ITC General Exclusion Orders Targeting All Importers Are on the Rise

In recent years, the ITC has issued more General Exclusion Orders (GEOs) than in the past. For IP owners facing infringing imported products from numerous elusive sources, a GEO can be a powerful remedy to tackle all infringing products at once.

The broadest remedy that the International Trade Commission (ITC or the Commission) can deliver under 19 U.S.C. §1337 (Section 337) is a General Exclusion Order (GEO), which blocks importation of all infringing goods regardless of source, even by importers who were not respondents in the ITC investigation. GEOs are more difficult to obtain than the more common Limited Exclusion Order (LEO) as they require additional proof either that an LEO will not be enough to stop the infringing imports or that there is a widespread pattern of violation of the asserted IP.

In recent years, the ITC has issued more GEOs than in the past. For IP owners facing infringing imported products from numerous elusive sources, a GEO can be a powerful remedy to tackle all infringing products at once. For importers of products potentially implicated by a requested GEO, the GEO can be a major threat even if the importer is not a respondent in the case.

This article addresses: 1) the recent rise in the number of GEOs; 2) the requirements for issuance of a GEO as discussed in recent decisions; 3) considerations for IP owners contemplating seeking a GEO; and 4) guidance for non-respondent importers facing a potential GEO.

Growth In Number of GEOs

Between 2006 and 2019, the number of GEOs averaged 3.5 per fiscal year, with an outlier peak of 7 GEOs issued in 2012, and all other years at 5 GEOs or fewer per year. In the past three years, however, the annual average has risen to more than 7.7 per year, with 10 GEOs issued in 2020 and 9 in 2022.

While the number of LEOs has also trended upwards, GEOs seem to be increasing at a proportionately higher rate. In 2014, the single GEO issued that year comprised 14% of the number of GEOs and LEOs combined. From 2015 through 2019, GEOs were approximately 29% of total exclusion orders. In the last three years, GEOs have been approximately 42% of total exclusion orders. See the chart created by Morrison Foerster from ITC statistics below.

Requirements for GEOs

The Federal Circuit held in Kyocera Wireless Corp. v. ITC, 545 F.3d 1340, 1356 (Fed. Cir. 2008), that LEOs were "[t]he default remedy" under Section 337(d)(2), and that GEOs were "only appropriate if two exceptional circumstances apply." Under Section 337(d)(2)(A), the Commission may issue a GEO if it is "necessary to prevent circumvention of an exclusion order limited to named persons." Alternatively, under Section 337(d)(2)(B), the Commission may issue a GEO if "there is a pattern of violation of this section and it is difficult to identify the source of infringing products."

Likelihood of Circumvention

Under Section 337(d)(2)(A), the complainant must establish a likelihood that an LEO directed to named respondents would be circumvented, warranting the issuance of the broader GEO. Among other factors, the Commission has considered the size, portability, ease of production, and expense of the infringing products when evaluating the risk of circumvention. In general, smaller products that are easier and cheaper to make pose a greater risk of LEO circumvention, since there may be more small suppliers of such products with the ability to obscure their identities. For instance, in Certain Toner Cartridges, Inv. No. 337-TA-1174, Comm'n Op. 16 (Dec. 17, 2020), the Commission cited evidence that foreign aftermarket toner cartridge manufacturers had "the capacity to replicate their operations to appear as a new business within a few months." See also, Certain Foldable Reusable Drinking Straws, Inv. No. 337-TA-1183, Comm'n Op. 9 (Feb. 10, 2021) ("[T]he evidence shows that the small size and portability of the products covered by the asserted patent makes circumvention of specific types of enforcement, such as a limited exclusion order, easy and inexpensive.").

Use of "large, online marketplaces" to sell the infringing products can also support the likelihood of circumvention. Certain Shaker Screens for Drilling Fluids, Inv. No. 337-TA-1184, Comm'n Op. 5 (Mar. 31, 2021). Such marketplaces enable "foreign distributors to sell directly to United States customers via the Internet," making it "possible for myriad fly-by-night entities to import infringing products." Foldable Reusable Drinking Straws, Comm'n Op. 9. On such websites, "sellers pop-up, disappear, and then pop-up again under a different name or brand." Certain Electronic Shavers, Inv. No. 337-TA-1230, Comm'n Op. 14 (May 3, 2022).

Sellers may be incentivized to circumvent LEOs where there are high profit margins and/or low barriers to entry. Certain Vaporizer Cartridges, Inv. No. 337-TA-1211, Comm'n Op. 9-10 (Mar. 1, 2022). Such conditions allow infringers to "undercut [Complainant] on price, but still make substantial profits." Id.

The Commission has also considered difficulty in identifying sellers or manufacturers under Section 337(d)(2)(A), such as "unmarked, generic, and/or reseller-branded" packaging that has "no apparent origin markings." Certain Toner Supply Containers (II), Inv. No. 337-TA-1260, Comm'n Op. 13 (Aug. 3, 2022). Other supporting evidence has included: using "resellers and intermediaries with unclear ties to the original manufacturer to distribute infringing product" (Shaker Screens for Drilling Fluids, Comm'n Op. 5); using "trade names, shell corporations, false or non-existent addresses" (Certain Apparatus and Methods of Opening Containers, Inv. No. 337-TA-1255, Comm'n Op. 10-11 (May 6, 2022)); and changing names and distribution patterns to avoid detection (Certain Batteries and Products Containing the Same, Inv. No. 337-TA-1244, Comm'n Op. 20-21 (Sept. 8, 2022)).

Pattern of Violation and Difficulty Identifying Sources

To establish a "pattern of violation" under Section 337(d)(2)(B), the Commission has focused on the volume of infringing products in the marketplace, confusing product and/or package design that can conceal a product's source, and the number and nature of known suppliers.

In Batteries, the Commission noted that "a search of just four prominent Internet websites" for complainant's product yielded "hundreds of offers for sale of unlicensed replacement battery packs, both branded and unbranded." Comm'n Op. 17. Even with quotation marks for a specific product on "a prominent Internet e-commerce website," complainant's product "did not appear until the second frame in the initial search results." Id. Instead, "the vast majority of populated search results" were for infringing products. Id. Takedown requests submitted to online marketplaces can also support a finding that a pattern of violation exists. Foldable Reusable Drinking Straws, Comm'n Op. at 8.

Evidence of "non-descript" package design that can confuse the consumer supports a Section 337(d)(2)(B) finding. Certain Vacuum Insulated Flasks, Inv. No. 337-TA-1216, Comm'n Op. 9 (Feb. 3, 2022). And while generic packaging can confuse consumers, so too can identical packaging. Foldable Reusable Drinking Straws, Comm'n Op. 8 (accused products were "nearly indistinguishable in design" and "the packaging associated with those products is identical and incorporate[s] [complainant's] own product imagery without authorization").

When evaluating the requirements of Section 337(d)(2)(B), the Commission has also considered the portability of equipment used to make the infringing products (Foldable Reusable Drinking Straws, Comm'n Op. 8); the ease of production (Certain High-Density Fiber Optic Equipment, Inv. No. 337-TA-1194, Comm'n Op. 75-76 (Aug. 23, 2021)); and the production capacity of foreign manufacturers (Toner Supply Containers (II), Comm'n Op. 14-15).

Marketplace considerations for Section 337(d)(2)(B) can include evidence of "many rapidly appearing and disappearing manufacturers that sell similar products." High-Density Fiber Optic Equipment, Comm'n Op. 75-76. In Vaporizer Cartridges, the Commission noted that even respondents had "no knowledge of the true identities of their Chinese suppliers, even where Respondents have wired funds directly to them." Comm'n Op. at 12.

Considerations for Complainants Contemplating a GEO

The considerations underlying Sections 337(d)(2)(A) and 337(d)(2)(B) overlap considerably and the Commission usually finds the provisions of both sections to be met when issuing a GEO. Accordingly, complainants typically endeavor to present evidence under both sections.

In general, GEOs may be most appropriate in cases involving smaller, less complex, easily replicated products (e.g., drinking straws or toner cartridges) with numerous foreign suppliers. Online marketplaces make it easier for such products to be sold directly to consumers while concealing the source of the products. See, Electronic Shavers, Comm'n Op. at 14 ("anonymity" provided by online sites lends support that an LEO would be circumvented). Products that can be easily designed to mask their source or mimic the patented brand products may be good candidates for GEOs. See, Foldable Reusable Drinking Straws, Comm'n Op. 8 (products were "nearly indistinguishable" from brand products and were shipped in "identical" packaging incorporating brand "product imagery"); Vacuum Insulated Flasks, Comm'n Op. 9 (products used "generic and non-descript packaging that omits their names"). In seeking a GEO, complainants should muster evidence establishing the nature of the infringing products, number of suppliers, marketing and sales tactics, and other relevant factors.

Notwithstanding that a GEO will cover all importers of infringing products, a complainant should still endeavor to name as many respondents in its ITC complaint as possible, including respondents who are likely to default. Every recent GEO case has included at least one, but usually many, defaulting respondents. See, e.g., Toner Cartridges, Comm'n Op. 16 (21 defaulting respondents); Vaporizer Cartridges, Comm'n Op. 9-10 (18 defaulting respondents). While the existence of defaulting respondents "alone is insufficient to establish that a GEO is necessary to prevent circumvention of a[n] LEO directed to respondents found in default," it can serve as supporting evidence. Opening Containers, Comm'n Op. 12. High numbers of defaulting respondents can demonstrate a likelihood of circumvention and a pattern of violation. Also, an inability to serve respondents due to difficulty locating them can support that it is "difficult to identify the source of infringing products."

It is also advisable for complainants to discuss the GEO evidence with ITC staff attorneys beginning in the pre-filing stage. The Office of Unfair Import Investigations (OUII) represents the public interest in certain ITC investigations. OUII attorneys have been assigned to participate in virtually all recent GEO cases and OUII has often supported complainant's request for a GEO. For instance, in Opening Containers, Comm'n Op. at 10-11, OUII argued that a GEO "is necessary to prevent the circumvention of an [LEO]" because "there is ample direct evidence that Defaulting Respondents have operated using multiple identities and are selling what appear to be identical products through different storefronts on multiple different Internet platforms." The Commission agreed with OUII's argument.

Considerations for Non-Respondent Importers Facing a Potential GEO

For companies in product spaces that could be susceptible to a GEO, it is important to monitor for any ITC complaints filed by competitors seeking a GEO. A GEO "effectively shifts to would-be importers of potentially infringing articles, as a condition of entry, the burden of establishing noninfringement." Certain Collapsible Sockets for Mobile Electronic Devices, Inv. No. 337-TA-1056, Comm'n Op. 26-27 (July 9, 2018). Since even non-respondents can be impacted by a GEO, a non-respondent company will want to evaluate whether the scope of a new investigation could implicate its products. If so, the company should consider whether to intervene in the investigation to defend its rights. If an importer waits until the remedy stage to seek a carve-out from a GEO, it may be too late, as it was in Collapsible Sockets. Id. ("[the non-party] knew early on in the investigation that its products may be subject to exclusion but decided not to intervene to protect its interest").

Intervention may be particularly important in cases where many, or even all, respondents end up defaulting and therefore the claims are not seriously contested on the merits. Section 337(g)(2) provides that "[w]here no respondents appear in an investigation, the Commission is authorized, subject to consideration of the public interest, to issue a GEO." Two recent examples of GEOs issuing under subsection (g)(2) include Batteries and Foldable Reusable Drinking Straws. While the administrative law judge will still scrutinize complainant's evidence in such a case before recommending a GEO, the respondents' position is obviously at a considerable disadvantage with no one in the case to represent it.

Conclusion

A GEO is the most powerful remedy available at the ITC and obtaining one can help protect an IP owner's market share for its patented products. Thorough preparation of supporting evidence and robust discovery will be crucial to satisfying the requirements for issuance of a GEO. For non-respondent importers, vigilance in spotting potentially threatening GEO cases and intervening as necessary can help avoid falling under a GEO.