Alert April 11, 2013

Are the EPROMs Factors Still Relevant?

You are patent counsel for a major airplane manufacturer and you have just found out that your company is being accused of infringing a patent that covers the razor blade disposal slot in the airplane bathroom.  If that suit were brought in federal district court, you would expect that — if your company was found to infringe — any damages would be quite limited.  However, if the suit was brought in the U.S. International Trade Commission (“ITC”), might the airplane be excluded from entering the United States?

In the past several years, the ITC has always issued an exclusion order directed to so-called downstream products containing infringing components. On some occasions the full Commission or the Administrative Law Judge (“ALJ”) have considered a set of factors called the EPROMs factors, which include factors such as the technological value of the infringing component; on other occasions, however, the full Commission or the ALJ have not considered these factors. The ITC has not been presented with a scenario as extreme as that described above. This article explains the current uncertainty about whether the EPROMs factors apply, the resolution of which might determine whether an exclusion order would issue where an asserted patent relates to a truly insignificant component of a downstream product.

Exclusion Orders in ITC Actions

In the ITC, the main remedy available is an order excluding infringing products from entering the United States. Exclusion orders come in two forms, limited and general. A general exclusion order applies to infringing products from any company, regardless of whether that company is a respondent  – i.e., a named defendant in an ITC action. A limited exclusion order applies only to the infringing products of a respondent. A limited exclusion order that covers downstream products is particularly valuable because, in many cases, an infringing component is not likely to be imported as a stand-alone product into the United States. Rather, it will be incorporated into a downstream product overseas and then that product will be imported into the United States.

Prior to the Federal Circuit’s decision in Kyocera Wireless Corp. v. International Trade Commission, 545 F.3d 1340 (Fed. Cir. 2008), it was possible to obtain both a limited exclusion order that covered downstream products manufactured and imported by a respondent, and also a limited exclusion order that covered downstream products imported by someone other than a named respondent (as long as the downstream product contained an infringing component made by a named respondent). The ITC would analyze a set of factors to determine whether the limited exclusion order should cover downstream products that incorporated products adjudged to infringe.

Those factors were set forth by the ITC in Certain Erasable Programmable Read Only Memories, Components Thereof, Products Containing Such Memories, and Processes for Making Such Memories, Inv. No. 337-TA-276, USITC Pub. No. 2196, 1989 ITC LEXIS 122 (May 1989) (“EPROMs”). The factors are: (1) the value of the infringing articles compared to the value of the downstream products in which they are incorporated, (2) the identity of the manufacturer of the downstream products (i.e., whether the downstream products were manufactured by the party found to have committed the unfair act, or by third parties), (3) the incremental value to complainant of the exclusion of downstream products, (4) the incremental detriment to respondents of such exclusion, (5) the burdens imposed on third parties resulting from exclusion of downstream products, (6) the availability of alternative downstream products which do not contain the infringing articles, (7) the likelihood that imported downstream products actually contain the infringing articles and are thereby subject to exclusion, (8) the opportunity for evasion of an exclusion order which does not include downstream products, and (9) the enforceability of an order by Customs. The decision noted that this list of factors was not intended to be exclusive and that the ITC may identify and take into account any other factors which bear on whether to extend an exclusion order to downstream products.

The Impact of Kyocera on the Use of the EPROMs Factors

In Kyocera, the Federal Circuit held that a limited exclusion order could only apply to products manufactured and imported by named respondents. Thus, a limited exclusion order could not apply to downstream products manufactured by someone other than a named respondent, even if the downstream product contained an infringing component made by a named respondent. Several ALJs have questioned whether the EPROMs analysis continues to be relevant post-Kyocera. The results have been mixed.

ALJ Robert K. Rogers suggested in his Initial Determination in Inv. No. 337-TA-665 that the EPROMs analysis might no longer be necessary, although he considered the factors, “[a]ssuming, arguendo, that notwithstanding the holding in Kyocera, it remains necessary to examine the EPROMs factors … .”   Retired ALJ Carl C. Charneski stated in his Initial Determination in Inv. No. 337-TA-685 that an EPROMs factors analysis for a named respondent’s own products is “unnecessary.”

After Kyocera, in three investigations involving semiconductor chips, ALJ Theodore R. Essex has relied upon the EPROMs analysis in some investigations but not others. For example, ALJ Essex did not conduct an EPROMs analysis in recommending the issuance of a limited exclusion order that covered downstream products in Inv. Nos. 337-TA-605 and -661, but he did conduct an EPROMs analysis in recommending the issuance of a limited exclusion order in Inv. No. 337-TA-753. The full Commission issued a limited exclusion order directed to the respondents’ downstream products in Inv. No. 337-TA-661, with no comment as to whether an EPROMs analysis should have been conducted.

Retired Chief ALJ Paul J. Luckern similarly conducted an EPROMs analysis in some investigations, but not others. In Inv. No. 337-TA-631, ALJ Luckern recommended the issuance of a limited exclusion order directed to downstream products, and the full Commission adopted that recommendation. However, in Inv. No. 337-TA-634, ALJ Luckern recommended a limited exclusion order directed to downstream products after conducting an EPROMs analysis, and the full Commission specifically adopted the EPROMs analysis as its own. ALJ Luckern also recommended the issuance of a limited exclusion order directed to downstream products after conducting an EPROMs analysis in Inv. No. 337-TA-709.

Chief ALJ Charles E. Bullock recommended the issuance of a limited exclusion order directed to downstream products without conducting an EPROMs analysis in Inv. No. 337-TA-664, citing to the full Commission’s opinion in Inv. No. 337-TA-661. He also recommended the issuance of a limited exclusion order directed to downstream products without conducting an EPROMs analysis in Inv. No. 337-TA-792, citing to the Commission’s opinion in Inv. No. 337-TA-661 and noting that the downstream products were specifically accused of infringement in the Notice of Investigation. ALJ Edward J. Gildea recommended the issuance of a limited exclusion order directed to downstream products in Inv. No. 337-TA-692 after conducting an EPROMs analysis. Finally, in contrast to his Initial Determination in Inv. No. 337-TA-665, ALJ Rogers recommended a limited exclusion order in Inv. No. 337-TA-772 directed to polyimide films and products containing the same without conducting an EPROMs analysis, rejecting the respondent’s argument that only the polyimide films (and not downstream products) should be subject to the limited exclusion order.

In two recent decisions, ALJ David P. Shaw not only determined that the EPROMs analysis was still applicable, but declined to recommend the issuance of a limited exclusion order directed to downstream products containing infringing components. In Inv. No. 337-TA-784, the accused products were LEDs incorporated into downstream products such as televisions, cell phones and computer monitors. Although he found that the respondents’ LEDs infringed every asserted claim of one of the patents-in-suit, ALJ Shaw, applying the EPROMs analysis, recommended that a limited exclusion order not issue with respect to the respondents’ downstream products. In particular, ALJ Shaw found that factors 3, 4, and 9 weighed against the issuance of an exclusion order directed to the respondents’ downstream products, noting that the vast majority of the respondents’ LEDs entering the United States were incorporated into downstream products and that the complainant sought to exclude a large number of downstream products, which would impose a “substantial administrative burden on [Customs.]”

In Inv. No. 337-TA-781,  the accused products were Intel microprocessors incorporated into downstream products such as computers, servers and workstations. ALJ Shaw recommended that  a limited exclusion order not issue with respect to the respondents’ downstream products. In particular, ALJ Shaw found that factors, 3, 4, 5, 7, and 9 weighed against an exclusion order directed to the respondents’ downstream products. The ALJ, noted that the detriment to the respondents from the exclusion of their products would likely be substantial, and that based on the record, it would be extremely difficult, if not impossible, to determine which downstream products actually contained the infringing microprocessors and which did not. Inv. 337-TA-784 was terminated prior to the issuance of an opinion from the Commission, and the Commission issued a notice in Inv. No. 337-TA-781 on Feb. 15, 2013 that it had reversed certain findings made by ALJ Shaw, but had nevertheless determined that there was no violation of Section 337. As such, the Commission will not be weighing in on these particular findings.

Conclusion

While oftentimes a limited amount of space is devoted to briefing the EPROMs factors, the continuing applicability of the analysis could be important to a complainant who wishes to bring a complaint where the accused product is merely a small component that is imported into the United States only in a downstream product. On the other hand, respondents might benefit from the continued applicability of the analysis to prevent a complainant from obtaining a limited exclusion order directed to a downstream product that contains an infringing component, e.g., as ALJ Shaw recommended in both Inv. Nos. 337-TA-781 and -784. As the full Commission has adopted ALJ recommendations for the issuance of limited exclusion orders directed to downstream products both where the ALJs conducted and did not conduct an EPROMs analysis, it is up to the full Commission to clarify the current state of the law.