United States Court of Appeals
for the Federal Circuit
__________________________
NINESTAR TECHNOLOGY CO., LTD.,
NINESTAR TECHNOLOGY COMPANY, LTD.,
AND TOWN SKY, INC.,
Appellants,
v.
INTERNATIONAL TRADE COMMISSION,
Appellee,
AND
EPSON PORTLAND INC., EPSON AMERICAN,
INC., AND SEIKO EPSON CORPORATION,
Intervenors.
__________________________
2009-1549
__________________________
Appeal from the United States International Trade
Commission in Investigation No. 337-TA-565.
___________________________
Decided: February 8, 2012
___________________________
EDWARD F. O’CONNOR, The Eclipse Group, LLP, of Ir-
vine, California, for appellants. With him on the brief was
STEPHEN M. LOBBIN.
NINESTAR TECHNOLOGY v. ITC 2
WAYNE W. HERRINGTON, Assistant General Counsel, Of-
fice of the General Counsel, United States International
Trade Commission, of Washington, DC, for appellee. With
him on the brief were JAMES M. LYONS, General Counsel,
and MICHAEL K. HALDENSTEIN, Attorney. Of counsel was
ANDREA C. CASSON, United States International Trade
Commission, of Washington, DC.
HAROLD A. BARZA, Quinn Emanuel Urquhart Oliver, of
Los Angeles, California, for intervenors. With him on the
brief were TIGRAN GULEDJIAN and VALERIE RODDY; and
SANFORD I. WEISBURST, of New York, New York. Of counsel
on the brief were LOUIS S. MASTRIANI and MICHAEL L.
DOANE, Adduci, Mastriani & Schaumberg, LLP, of Washing-
ton, DC.
__________________________
Before NEWMAN, SCHALL, and LINN, Circuit Judges.
NEWMAN, Circuit Judge.
This appeal is taken from the Order of the United States
International Trade Commission assessing a civil penalty
against the Ninestar companies for failure to comply with
exclusion and cease and desist orders arising from violation
of Section 337 of the Tariff Act, 19 U.S.C. §1337. We affirm
the Commission’s rulings.
BACKGROUND
In the foundation action under Section 337, the Com-
mission had found unfair trade practices based on infringe-
ment of certain United States patents by the importation
and sale of ink printer cartridges produced in China by
Ninestar Technology Co., Ltd. (“Ninestar China”) and im-
ported into and sold in the United States by various entities
including Ninestar’s wholly owned United States subsidiar-
3 NINESTAR TECHNOLOGY v. ITC
ies, Ninestar Technology Company, Ltd. (“Ninestar U.S.”)
and Town Sky, Inc. (“Town Sky”) (the three Ninestar com-
panies collectively “Ninestar” unless specifically desig-
nated). The Commission ruled that the ink printer
cartridges infringed United States patents owned by or
exclusively licensed to Epson America, Inc., Epson Portland
Inc., and Seiko Epson Corporation (collectively “Epson”),
and issued a general exclusion order, limited exclusion
orders, and cease and desist orders. Certain Ink Cartridges
and Components Thereof, Inv. No. 337-TA-565, USITC Pub.
4195 (Oct. 19, 2007) (Final Orders); 72 Fed. Reg. 60,692
(Oct. 25, 2007) (Notice). The Federal Circuit affirmed.
Ninestar Tech. Co. v. U.S. Int’l Trade Comm’n, No. 2008-
1201, 309 F. App’x 388 (Fed. Cir. Jan. 13, 2009).
The Final Orders prohibited importation and sale of in-
fringing cartridges, including imported cartridges in the
inventory of Ninestar’s United States subsidiaries and other
respondents. The Orders were directed to each Respondent:
IT IS HEREBY ORDERED THAT Nine Star Tech-
nology Company Ltd., 4620 Mission Boulevard,
Montclair, California 91763, cease and desist from
conducting any of the following activities in the
United States: importing, selling, marketing, adver-
tising, distributing, offering for sale, transferring
(except for exportation), and soliciting U.S. agents
or distributors for, ink cartridges that are covered
by one or more of claim 7 of U.S. Patent No.
5,615,957 (“the ‘957 patent”); claims 18, 81, 93, 149,
and 164 of U.S. Patent No. 5,622,439 (“the ‘439 pat-
ent”); claims 83 and 84 of U.S. Patent No. 5,185,377
(“the ‘377 patent”); claims 19 and 20 of U.S. Patent
No. 5,221,148 (“the ‘148 patent”); claim 1 of U.S.
Patent No. 5,488,401 (“the ‘401 patent”); claims 1, 2,
3 and 9 of U.S. Patent No. 6,502,917 (“the ‘917 pat-
NINESTAR TECHNOLOGY v. ITC 4
ent”); claims 1, 31, and 34 of U.S. Patent No.
6,550,902 (“the ‘902 patent”); claims 1, 10, and 14 of
U.S. Patent No. 6,955,422 (“the ‘422 patent”); claim
1 of U.S. Patent No. 7,008,053 (“the ‘053 patent”), in
violation of section 337 of the Tariff Act of 1930, as
amended, 19 U.S.C. § 1337.
Final Orders at *121 (Cease and Desist Order). A separate,
identical Order was directed to Town Sky, Inc. Id. at *137.
Each Order states:
The provisions of this Cease and Desist Order shall
apply to Respondent and any of its principals,
stockholders, officers, directors, employees, agents,
licensees, distributors, controlled (whether by stock
or ownership) and majority-owned business entities,
successors, and assigns, and to each of them, insofar
as they are engaging in conduct prohibited by Sec-
tion III, infra, for, with, or otherwise on behalf of
Respondent.
Id. at *123, *139.
After issuance of the Commission’s exclusion and cease
and desist orders, Ninestar U.S. and Town Sky continued to
import into the United States and to sell the ink cartridges
that were the subject of the orders. An enforcement pro-
ceeding was brought and, upon investigation and hearing,
the Administrative Law Judge determined that Ninestar
was in violation of the orders, and levied a civil penalty in
accordance with 19 U.S.C. §1337(f)(2). Certain Ink Car-
tridges and Components Thereof, Inv. No. 337-TA-565,
USITC Pub. 4196 (Apr. 17, 2009) (Enforcement Initial Det’n
or “EID”). The full Commission adopted the findings and
conclusions of the EID, but reduced the penalty by about
half. Certain Ink Cartridges and Components Thereof, Inv.
5 NINESTAR TECHNOLOGY v. ITC
No. 337-TA-565, USITC Pub. 4196 (August 17, 2009) (Final
Det’n); 74 Fed. Reg. 42,325 (Aug. 21, 2009). Ninestar ap-
peals the assessment of the penalty and its amount.
Ninestar also objects to the inclusion of Ninestar China as
jointly and severally liable for the penalty along with the
Ninestar United States subsidiaries.
DISCUSSION
Ninestar argues that the International Trade Commis-
sion incorrectly found infringement by the Ninestar prod-
ucts, that the authority exercised by the Commission to
exclude these products and to enforce its orders is in viola-
tion of the constitutional principles of separation of powers,
and that the proceedings violated Ninestar’s constitutional
rights to notice, clarity, and a jury trial.
As provided in 19 U.S.C. §1337(c), rulings of the Inter-
national Trade Commission are reviewed in accordance with
the Administrative Procedure Act, 5 U.S.C. §706(2). Find-
ings of fact are reviewed to determine whether they are
supported by substantial evidence, e.g., GemStar-TV Guide
Int’l, Inc. v. U.S. Int’l Trade Comm’n, 383 F.3d 1352, 1360
(Fed. Cir. 2004), and legal conclusions receive plenary
review, e.g., Bourdeau Bros. v. U.S. Int’l Trade Comm’n, 444
F.3d 1317, 1320 (Fed. Cir. 2006). Assessment of a civil
penalty under 19 U.S.C. §1337(f) is reviewed on the stan-
dard of abuse of discretion, e.g., Genentech, Inc. v. U.S. Int’l
Trade Comm’n, 122 F.3d 1409, 1414 (Fed. Cir. 1997).
I
VIOLATION OF THE COMMISSION’S ORDERS
At the enforcement hearing, executives of the Ninestar
United States subsidiaries testified, upon subpoena, that
NINESTAR TECHNOLOGY v. ITC 6
they continued to import and sell the ink cartridges pro-
duced by Ninestar China, with knowledge that the car-
tridges had been held by the Commission to infringe United
States patents and were subject to the Commission’s exclu-
sion 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 misde-
scriptions of the cartridges as compatible or remanufac-
tured. 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 Com-
mission’s orders, but argues that it was justified in non-
compliance 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 “extin-
guishes 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
1 “Compatible” cartridges are new ink cartridges pro-
duced by Ninestar China for use in Epson printers; “re-
manufactured” cartridges (“remans”) are genuine used
Epson cartridges that were reprocessed by Ninestar China.
Final Det’n 6.
7 NINESTAR TECHNOLOGY v. ITC
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 (2008). However, neither the facts nor
the law in Quanta Computer concerned the issue of importa-
tion 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
NINESTAR TECHNOLOGY v. ITC 8
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 execu-
tives as well as Ninestar’s actions in attempted avoidance,
showed that Ninestar understood the law and the Commis-
sion’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.
II
THE STATUTORY PENALTY
The Tariff Act sets a civil penalty for violation of an or-
der of the Commission, as follows:
19 U.S.C. §1337(f)(2) Any person who violates an
order issued by the Commission . . . shall forfeit and
pay to the United States a civil penalty for each day
on which an importation of articles, or their sale, oc-
curs in violation of the order of not more than the
greater of $100,000 or twice the domestic value of
9 NINESTAR TECHNOLOGY v. ITC
the articles entered or sold on such day in violation
of the order. . . .
Ninestar argues that there should be no penalty in view of
Ninestar’s good faith belief that the Commission’s orders
were based on incorrect law, and also that the Commission
proceedings violate the Constitution in several respects.
The Commission’s penalty ruling is reviewed on the stan-
dard of abuse of discretion, to determine if the decision “(1)
is clearly unreasonable, arbitrary, or fanciful; (2) is based on
an erroneous conclusion of law; (3) rests on clearly errone-
ous fact findings; or (4) follows from a record that contains
no evidence on which the decision-making body could ra-
tionally base its decision.” Genentech, 122 F.3d at 1415.
A. Factors Considered
In considering the penalty for violation of the Commis-
sion’s orders, the ALJ and the full Commission applied the
factors summarized in San Huan Materials High Tech, Inc.
v. International Trade Commission, 161 F.3d 1347, 1362
(Fed. Cir. 1998), viz., (1) the good or bad faith of the respon-
dent; (2) any injury due to the infringement; (3) the respon-
dent’s ability to pay the assessed penalty; (4) the extent to
which the respondent benefitted from its violations; (5) the
need to vindicate the authority of the Commission; and (6)
the public interest. Final Det’n 17–18.
In determining whether there was good or bad faith, the
Commission applied the criteria in Certain Erasable Pro-
grammable Read Only Memories (EPROMs), Inv. No. 337-
TA-276, 1991 ITC LEXIS 1311, at *45 (Aug. 1, 1991) and
Certain Agricultural Tractors Under 50 Power Take-Off
Horsepower, Inv. No. 337-TA-380, 1999 ITC LEXIS 260, at
*87, *99 (Aug. 18, 1999). The ALJ pointed to Ninestar’s
false compliance statements, under oath, that they “believe
NINESTAR TECHNOLOGY v. ITC 10
that substantially all of such cartridges were of U.S. origin
and therefore not covered products.” EID 80. This belief
was contravened by the testimony at the hearing, where
Ninestar U.S. vice president William Dai testified:
Q. Sir, when you signed this compliance statement,
you did not believe that substantially all of the re-
manufactured cartridges which Ninestar U.S. had
imported or sold in the United States after the date
of the cease and desist order were of U.S. origin
and, therefore, not covered products, isn’t that true?
A. No, what I said just now was I didn’t know -- or I
don’t know.
Q. Don’t know what?
A. I mean, I didn’t know where the empties used for
producing the remans came from, that I didn’t
know.
Id.
The Commission found that Ninestar continued the im-
portation and sales of the infringing ink cartridges with
knowledge that the products were the subject of exclusion
and cease and desist orders, that Ninestar “deliberately
evaded” the Commission’s orders, and that “[t]he record is
replete with evidence of bad faith.” Final Det’n 24, 35.
The ALJ based the sanction assessment on Ninestar
United States subsidiaries’ electronic records between
October 23, 2007 (four days after issuance of the cease and
desist orders) and May 5, 2008. These records showed that
11 NINESTAR TECHNOLOGY v. ITC
the infringing products were imported on fifteen days and
sold on 187 days. The ALJ did not count records from other
sources, such as customers, that showed additional sales not
in the subsidiaries’ electronic records. The ALJ found that
the importation and sales were made in deliberate and
knowing violation of the Commission’s orders, and levied
the maximum statutory penalty of $100,000 per day. EID
122–24.
The full Commission, while remarking on the “egre-
gious” bad faith of the violations, reduced the penalty to
$55,000 per day, stating that the reduced amount was
commensurate with the sales violations and the lost sales of
Epson, and the bond that should have been posted during
the Presidential review period. Final Det’n 44–45. The
Commission stated that “[t]he combined penalty of
$11,110,000 should be sufficient to deter future violations by
the Ninestar Respondents and others considering violating
the Commission’s orders.” Id. The Commission observed
that Ninestar has “the ability to pay substantial penalties”
and that Ninestar “did not introduce accounting records or
demonstrate any reason why the maximum penalties should
not be imposed.” Final Det’n 31.
The Commission points to Ninestar’s knowledge of its
violation and the fraudulent actions taken to evade compli-
ance. The Commission referred to the harm to domestic
industry due to the magnitude of the infringing operations.
The Commission found the amount of the penalty to be
comparable to the lost sales to the patentee, found to exceed
nine million dollars. Final Det’n 45. The Commission
points out that the statutory penalty is designed to serve as
a deterrent, because “[t]he public interest is not served if
intellectual property rights are not respected, and the
imposition of a penalty that is substantial enough to deter
future violations is in the public interest.” Final Det’n 38.
NINESTAR TECHNOLOGY v. ITC 12
If the only consequence of ignoring the Commission’s orders
were payment of a modest fee if caught, the statutory pur-
pose of deterring unfair trade practices would fail, for the
Commission has no other remedy.
The Commission’s penalty was within the Commission’s
authority, and in accordance with the legislative purpose.
Abuse of discretion has not been shown in the imposition of
a penalty and its amount.
B. Joint and Several Liability
The Commission ordered that “[a]ll three of the
Ninestar Respondents, Ninestar Technology Co., Ninestar
Technology Company, Ltd., Town Sky Inc., shall have joint
and several liability for the payment of the total amount of
these civil penalties.” Certain Ink Cartridges and Compo-
nents Thereof, Inv. No. 337-TA-565, USITC Pub. 4196 (Aug.
18, 2009) (Comm’n Order). The Commission adopted the
ALJ’s determination that the text of the limited exclusion
order, which identifies both subsidiaries Ninestar U.S. and
Town Sky, and “any of its principals, stockholders, officers,
directors, employees, agents, licensees, distributors, con-
trolled (whether by stock or ownership) and majority-owned
business entities, successors, and assigns” makes “Ninestar
China, the subsidiaries’ principal and sole owner, liable for
violating the Cease and Desist Orders, whether directly,
through its own actions, or through its control over the
violations of the two subsidiaries, under basic agency prin-
ciples,” EID 18. Final Det’n 52–53.
Ninestar argues that the penalty cannot be levied
against Ninestar China, but only against the United States
subsidiaries. Ninestar states that it is “elementary and well
established law that a parent is not liable for the actions of
its subsidiary, even if there are overlapping directors or
13 NINESTAR TECHNOLOGY v. ITC
officers.” Ninestar Br. 27 (citing United States v. Bestfoods,
524 U.S. 51, 61–62 (1998) for the rule that a parent corpora-
tion and its subsidiaries are separate legal entities and that
the parent is not liable for acts or obligations of the subsidi-
ary). Ninestar argues that the Commission did not prove
that Ninestar China controlled the activities of its United
States subsidiaries and that the burden of proof was with
the Commission. Ninestar points to the testimony of its
executives that the United States subsidiaries operated
independently of the parent in China. Ninestar states that
the Commission does not have jurisdiction over Ninestar
China and that the United States subsidiaries do not have
the resources to pay the penalty.
The Commission found that Ninestar China monitored
and controlled the actions of its United States subsidiaries,
that regular reports were made of sales, inventories, and
returns, and that the profits of the infringing sales were
regularly sent to Ninestar China.
The Commission found that Ninestar China exercised
control over the United States subsidiaries for the benefit of
Ninestar China, and that although Ninestar China was a
participant in the Commission’s proceedings and a recipient
of the judgment and enforcement orders, Ninestar China did
not order its subsidiaries to terminate importation and
sales, but instead was complicit in violation of the orders,
including providing to its subsidiaries the false affidavits of
compliance. The Commission states that Best Foods “fully
support[s] imposition of joint and several liability” because
Best Foods “indicates that an owner of a corporation may be
held liable for the subsidiary’s conduct when ‘the corporate
form would otherwise be misused to accomplish certain
wrongful purposes . . . on the shareholder’s behalf.’” Final
Det’n 53 (quoting Bestfoods, 524 U.S. at 62).
NINESTAR TECHNOLOGY v. ITC 14
Ninestar also argues that Ninestar China cannot be li-
able for the penalty because it is a foreign entity and not
within the Commission’s jurisdiction. The Commission
responds that Ninestar China waived any issue of jurisdic-
tion because “it was a party that participated fully in the
enforcement proceedings and the underlying investigation.”
Comm’n Br. 42 n.10. The Commission points out that
Ninestar China participated actively in trade with the
United States as the owner of the United States subsidiar-
ies that import and sell its products and that remit all
profits to the parent company in China.
The record contains substantial evidence to support the
Commission’s finding that “Ninestar China knew of the
cease and desist orders and was in a position to ensure
compliance with the cease and desist orders, yet it contin-
ued to supply covered products to its subsidiaries rather
than directing compliance with the orders.” Final Det’n 52;
cf. Fuji Photo Film Co. v. Int’l Trade Comm’n, 474 F.3d
1281, 1293 (Fed. Cir. 2007) (affirming liability of the foreign
shareholder as “legally identified with [the respondent] and
had the power to affect compliance with the Cease and
Desist Order”); San Huan Materials, 161 F.3d at 1347 n.2
(confirming joint and several liability of foreign provider and
United States importer of infringing goods).
The Commission’s assessment of joint and several liabil-
ity of the three Ninestar entities is commensurate with the
evidence of control, commercial relationships, monetary
flow, and knowing violation of the Commission’s orders.
The assessment is affirmed.
C. Ninestar’s Constitutional Arguments
The Commission states that Ninestar waived any con-
stitutional arguments, for they were not presented during
15 NINESTAR TECHNOLOGY v. ITC
the enforcement proceeding. Ninestar responds that consti-
tutional issues were not raised to the Commission because
the Commission has no authority to declare its governing
statute unconstitutional. Although we agree that these
issues are tardily raised, constitutional challenges should
not be deemed waived when they relate to the foundations
of governmental process. Courts of appeal have the discre-
tion to consider issues not raised below “as justice may
require,” Hormel v. Helvering, 312 U.S. 552, 555–59 (1941);
and waiver is inapplicable to “significant questions of gen-
eral impact or of great public concern,” Interactive Gift
Express, Inc. v. Compuserve Inc., 256 F.3d 1323, 1345 (Fed.
Cir. 2001). See Singleton v. Wulff, 428 U.S. 106, 121 (1976)
(Waiver is not jurisdictional but a prudential concern “left
primarily to the discretion of the courts of appeals, to be
exercised on the facts of individual cases.”). Thus we have
considered Ninestar’s constitutional arguments.
1.
Ninestar argues that a non-judicial body cannot be as-
signed authority to issue a punitive penalty for violation of
an administrative order. Ninestar argues that the statutory
penalty is of such magnitude as to be criminal in nature and
that a procedure whereby an administrative agency levies a
criminal penalty is an unconstitutional violation of separa-
tion of powers. Ninestar states that before a penalty of the
magnitude authorized in Section 337(f) can be imposed,
Ninestar must be tried in an Article III court with the
safeguards to which criminal defendants are entitled, in-
cluding the right not to provide adverse testimony and
entitlement to proof beyond a reasonable doubt. Ninestar
cites United Mine Workers v. Bagwell, 512 U.S. 821 (1994),
in which the Court stated that a monetary penalty is akin to
“criminal contempt,” for in cases “[w]here a fine is not
compensatory, it is civil only if the contemnor is afforded an
NINESTAR TECHNOLOGY v. ITC 16
opportunity to purge.” Id. at 829. In Bagwell the Court
held that a contempt fine of $52 million against the United
Mine Workers for violation of a labor injunction was crimi-
nal in nature and required a jury trial. See also United
States v. Dixon, 509 U.S. 688, 696 (1993) (holding that
constitutional protections afforded criminal defendants
through the Sixth Amendment apply in nonsummary crimi-
nal contempt prosecutions just as they do in other criminal
prosecutions).
In Hudson v. United States, 522 U.S. 93, 99 (1997) the
Court explained that “whether a particular punishment is
criminal or civil is . . . a matter of statutory construction,”
citing Helvering v. Mitchell, 303 U.S. 391, 399 (1938), and
that a court must ascertain whether the legislature, “in
establishing the penalizing mechanism, indicated either
expressly or impliedly a preference for one label or the
other,” citing United States v. Ward, 448 U.S. 242, 248
(1980). The Court elaborated:
Even in those cases where the legislature “has indi-
cated an intention to establish a civil penalty, we
have inquired further whether the statutory scheme
was so punitive either in purpose or effect,” Ward,
448 U.S. at 248–49, as to “transfor[m] what was
clearly intended as a civil remedy into a criminal
penalty,” Rex Trailer Co. v. United States, 350 U.S.
148, 154 (1956).
Hudson, 522 U.S. at 99.
Ninestar draws analogy to the criminal statutes of the
Internal Revenue Service, where criminal penalties against
individuals require litigation in federal district court with
the right to a jury trial, citing 26 U.S.C. §§7401–7402.
Ninestar also relies on the Seventh Amendment and cites
17 NINESTAR TECHNOLOGY v. ITC
the Securities and Exchange Commission civil penalty
provisions of 15 U.S.C. §§78u(d)(3), 78aa and the Federal
Trade Commission civil penalty provisions of 15 U.S.C.
§45(m) as establishing that only the district courts, not the
administrative agencies, have authority to assess a civil
penalty. Ninestar Reply Br. 3. Thus Ninestar argues that
the International Trade Commission does not have constitu-
tional authority to levy and enforce the civil penalty of
Section 337(f). Ninestar states that it is entitled to a jury
trial, by constitutional right and Supreme Court precedent,
and that since a jury trial is impossible in a Commission
proceeding, “the entire congressional scheme is invalid.”
Ninestar Br. 49. Ninestar calls the International Trade
Commission statute “an unconstitutional monstrosity,” Br.
47, and urges that “[t]his court should strike down the
ability of the ITC to impose financial punishments on those
who violate their orders,” Br. 50.
The Commission responds that it is beyond challenge
that administrative agencies may by legislation be assigned
the authority to impose penalties or sanctions for violation
of their rulings and orders, citing the monetary penalties
routinely imposed by the Internal Revenue Service. The
Court in Ward, supra, listed various criteria relevant to the
objective evaluation of a legislated civil penalty, including:
[w]hether the sanction involves an affirmative dis-
ability or restraint, whether it has historically been
regarded as a punishment, whether it comes into
play only on a finding of scienter, whether its opera-
tion will promote the traditional aims of punish-
ment-retribution and deterrence, whether the
behavior to which it applies is already a crime,
whether an alternative purpose to which it may ra-
tionally be connected is assignable for it, and
NINESTAR TECHNOLOGY v. ITC 18
whether it appears excessive in relation to the al-
ternative purpose assigned.
Ward, 448 U.S. at 248 n.7 (citing Kennedy v. Mendoza-
Martinez, 372 U.S. 144, 168–69 (1963)). The Court cau-
tioned, however, that “these factors must be considered in
relation to the statute on its face.” Mendoza-Martinez, 372
U.S. at 168. The Court advises that “only the clearest proof”
will suffice to override legislative intent and transform what
has been denominated a civil remedy into a criminal pen-
alty. Ward, 448 U.S. at 249. We do not discern such proof
in this case.
There is no issue here of criminal contempt or double
jeopardy, as existed in Hudson, or of a fine that is highly
disproportionate to the monetary value of the offense, as in
Bagwell. In considering Seventh Amendment rights in the
context of the administrative state, in Atlas Roofing Co. v.
Occupational Safety & Health Review Commission, 430 U.S.
442 (1977) the Court explained:
[W]hen Congress creates new statutory ‘public
rights,’ it may assign their adjudication to an ad-
ministrative agency with which a jury trial would be
incompatible, without violating the Seventh
Amendment’s injunction that jury trial is to be ‘pre-
served’ in ‘suits at common law.’ . . . This is the case
even if the Seventh Amendment would have re-
quired a jury where the adjudication of those rights
is assigned instead to a federal court of law instead
of an administrative agency.
Id. at 455. International Trade Commission proceedings are
within this category, for Congress “created a new cause of
action, and remedies therefor, unknown to the common law,
and placed their enforcement in a tribunal supplying speedy
19 NINESTAR TECHNOLOGY v. ITC
and expert resolutions of the issues involved. The Seventh
Amendment is no bar to the creation of new rights or to
their enforcement outside the regular courts of law.” Id. at
460–61.
The jury aspect of administrative processes was again
discussed in Granfinanciera, S.A. v. Nordberg, 492 U.S. 33,
55 n.10 (1989): “Those cases in which Congress may decline
to provide jury trials are ones involving statutory rights that
are integral parts of a public regulatory scheme and whose
adjudication Congress has assigned to an administrative
agency or specialized court of equity.” See Akzo N.V. v. U.S.
Int’l Trade Comm’n, 808 F.2d 1471, 1488 (Fed. Cir. 1986)
(stating that “[a]lthough it is true that private rights may be
affected by section 337 determinations, the thrust of the
statute is directed toward the protection of the public inter-
est from unfair trade practices in international commerce”).
Section 337 proceedings are integral to the control of un-
fair competition in trade, and the provision of a civil penalty
is within regulatory authority and is appropriately assigned
to the administrative agency.
2.
Ninestar also argues that the Commission’s cease and
desist order is “unconstitutional on its face” because it is
“unclear” in that it does not identify the specific ink car-
tridges and model numbers that are affected. Ninestar Br.
22. The Commission responds that the affected products
were before the ALJ and the full Commission and were
known to Ninestar, and that Ninestar witnesses conceded
that no change was made in the products after the Commis-
sion’s order. The Commission directs attention to its proce-
dure for obtaining an “advisory opinion” if an order is
unclear or if a product is changed:
NINESTAR TECHNOLOGY v. ITC 20
19 C.F.R. §210.79. Upon request of any person, the
Commission may . . . issue an advisory opinion as to
whether any person’s proposed course of action or
conduct would violate a Commission exclusion or-
der, cease and desist order, or consent order.
Ninestar did not invoke this procedure or otherwise request
clarification, or suggest a modified course of action. The
Commission found that “the Ninestar Respondents knew
that their conduct was prohibited,” Final Det’n 17, and that
Ninestar “did not simply ignore or disregard the Commis-
sion’s orders; they deliberately evaded the orders,” Final
Det’n 35. These findings were supported by substantial
evidence.
It is also relevant that decisions of the Commission are
subject to judicial review, as a safeguard against adminis-
trative excess. We discern no violation of constitutional
structure in the Commission’s authority to levy a civil
penalty, and no violation of constitutional protections in the
procedures followed and the penalty assessed.
CONCLUSION
The Commission’s rulings are affirmed.
AFFIRMED