Opinion ID: 622473
Heading Depth: 2
Heading Rank: 1

Heading: violation of the commission's orders

Text: At the enforcement hearing, executives of the Ninestar United States subsidiaries testified, upon subpoena, that they continued to import and sell the ink cartridges produced by Ninestar China, with knowledge that the cartridges had been held by the Commission to infringe United States patents and were subject to the Commission's exclusion and cease and desist orders. The Ninestar executives acknowledged, and the evidence showed, imports and sales after issuance of the Commission's orders. The evidence also showed manipulation of transaction dates, and misdescriptions of the cartridges as compatible or remanufactured. [1] The Ninestar executives acknowledged that they filed false affidavits of compliance during the period after issuance of the cease and desist orders. The ALJ, on an extensive evidentiary record, found that Ninestar had deliberately and in bad faith violated the exclusion and cease and desist orders. The Commission adopted the ALJ's findings and conclusions, describing the violations of the Commission's orders as egregious. Final Det'n 44. On this appeal Ninestar does not deny its actions and its knowledge that it was not in compliance with the Commission's orders, but argues that it was justified in noncompliance because the law applied by the Commission is wrong. Ninestar states that the correct law is that the manufacture and sale of a product in any country extinguishes all patent rights, regardless of the physical location where the sales occur. Ninestar Br. 4. Ninestar states that national patent rights are exhausted by the manufacture and sale in a foreign country of a product covered by a national patent, and thus the importation of that product cannot violate the national patent. Thus Ninestar states that the sale in a foreign country of a product manufactured in the foreign country extinguishes any right to enforce a United States patent against that product if it is imported into the United States. Ninestar argues that since the law on which the Commission relied is incorrect, no penalty should be imposed for Ninestar's violation of orders based on law that Ninestar, in good faith, believed was incorrect. Ninestar Br. 43-44. Ninestar focuses on the ruling in Jazz Photo Corp. v. U.S. Int'l Trade Comm'n, 264 F.3d 1094 (Fed.Cir.2001), where this court held that United States patents are not exhausted as to products that are manufactured and sold in a foreign country, and that importation of such products may violate United States patents. As stated in Jazz Photo, United States patent rights are not exhausted by products of foreign provenance. To invoke the protection of the first sale doctrine, the authorized first sale must have occurred under the United States patent. 264 F.3d at 1105. Ninestar states that this case and the precedent on which it relied were incorrectly decided, and were overruled by the Supreme Court in Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617, 632 n. 6, 128 S.Ct. 2109, 170 L.Ed.2d 996 (2008). However, neither the facts nor the law in Quanta Computer concerned the issue of importation into the United States of a product not made or sold under a United States patent. In Fujifilm Corp. v. Benun, 605 F.3d 1366, 1371 (Fed.Cir.2010), the court remarked that  Quanta Computer, Inc. v. LG Electronics, Inc. did not eliminate the first sale rule's territoriality requirement. The patents, products, and methods in Quanta Computer all concerned products manufactured and first sold in the United States, and the Court held that method patents as well as product patents are subject to exhaustion upon sale of product or components in the United States. Ninestar does not dispute Epson's statement that the vast majority of Ninestar's remanufactured Epson cartridges were of Asian or European origin, although Ninestar does argue that it was Epson's burden to establish the provenance of each cartridge imported by Ninestar. Ninestar also states that repair/reconstruction was never an issue in the case. Ninestar Rep. Br. 10. The evidence, including testimony of Ninestar executives as well as Ninestar's actions in attempted avoidance, showed that Ninestar understood the law and the Commission's orders. Indeed, in its prehearing statement Ninestar stated: Admittedly, a patent attorney would and should know that refurbishing and reselling of spent cartridges, which were not first sold in the United States, would be patent infringement. Statement at 5 (Dec. 11, 2008). Ninestar did not dispute that the ink cartridges that it imported and the inventory that it sold after issuance of the Commission's orders are the same technological products as the cartridges whose importation and sale were found to be infringing and were prohibited by the Commission. The Commission's ruling that its orders were violated with knowledge and in bad faith is supported by substantial evidence and is in accordance with law, and is affirmed.