Judge Essex Recommends General Exclusion Order for Counterfeit Loom Kits

A recent decision by Administrative Law Judge Theodore R. Essex in the matter of Certain Loom Kits for Creating Linked Articles, ITC Inv. No. 337-TA-923, highlights the distinctive value of Section 337 proceedings to thwart counterfeiting of low-technology products. On February 3, 2015, Judge Essex issued an order granting Complainant Choon's Design Inc.'s motion for summary determination, holding that Choon had established the existence of a domestic industry and a violation of Section 337 and recommending that the Commission issue a general exclusion order.

The dispute in Loom Kits involves toys called loom kits, which allow the user to link colorful rubber bands together to create objects such as bracelets or flags. Cheong Choon Ng, founder of Choon's Design Inc., designed and patented a type of loom kit called the "Rainbow Loom." The Rainbow Loom enjoyed great commercial success and was voted "Toy of the Year" by the Toy Industry Association in 2014. Unfortunately, the Rainbow Loom's success also spawned a cottage industry of infringing knock-off loom kits. In its Complaint at the ITC, Choon provided evidence that more than 600 unique sellers were offering counterfeit loom kits for sale over the internet. After previous attempts to assert its patent rights failed, including nine separate lawsuits and numerous cease-and-desist letters, Choon filed a Section 337 proceeding at the ITC requesting a general exclusion order barring importation of infringing loom kits by any entity. In his order granting summary determination, Judge Essex found that the accused loom kits infringed Choon's patent rights and that Choon had demonstrated a domestic industry in the United States relating to its patent.

Crucially, Judge Essex also recommended that the Commission issue a general exclusion order, which would exclude all infringing loom kits from entry into the United States without regard for their source. Judge Essex found that a general exclusion order was warranted in light of the widespread pattern of unauthorized importation, as evidenced by the 600-plus unique online sellers of counterfeit loom kits. Judge Essex also emphasized several business conditions supporting issuance of a general exclusion order, including the low barriers to entry in the loom market; the high potential profits on infringing loom kits; the difficulty of identifying the sources of knockoff loom kits, particularly given the anonymous nature of many internet sales; and the failure of Choon's previous lawsuits to stem the tide of infringing articles.

As underscored by Judge Essex's decision in Certain Loom Kits, the unique remedies available in Section 337 proceedings can be a particularly effective way to combat the diffuse problem of counterfeit knockoff goods. Because a general exclusion order provides a firewall against infringing goods regardless of source, it allows a patent owner to avoid playing whack-a-mole against an ever-changing cast of infringers and instead address the entire counterfeiting problem within the context of a single proceeding.