The U.S. International Trade Commission (USITC) has determined to maintain the $650,000.00 penalty it imposed for violation of a consent order entered in a Section 337 investigation, notwithstanding that the parties and the Office of Unfair Import Investigations (OUII) supported rescinding the penalty.

The investigation (Certain DC-DC Controllers and Products Containing Same, 337-TA-698) commenced in 2009 based on alleged trade secret misappropriation and patent infringement.  The investigation was resolved on the basis of consent orders in 2010.  In 2011, the complainants filed an enforcement proceeding alleging violations of the consent orders.  In 2012, the Commission ruled that respondent’s imported products had violated the consent order based on patent infringement, but that the products were developed independently of any trade secrets.  The Commission imposed a penalty of $620,000.00 for the violation, representing $100,000.00 for each violation day (one of the available penalties expressly provided in Section 337).

After appeals were taken to the Federal Circuit that resulted in a remand, the Commission increased the penalty slightly–to $650,000.00.  This decision was not appealed.  Shortly thereafter, the complainant and respondent reached a settlement and jointly petitioned the Commission to rescind the consent order and the civil penalty.  The petition was supported by OUII.  The Staff argued “it would be an abuse of the Commission’s discretion to decline to vacate the civil penalty order” by analogy to Biocraft Laboratories v. International Trade Commission, 947 F.2d 483 (Fed. Cir. 1991), which the Staff characterized as holding “that the Commission abused its discretion by declining to release funds [bond payments] payable to the U.S. Treasury for acts which were later authorized by a settlement agreement.”

In an October 16, 2017 Order, the Commission agreed to rescind the consent order but refused to rescind the penalty.  The Commission distinguished other, related Commission rulings cited by the parties because “the settlement agreement [in this investigation] was reached and the joint petition was filed after the time for seeking judicial review expired.”  And, it reasoned that the parties had “failed to point to any instance, including Biocraft, in which any tribunal, including the Commission, excused the levy of civil penalties owed to the government or their equivalent under such circumstances.”

It is unclear if the Commission’s decision will impact the parties’ settlement and if any appeal could be taken from the decision under the circumstances.  Nevertheless, while the decision to maintain the penalty even in the face of settlement may appear legalistic, it is arguably consistent with other cases in which the Commission has used its discretion to enforce penalties for consent order violations.  For example, in Delorme Publ’g Co. v. ITC, 805 F.3d 1328 (Fed. Cir. 2015) (mentioned in a prior blog here), the Federal Circuit affirmed the ITC’s enforcement of a consent order and the imposition of $6 million in penalties against a respondent that had imported components for use in the infringing products even though an ITC administrative law judge found the components to be non-infringing.  One possible takeaway is that the Commission views consent order violations as the most direct possible challenge to its enforcement powers and that the Commission will therefore unsparingly wield its discretion to uphold penalties for consent order violations in most circumstances.