Continued Developments in Challenges to Customs’s Enforcement of Section 337 Exclusion Orders in Disputes Before the U.S. Court of International Trade

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At the end of 2018, the U.S. Court of International Trade (CIT) issued an opinion in One World Techs., Inc. v. United States. In that decision, Judge Choe-Groves concluded that U.S. Customs and Border Protection (CBP) improperly excluded from importation one entry of a redesigned garage door opener imported by One World Technologies, Inc. She determined that One World’s redesigned garage door opener did not infringe U.S. Patent 7,161,319, which formed the basis of an exclusion order issued by the U.S. International Trade Commission (ITC) pursuant to Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337), because CBP had misconstrued certain claim terms in that patent. In so doing, Judge Choe-Groves construed the claims of the ’319 patent, an exercise rarely undertaken in prior disputes before the CIT. As a result of her conclusion, Judge Choe-Groves issued an injunction preventing CBP from excluding the entry at issue. Our earlier coverage of that decision provides additional details.

Since that time, the parties have settled the dispute, based on an administrative law judge’s determination in an ITC modification proceeding that One World’s redesigned garage door openers do not infringe the ’319 patent. The government conceded that the ITC’s modification determination would govern CBP’s treatment of future entries of One World’s redesigned garage door openers. As a result, the CIT placed the litigation on hold at the parties’ request.

After its preliminary win in December 2018, One World imported four additional entries of its redesigned garage door openers in January 2019. CBP detained them at the border for further examination. One World once more filed suit at the CIT and sought injunctive relief. Chief Judge Stanceu assigned this new dispute to a familiar face—Judge Choe-Groves, who presided over the original litigation. CBP had to release the imports based on the injunction entered by Judge Choe-Groves’s in the initial One Worldlitigation, right? Not so fast.

When CBP detains merchandise for further examination, it generally has three options at its disposal: it may decide to release the imports, exclude them or seize them. If CBP excludes the merchandise, a party may protest that decision and appeal the denial of its protest to the CIT, just as One World did in its initial lawsuit. If CBP seizes the imports, the CIT would have to dismiss the appeal because only U.S. district courts have subject matter jurisdiction over CBP seizures. See, e.g.H & H Wholesale Servs., Inc. v. United States, 437 F. Supp. 2d 1335 (Ct. Int’l Trade 2006). Over the years, the Customs and International Trade Bar Association has offered legislative proposals to transfer jurisdiction over seizure disputes to the CIT.

The U.S. government sought to dismiss the new lawsuit, arguing that the dispute does not fall within 28 U.S.C. § 1581(h), which authorizes challenges to a pre-importation CBP ruling, or the CIT’s jurisdictional “catch all provision” in 28 U.S.C. § 1581(i). It further alleged that One World’s claims would not ripen until CBP selected one of the three options (release, exclusion or seizure) described above. It also argued that, after One World commenced the new litigation, CBP deemed the entries excluded, such that One World should file a protest and appeal the denial of any protest pursuant to 28 U.S.C. § 1581(a).

In the weeks that followed, a fight over subject matter jurisdiction and injunctive relief ensued between One World, the U.S. government, the ITC and the patent holder (The Chamberlain Group, Inc.). Before resolving the issue of jurisdiction, Judge Choe-Groves issued a temporary restraining order barring CBP from seizing the imports at issue, based in part on CBP’s expressed intention to do so. That injunctive relief stayed in place for nearly a month while the parties debated subject matter jurisdiction. During that time, the U.S. Court of Appeals (Federal Circuit) denied a petition for writ of mandamus filed by the Chamberlain Group, holding that it would not grant mandamus relief at that time “with the understanding that the jurisdictional issues will be timely resolved” by the CIT. No doubt the “with the understanding” clause of the Federal Circuit’s order signaled some concern with the CIT’s decision to grant equitable relief without first resolving jurisdiction.

Approximately a month after affording injunctive relief to One World, Judge Choe-Groves issued an opinion holding that the CIT had subject matter jurisdiction over the dispute. She agreed with the government that she lacked jurisdiction over the dispute pursuant to 28 U.S.C. § 1581(h), given that three of the four entries at issue postdated the commencement of the new lawsuit and that One World had not challenged a CBP ruling governing these entries. Slip Op. at 6–20. Nevertheless, Judge Choe-Groves concluded that she could hear the dispute pursuant to 28 U.S.C. § 1581(i)(4) because “One World’s cause of action speaks directly to the ‘administration and enforcement,’ of a matter referred to in [28 U.S.C. § 1581(a)], i.e., detention arising from the interpretation of a protest decision.”  Id. at 21. She also held that One World stated an appropriate claim for relief that did not require the exhaustion of administrative remedies because CBP’s seizure of the entries “would have deprived One World of its opportunity to challenge the detention if One World were to follow the statutory scheme for protests and wait to receive a response from [CBP].”  Id. at 25. In her decision, Judge Choe-Groves also granted One World the preliminary injunction that it requested and barred CBP from seizing the entries at issue. She held that One World will suffer irreparable harm absent an injunction and likely succeed on the merits of its claim that the redesigned garage door openers do not infringe the ’319 patent. Id. at 26–30. As to irreparable harm, she found that “One World would suffer loss of business, loss of goodwill, and loss of business opportunities.” Id. at 28. (Notably, when Judge Choe-Groves entered an injunction in the initial dispute between One World and CBP, she found irreparable harm based on One World’s likely loss of business, market share and “innovative advantage,” as well as likely damage to the company’s reputation.) She also concluded that the balance of the hardships weighed in One World’s favor because CBP’s seizure of the entries “would place a greater hardship” on the company than the government. Id. at 31.

The ITC, CBP and the Chamberlain Group immediately filed an interlocutory appeal with the Federal Circuit challenging Judge Choe-Groves’s decision to exercise subject matter jurisdiction over the appeal and grant injunctive relief. In the weeks that followed, the parties made a flurry of filings ranging from motions to amend the complaint to requests for additional injunctive relief. Ultimately, however, the parties settled the dispute and jointly sought to dismiss or stay the case, based on the same ITC administrative law judge determination discussed above regarding the noninfringement of the ’319 patent by One World’s redesigned garage door openers. Days later, Judge Choe-Groves dismissed the appeal.

Bottom Line:  The latest round of litigation involving One World’s redesigned garage door openers teaches us several important lessons:

  • CBP’s enforcement efforts can engender litigation with procedural complications spread over multiple practice areas.
  • Additional challenges to CBP’s enforcement of Section 337 exclusion orders seem likely to arrive at the CIT in the years ahead.
  • Separation of powers issues may arise due to the inherent tension that exists in the competing aims of CBP, which has enforcement prerogatives (e.g., seizure) that it may exercise in the first instance, and the CIT, which must enter judgments and injunctive relief consistent with what the law and facts demand. In this case, Judge Choe-Groves took the somewhat bold step of enjoining CBP from seizing the entries at issue, despite Congress conferring such authority on CBP.
  • If a party challenging CBP’s enforcement efforts seeks injunctive relief, it may overcome the difficult burden of proving irreparable harm by testifying on its likely loss of business, business opportunities, market share, goodwill and innovative advantage, as well as the likely damage to its reputation.
  • Customs and patent law involve different enforcement mechanisms. For example, estoppel principles undoubtedly apply in patent disputes. See, e.g.Pharmacia & Upjohn Co. v. Mylan Pharm., Inc., 170 F.3d 1373 (Fed. Cir. 1999) (discussing prosecution history and collateral estoppel). But nearly a century ago, the Supreme Court in United States v. Stone & Downer held that a prior judicial decision on a classification issue did not control the outcome in subsequent litigation on another import of the same type of merchandise, imported by the same party, who raised the same issues. See 274 U.S. 225, 236 (1927). If that principle extends to disputes over imports excluded by CBP pursuant to an exclusion order, we can expect CBP to continue its vigorous enforcement activities. In the instant dispute, however, CBP declined to rest on the principle articulated in Downer and instead deferred to the ITC administrative law judge’s determination that One World’s redesigned garage door openers do not infringe the ’319 patent.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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