 patent”), 8,630,564 (“the ‘564 patent”), 8,682,215 (“the ‘215 patent”), 8,676,090 (“the ‘090 patent”), 8,369,744 (“the ‘744 patent”), 8,565,640 (“the ‘640 patent”), 8,676,085 (“the ‘085 patent”), 8,135,304 (“the ‘304 patent”), and 8,688,008 (“the ‘008 patent”).
The Commission’s notices of investigation named thirty-three respondents as infringing parties, Clover was not named as a respondent. During the course of the investigation, the ‘744 patent, the ‘640 patent, the ‘085 patent and the ‘304 patent were withdrawn by Canon.
The ALJ found a violation of section 337 of the Tariff Act of 1930, as amended, which was affirmed by the Commission on review. See Certain Toner Cartridges and Components Thereof, Inv. No. 337-TA-918, Commission Opinion (“ITC CO”) at 1 (dated August 31, 2015). The Commission decided to provide relief in the form of a general exclusion order that bars the entry for consumption into the United States into the United States of toner cartridges that infringe claims 160, 165, and 166 of the ‘278 patent; claims 171, 176, 179, 181, 189, 192, and 200 of the ‘564 patent; claims 23, 26, 27, and 29 of the ‘215 patent; claims 1-4 of the ‘090 patent; and claims 1, 7-9, 11, 12, and 34 of the ‘008 patent. Id. at 17; 918 General Exclusion Order (“918 GEO”) (dated August 31, 2015).
On November 13, 2015, Clover submitted a ruling request to CBP regarding the importation of remanufactured toner cartridges, requesting a determination that said toner cartridges do not infringe upon the underlying patents of the 918 order under the permissible repair doctrine of patent law. In its ruling request, Clover establishes the process used to obtain original cartridges and the methods used to refurbish those cartridges for re-sale purposes. Empty cartridges are received from big box retailers like [xxxxxxxxxxxxxxxxxx], office supply specialists like [xxxxxxxxxxxx], and non-profit entities such as schools and churches. These empty cartridges are all collected within the United States. Clover will also purchase empty cartridges directly from third party suppliers, who must certify in writing that all empty cartridges were obtained within the United States.
Clover then describes the process used to remanufacture HP and Canon empty cartridges which were collected in the United States. The “dongle” is removed from the drum. This piece is referred to as the “coupling member” in the patents at issue in the 918 GEO. The dongle is collected to be placed onto a different cartridge later on in the remanufacturing process. The photo sensitive drum with attached “drum gear” is also removed from the cartridge. The “drum gear” contains the “drum flanges” which are claimed in the underlying patents at issue. The drum gear is then separated from the photo sensitive drum through a mechanical pinching process. The pinched drum is discarded. The separated drum gear is saved and later attached to a new drum. This new combination is then collected to be attached to a different cartridge later on in the remanufacturing process. The cartridge is then cleaned and refilled with toner. A new photosensitive drum with attached drum gear and dongle from the previously remanufactured cartridges is then attached.
ISSUE:
The issue presented is whether the patent rights in the refurbished toner cartridges 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-918.
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 Importer to show that the toner cartridges at issue have been the subject of permissible repair and have not gone through a complete reconstruction.
Clover’s Argument
Clover does not contest that the products in question practice the patents at issue in the 918 GEO, rather Clover asserts that the products are original toner cartridges sold by Canon which have been refurbished for sale. To establish the original sale of the toner cartridges in question, Clover describes the collection process used to obtain the empty cartridges which will be remanufactured for later importation and sale in the United States. Empty cartridges are received from big box retailers like [xxxxxxxxxxxxxxx], office supply specialists like [xxxxxxxxx], and non-profit entities such as schools and churches. These empty cartridges are all collected within the United States. Clover will also purchase empty cartridges directly from third party suppliers, who must certify in writing that all empty cartridges were obtained within the United States.
Based on the evidence provided by Clover, it would appear that the cartridges in question were originally collected within the United States. Statements provided by Clover and the third party suppliers indicate many steps taken to ensure that all empties used by Clover were originally collected in the U.S. which is important due to the industry understanding that cartridges collected in the U.S. were more than likely originally sold in the U.S.. This is similar to the industry practices of the disposable camera shells at issue in Jazz Photo, which were found by the Federal Circuit to satisfy the evidentiary burden. 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 are sufficient to support a finding that that the cartridges were originally purchased in the United States.
Clover then describes the process used to remanufacture HP and Canon empty cartridges which were collected in the United States. The “dongle” is removed from the drum. This piece is referred to as the “coupling member” in the patents at issue in the 918 GEO. The dongle is collected to be placed onto a different cartridge later on in the remanufacturing process. The photo sensitive drum with attached “drum gear” is also removed from the cartridge. The “drum gear” contains the “drum flanges” which are claimed in the underlying patents at issue. The drum gear is then separated from the photosensitive drum through a mechanical pinching process. The pinched drum is discarded. The separated drum gear is saved and later attached to a new drum. This new combination is then collected to be attached to a different cartridge later on in the remanufacturing process. The cartridge is then cleaned and refilled with toner. A new photosensitive drum with attached drum gear and dongle from the previously remanufactured cartridges is then attached.
As stated by Clover in its ruling request, citing Aro, “reconstruction of a patented entity, comprised of unpatented elements is limited to such a true reconstruction as to in fact make a new article.” The method Clover uses to remanufacture toner cartridges can be described as an assembly-line method which is very similar to a method that was at issue in Dana Corp. v. Am. Precision Co., 827 F.2d 755, 757 (Fed. Cir. 1987). In Dana Corp., the defendant was in the practice of refurbishing truck clutches. The used clutches were disassembled, and the various components were cleaned and sorted. The components parts that were still usable were placed into different bins. Then using a production line process, they would assemble clutches using the various components pulled from the bins. No records were kept nor efforts made to ensure that the original components were placed together in the reassembled clutch. Likewise, Clover will disassemble toner cartridges into component parts as part of the refurbishment process. Worn out parts, such as the photosensitive drum, are discarded and replaced while parts from multiple original toner cartridges are used to repair the toner cartridge. No effort is made to ensure that the original parts are placed back onto the original toner cartridge. The toner cartridges at issue may not have been designed to be remanufactured, however, as stated in Jazz Photo, “the patentee’s unilateral intent … does not bar reuse of the patented article, or convert repair into reconstruction. See Jazz Photo at 1106. In this instance the only parts being replaced are unpatented components which wear out more rapidly than the patented components of the cartridge in question. See Aro at 346. As such, it is our position in the particular circumstances of this case that the steps taken by Clover to remanufacture the toner cartridges at issue do not amount to reconstruction but rather constitute permissible repair.
HOLDING:
The toner cartridges are not covered by the claims at issue in the ‘278 patent, the ‘564 patent, the ‘215 patent, the ‘090 patent and the ‘008 patent seeing that they have been permissibly repaired. Therefore, these products fall outside the scope of the ITC’s general exclusion order in Investigation No. 337-TA-918. Accordingly, the instant products may be entered for consumption into the United States, entered for consumption from a foreign-trade zone, or withdrawn from a warehouse for consumption.
This decision is limited to the specific facts set forth herein. If Clover manufactures or imports toner cartridges that differ from the embodiment described above, or if future importations vary from the facts stipulated to herein, this decision shall not be binding on CBP as provided for in 19 C.F.R. §§177.2(b)(1), (2), and (4), and §§177.9(b)(1) and (2).
Sincerely,
Charles R. Steuart, Chief
Intellectual Property Rights Branch