Customs Ruling HQ H286719 - Ruling Request; U.S. International Trade Commission; Limited Exclusion Order; Investigation No. 337-TA-972; Certain Automated Teller Machines, ATM Modules, Components Thereof, and Products Containing Same.

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HQ H286719
Jul 24, 2017

Type : 19 U.S.C. §1337; Unfair Competition • HTSUS :
Related: H121519

OT:RR:BSTC:IPR H286719 JW

Mr. Michael J. McKeon
Fish & Richardson P.C.
901 15 Street, N.W.
Washington, DC 20005

RE: Ruling Request; U.S. International Trade Commission; Limited Exclusion Order; Investigation No. 337-TA-972; Certain Automated Teller Machines, ATM Modules, Components Thereof, and Products Containing Same. Dear Mr. McKeon:

This ruling letter, issued under 19 C.F.R. § 177, is the result of an inter partes proceeding that the Intellectual Property Rights Branch, Regulations and Rulings, U.S. Customs and Border Protection (“CBP”), administered pursuant to section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337, that involved your client, Nautilus Hyosung Inc., Nautilus Hyosung America Inc., and HS Global, Inc. (collectively, “Nautilus Hyosung”), and Diebold-Nixdorf Incorporated and Diebold Self-Service Systems, Inc. (collectively, “Diebold”) as the two parties with a direct and demonstrable interest in the question presented by their respective ruling requests.

In your letter, dated May 26, 2017, which included Exhibits 1 to 14 (“Ruling Request”), submitted on behalf of your client Nautilus Hyosung you requested an administrative ruling, pursuant to 19 C.F.R. § 177, whether certain automated teller machines, ATM modules, components thereof, and products containing same to be imported by Nautilus Hyosung are subject to the limited exclusion order (“972 LEO”) issued by the U.S. International Trade Commission (“ITC” or “Commission”) in Investigation No. 337-TA-972. On June 16, 2017, Diebold submitted a response letter to the Ruling Request, which included Exhibit A (“Diebold’s Opposition”). Both parties presented arguments before CBP during the proceeding held on June 30, 2017. At the proceeding, Nautilus Hyosung also provided CBP with a sample of the upper half of a redesigned Halo II ATM machine, which included the metal tray and plastic covering. Post proceeding briefs were subsequently submitted by both parties to CBP on July 10, 2017. Nautilus Hyosung’s post proceeding submission included Exhibits 15 to 17 (collectively, “Nautilus Hyosung’s Post Proceeding Submission”) and Diebold’s post proceeding submission included Exhibits 1 to 3 and Exhibit B (collectively, “Diebold’s Post Proceeding Submission”). Replies to the post proceeding briefs were submitted by both parties to CBP on July 17, 2017. Nautilus Hyosung’s reply included Exhibit 18, (collectively, “Nautilus Hyosung’s Reply), and Diebold’s reply included Exhibit A (collectively, “Diebold’s Reply”).

FACTS:

A. Investigation No. 337-TA-972

The Commission instituted Investigation No. 337-TA-972 on November 20, 2015, based on a complaint filed by Diebold, Incorporated and Diebold Self-Service Systems (collectively, “Diebold”). See 80 Fed. Reg. 72735-36 (November 20, 2015). The complaint alleged violations of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337, in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain automated teller machines, ATM modules, components thereof, and products containing the same by reason of infringement of U.S Patent No. 7,121,461 (“the ‘461 patent”); U.S. Patent No. 7,249,761 (“the ‘761 patent”); U.S. Patent No. 7,314,163 (“the ‘163 patent”); U.S. Patent No. 6,082,616 (“the ‘616 patent”); U.S. Patent No. 7,229,010 (“the ‘010 patent”); and U.S. Patent No. 7,832,631 (“the ‘631 patent”). Commission Opinion (May 19, 2017) at 1. The notice of investigation names Nautilus Hyosung as respondents. Id. The Office of Unfair Import Investigations was not named as a party. Id.

The ‘461 patent, the ‘761 patent, and the ‘163 patent were previously terminated from the investigation. Id. On November 30, 2016, the presiding administrative law judge (“ALJ”) issued the final initial determination (“ID”), which found a violation of section 337 with respect to the ‘616 patent and the ‘631 patent. Id. at 2. The ALJ found no violation with respect to the ‘010 patent. Id. The ALJ recommended the issuance of a limited exclusion order and cease and desist orders against Nautilus Hyosung. Id.

Petitions for review were filed by the parties with respect to certain findings related to the ‘616 patent and the ‘631 patent. Id. The Commission determined to review and modify two claim constructions for the ‘616 patent. Id. The Commission Claim Construction Opinion issued on January 30, 2017, and as a result the Commission determined to review certain issues with respect to infringement, domestic industry, and invalidity. Id. The Commission decided not to review the ID’s finding of violation with respect to the ‘631 patent. Id.

The Commission issued a notice finding a violation of section 337 as to the ‘616 patent. Id. Accordingly, on May 19, 2017, the Commission issued a limited exclusion order and cease and desist orders, prohibiting, inter alia, the importation of articles that infringe claims 1, 6, 10, 16, 26, and 27 of the ‘616 patent and claims 1-7 and 18-20 of the ‘631 patent. Id.; see also 972 LEO (May 19, 2017).

B. The ‘616 Patent

While the Commission found a violation of section 337 with respect to both the ‘616 patent and the ‘631 patent, the Ruling Request relates to just one patent: the ‘616 patent. See Ruling Request at 1. The ‘616 patent “relates to an enclosure for an ATM that includes a rollout tray.” ALJ ID at 3. The rollout tray includes a service opening “used to access service points on the serviceable components when the rollout tray is extended from the housing.” ‘616 patent, Abstract. Figure 2 in the ‘616 patent depicts an embodiment of the service opening 54 in the tray’s lower wall 52:

‘616 patent, Fig. 2.

In the Commission’s Claim Construction Opinion dated January 30, 2017, the Commission construed the term “service opening” to have its plain and ordinary meaning, namely, “an opening through which a component may be serviced.” Commission Claim Construction Opinion at 11. As noted above, the 972 LEO prohibits the importation of articles that infringe claims 1, 6, 10, 16, 26, and 27 of the ‘616 patent. Of these claims, claims 1, 26, and 27 of the ‘616 patent are independent claims. The independent claims, with the limitations relevant to this ruling in bold, read as follows:

Claim 1

1. An automated banking machine apparatus comprising:

a housing bounding an interior area, the housing having a first opening to the interior area;

a rollout tray movably supported on the housing, the rollout tray including a wall portion, a service opening extending through the wall portion, wherein the rollout tray is movable between a first position wherein the tray extends outward from the first opening and the service opening is accessible from outside the housing, and a second position wherein the tray is within the interior area and the service opening is not accessible from outside the housing;

a first serviceable component mounted in supporting connection with the tray and overlying the service opening, the serviceable component having a service point, and wherein the service point is accessible from outside the housing by extending a tool upwardly through the service opening when the tray is in the first position.

Claim 26

26. An automated banking machine apparatus comprising:

a housing bounding an interior area, the housing having a first opening to the interior area;

a rollout tray movably mounted in supporting connection with the housing, the rollout tray including a service opening, wherein the rollout tray is movable between a first position wherein the tray extends outward from the first opening and the service opening is accessible from outside the housing, and a second position wherein the tray is within the interior area and the service opening is not accessible from outside the housing;

a serviceable component mounted in supporting connection with the tray, the serviceable component having a service point, and wherein the service point is accessible from outside the housing through the service opening when the tray is in the first position;

an upper wall in supporting connection with the tray, the wall disposed above the service opening, wherein the service point is disposed between the wall and the service opening.

Claim 27

27. An automated banking machine apparatus comprising:

a housing bounding an interior area, the housing having a first opening to the interior area;

a rollout tray movably mounted in supporting connection with the housing, wherein the rollout tray is movable between a first position wherein the tray extends outward from the first opening and wherein a service opening is accessible from outside the housing, and a second position wherein the tray is generally within the interior area and the service opening is not accessible from outside the housing;

a serviceable component mounted in supporting connection with the tray, the serviceable component having a service point, and wherein the service point is accessible from outside the housing through the service opening when the tray is in the first position;

a fascia in supporting connection with the tray, and wherein the fascia generally covers the first opening when the tray is in the second position.

C. The Accused Products

The products accused of infringing in the underlying investigation were ATMs, which could generally be divided into two groups: full service bank ATMs and lower cost retail ATMs. See ID at 11. The ATMs accused of infringing the ‘616 patent were generally the retail ATMs. Id. The specific Nautilus Hyosung ATMs accused of infringing the ‘616 patent were the Halo, Halo S, NH2600, and MX2600, which are part of the Halo series; the Halo II and MX2600SE, which are part of the Halo II series; the MX5000CE and MX5000SE, which are part of the MX5000 series; the MX5200XP, MX5200W7, and MX5200SE, which are part of the MX5200 series; the MX5300, MX5300CE, and MX5300XP, which are part of the MX5300 series; and the MX5600 model. Id.; Commission Opinion at 5-6.

Ultimately, the Commission found the Halo II, MX5200, and MX5600 series ATMs to infringe the ‘616 patent. Commission Opinion at 20. In so finding, the Commission found that, inter alia, these ATMs had a “service opening” and noted that the “service opening” does not have to be only “for service a real technician would do,” rather “it should be for service that a real technician could do.” Id. at 7 (emphasis in the original). The pictures below depict the service openings in the rollout trays of the Halo II, MX5200, and MX5600 series.

[ ]

See Diebold’s Opposition at 3.

D. The Redesign

The Commission found that the Halo, MX5000, and MX5300 series ATMs did not infringe the ‘616 patent; hence, Nautilus Hyosung has not redesigned those ATMs and they are not included in the Ruling Request. See Ruling Request at 1. Nautilus Hyosung’s Ruling Request relates only to the three lines of ATMs found to infringe in Investigation No. 337-TA-972: the Halo II, MX5200, and MX5600 series ATMs. Id. Nautilus Hyosung purports to have “eliminated the cutouts and gaps that were accused of being openings in the accused ATMs.” Ruling Request at 9. Nautilus Hyosung states that for the three product series (i.e., the Halo II, MX5200, and MX5600) a non-removable hard cover has been added to the tray to completely cover the accused cutouts and gaps. Id. at 9-10; see also Nautilus Hyosung Post Proceeding Submission at 4 (“. . . the hard plastic covering is connected to the ATM trays with rivets.”). Nautilus Hyosung further notes that the covering is riveted onto the ATMs and cannot be removed without substantial damage. Ruling Request at 10. Nautilus Hyosung believes that this substantial damage would be harm to the plastic of the covering and harm to the structural integrity of the machine such as destroying the metal of the tray or the breaking of other components. See Hearing Transcript at 36:12-38:8.

The following images provided by Nautilus Hyosung compares the products found to infringe at the ITC (left column) with the redesigned ATMs (right column).

[ ]

Ruling Request at 10. Accordingly, Nautilus Hyosung contends that as the redesigned ATMs no longer have “service openings,” they do not infringe the asserted claims of the ‘616 patent and fall outside the scope of the exclusion order. Id. at 12.

Diebold disagrees. Diebold asserts that Nautilus Hyosung’s redesigned ATMs still have a service opening as shown in the pictures below taken by Diebold during its June 12, 2017 inspection of the redesigned ATMs.

[ ]

Diebold Opposition at 5. Diebold contends that “[e]ven though [Nautilus] Hyosung has placed a temporary plastic cover over the opening, the redesigned machines nonetheless have ‘an opening through which a component may be serviced’” that “would provide the exact same access to components that the Commission determined to infringe the 616 Patent.” Id. at 6.

In addition, Diebold argues that the manner by which Nautilus Hyosung chose to cover the opening shows that Nautilus Hyosung does not intend for the cover to be a permanent fixture on the redesigned ATMs. Id. Diebold points out that the plastic cover secured by rivets can be easily removed with no harm done to the machine. Exhibit 1 (Kurfess Declaration) of Diebold’s Post Proceeding Submission at ¶¶ 18-23. Diebold further states that the cover can be easily undone in the field, and in fact, must be removed to perform services on the machines. Diebold Opposition at 6. As an example, Diebold cites to the MX5600 Service Manual, which Diebold asserts that Nautilus Hyosung has no intent of modifying. Id. The MX5600 Service Manual directs users to service the ATM’s pin pad through the service opening. Id. Diebold also states that “the temporary plastic cover in at least the ‘redesigned’ MX5600 is positioned such that the pin pad cannot actually be serviced when the cover is in place.” Id.

II. ISSUE

Whether Nautilus Hyosung’s redesigned ATMs are covered by the asserted claims of the `616 patent and therefore fall within the scope of the Commission’s limited exclusion order from Investigation No. 337-TA-972, such that they would be excluded from entry for consumption into the United States.

III. LAW AND ANALYSIS

A. Treatment of Confidential Business Information Submitted Under 19 C.F.R. § 177

As a preliminary matter, Nautilus Hyosung has requested confidential treatment in connection with this ruling request for certain information from its submissions, claiming that the disclosure of such information would likely cause substantial harm to its competitive position and, on this basis, seeks to have the information in question redacted from any ruling that is published in accordance with 19 U.S.C. § 1625(a). Disclosure of information related to administrative rulings under 19 C.F.R. § 177 is governed by 31 C.F.R. § 1, 19 C.F.R. § 103, and 19 C.F.R. § 177.8(a)(3). See 19 C.F.R. § 177.10(a). Moreover, the determination whether to include or redact information within a published ruling is guided by various federal laws—and the relevant standards for their application—that involve confidentiality and disclosure, to include the Freedom of Information Act (“FOIA”) (5 U.S.C. § 552), the Trade Secrets Act (18 U.S.C. § 1905), and the Privacy Act of 1974 (5 U.S.C. § 552a). See CBP HQ Ruling H121519 at 1 (dated February 8, 2011).

Congress enacted FOIA to overhaul the earlier public-disclosure section of the Administrative Procedure Act that gradually became more “a withholding statute than a disclosure statute.” Milner v. Dep't of the Navy, 562 U.S. 562, 565 (quoting EPA v. Mink, 410 U.S. 73, 79 (1973). Accordingly, there is a strong presumption in favor of disclosure, which is consistent with the purpose as well as the plain language of the Act. United States Dep't of State v. Ray, 502 U.S. 164, 173 (1991). Thus, FOIA mandates that an agency disclose certain information unless it falls within one of nine exemptions. Milner, at 565. These exemptions are “explicitly made exclusive,” EPA, at 79, and must be “narrowly construed,” FBI v. Abramson, 456 U.S. 615, 630 (1982).

Exemption 4 of FOIA, which is especially relevant here, provides that FOIA does not apply to matters that are “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” 5 U.S.C. § 552 (b)(4); see also Chrysler Corp. v. Brown, 441 U.S. 281, 291 (1979). Furthermore, it is worth noting that, as a general matter, the proscriptions of the Trade Secrets Act are “at least co-extensive with Exemption 4 of FOIA . . . [such that], unless another statute or a regulation authorizes disclosure of the information, the Trade Secrets Act requires each agency to withhold any information it may withhold under Exemption 4 of the FOIA.” Venetian Casino Resort, LLC v. EEOC, 530 F.3d 925, 932 (D.C. Cir. 2008) (quoting Canadian Comm. Corp. v. Air Force, 514 F.3d 37, 39 (D.C. Cir. 2008) (emphasis added); see also Dow Chem. Co. v. United States, 476 U.S. 227, 234, n. 2 (1986) (“Dow's fear that EPA might disclose trade secrets revealed in these photographs appears adequately addressed by federal law prohibiting such disclosure generally under the Trade Secrets Act, 18 U.S.C. § 1905, and the Freedom of Information Act, 5 U.S.C. § 552(b)(4).”).

That said, “Congress did not design the Freedom of Information Act exemptions to be mandatory bars to disclosure.” Chrysler Corp., 441 U.S. at 293, 294 (“We therefore conclude that Congress did not limit an agency's discretion to disclose information when it enacted the FOIA.”) (emphasis added); see also GTE Sylvania v. Consumers Union of United States, 445 U.S. 375, 378, n. 2 (1980) (“The theory of the so-called ‘reverse Freedom of Information Act’ suit, that the exemptions to the Act were mandatory bars to disclosure and that therefore submitters of information could sue an agency under the Act in order to enjoin release of material, was squarely rejected in Chrysler Corp.”).

The test, for administrative rulings under 19 C.F.R § 177, to determine whether certain information is confidential (and therefore properly redacted from any published ruling) is identical to the federal government-wide standard for disclosure under FOIA Exemption 4 as it relates to the likelihood of substantial harm to the competitive position of the person submitting the information and requesting that it be withheld from publication. As with FOIA, the basic objective of administrative rulings under 19 C.F.R. § 177 favors disclosure to provide notice to interested persons of the reasons for the agency’s position and its decision-making process. See Chrysler Corp., 441 U.S. at 290, n. 10 (“We observed in Department of Air Force v. Rose that ‘disclosure, not secrecy, is the dominant objective of the Act.’ The legislative history is replete with references to Congress' desire to loosen the agency's grip on the data underlying governmental decisionmaking.”) (internal citation omitted). Notably, under 19 C.F.R. § 177.8(a)(3) referenced above, there is a general presumption that “[n]o part of the ruling letter, including names, addresses, or information relating to the business transactions of private parties, shall be deemed to constitute privileged or confidential commercial or financial information or trade secrets exempt from disclosure pursuant to the Freedom of Information Act, as amended (5 U.S.C. 552), unless, as provided in §?177.2(b)(7), the information claimed to be exempt from disclosure is clearly identified and the reasons for the exemption are set forth.”

In turn, 19 C.F.R. § 177.2(b)(7) provides that “[i]nformation which is claimed to constitute trade secrets or privileged or confidential commercial or financial information regarding the business transactions of private parties the disclosure of which would cause substantial harm to the competitive position of the person making the request (or of another interested party), must be identified clearly and the reasons such information should not be disclosed, including, where applicable, the reasons the disclosure of the information would prejudice the competitive position of the person making the request (or of another interested party) must be set forth.”

Significantly, § 177.2(b)(7) was added to this section through rulemaking (T.D. 75-186, 40 Fed. Reg. 31929, July 30, 1975) that promulgated a final rule based on a previous notice of proposed rulemaking (40 Fed. Reg. 2437, January 13, 1975) where the text as proposed did not contain (b)(7) or any other provision addressing the treatment of putative confidential business information. The “substantial harm to a competitive position” standard adopted in § 177.2(b)(7) to handle confidentiality issues is identical to that standard for FOIA Exemption (b)(4) contemporaneously established by the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) in National Parks & Conservation Asso. v. Morton, 498 F.2d 765 (D.C. Cir. 1974). See N.H. Right to Life v. HHS, 136 S. Ct. 383; 193 L. Ed. 2d 412; 2015 U.S. LEXIS 7169 (2015) (Thomas, J., dissenting from denial of the petition for writ of certiorari). In 1974, a year before the promulgation of the Customs final rule, the D.C. Circuit construed the word “confidential” in Exemption 4 and determined that commercial information is “confidential” if disclosure would “cause substantial harm to the competitive position of the person from whom the information was obtained.” National Parks, at 770; see also N.H. Right to Life, 136 S. Ct. at 384. The D.C. Circuit later elaborated that, when applying this test, there was no need to show actual competitive harm and that actual competition and the likelihood of substantial competitive injury sufficed. See Public Citizen Health Research Group v. FDA, 704 F.2d 1280, 1291 (D.C. Cir. 1983); see also N.H. Right to Life, at id. Accordingly, to overcome the strong presumption in favor of disclosure, ruling requesters seeking confidential treatment must prove (1) they actually face competition, and that (2) substantial competitive injury would likely result from disclosure. See Gov't Accountability Project v. FDA, 2016 U.S. Dist. LEXIS 114927, at *15 (D.C. Cir. 2016). Conclusory and generalized allegations of substantial competitive harm are unacceptable and will not support a ruling requester’s efforts to withhold certain information from publication. See Public Citizen Health Research Group, at id. There is no dispute that Nautilus Hyosung faces actual competition and therefore the relevant analysis will focus on the second prong above.

As suggested above, the relevant Customs regulations not only mirror the general presumption in favor of disclosure but also place the burden on the person requesting confidentiality to demonstrate that such information qualifies. See generally FCC v. Schreiber, 381 U.S. 279 (1965) (upholding a rule requiring public disclosure except where the proponents of a request for confidential treatment have established their burden to justify that such information should not be disclosed). Moreover, the provisions of the Customs regulations that place the burden on the ruling requester to establish, during the administrative proceeding, that the information at issue constitutes confidential business information is consistent with the burden the government must satisfy in an action brought against it under FOIA challenging the position an agency has taken not to disclose information pursuant to one or more of the exemptions. See 5 U.S.C. § 552(a)(4)(B); see also United States Department of Justice v. Landano, 508 U.S. 165, 171 (1993) (“The Government bears the burden of establishing that the exemption applies.”).

This line of inquiry is further illuminated by the “general right to inspect and copy public records and documents” that courts have historically recognized, including in patent cases involving highly sensitive information. Apple Inc. v. Samsung Elecs. Co., 727 F.3d 1214, 1221 (Fed. Cir. 2013) (quoting Nixon v. Warner Commc’ns, Inc., 435 U.S. 589 (1978)). The nature of this right, rooted in the common law, is not conditioned on a proprietary interest in the information, see Nixon, at 597, although certainly there are instances where an interest in the information may rise to or approach such a level. Instead, the only interest necessary to compel access to such information is found in the “citizen's desire to keep a watchful eye on the workings of public agencies.” Nixon, at 597-98.

Therefore, a determination whether to grant a request for confidential treatment must balance the likelihood of substantial harm to a competitive position against the need to provide the greatest amount of transparency possible to the agency’s decision-making process. In light of the above, a request for confidential treatment of information submitted in connection with a ruling requested under 19 C.F.R. § 177 faces a strong presumption in favor of disclosure and the person seeking this treatment must overcome that presumption with a request that is narrowly tailored and supported by evidence establishing a likelihood of substantial harm to a competitive position that outweighs the general history and public policy—embedded in FOIA, the common law, and the relevant Customs regulations—favoring transparency and disclosure. To that end, any request for confidential treatment must provide a particularized showing of the specific harm that will result if certain information is disclosed. Broad, unsubstantiated allegations of harm without specific examples articulating reasons for the harm will not suffice.

Therefore, as noted above, requests for confidential treatment in the context of section 337 exclusion order-based rulings under 19 C.F.R. § 177 must be narrowly tailored, fully supported by evidence showing a likelihood of substantial harm to a competitive position, and still permit a description of the device’s operation.

Based on the framework above, the information for which Nautilus Hyosung has established a likelihood of substantial harm to its competitive position if disclosed (or consists of information that was redacted from the public version of the agency record at the Commission) has been bracketed in red for redaction from the published ruling but otherwise has been described or identified to the greatest extent allowed throughout this ruling (including, whenever possible, with citations referencing the confidential agency record at the Commission from Inv. No. 337-TA-972).

B. Law of Patent Infringement

Determining patent infringement requires two steps. Advanced Steel Recovery, LLC v. X-Body Equip., Inc., 808 F.3d 1313, 1316 (2015). The first is to construe the limitations of the asserted claims and the second is to compare the properly construed claims to the accused product. Id. To establish literal infringement, every limitation recited in a claim must be found in the accused product whereas, under the doctrine of equivalents, infringement occurs when there is equivalence between the elements of the accused product and the claimed elements of the patented invention. Microsoft Corp. v. GeoTag, Inc., 817 F.3d 1305, 1313 (Fed. Cir. 2016). One way to establish equivalence is by showing, on an element-by-element basis, that the accused product performs substantially the same function in substantially the same way with substantially the same result as each claim limitation of the patented invention, which is often referred to as the function-way-result test. See Intendis GmbH v. Glenmark Pharms., Inc., 822 F.3d 1355, 1361 (Fed. Cir. 2016).

Under section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337, the Commission has authority to conduct investigations into imported articles that allegedly infringe United States patents and impose remedies if the accused articles are found to be infringing. See 19 U.S.C. § 1337(a)(1)(B), (b)(1), (d), (f), (i). 19 U.S.C. § 1337(d), in particular, empowers the Commission to direct the exclusion from entry of articles found to infringe the asserted patents. When the Commission determines there is infringement and thus a violation of section 337, it generally issues one of two types of exclusion orders: (1) a limited exclusion order or (2) 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).

Both types of orders direct CBP to bar 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. In contrast, a general exclusion order bars the importation of infringing products by everyone, regardless of whether they were respondents in the Commission's investigation.” Id. A general exclusion order is appropriate only 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 [general exclusion order] by satisfying the heightened burdens of §§ 1337(d)(2)(A) and (B).”).

In addition to the action taken above, the Commission may issue an order under 19 U.S.C. § 1337(i) directing CBP to seize and forfeit articles attempting entry in violation of an exclusion order if their owner, importer, or consignee previously had articles denied entry on the basis of that exclusion order and received notice that seizure and forfeiture would result from any future attempt to enter articles subject to the same. An exclusion order under § 1337(d)—either limited or general—and a seizure and forfeiture order under § 1337(i) apply at the border only and are operative against articles presented for customs examination or articles conditionally released from customs custody but subject to a timely demand for redelivery. See 19 U.S.C. §§ 1337(d)(1) (“The Commission shall notify the Secretary of the Treasury of its action under this subsection directing such exclusion from entry, and upon receipt of such notice, the Secretary shall, through the proper officers, refuse such entry.”) and (i)(3) (“Upon the attempted entry of articles subject to an order issued under this subsection, the Secretary of the Treasury shall immediately notify all ports of entry of the attempted importation and shall identify the persons notified under paragraph (1)(C).”); see also ClearCorrect Operating, LLC v. U.S. Int’l Trade Comm’n, 810 F.3d 1283, 1295 (Fed. Cir. 2015) (“This section [1337(i)] permits the Commission to exclude ‘articles’ from importation into the United States; however, it is difficult to see how one could physically stop electronic transmissions at the borders under the current statutory scheme…. A construction of the term ‘articles’ that includes electronically transmitted digital data is also not reasonable when applied to Section 337(i)(3). This section reads, ‘[u]pon the attempted entry of articles subject to an order issued under this subsection, the Secretary of the Treasury shall immediately notify all ports of entry of the attempted importation and shall identify the persons notified under paragraph (1)(C).’ Not only can an electronic transmission not be subject to an ‘attempted entry’ through a ‘port of entry,’ it also cannot be intercepted at a ‘port of entry’ as contemplated in the statute.”) (emphasis added).

Significantly, unlike district court injunctions, the Commission can issue a general exclusion order that broadly prohibits entry of articles that infringe the relevant claims of an asserted patent without regard to whether the persons importing such articles were parties to, or were related to parties to, the investigation that led to issuance of the general exclusion order. See Vastfame Camera, Ltd. v. U.S. Int’l Trade Comm’n, 386 F.3d 1108, 1114 (Fed. Cir. 2004). The Commission also has recognized that even limited exclusion orders have broader applicability beyond just the parties found to infringe during an investigation. See Certain GPS Devices and Products Containing Same, Inv. No. 337-TA-602, Comm’n Op. at 17, n. 6, Doc ID 317981 (Jan. 2009) (“We do not view the Court’s opinion in Kyocera as affecting the issuance of LEOs [limited exclusion orders] that exclude infringing products made by respondents found to be violating Section 337, but imported by another entity. The exclusionary language in this regard that is traditionally included in LEOs is consistent with 19 U.S.C. § 1337(a)(1)(B) - (D) and 19 U.S.C. § 1337(d)(1).”).

However, this is not the only difference between district court injunctions under section 283 of the Patent Act and Commission exclusion orders under section 337 of the Tariff Act. For example, the traditional test for injunctive relief, used by district courts in accordance with the Supreme Court’s eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), “does not apply to Commission remedy determinations under Section 337.” Spansion, Inc. v. U.S. Int’l Trade Comm’n, 629 F.3d 1331, 1359 (Fed. Cir. 2010). This difference between exclusion orders under Section 337 and injunctions under the Patent Act follows “the long-standing principle that importation is treated differently than domestic activity.” Id. at 1360 (citing United States v. 12 200-Ft. Reels of Super 8mm Film, 413 U.S. 123 (1973) (“Import restrictions and searches of persons or packages at the national borders rest on different considerations and different rules of constitutional law from domestic regulations. The Constitution gives Congress broad, comprehensive powers ‘to regulate Commerce with foreign Nations.’ Art. I, § 8, cl. 3.”); see also Buttfield v. Stranahan, 192 U.S. 470 (1904) (“As a result of the complete power of Congress over foreign commerce, it necessarily follows that no individual has a vested right to trade with foreign nations, which is so broad in character as to limit and restrict the power of Congress to determine what articles of merchandise may be imported into this country and the terms upon which a right to import may be exercised. This being true, it results that a statute which restrains the introduction of particular goods into the United States from considerations of public policy does not violate the due process clause of the Constitution.”) (emphasis added).

Moreover, in the district courts, the criteria for adjudicating a violation of an injunction against future infringement by a party whose legacy products have already been adjudged to infringe requires application of the colorable differences test. TiVo Inc. v. Echostar Corp., 646 F.3d 869, 876 (Fed. Cir. 2011) (en banc). Under this test, if new or redesigned products are so different from the product previously found to infringe (focusing not on differences randomly chosen between the two but on the specific features of the product found to infringe in the earlier infringement trial), such that they raise a fair ground of doubt as to the wrongfulness of the defendant's conduct, the new or redesigned products are deemed to be more than colorably different from the legacy one adjudged to be infringing and violation of the injunction at this point would not be the appropriate consideration. Instead, a new trial would be required to litigate the infringement question. Id. at 881-83. The initial inquiry under the colorable differences test, therefore, focuses on whether the modification in question is significant. Id.

Exclusion orders, however, apply to any articles—new, modified, or otherwise—that are “covered by” the patent claims included in the exclusion order. See Certain Optical Disk Controller Chips and Chipsets, Inv. No. 337-TA-506, Comm’n Op. at 56-57, USITC Pub. 3935, Doc ID 287263 (July 2007) ("The Commission's long-standing practice is to direct its remedial orders to all products covered by the patent claims as to which a violation has been found, rather than limiting its orders only to those specific models selected for the infringement analysis...[W]hile individual models may be evaluated to determine importation and infringement, the Commission's jurisdiction extends to all models of infringing products that are imported at the time of the Commission's determination and to all such products that will be imported during the life of the remedial orders."). The Commission has confirmed that this requires CBP to employ the traditional two-step test for patent infringement, and not the colorable differences test from TiVo, when administering a Commission exclusion order under section 337 to determine whether an imported article, or one at issue in a ruling request, is within the scope of that exclusion order. See Certain Sleep-Disordered Breathing Treatment Systems and Components Thereof, Inv. No. 337-TA-879, Advisory Opinion at 10, n. 2, Doc ID 539875 (Aug. 2014); see also Certain Erasable Programmable Read Only Memories, Inv. No. 337-TA-276 Enforcement Proceeding Comm’n Op. at 11, Doc ID 43536 (Aug. 1991) (“The Commission has always issued its orders in terms of ‘infringing’ products, and has always intended them, as in this case, to prohibit to future importation or sale of products which were not specifically adjudged infringing in the violation proceeding, but do in fact infringe. The Commission has consistently issued exclusion orders coextensive with the violation of section 337 found to exist. Thus, in cases where the violation found involves infringement of patent claims, the Commission has consistently ordered the exclusion of articles which infringe the relevant patent claims.”) (emphasis added).

Lastly, despite the well-established principle that “the burden of proving infringement generally rests upon the patentee,” Medtronic, Inc. v. Mirowski Family Ventures, LLC, 134 S. Ct. 843; 187 L. Ed. 2d 703; 2014 U.S. LEXIS 788 (2014), the Commission has held that Medtronic is not controlling precedent and does not overturn its longstanding practice of placing the burden of proof on the party who, in light of the issued exclusion order, is seeking to have an article entered for consumption. See Certain Sleep-Disordered Breathing Treatment Systems and Components Thereof, Inv. No. 337-TA-879, Advisory Opinion at 6-11. In particular, the Commission has noted that “[t]he Federal Circuit has upheld a Commission remedy which effectively shifted the burden of proof on infringement issues to require a company seeking to import goods to prove that its product does not infringe, despite the fact that, in general, the burden of proof is on the patent to prove, by a preponderance of the evidence, that a given article does infringe the patent in question.” Certain Integrated Circuit Telecommunication Chips, Inv. No. 337-TA-337, Comm’n Op. at 21, n. 14, USITC Pub. 2670, Doc ID 217024 (Aug. 1993), citing Sealed Air Corp. v. U.S. Int’l Trade Comm’n, 645 F.2d 976, 107-08 (C.C.P.A. 1981) (emphasis in original).

This approach is supported by Federal Circuit precedent. See Hyundai Elecs. Indus. Co. v. U.S. Int'l Trade Comm'n, 899 F.2d 1204, 1210 (Fed. Cir. 1990) (“Indeed, we have recognized, and Hyundai does not dispute, that in an appropriate case the Commission can impose a general exclusion order that binds parties and non-parties alike and effectively shifts to would-be importers of potentially infringing articles, as a condition of entry, the burden of establishing noninfringement. The rationale underlying the issuance of general exclusion orders—placing the risk of unfairness associated with a prophylactic order upon potential importers rather than American manufacturers that, vis-a-vis at least some foreign manufacturers and importers, have demonstrated their entitlement to protection from unfair trade practices—applies here [in regard to a limited exclusion order] with increased force.”) (emphasis added, internal citation omitted).

Accordingly, the burden is on Nautilus Hyosung to establish that the redesigned ATMs do not infringe the asserted claims of the ‘616 patent.

C. Infringement Analysis

The “service opening” limitation is the primary claim element at issue. Each asserted patent claim of the ‘616 patent calls for a “service opening.” Commission Opinion at 6. The Commission construed the term “service opening” to have its plain and ordinary meaning, namely, “an opening through which a component may be serviced.” Commission Claim Construction Opinion at 11.

First, we note that all the claims at issue in the ‘616 patent all require an opening, namely a “service opening.” See claims 1, 26, and 27 of the ‘616 patent. Even though Diebold argues that Nautilus Hyosung’s redesigned ATMs still infringe the ‘616 patent, there appears to be no dispute that capability of service through a “service opening” in Nautilus Hyosung’s redesigned ATMs, is possible only after modification, e.g., drilling out the rivets to remove the plastic box, or cutting open the plastic box. See e.g., Hearing Transcript 87:13-15 (“The service points that may be accessed before still may be accessed through the exercise of maybe 12 seconds.”). Diebold has not presented any evidence that shows that a component may be serviced through an opening when the plastic box is riveted to the bottom of the rollout tray. When the plastic covering is riveted to the bottom of the tray there are no openings through which a component may be serviced.

Instead, Diebold argues that the ‘616 patent only requires the capability of service through the “service opening.” See Diebold Post Proceeding Submission at 1-2. Diebold states that “[i]t is the presence of this capability in Hyosung’s modified machines that makes them infringe because. . .it is undisputed that the opening identified in the Commission’s decision as the service opening is still present in Hyosung’s modified machines.” Id. at 2. In support, Diebold cites to cases such as Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1204 (Fed. Cir. 2010) for the proposition that “to infringe a claim that recites capability and not actual operation, an accused device ‘need only be capable of operating’ in the described mode.” (citing Intel Corp. v. United States International Trade Commission, 946 F.2d 821, 832 (Fed. Cir. 1991)). Id. Diebold contends that Nautilus Hyosung’s redesign still infringes the ‘616 patent because the plastic box riveted to the bottom of the tray “was designed to, and easily can be, removed from Hyosung’s ATMs, thus providing the exact same structure that the Commission already determined to infringe.” See Diebold Post Proceeding Submission at 5.

While Diebold argues that the claims of the ‘616 patent are infringed “as long as there is capability of access, as established by the Commission’s permissive ‘may be serviced’ claim construction, and the plain meaning of the word ‘accessible’”, we note, that both the ‘616 patent and the Commission claim construction of “service opening” nonetheless first require the presence of an opening. See Diebold Reply Submission at 2; Commission Claim Construction Opinion at 11; and the ‘616 patent. In contrast to the claim language at issue in Finjan and Intel, the claim language in the ‘616 patent that refers to a “service opening” does not refer to the capability to create or form a “service opening,” rather the claim language explicitly requires the actual structure of a “service opening.” See claims 1, 26, and 27 of the ‘616 patent (respectively requiring, “a service opening extending through the wall portion”; “the rollout tray including a service opening”; and “wherein a service opening is accessible from outside the housing.”); cf. Intel Corp. v. United States International Trade Commission, 946 F.2d 821 (Fed. Cir. 1991) (the claim at issue only required a memory chip to be “programmable” to operate in a certain manner); see also Finjan, 626 F.3d at 1205 (example of some of the claim language at issue included “a logical engine for preventing execution.”). As such, we find this case similar to High Tech Medical Instrumentation v. New Image Industries, 49 F.3d 1551, 1552 (Fed. Cir. 1995), which also required a structure; namely, a camera “rotatably coupled” to a body member.

In High Tech Medical Instrumentation v. New Image Industries, 49 F.3d 1551, 1552 (Fed. Cir. 1995) the claim at issue was directed to a hand-held endoscope for dental work, comprising a body member and a camera disposed in the body member, with the camera “being rotatably coupled to said body member.” The district court found infringement because in the accused product, “the camera [was] ‘rotatably coupled to the body member’ when the set screws [were] loosened or removed.” Id. at 1555. The Federal Circuit reversed stating that “a device does not infringe simply because it is possible to alter it in a way that would satisfy all the limitations of a patent claim,” and reasoning that the accused camera “was not rotatable within its housing unless [it was] altered, at least to the extent of removing or loosening the set screws that secure the camera to the housing.” Id. at 1555-56 (citation omitted).

Similar to the accused product in High Tech Medical, Nautilus Hyosung’s redesigned ATMs do not have a service opening unless they are altered, e.g., by removing the rivets, or cutting open the plastic box. Accordingly, as there is no service opening in the redesigned ATMs unless there is alteration, at least to the extent of removing the rivets that secure the plastic box to the tray, or cutting open the plastic box, there is no infringement of the claims at issue in the ‘616 patent. See also Nautilus Hyosung’s Post Proceeding Submission at 8 (citing Nazomi Commc'ns, Inc. v. Nokia Corp.,739 F.3d 1339, 1346 (Fed. Cir. 2014) (finding no infringement where the accused “products . . .do not infringe without modification”)).

We do note that the Federal Circuit did provide a caveat when concluding that “a device does not infringe simply because it is possible to alter it in a way that would satisfy all the limitations of a patent claim.” High Tech Medical, 49 F.3d at 1555-56. Specifically, the Federal Circuit added, “To be sure, if a device is designed to be altered or assembled before operation, the manufacturer may be held liable for infringement if the device, as altered or assembled, infringes a valid patent.” Id. This caveat appears to be what the majority of Diebold’s remaining arguments are directed to, and as such we will address these arguments below.

To further support our holding that Nautilus Hyosung’s redesigned ATMs do not infringe the claims at issue in the ‘616 patent, we note Accent Packaging, Inc. v. Leggett & Platt, Inc., 707 F.3d 1318 (Fed. Cir. 2013). In Accent Packaging, some of the claims at issue required a mount that permits pivoting “of at least about 90°.” Id. at 1327. In arguing that the accused product infringed, Accent argued that but for the stop on the accused product, the mount would be permitted to pivot the required 90°. Id. Accent also argued that the accused product infringed because the stop can easily be removed by the user. Id. In affirming the district court's grant of summary judgment of noninfringement of these claims, the Federal Circuit reasoned that the stop is in fact part of the accused product and it cannot be ignored when determining whether the mount of the accused product actually permits pivoting of the required 90°. Id. (emphasis in the original). The Federal Circuit further stated that accepting Accent’s argument would render the ninety degree limitation meaningless. Id. With respect to Accent’s argument that the stop can be easily removed by the user, the Federal Circuit cited High Tech Medical for the proposition that, “a device does not infringe simply because it is possible to alter it in a way that would satisfy all the limitations of a patent claim.” Id. (citing High Tech Medical, 49 F.3d at 1555-56) (quotations omitted). The court concluded that “[t]he fact that it is possible to alter the [accused device] so that the cover can be pivoted through a ninety degree arc is not enough, by itself, to justify a finding that the manufacture and sale of the [accused device] infringe Accent's patent rights.” Id. (citation omitted) (internal quotations omitted).

While Diebold argues that the ease with which the plastic covering can be removed without damaging the redesigned ATMs means that there is a “service opening” and service points are “accessible” (see Diebold Reply Submission at 2), similar to the stop on the accused product in Accent Packaging, the plastic cover here is riveted onto, and in fact, part of the redesigned machines and as such cannot be ignored when determining whether there actually is an opening. Diebold has not provided evidence to show that “a component may be serviced” when the plastic cover is in place. Further, while Diebold has consistently argued that all that is required by the ‘616 patent is “ability to access” or “capability of access,” as discussed above, there must be an opening first, otherwise similar to Accent Packaging, the “service opening” limitation would be rendered meaningless because theoretically an opening can always be created later on regardless of whether the original machine featured one.

With respect to Diebold’s argument regarding the ease with which the plastic can be removed, as Accent Packaging noted, “a device does not infringe simply because it is possible to alter it in a way that would satisfy all the limitations of a patent claim.” Id. (citation omitted). Although Diebold points out that there is no dispute that covering the opening with materials of insubstantial character, such as Saran Wrap or paper, would not render the redesign successful, the plastic cover riveted to the bottom of the tray is not of such insubstantial character that the redesign would be rendered unsuccessful. See Diebold Post Proceeding Submission at 2; see also Hearing Transcript at 49:11-19. Unlike Saran Wrap or paper or tin foil, without tools, the plastic cover secured by rivets cannot likely be removed. See e.g., Exhibit 1 (Kurfess Declaration) of Diebold’s Post Proceeding Submission at ¶¶ 16, 18. While Diebold contends that pop rivets are not permanent structures, see Exhibit 1 (Kurfess Declaration) of Diebold’s Post Proceeding Submission at ¶ 18, their use does not, by itself, evidence an instruction or intention that the redesigned ATMs are to be altered or dissembled in any way prior to operation. See also Accent Packaging, 707 F.3d at 1327 (“Screws are a widely used fastener, but their use does not, by itself, evidence an instruction or intention that the Pinnacle be altered or dissembled in any way prior to operation.”); see also Exhibit 18 of Nautilus Hyosung’s Reply Submission (Rivets are “intended to take the place of screws under special circumstances when a nonremovable fastening is desired. . . .”). Moreover, Nautilus Hyosung has submitted a declaration from Mr. Bo Soon Kim, the Vice President of Operations and Engineering at Nautilus Hyosung America Inc., stating, inter alia:

Exhibit 16 (Declaration of Bo Soon Kim) of Nautilus Hyosung’s Post Proceeding Submission at ¶¶ 7-9, 12.

Finally, Diebold also asserts that “the record from the Commission’s investigation makes clear that infringement is found even if steps are necessary to alter the machine and even remove parts for the service opening to be accessible.” See Diebold Reply Submission at 2-4. Even though it may be that steps are necessary to alter the machine or even remove parts before components can be serviced through the service opening, the machines found to infringe in the underlying investigation all still appear to initially, without any modification, have an opening on the underside of the tray. See e.g., Exhibit 15 of Nautilus Hyosung’s Post Proceeding Submission at A98 on p.26. To the contrary, in the redesigned ATMs, without modification, there are no openings present in the undersides of the trays. See e.g., Ruling Request at 10. Moreover, as Diebold points out, the manual directs users to dissemble the front protective cover, see Diebold Reply Submission at 3, but Nautilus Hyosung has stated that manuals will not teach users to remove the plastic coverings riveted to the undersides of the trays. See Exhibit 16 (Declaration of Bo Soon Kim) of Nautilus Hyosung’s Post Proceeding Submission at ¶¶ 9, 12.

While recognizing that Nautilus Hyosung bears the burden of demonstrating that the redesigned ATMs do not infringe the ‘616 patent, we have reviewed the evidence upon which Diebold has relied to rebut Nautilus Hyosung’s showing. Weighing the evidence of record, we find that Nautilus Hyosung has met its burden showing that the redesigned ATMs do not infringe the claims of the ‘616 patent.

IV. HOLDING

Nautilus Hyosung’s redesigned Halo II, MX5200, and MX5600 series ATMs are not subject to the 972 LEO because a limitation required by the relevant claims of the ‘616 patent is not met; namely the redesigned ATMs do not have a “service opening.” Accordingly, the redesigned ATMs are admissible into the United States and may make entry for consumption, entry for consumption from a foreign-trade zone, and withdrawal from a warehouse for consumption. This decision is limited to the specific facts set forth herein. If the ATMs 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. Part 177.2(b)(1), (2), and (4), and Part 177.9(b)(1) and (2).

Sincerely,

Charles R. Steuart
Chief, Intellectual Property Rights Branch