11/18/14

uPI Semiconductor v. ITC: Fed. Cir. reviews ITC's treatment of Consent Order


Category: ITC   
 
 
 
By: Christian Hannon, Contributor 
 
TitleuPI Semiconductor Corp. v. ITC, No. 2013-1157, -1159 (Fed. Cir. Sept. 25, 2014).
IssueBefore the court are the appeal of respondent intervenor uPI Semiconductor Corp. (“uPI”) and the companion appeal of complainant-intervenors Richtek Technology Corp. and Richtek USA, Inc. (together “Richtek”) from rulings of the International Trade Commission in an action to enforce a Consent Order, Certain DC-DC Controllers and Products Containing Same, Inv. No. 337-TA-698 (75 Fed. Reg. 446).
uPI Semiconductor Corp., at *3.
HoldingWe affirm the Commission’s ruling that uPI violated the Consent Order as to the imports known as “formerly accused products,” and affirm the modified penalty for that violation. We reverse the ruling of no violation as to the “post-Consent Order” products. The case is remanded for further proceedings in accordance with our rulings herein.
Id. 
 
 
 
 
Procedural HistoryBefore the court are the appeal of respondent- intervenor uPI Semiconductor Corp. (“uPI”) and the companion appeal of complainant-intervenors Richtek Technology Corp. and Richtek USA, Inc. (together “Rich- tek”) from rulings of the International Trade Commission in an action to enforce a Consent Order, Certain DC-DC Controllers and Products Containing Same, Inv. No. 337- TA-698 (75 Fed. Reg. 446).
uPI Semiconductor at *3.
 
 
Legal Reasoning (NEWMANN, Moore, Chen)
Background
The § 337 ActionRichtek in 2010 filed a complaint with the International Trade Commission, alleging that uPI misappropriated Richtek’s trade secrets and infringed Richtek’s United States patents, and that uPI’s importation, sale for importation, or sale after importation of DC-DC controllers and products containing these controllers violated 19 U.S.C. §1337 (Section 337) of the Tariff Act. [...] Shortly before the evidentiary hearing scheduled by the Commission’s Administrative Law Judge (“ALJ”), uPI moved to terminate the investigation, pursuant to 19 C.F.R. §210.21, by unilaterally offering to enter into a consent order whereby uPI would cease importation of all products produced using or containing Richtek’s trade secrets or infringing Richtek’s patents. Over Richtek’s objection, the ALJ agreed to enter the consent order substantially as drafted and proposed by uPI. The Commission declined to review the ALJ’s grant of uPI’s motion, and, on August 13, 2010, the Commission terminated the investigation and entered the Consent Order.
uPI Semiconductor at *3-4.
The Consent OrderThe Consent Order includes the following provisions:

A. Effective immediately upon the entry of this Consent Order, uPI will not import into the United States, sell for importation into the United States, or sell or offer for sale in the United States after importation, or knowingly aid, abet, encourage, participate in, or induce importation into the United States, the sale for importation into the United States, or the sale, offer for sale, or use in the United States after importation, without the consent or agreement of Richtek, any DC-DC controllers or products containing same which infringe claims 1-11, 26, or 27 of U.S. Patent No. 7,315,190, claims 29 or 34 of U.S. Patent No. 6,414,470, or claims 1-3 or 6-9 of U.S. Patent No. 7,132,717, or which are produced using or which contain Richtek’s D. UPI will not challenge the validity of Richtek’s intellectual property rights in any administrative
or judicial proceeding to enforce the Consent Order, but may do so in any other proceeding.

F. The requirements of Paragraph A of this Consent Order shall be of no further force and effect with respect to Richtek’s asserted trade secrets ten (10) years after issuance of this Order.

Id. at *4-5.
Subsequent Actions of RichtekApproximately one year later Richtek filed an Enforcement Complaint alleging, inter alia, that uPI was in violation of the Consent Order. The Commission instituted an enforcement proceeding, the ALJ held an evidentiary hearing, and, on June 8, 2012, the ALJ issued an Enforcement Initial Determination (“EID”).[...] [Thereafter] [b]oth sides petitioned the full Commission for review. uPI admitted its violative importation of formerly accused chips for a single day, and argued that the ALJ’s finding of violation for the remaining 74 days was erroneous because there was no explicit finding that uPI had knowingly aided or abetted its customers’ importations, and because there was no proof that uPI’s upstream sales of the formerly accused products were directly linked to downstream U.S. sales or importations.[...] The Commission thus sustained the ALJ’s findings of violations of the Consent Order only with respect to the formerly accused products, as to which the Commission found uPI directly imported violative controllers on one day, and on 61 days knowingly aided or abetted the United States sale of formerly accused products that, standing alone or when incorporated into downstream products, infringed the ’190 patent or contained or were produced using Richtek’s trade secrets.
Id. at 6-8.
Standard of Review & ITC Authority[The Federal Circuit] review[s] the Commission's legal determinations without deference and its factual determinations for substantial evidence. The Commission has authority to terminate a Section 337 investigation by consent order, and to investigate and impose a penalty for violation of a consent order. Consent orders are construed as contracts. Contract interpretation is a question of law reviewed de novo.
Id. at 8-9.
UPI's Appeal
Third Party Imports
uPI's Argument - 3rd Parties Immune from the Consent OrderuPI states that, despite its agreement by Consent Order not to knowingly aid, abet or induce importation of products produced using or containing Richtek trade secrets or infringing Richtek patents, this provision cannot reach third-party importations.
uPI Semiconductor at *10.
Court's Holding - Consent Order Reached 3rd PartiesThe Consent Order prohibits uPI from knowingly aiding or abetting the importation of DC-DC controllers produced using or containing Richtek trade secrets or infringing Richtek patents, "or products containing same." The Commission had statutory authority to assess a civil penalty against uPI for its violation of the Consent Order's knowingly aiding or abetting provision.
Id. at *13.
Patents at Issue
uPI's Argument - No InfringementuPI also challenges the Commission's finding that uPI's formerly accused products directly infringed the '190 patent, although uPI acknowledges that reversal of the Commission's findings as to the '190 patent "will not change the total days of violation, or the associated civil penalties, because the Commission had an alternate basis on which to find a violation by uPI's 'aiding and abetting' importation of the same downstream third party products containing uP61xx DC-DC-controllers."
Id. at *13-14.
Court's Holding - InfringementThe record makes clear the Commission did not find direct infringement of the ’190 patent by the uPI upstream products. For the reasons discussed in the preceding section, we affirm the Commission’s finding that the United States sale or importation of downstream products, which incorporate uPI’s upstream products and infringe the ’190 patent, constitutes a violation of the Consent Order’s knowingly aiding or abetting provision.
Id. at *14.
Richtek's Appeal
Richtek's Argument - uPI's post-Consent Order Controllers contain Richtek trade secretsRichtek challenges the Commission’s finding that uPI’s post-Consent Order controllers do not contain or are not produced using Richtek trade secrets. Richtek states that uPI’s “clean room” procedures did not avoid all use of its trade secrets for the post-Consent Order products and that substantial evidence does not support the Commission’s finding that the post-Consent Order products were not produced using and do not contain Richtek trade secrets.
uPI Semiconductor at *16.
Court's Reasoning - lack of substantial evidence
The record as a whole does not contain substantial evidence to support a finding of uPI’s independent development [of design software encompassing Richtek's trade secrets]. It is undisputed that 23 lines of code in the ECS.ini file, covered by Richtek’s trade secrets, appear verbatim in the ECS.ini file uPI used for its post-Consent Order
products. The ALJ considered this duplication in finding uPI’s violative use of Richtek trade secrets for its formerly accused products, but disregarded the continued duplication for the post-Consent Order products.
Id. at *18.
On the record provided, substantial evidence does not support the Commission’s conclusion that uPI’s post-Consent Order products were independently developed. The determination that uPI did not violate the Consent Order with respect to post-Consent Order products is reversed. We remand for further proceedings with respect to violation of the Consent Order.
Id. at *19.
Conclusion
On the record provided, substantial evidence does not support the Commission’s conclusion that uPI’s post- Consent Order products were independently developed. The determination that uPI did not violate the Consent Order with respect to post-Consent Order products is reversed. We remand for further proceedings with respect to violation of the Consent Order.
uPI Semiconductor at *19.
 
 
 
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