ITC Exclusion Of DOWNSTREAM Products: What Remains Of EPROMS? - International Trade & Investment

The U.S. International Trade Commission ("ITC" or "Commission") has the authority to issue exclusion orders barring the importation of articles that infringe U.S. intellectual property rights. The default remedy is a limited exclusion order ("LEO") directed to the infringing imported articles of named respondents.¹ However, before an LEO can be issued, the Commission must determine the appropriate scope of the remedy and its effect on the four statutory public interest factors.² A critical part of this analysis has long been whether an LEO should cover downstream products that incorporate the infringing articles. For instance, in a hypothetical case involving infringing computer chips incorporated into automobiles (the downstream products), should the LEO exclude the automobiles themselves from importation because they contain infringing chips?

Historically, investigations involving downstream products containing an infringing component warranted a special nine-factor test (the "EPROMs analysis," named for the ITC investigation in which the test was first stated) to determine whether the LEO should reach downstream products.³ When the EPROMs analysis was first introduced in 1989, LEOs could reach downstream products of non-parties as well as named respondents. In 2008, the Federal Circuit held in Kyocera Wireless Corp. v. U.S. Int'l Trade Comm'n that the Commission may not exclude downstream products of non-parties to an investigation. After Kyocera, a patent owner must name suppliers of downstream products as respondents if it seeks to exclude those products under an LEO.

In two opinions in 2018, the Commission found that the EPROMs analysis was not relevant where the LEO was directed only to accused products of named respondents.⁴ In such circumstances, the Commission held that the question of whether to exempt a downstream product from an LEO can be considered under the statutory public interest factors rather than a separate EPROMs analysis.

In view of Kyocera and the Commission's 2018 opinions, the relevance of the EPROMs analysis has narrowed, but it would still appear to remain applicable in certain situations. For instance, the EPROMs analysis could apply if (1) an LEO encompasses a named respondent's downstream products that were not specifically accused in the investigation, or (2) an LEO extends to a related non-party (e.g., customer or affiliate) of a named respondent involved in supplying the downstream product. Furthermore, at least some of the EPROMs factors overlap with the public interest issues and might be evaluated in that context. This article assesses the state of the EPROMs analysis as reflected in decisions by the Commission, as well as current and recently retired Administrative Law Judges.

Background

The Commission first applied the EPROMs analysis in Inv. No. 337-TA-276 ("EPROMs") to "balance the complainant's interest in obtaining complete protection from all infringing imports by means of exclusion of downstream products against the inherent potential of even [the] [LEO] ... to disrupt legitimate trade."⁵ In the EPROMs investigation, the Commission evaluated whether to exclude Respondent Hyundai's downstream products ranging from personal computers to automobiles that incorporated infringing Hyundai-manufactured EPROM chips (a type of computer memory). The Commission applied nine factors⁶ in determining that the LEO should apply to some of Hyundai's downstream products (computers, computer peripherals, telecommunications equipment, automotive electronic equipment), but should not reach downstream Hyundai automobiles because such exclusion "per se is excessive, and would not significantly increase the relief afforded complainant."

Until 2008, a complainant could seek an LEO against downstream products imported by both named respondents and non-parties, subject to the EPROMs analysis.⁷ However, the Federal Circuit's decision in Kyocera held that an LEO cannot reach downstream products of non-parties. Thus, if a complainant now seeks to exclude downstream products based on an infringing component, the suppliers of the products must be named as respondents in the investigation.

Commission EPROMs Opinions post-Kyocera

Since the Kyocera decision in 2008, the Commission has issued at least three opinions substantively discussing the applicability of the EPROMs analysis. In a 2009 opinion, the Commission embraced an ALJ's EPROMs analysis where an LEO was directed to "all infringing products" (not just specifically identified accused products) of a named respondent. In two opinions in 2018, the Commission rejected the applicability of EPROMs where an LEO was directed only to the accused products of named respondents.

Inv. No. 337-TA-634 (2009): In this investigation, former Chief Judge Luckern recommended an LEO against downstream products after undertaking a detailed EPROMs analysis.⁸ The LEO covered "not just specifically-identified products, but all infringing products" of the named respondents, and extended to downstream products of respondent Samsung (including televisions and computer monitors) containing infringing LCD devices. The Commission adopted Judge Luckern's "detailed analysis of how the EPROMs factors support inclusion in the relief of downstream Samsung products." The Commission noted that the remedial orders "d[id] not run afoul of the Federal Circuit's holding in Kyocera" because the LEOs applied only to the downstream products of a named respondent.

Inv. No. 337-TA-1044 (2018): The Commission found that an LEO was proper against accused downstream products (televisions containing infringing graphics systems) of respondent VIZIO. The Commission agreed with Judge McNamara that the EPROMs analysis was irrelevant because the LEO was directed only to the accused products of a named respondent.⁹ The LEO would not extend beyond the accused VIZIO televisions and the infringing graphics systems. The Commission noted that "[t]he question of whether the exclusion order should exempt VIZIO's infringing televisions is a matter to be addressed in connection with the Commission's analysis of the statutory public interest factors and the tailoring of relief." In evaluating the public interest, the Commission determined that the factors did not preclude an LEO excluding the VIZIO televisions because these products were luxury entertainment goods with ample alternative suppliers.

Inv. No. 337-TA-1046 (2018): In this investigation, the Commission accepted Judge Lord's recommendation for issuance of an LEO against respondent Toshiba's downstream products—personal computers containing infringing flash memory products.¹⁰ The Commission found that the EPROMs analysis was not relevant because the LEO only applied to accused products of a named respondent. The Commission noted that the LEO did not impact downstream products of non-parties. With respect to the public interest, the Commission found that the factors did not weigh against issuance of an LEO, because the excluded products were not integral to the delivery of healthcare or maintenance of public safety, and there were alternative suppliers.

ALJ EPROMs Decisions post-Kyocera

Administrative Law Judges at the ITC have wrestled with whether the EPROMs analysis still applies when determining whether to exclude downstream products. Current Judges McNamara, Bhattacharyya, and former Judges Shaw, Essex, Bullock, Lord, Luckern, Pender, and Rogers have issued decisions concerning the applicability of the EPROMs analysis, while it appears that current Judges Cheney, Elliot, and Moore have not yet had the opportunity to conclusively weigh in on the issue. It should be noted that many of the ALJ decisions discussed below pre-date the Commission's 2018 opinions addressing EPROMs.

Judge McNamara has expressed doubt as to whether the EPROMs analysis remains applicable post-Kyocera. In Inv. No. 337-TA-1044, Judge McNamara stated that the EPROMs analysis was devised specifically with "products which were not themselves the subject of a finding of violation" in mind, and the concern addressed by the EPROMs analysis "has been substantially, if not entirely, obviated by the Federal Circuit's 2008 opinion in [Kyocera]."¹¹ Judge McNamara concluded that the EPROMs analysis did not apply in 337-TA-1044 because all downstream products were "specifically accused" in the investigation. In Inv. No. 337-TA-1235, even though Judge McNamara allowed the parties to introduce defenses based on the EPROMs analysis because the analysis was also relevant to public interest, Judge McNamara restated her finding from the 337-TA-1044 that "the EPROMs factors do[] not apply to remedial relief directed to infringing articles of the named respondents."¹²

Judge Bhattacharyya has found that the EPROMs analysis is not applicable to a named respondent's accused downstream products. In Inv. No. 337-TA-1267, Judge Bhattacharyya granted the complainant's motion in limine to exclude expert testimony regarding the EPROMs factors.¹³ Citing the Commission's opinion in 337-TA-1046, Judge Bhattacharyya found that "the EPROMs factors [we]re not relevant where the exclusion order is directed to products that 'are imported and sold in violation of Section 337 by . . . a respondent named in [the] Investigation.'" Even though Judge Bhattacharyya precluded the expert from referencing the EPROMs case in his testimony, she acknowledged that some of the expert's EPROMs analysis should not be excluded because it was also relevant to public interest and bond issues. However, Judge Bhattacharyya later also rejected the respondents' public interest arguments "based on the value of an infringing component as compared to the accused product, where the accused products are imported and sold by a named respondent," again citing the Commission opinion in 337-TA-1046.¹⁴

Former Judge Lord stated that the EPROMs analysis "addressed the question whether downstream products made by unnamed respondents should be excluded."¹⁵ Accordingly, in Inv. No. 337-TA-1046, Judge Lord found the EPROMs analysis "not relevant" when determining whether to issue an LEO against "a respondent's own downstream products."¹⁶ However, Judge Lord also noted in Inv. No. 337-TA-910, where the Commission had delegated public interest to the ALJ, that some EPROMs-related evidence might be relevant to the public interest analysis.¹⁷

Former Judge Shaw has applied the EPROMs analysis in several investigations.¹⁸ In Inv. Nos. 337-TA-781 and 337-TA-784, Judge Shaw recommended that LEOs not reach respondents' downstream products based on the EPROMs analysis (both of those investigations were terminated prior to Commission review).

Former Judge Essex issued contrasting decisions, applying the EPROMs analysis in one investigation, but finding the analysis to be unnecessary in another investigation.¹⁹ Judge Essex also stated that he did not view the EPROMs test as having been overturned: "In looking at Kyocera, and I've read that one a lot and I read EPROMs, and I don't see that EPROMs has been specifically overturned in any way. I don't see that either in the [Federal] Circuit's decision or in any of the subsequent Commission actions."²⁰

Former Chief Judge Bullock issued decisions suggesting uncertainty as to whether the EPROMs analysis was still applicable.²¹ Chief Judge Bullock's Order in Inv. No. 337-TA-893 is illustrative: "In the absence of clear guidance from the Commission (or Federal Circuit) as to whether the EPROMs factors may still be a consideration for the downstream products of named Respondents, the undersigned declines to prevent a party from introducing evidence or argument regarding the same."

Former Chief Judge Luckern continued to apply the EPROMs analysis after Kyocera.²² In Inv. No. 337-TA-634, Judge Luckern recommended an exclusion order after a detailed EPROMs analysis and "find[ing] that the evidence show[ed] a balance of the EPROMs factors weigh[ed] in favor of excluding" the downstream products.

Former Judge Pender in Inv. No. 337-TA-1073 found the EPROMs analysis inapplicable when the downstream products at-issue were specifically accused and imported by named respondents.²³

Former Judge Rogers was unequivocal in holding that the EPROMs analysis no longer applied in Section 337 investigations after Kyocera. In Inv. No. 337-TA-735, Judge Rogers rejected an expert report on the EPROMs analysis after concluding that "[t]he Commission's concern articulated in EPROMs has been obviated by the Federal Circuit's decision in Kyocera."²⁴

Uncertainty Remains

The Commission's 2018 opinions and recent ALJ decisions state that the EPROMs analysis is not relevant to LEOs directed to infringing articles of the named respondents. But these decisions involved LEOs that were limited to only those downstream products that were specifically accused in the investigations. The scope of an ITC remedial order can be broader than specifically accused products, and can cover "all products that infringe and are not limited to specified models or products."²⁵ Additionally, complainants often seek LEOs directed not only to named respondents, but also to affiliates, parents, subsidiaries, or other related business entities of named respondents involved in the manufacture of the accused products. The EPROMs analysis might still be applicable in such circumstances involving broader LEOs.

In addition, Kyocera and the EPROMs decisions discussed above focused on the applicability of EPROMs to exclusion orders. Neither the Commission nor the ALJs have addressed whether the EPROMs analysis should be applied to determine whether to issue a cease-and-desist order against downstream products.

Conclusion

Given the overlap between certain EPROMs factors and the public interest analysis, downstream respondents would be well advised to continue to offer EPROMs-related evidence where exclusion of downstream products is sought, especially in investigations in which the public interest analysis has been delegated to the Judge. Also, in cases where a broader LEO is sought—e.g., an LEO covering downstream products of a named respondent that were not specifically accused—respondents should continue to seek an EPROMs analysis.

Footnotes

1. See Kyocera Wireless Corp. v. U.S. Int'l Trade Comm'n, 545 F.3d 1340, 1356 (Fed. Cir. 2008) (citing 19 U.S.C. § 1337(d)(2)) ("Kyocera").

2. See 19 U.S.C. § 1337(d)(1) ("[The Commission] shall direct that the articles concerned. . .be excluded from entry into the United States, unless, after considering the effect of such exclusion upon the [1] public health and welfare, [2] competitive conditions in the United States economy, [3] the production of like or directly competitive articles in the United States, and [4] United States consumers, it finds that such articles should not be excluded from entry.")

3. See Certain Erasable Programmable Read-Only Memories (EPROMs), Inv. No. 337-TA-276, Comm'n Op. (May 1989), aff'd sub nom., Hyundai Elecs. Indus. Co. v. U.S. Int'l Trade Comm'n, 899 F.2d 1204 (Fed. Cir. 1990).

4. Certain Graphics Systems, Components Thereof, and Consumer Products Containing the Same, Inv. No. 337-TA-1044, Comm'n Op. at 66-68 (Sep. 18, 2018); Certain Non-Volatile Memory Devices and Products Containing Same (Memory Devices), Inv. No. 337-TA-1046, Comm'n Op. at 51-52 (Oct. 26, 2018).

5. EPROMs, Inv. No. 337-TA-276, USITC Pub. No. 2196 at 125.

6. The non-exhaustive factors include:

the value of the infringing articles compared to the value of the downstream products in which they are incorporated;
the identity of the manufacturer of the downstream products;
the incremental value to the complainant of the exclusion of downstream products;
the incremental detriment to respondents of the exclusion of downstream products;
the burdens imposed on third parties resulting from exclusion of downstream products;
the availability of alternative downstream products which do not contain the infringing articles;
the likelihood that the downstream products actually contain the infringing articles and are thereby subject to exclusion;
the opportunity for evasion of an exclusion order which does not include downstream products; and
the enforceability of an order by Customs.

7. Kyocera, 545 F.3d at 1358.

8. Certain Liquid Crystal Display Modules, Products Containing Same, and Methods for Using the Same, Inv. No. 337-TA-634, Comm'n Op. at 3-4 (Nov. 24, 2009).

9. Inv. No. 337-TA-1044, Comm'n Op. at 66-68.

10. Inv. No. 337-TA-1046, Comm'n Op. at 50-51.

11. Inv. No. 337-TA-1044, Initial Determination at 136-41 (Apr. 13, 2018).

12. Certain Vehicle Control Systems, Vehicles Containing the Same, and Components Thereof, Inv. No. 337-TA-1235, Order No. 42 at 4-8 (Apr. 26, 2021).

13. Certain Power Inverters and Converters, Vehicles Containing the Same, and Components Thereof, Inv. No. 337-TA-1267, Order No. 43 at 3-4 (Mar. 30, 2022).

14. Inv. No. 337-TA-1267, Recommended Determination on Remedy, Bonding, and the Public Interest at 21 (Aug. 26, 2022).

15. Certain Semiconductor Devices, Semiconductor Device Packages, and Products Containing the Same, Inv. No. 337-TA-1010, Initial Determination at 256-259 (June 30, 2017).

16. Memory Devices, Inv. No. 337-TA-1046, Recommended Determination on Remedy and Bonding at 2-3 (May 10, 2018) (citing to Inv. No. 337-TA-1010 as "finding the EPROMs analysis inapplicable to limited exclusion orders after Kyocera").

17. See id. at 2-3 ("Moreover, the Notice of Investigation directs me to take evidence and hear arguments with respect to the public interest in this investigation, and some of the evidence that Complainant seeks to exclude may be relevant to the statutory public interest factors even if I do not conduct an analysis based on the EPROMs factors").

18. See, e.g., Certain Microprocessors, Components Thereof, and Products Containing Same, Inv. No. 337-TA-781, Initial Determination at 377-383 (Dec. 14, 2012); Certain Light-Emitting Diodes and Products Containing the Same, Inv. No. 337-TA-784, Recommended Determination on Remedy and Bonding at 9-12 (July 23, 2012); Certain Audiovisual Components and Products Containing Same, Inv. No. 337-TA-837, Recommended Determination at 5-6 (July 31, 2013) ("the Federal Circuit's opinion in Kyocera does not reach the question of whether the Commission should consider the EPROMs factors"); Certain Graphics Processing Chips, Systems on a Chip, and Products Containing the Same, Inv. No. 337-TA-941, Recommended Determination on Remedy and Bonding at 5-9 (Jan. 5, 2016).

19. Compare Certain Semiconductor Chips and Products Containing Same, Inv. No. 337-TA-753, Initial Determination and Recommended Determination on Remedy and Bond at 372 (Mar. 2, 2012) (applying most EPROMs factors), with Certain Computer and Computer Peripheral Devices and Components Thereof and Products Containing the Same, Inv. No. 337-TA-841, Initial Determination and Recommended Determination on Remedy and Bond at 162 (Aug. 2, 2013) ("The ALJ disagrees with Respondents' assertion that an EPROMs analysis is warranted. Respondents provide no basis for arguing that the EPROMs analysis is necessary in light of Kyocera and Certain Semiconductor Chips, [Inv. No.] 337-TA-661").

20. Certain Radio Frequency Integrated Circuits and Devices Containing Same, Inv. No. 337-TA-848, Hearing Tr. 10:25 – 11:5 (Aug. 17, 2012) (emphasis omitted).

21. Compare Certain Static Random Access Memories and Products Containing the Same, Inv. No. 337-TA-792, Initial Determination and Recommended Determination on Remedy and Bond at 62 (Oct. 25, 2012) (recommending downstream remedy without analyzing the EPROMs factors), with Certain Flash Memory Chips and Products Containing Same, Inv. No. 337-TA-893, Order No. 51 at 3 (Sept. 29, 2014) (denying motions in limine to preclude respondents from introducing testimony or argument with respect to the EPROMs factors).

22. See Certain Liquid Crystal Display Modules, Products Containing Same, and Methods for Using the Same, Inv. No. 337-TA-634, Final Initial and Recommended Determinations at 172-83 (Jun. 12, 2009).

23. Certain Thermoplastic-Encapsulated Electric Motors, Components Thereof, and Products and Vehicles Containing Same, Inv. No. 337-TA-1073, Recommended Determination at 14 n.3 (Nov. 27, 2018)

24. Certain Flash Memory Chips and Products Containing the Same, Inv. No. 337-TA-735, Order No. 32: Granting –In-Part & Denying –In-Part Complainant's Motion for Leave to Submit the Supplemental Expert Report of Kathryn L. Kobe, at 8 (May 9, 2011).

25. See Inv. No. 337-TA-634, Final Initial and Recommended Determinations at 171 (emphasis added).

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.