Lexis Nexis Published Case Study on the Trimone Case

On March 26, 2010, Lexis Nexis published a case study by Lei Mei, a founding partner at Mei & Mark LLP, in its China Legal Review in English and Chinese. Click here for a copy of the article. The English version is reproduced below.

The Trimone Case: The First Ever Win for a Chinese Company in an ITC-Related U.S. Customs Proceeding

Lei Mei, Managing Partner, Mei & Mark LLP

On May 12, 2009, U.S. Customs issued a ruling that Zhejiang Trimone’s re-designed TGM ground fault circuit interrupters (GFCIs) fall outside the scope of the exclusion orders issued by the United States International Trade Commission (ITC) in Investigation No. 337-TA-615. This case was reported by national media in China to be the first ever win for a Chinese company to obtain a favorable ruling from the U.S. Customs after it had lost at the ITC.

This article describes the background of the Trimone case, and offers practical advice regarding post-ITC U.S. Customs proceedings. For many Chinese companies, the U.S. Customs proceedings may be a cost effective option to overcome the trade barriers created by ITC exclusion orders.

I. Background

The ITC instituted an investigation of certain GFCIs and products containing same on September 18, 2007, based on a complaint filed by Pass & Seymour, Inc. (“P&S”). The complaint alleged that Trimone and other respondents violated Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, by selling for importation certain GFCIs that infringed P&S’ patents.

Trimone is a privately held company based in Zhejiang. The company develops its own GFCI technologies and owns several Chinese and U.S. patents related to GFCI. In previous cases, many Chinese companies chose not to respond to ITC investigations. Trimone, however, aggressively defended its claim that it did not infringe P&S’ patents, retaining one of the largest international law firms to represent it before the ITC. On March 9, 2009, the ITC found that Trimone infringed U.S. Patent No. 7,283,340 (“the ’340 patent”), but not other P&S patents. As a result, the ITC issued a limited exclusion order, excluding entry of Trimone’s infringing GFCI products.

On March 18, 2009, Trimone retained our firm, Mei & Mark LLP, to find a resolution to allow it to continue to sell products in the U.S. notwithstanding the limited exclusion order. The traditional option, of course, was to appeal to the United States Court of Appeals for the Federal Circuit (“the Federal Circuit”), which could take over a year to resolve. In addition to the appeal, we proposed a little known legal option to bring a design-around product before the U.S. Customs for a quick ruling on whether the re-designed product is subject to the limited exclusion order.

The U.S. Customs option is more cost-effective, because a U.S. Customs proceeding typically takes about three to four months to complete, much faster than the Federal Circuit appeal or an advisory opinion proceeding before the ITC.
We contacted the IPR branch of the U.S. Customs’ headquarters in Washington, D.C., and submitted legal briefs and supporting documents to demonstrate that Trimone’s new GFCI products do not infringe the ’340 patent. On April 3, 2009, we had an in-person, meeting with an U.S. Customs official, who is also an attorney, at the IPR branch. Subsequently, we communicated with the U.S. Customs, providing additional supporting documents.

On May 12, 2009, the U.S. Customs ruled that Trimone’s re-designed TGM series of its GFCI products do not infringe the ’340 patent and fall outside the scope of the limited exclusion order. Therefore, unlike other Chinese respondents in this case, Trimone is the only Chinese company that can sell its GFCI products to the U.S.
As a result, not only has Trimone’s business recovered from its loss at the ITC, Trimone has also received more orders now from U.S. customers than it did before the ITC investigation because of this favorable ruling from the U.S. Customs.

II. Legal Basis

According to the U.S. Federal Regulations 19 C.F.R. Part 177, the U.S. Customs has discretion to issue legal opinions related to imported goods. Because the ITC does not enforce the exclusion orders, the U.S. Customs has the responsibilities for enforcement.

ITC exclusion orders are typically very general and vague. Therefore, the U.S. Customs also has the flexibility in implementing the enforcement mechanism and interpreting ITC exclusion orders.

For example, in the Trimone case, the ITC issued a limited exclusion order, paragraph 3 of which prohibits import of any GFIC products that infringe the ’340 patent, without naming specific products:

3. Ground fault circuit interrupters and products containing the same covered by one or more of claims 14 and 18 of the ‘340 patent, and that are manufactured abroad by or on behalf of, or imported by or on behalf of, Trimone or any of its affiliated companies, parents, subsidiaries, or other related business entities, or its successors or assigns are excluded from entry for consumption, entry for consumption from a foreign-trade zone, or withdrawal from a warehouse for consumption, for the remaining term of the patents, except under license of the patent owner or as provided by law.

As a result, the U.S. Customs must decide what products would infringe the patents in dispute. Obviously, for the specific products named in the ITC investigation, the ITC has already made the ruling, so the U.S. Customs cannot change that. For new or re-designed products, however, the ITC has not ruled on them before. Therefore, the U.S. Customs has the discretion under 19 C.F.R. Part 177 to issue a ruling.

Typically, an ITC exclusion order specifically allows the U.S. Customs to have discretion in the enforcement. For example, in the Trimone case, paragraph 6 of the limited exclusion order describes the U.S. Customs’ role in enforcing the limited exclusion order:

6. At the discretion of U.S. Customs and Border Protection (“CBP”) and pursuant to procedures it establishes, persons seeking to import ground fault circuit interrupters and products containing the same that are potentially subject to this Order may be required to certify that they are familiar with the terns of this Order, that they have made appropriate inquiry, and thereupon state that, to the best of their knowledge and belief, the products being imported are not excluded from entry under paragraphs 1 through 10 of this Order. At its discretion, Customs may require persons who have provided the certification described in this paragraph to furnish such records or analyses as are necessary to substantiate the certification.

Unfortunately, most Chinese companies are unfamiliar with post-ITC U.S. Customs proceedings. Indeed, even American companies have rarely used this legal option until recently, and many U.S. lawyers are not aware of this area of law. Therefore, we hope that more Chinese companies can learn from Trimone’s experience.

III. Conclusion

IP-related trade barriers are not insurmountable. When facing a patent lawsuit in the United States, whether it is an ITC investigation or a federal district court litigation, Chinese companies must consult with competent U.S. patent lawyers and consider all options. It is not necessary to always spend millions of dollars in attorneys’ fees to defend a patent infringement lawsuit. Other legal options, such as U.S. Customs proceedings, could be cost-effective alternatives. If advised properly, more and more Chinese companies can learn from Trimone’s success and become much stronger coming out of IP disputes.

About the Author:

Lei Mei is a partner at Mei & Mark LLP, an Intellectual Property and Litigation law firm based in Washington, DC.