ITC Monthly Wrap-Up: October 2021

It was another busy month at the ITC. A Final Determination was issued by the Commission in three Section 337 Investigations: Certain Laparoscopic Surgical Staplers, Reload Cartridges, and Components Thereof, Inv. No. 337-TA-1167 (finding violation of Section 337 and suspension of enforcement of the remedial orders pending final resolution of final written decision by the PTAB); Certain Foodservice Equipment and Components Thereof, Inv. No. 337-TA-1166 (finding no violation of Section 337); and Certain Balanced Armature Devices, Products Containing the Same, and Components Thereof, Inv. No. 337-TA-1186 (finding violation of Section 337 and issuance of a General Exclusion Order and Cease and Desist Orders) and one other Investigation (Inv. No. 337-TA-1219) was terminated based upon settlement. Four new Section 337 Investigations were instituted in October: Certain Tunable Lenses and Products Containing the Same, Inv. No. 337-TA-1282; Certain Composite Baseball and Softball Bats and Components Thereof, Inv. No. 337-TA-1283; Certain Electronic Devices Having Wireless Communication Capabilities and Components Thereof, Inv. No. 337-TA-1284; and Certain Barcode Scanners, Mobile Computers with Barcode Scanning Capabilities, Scan Engines, and Components Thereof, Inv. No. 337-TA-1285. Additionally, the Commission received a new complaint, and after soliciting comments on public interest, instituted a new Investigation on November 4, 2021 (Certain Oil-Vaping Cartridges, Components Thereof, and Products Containing the Same, Inv. No. 337-TA-1286).

This month's ITC wrap-up focuses on an issue often present but rarely contested: the role of defaulting parties in ongoing investigations. That issue in particular as it relates to the ability of defaulting parties to continue to advocate issues after being found in default was addressed in the recent Commission Opinion in Certain Balanced Armature Devices, Products Containing Same, and Components Thereof, Inv. No. 337-TA-1186 (public version issued October 29, 2021) (hereinafter "Balanced Armature Devices").

Commission Rule 210.16(a), 19 C.F.R. 210.16(a) provides two avenues by which a party can be found in default: (1) "if it fails to respond to the complaint and notice of investigation in the manner prescribed in 210.13 or 210.59(c), or otherwise fails to answer the complaint and notice, and fails to show cause why it should not be found in default"; or (2) "as a sanction for abuse of process, under 210.4(c), or failure to make or cooperate in discovery, under 210.33(b)."

Commission Rule 210.16(b)(4), 19 C.F.R. 210.16(b)(4) further provides that "[a] party found in default shall be deemed to have waived its right to appear, to be served with documents, and to contest the allegations at issue in the investigation." Upon finding a party in default, the Commission "presume[s] to be true all allegations" made in the complaint. Certain Opaque Polymers, Inv. No. 337-TA-883, Comm'n Op. at 19 (Jun. 15, 2015); Balanced Armature Devices, Order No. 50 at 15 (Jun. 1, 2021); see generally 19 C.F.R. 210.16(c)(1).

Case Overview: In the Matter of Certain Balanced Armature Devices, Products Containing Same, and Components Thereof, Inv. No. 337-TA-1186

On November 29, 2019, the Commission instituted an Investigation based on a complaint filed by Knowles Corporation and Knowles Electronics, LLC ("Knowles") against twelve respondents, including four Bellsing entities ("Bellsing"). At issue was the misappropriation of ten trade secrets related to balanced armature devices used in earphones, ear buds, headsets, headphones, and similar devices.

After the close of discovery, Bellsing was found in default in part due to its failure to disclose spoliation of evidence by one of its employees. Order No. 46 (Initial Determination on Sanctions). In particular, Knowles had obtained a motion to compel (Order No. 15) Bellsing to respond to certain discovery related to Bellsing's use of Knowles' testing software, Bellsing's possession of source code for certain production equipment used by Bellsing in its manufacturing facilities, and Bellsing's acquisition of certain production equipment. Ultimately, Bellsing was found to have knowingly and in bad faith concealed the spoliation of evidence relevant to that discovery, placing "the integrity of the factual record of this investigation into question" and casting a "cloud over the factual record [that] prejudices the Commission, as well as Knowles." Order No. 46 at 43. Although no party petitioned the Initial Determination on Sanctions, the Commission determined to review it, and subsequently affirmed the ALJ in finding Bellsing in default. Mar. 17, 2021 Comm'n Op. (public version issued Mar. 23, 2021).

Notwithstanding the Commission's finding of default, Bellsing continued to submit briefing on certain issues, including remedy and bonding. Citing Bellsing's default and Commission Rule 210.16(b)(4), 19 C.F.R. 210.16(b)(4), the ALJ held that Bellsing could not contest any issues related to its violation after it had been found in default. Accordingly, the ALJ did not consider Bellsing's briefing on these issues. Order No. 50 at 2, 4, 15, 114, & 126. On June 1, 2021, ALJ Bullock issued a Final Initial Determination finding that a violation of Section 337 had occurred as to Bellsing, and further recommending an appropriate remedy and bond. Order No. 50 at 15 & 94-127.

On June 11, 2021, Bellsing filed a petition for review of Order No. 50, and on August 2, 2021, the Commission determined to review the Final Initial Determination in part. Pertinent to this writing, the Commission determined to review whether Bellsing can participate in briefing on remedy, bonding, and the public interest before the ALJ and/or the Commission, notwithstanding Bellsing's default. See Aug. 2, 2021 Comm'n Notice at 2 (requesting responses to the questions: "Should briefing on remedy, bonding, and the public interest be considered from a defaulting party (assuming that the briefing presented by the defaulting party is not related to issues concerning a finding of violation)? Are there any policy considerations that the Commission should take into account?"). In their submissions to the Commission, Knowles and the Office of Unfair Import Investigations ("OUII") argued that allowing Bellsing to present such briefing would defeat the policy reasons underlying a finding of default, while Bellsing argued that not allowing its briefing on these issues would constitute a denial of due process.

On October 5, 2021, the Commission affirmed with modifications the ALJ's Final Initial Determination finding a violation of Section 337. As to the issue of briefing by a defaulting party, the Commission first noted that, in this investigation, Bellsing's briefing on remedy and bonding before the ALJ was not timely submitted, and the ALJ was therefore correct in not considering it. Oct. 5, 2021 Comm'n Op. at 10 (public version issued Oct. 29, 2021). The Commission also responded that Bellsing's arguments to the Commission on remedy and bonding were duplicative of another, non-default Respondent's arguments, and accordingly the Commission exercised its discretion and declined to accept Bellsing's duplicative briefing (the Commission did not address Bellsing's briefing on the public interest). Id. at 11. In doing so, however, the Commission also noted that "there may be situations where it is prudent for the Commission and/or the ALJ to accept remedy and bonding briefing from parties who have defaulted, and the Commission retains discretion to do so. The Commission also retains the discretion to determine what weight, if any, to give the briefing." Id.

Conclusion

The 1186 Investigation demonstrates the flexibility retained by an ALJ and the Commission to consider remedy and bonding arguments, even from a defaulting party. However, that discretion appears limited to the unique issues of remedy and bonding, and it does not otherwise upset the Commission Rule prohibiting a defaulting party from contesting any issues relating to violation after that party is found to be in default.