Funai Elec. Co., Ltd. v. United States

Slip Op. 09 - 109

UNITED STATES COURT OF INTERNATIONAL TRADE

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FUNAI ELECTRIC CO., LTD. and FUNAI :
CORPORATION, INC.,
:
Plaintiffs,
:
v. Court No. 09-00374
:
UNITED STATES and UNITED STATES BUREAU
OF CUSTOMS AND BORDER PROTECTION, :

Defendants. :
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Opinion & Order

[Defendants’ motion to dismiss for lack of sub-
ject-matter jurisdiction over this action for
relief from U.S. Customs and Border Protection
ruling of admissibility of DTVs alleged to be
within purview of an exclusion order of the
U.S. International Trade Commission granted.]

Decided: October 6, 2009

Morrison & Foerster LLP (Karl J. Kramer, G. Brian Busey and
Teresa M. Summers) and Grunfeld, Desiderio, Lebowitz, Silverman &
Klestadt LLP (Harold M. Grunfeld, Robert B. Silverman and Frances
P. Hadfield) for the plaintiffs.

Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director, Franklin E. White, Jr., Assistant Director, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice
(Antonia R. Soares); and Barbara S. Williams, Attorney in Charge,
International Trade Field Office, Commercial Litigation Branch,
Civil Division, U.S. Department of Justice (Amy M. Rubin); and
Office of Assistant Chief Counsel, International Trade Litigation,
U.S. Customs and Border Protection (Michael W. Heydrich), of
counsel, for the defendants.

Jones Day (Eric S. Namrow, Thomas V. Heyman and Cecilia R.
Dickson) for proposed intervenor-defendants Vizio, Inc., AmTran
Technology Co., Ltd. and AmTran Logistics, Inc.
Court No. 09-00374 Page 2

O’Melveny & Myers LLP (Mark A. Samuels and Jonathan D. Hacker)
for proposed intervenor-defendants TPV Technology, Ltd., TPV
International (USA), Inc., Top Victory Electronics (Taiwan) Co.,
Ltd. and Envision Peripherals, Inc.

Bingham McCutchen LLP (James Hamilton, Robert C. Bertin,
Warren A. Fitch and Diane C. Hertz) for proposed intervenor-
defendant Tatung Co.

AQUILINO, Senior Judge: Immediately upon the filing of

plaintiffs’ summons and complaint and applications for a temporary

restraining order and preliminary injunction, the defendants and

then would-be intervenor-defendants contested the Court of

International Trade’s subject-matter jurisdiction, supported by the

filing of formal motions to dismiss this action for lack thereof.

Hearings have been held, and the record developed and papers

presented on all sides reveal the following:

I

Funai Corporation, Inc. is a wholly-owned U.S. subsidiary

of Funai Electric Co., Ltd., a Japanese corporation that

manufactures and markets consumer electronic products, including

digital televisions (“DTVs”) under such trade names as Sylvania,

Emerson, Magnavox, Philips, and Symphonic. Effective September 30,

2007, all rights in U.S. Patent No. 5,329,369 (July 12, 1994),

entitled “Asymmetric Picture Conversion”, and U.S. Patent No.

6,115,074 (Sept. 5, 2000) (“System for Forming and Processing

Program Map Information Suitable for Terrestrial, Cable and
Court No. 09-00374 Page 3

Satellite Broadcast”) were assigned to Funai Electric Co., which

then filed a complaint with the U.S. International Trade Commission

(”ITC”), alleging violations of those patents within the meaning of

section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. §1337.

The Commission responded by publishing a formal notice of

investigation, No. 337-TA-617, sub nom. In the Matter of Certain

Digital Televisions and Certain Products Containing Same and

Methods of Using Same, 72 Fed.Reg. 64,240,-241 (Nov. 15, 2007), as

to

whether there is a violation of subsection (a)(1)(B) of
section 337 in the importation into the United States,
the sale for importation, or the sale within the United
States after importation of certain digital televisions
and certain products containing same and methods of using
same by reason of infringement of one or more of claims
1, 4, 5, 8, 9, and 23 of U.S. Patent No. 6,115,074 and
claims 1-3, 5, 7, 10-13, 15, and 19-29 of U.S. Patent No.
5,329,369, and whether an industry in the United States
exists as required by subsection (a)(2) of section 337[.]

Named as respondents were Vizio, Inc., AmTran Technology Co., Ltd.,

Polaroid Corporation, Petters Group Worldwide, LLC, Syntax-Brillian

Corporation, Taiwan Kolin Co., Ltd., Proview International

Holdings, Ltd., Proview Technology (Shenzhen) Co., Ltd., Proview

Technology, Ltd., TPV Technology, Ltd., TPV International (USA),

Inc., Top Victory Electronics (Taiwan) Co., Ltd., Envision

Peripherals, Inc., and International Reliance Corp., which

enterprises paragraph 5 of plaintiffs’ instant complaint groups as

follows: (1) Vizio and AmTran; (2) TPV Technology, TPV
Court No. 09-00374 Page 4

International, Top Victory, and Envision; (3) the Proview firms;

(4) Polaroid and Petters; (5) Syntax-Brillian and Taiwan Kolin; and

(6) International Reliance1.

Proceedings before an administrative law judge of the ITC

resulted in publication of his Initial Determination that

a violation of section 337 . . . has occurred in the
importation into the United States, the sale for
importation, or the sale within the United States after
importation of certain digital televisions and certain
products containing same and methods of using same by
reason of infringement of claims 1, 5, and 23 of . . .
Patent No. 6,115,074. It is further found that no
violation of section 337 has occurred in connection with
claim 1, 3, 7, 19, or 21 of . . . Patent No. 5,329,369.

Plaintiffs’ Complaint, Exhibit 1, first page. This was followed by

the judge’s Recommended Determination on Remedy and Bonding [id.,

Exhibit 2] that suggested, among other things, that a limited

exclusion order issue that covers each asserted patent found by the

Commission to be infringed and that cease-and-desist orders issue

as to the domestic respondents. Plaintiffs’ complaint proceeds to

aver:

9. On April 10, 2009, the Commission . . . affirmed
the ALJ’s determination with respect to the three claims
found to be infringed.

1
Footnote 1 to plaintiffs’ paragraph 5 reports ITC
termination of its investigation of International Reliance Corp.
and also with regard to Polaroid and Petters, although “Polaroid -
branded televisions manufactured and sold by Proview are covered by
the remedial orders issued in this Investigation.”
Court No. 09-00374 Page 5

10. Consistent with the ALJ’s definition of the
universe of accused products, the Commission determined
that the DTVs at issue include all digital televisions
made or imported by the Respondents that “process
information received in the ATSC-compliant broadcast
signal.” See . . . Comm’n Op. at 4 . . . (Exhibit 3).

11. The Commission held that all of the Respondents
accused products infringe all asserted claims of the ‘074
Patent.

12. On April 10, 2009, the Commission . . . issued
a Limited Exclusion Order (the “Exclusion Order”),
directing Customs to exclude all products that infringe
the ‘074 Patent from entry into the United States, as
well as Cease and Desist Orders, which are enforced by
the Commission rather than Customs and are not at issue
here. See . . . Notice of Commission Final Determination
. . . (Exhibit 4).

13. The Commission’s Exclusion Order states in
relevant part:

Digital televisions and products containing
same (known as “combination” or “combo” units)
that are covered by one or more of claims 1,
5, and 23 of the ‘074 patent and that are
manufactured abroad by or on behalf of[,] or
are[] imported by or on behalf of[,] Vizio,
AmTran, SBC, Taiwan Kolin, Proview
International, Proview Shenzhen, Proview
Technology, TPV Technology, TPV USA, Top
Victory[,] and Envision or any of their
affiliated companies, parents, subsidiaries,
or other related business entities, or their
successors or assigns, are excluded from entry
for consumption into the United States, entry
for consumption from a foreign-trade zone, or
withdrawal from a warehouse for consumption,
for the remaining term of the patent, except
under license of the patent owner or as
provided by law.

14. The meaning of the phrase “covered by one or
more of claims 1, 5, and 23 of the ‘074 patent” is
Court No. 09-00374 Page 6

clearly set forth in the Commission Opinion and the ALJ’s
Initial Determination, which the Commission adopted in
significant part.

15. Consistent with the ALJ’s definition of the
universe of accused products, the Commission determined
that the DTVs at issue include all digital televisions
made or imported by the Respondents that “process
information received in the ATSC-compliant broadcast
signal.” See . . . Comm’n Op. at 4 . . . (Exhibit 3).

16. By its plain terms, and also as intended upon
the findings and analysis of the Commission, the
Exclusion Order is not limited to any particular models
of Respondents’ DTVs.

17. The Exclusion Order covers all of Respondents’
DTVs that conform to the Advanced Television Systems
Committee (“ATSC”) Standard, mandated by the Federal
Communications Commission, to which the ‘074 Patent
pertains. Because all digital televisions are required
to process ATSC-compliant signals in the U.S., the
products covered by the Commission’s Exclusion Order
include all digital televisions made or imported by the
Respondents. In issuing its broadly-worded Exclusion
Order, the Commission determined that the ‘074 Patent had
been designated as essential to practice the ATSC
standard, with which all televisions sold in the United
States must be compliant by law. See . . . Comm’n Op. at
8-9. . . . The Commission also found that the
Respondents “market their DTVs for the specific purpose
of receiving ATSC compliant signals.” Id.

18. Respondents raised the issue of whether they
could import certain redesigned DTVs during the
Investigation, but the Commission did not grant such
permission. The Commission adopted the ALJ’s findings
that both their so-called “work around” products as well
as their older “legacy” products infringe the asserted
claims of the ‘074 patent. See . . . Comm’n Op. at 8.
. . . Thus, the Commission issued its broadly-worded
Exclusion Order that “all” of Respondents’ products “that
infringe” must be excluded.

Underscoring in original.
Court No. 09-00374 Page 7

To read further the complaint, paragraph 25 alleges that

Vizio, Inc. and its manufacturer AmTran, as well as TPV and its

affiliate Envision, “and perhaps others” requested ex parte a

ruling from U.S. Customs and Border Protection (“CBP”) pursuant to

19 C.F.R. §177 that current models of DTV’s, which incorporate

certain ATSC-compliant chipsets, are not covered by the ITC’s

exclusion order. Pursuant thereto, the CBP Intellectual Property

Rights & Restricted Merchandise Branch issued HQ H067500 (Aug. 5,

2009), holding that

three semiconductor chip samples submitted by or on
behalf of Amtran Logistics, Inc., TPV International
(USA), Inc., and Envision Peripherals, Inc., are not
subject to Exclusion Order 337-TA-617. Therefore, DTVs
that contain the . . . three semiconductor chips
identified as Model BCM35243 (Broadcom), Model MT5382PTR
(MediaTek), Model ZR39775HGCF-B(Zoran), and all
functional equivalents of the aforementioned models, may
be entered for consumption into the United States.

Plaintiffs’ Complaint, Exhibit 8, Part C, p. 16. Whereupon the

plaintiffs plead that questions regarding the scope and coverage of

an ITC exclusion order are the sole authority of the Commission2,

that it retains the authority to make a dispositive ruling on

infringement3, and that CBP has no authority to change or fail to

enforce a duly-issued ITC order of exclusion4. Hence, CBP’s

2
Complaint, para. 37.
3
Id., para. 41.
4
Id., para. 42 (emphasis in original).
Court No. 09-00374 Page 8

unilateral interpretation of the scope of that order is quo

warrento and ultra vires5, and

[p]ublicly available information indicates that, since
the Commission’s Exclusion Order became fully enforceable
on July 29, 2009, Respondents have continued to import
the redesigned DTVs and sell them to customers. . . .

45. If Customs permits Amtran, TPV and Envision to
import the redesigned product, Funai will be irreparably
harmed in a manner for which Funai will have no redress
in a court of law.6

II

Before this particular court of law, the plaintiffs pray

for judgment:

A. . . . declar[ing] that Customs’ Ruling HQ H067500
. . . that the alleged redesigned digital television
products of Amtran Logistics, . . . TPV International
(USA), Inc. . . . and Envision Peripherals, Inc. . . .
that contain the . . . three semiconductor chips
identified as Model BCM35243 (Broadcom), Model MT5382PTR
(MediaTek), Model ZR39775HGCF-B (Zoran), and all
functional equivalents of the aforementioned models, may
be entered for consumption into the United States . . .
is null and void and that the . . . Defendants[],
together with their officers, agents and employees, . . .
be . . . enjoined from enforcing [the] . . . Ruling . . .;

B. [] declar[ing] that Customs’ enforcement position
as to the redesigned DTVs is arbitrary, capricious and an
abuse discretion;

5
Id., para. 46.
6
Id., paras. 44 and 45 and 73 and 74.
Court No. 09-00374 Page 9

C. . . . setting aside Customs’ enforcement position
as to the redesigned DTVs;

D. [] order[ing] that Customs communicate with the
Commission as to the proper interpretation and scope of
the exclusion order;

E. [] order[ing] that Customs [] exclude (under 19
U.S.C. § 1337(d)(1)) or seize where appropriate (under 19
U.S.C. § 1337(i)) the redesigned DTVs and not allow
admission of redesigned DTVs unless a determination of
non-infringement is made by the Commission;

F. [] declar[ing] that the redesigned DTVs are
subject to the Commission Exclusion Order unless or until
a determination of non-infringement is made by the
Commission[;]

G. [] order[ing] that Customs seek redelivery
immediately of all unliquidated entries of redesigned
DTVs that have been admitted into the customs territory
of the United States since July 29, 2009;

H. [] order[ing] that Customs issue explicit
instructions to the ports, to Amtran, TPV and Envision
stating that any redesigned DTVs are not entitled to
admission into the United States unless a determination
of non-infringement is made by the Commission; [and]

I. If this Court permits Customs to use Rule 177 to
determine whether redesigned DTVs are within the scope of
the Exclusion Order, [] order[ing] that Customs provide
Funai fair access to information exchanged and an
opportunity to comment and be heard[.] . . .7

7
Id., pp. 17-18.
Court No. 09-00374 Page 10

A

The plaintiffs posit jurisdiction for such relief under

subsections (h) and (i) of 28 U.S.C. §1581. They provide in per-

tinent part:

(h) The Court of International Trade shall have
exclusive jurisdiction of any civil action commenced to
review, prior to the importation of the goods involved,
a ruling issued by the Secretary of the Treasury, or a
refusal to issue or change such a ruling, relating to
classification, valuation, rate of duty, marking,
restricted merchandise, entry requirements, drawbacks,
vessel repairs, or similar matters, but only if the party
commencing the civil action demonstrates to the court
that he would be irreparably harmed unless given an
opportunity to obtain judicial review prior to such
importation.

(i) In addition to the jurisdiction conferred upon
the Court of International Trade by subsection . . . (h)
of this section . . ., the Court of International Trade
shall have exclusive jurisdiction of any civil action
commenced against the United States, its agencies, or its
officers, that arises out of any law of the United States
providing forSS

(1) revenue from imports or tonnage;

(2) tariffs, duties, fees, or other taxes
on the importation of merchandise for reasons
other than the raising of revenue;

(3) embargoes or other quantitative
restrictions on the importation of merchandise
for reasons other than the protection of the
public health or safety; or

(4) administration and enforcement with
respect to the matters referred to in
paragraphs (1)-(3) of this subsection and
subsection . . . (h) of this section. . . .
Court No. 09-00374 Page 11

These provisions emanate from the Customs Courts Act of

1980, Pub. L. No. 96-417, 94 Stat. 1727, and, as indicated at the

hearing on September 3, 2009, the undersigned has not doubted the

intent of its framers that an action like this be subject to the

jurisdiction of the Court of International Trade. See generally

H.R. Rep. No. 96-1235 (Aug. 20, 1980). Indeed, when another holder

of a U.S. patent, which had sought its enforcement via proceedings

pursuant to 19 U.S.C. §1337 before the ITC, came to believe that

the resultant exclusion order was not being properly enforced by

CBP and commenced an action, CIT No. 05-00487, preliminary

injunctive relief was granted therein based, in part, upon reading

of Vivitar Corp. v. United States, 761 F.2d 1552, 1557-60 (Fed.Cir.

1985), cert. denied, 474 U.S. 1055 (1986), and U.S. Ass’n of

Importers of Textiles & Apparel v. United States, 413 F.3d 1344,

1348 (Fed.Cir. 2005). See Eaton Corp. v. United States, 29 CIT

1149, 395 F.Supp.2d 1314 (2005).

But subsequent reading does not lead this court to

conclude that the current state of the law supports plaintiffs’

position herein. In Eaton Corp., the court opined that it did not

have subject-matter jurisdiction under section 1581(h), supra. See

29 CIT at 1161, 395 F.Supp.2d at 1324-25. Nor has a review of

cases properly brought thereunder revealed a party plaintiff in

Funai’s current circumstance. See, e.g., Nat’l Juice Prods. Ass’n
Court No. 09-00374 Page 12

v. United States, 10 CIT 48, 628 F.Supp. 978 (1986); American

Frozen Food Inst., Inc. v. United States, 18 CIT 565, 855 F.Supp.

388 (1994); Ross Cosmetics Distrib. Ctrs., Inc. v. United States,

18 CIT 979 (1994); CPC Int’l v. United States, 19 CIT 978, 896

F.Supp. 1240 (1995), rev’d on other grounds sub nom. Bestfoods v.

United States, 260 F.3d 1320 (Fed.Cir. 2001); Holford USA Ltd. v.

United States, 19 CIT 1486, 912 F.Supp. 555 (1995); Heartland By-

Prods., Inc. v. United States, 23 CIT 754, 74 F.Supp.2d 1324

(1999); Boltex Mfg. Co. v. United States, 24 CIT 972, 140 F.Supp.2d

1339 (2000); Pacific Cigar, Co. v. United States, 28 CIT 1931, 350

F.Supp.2d 1248 (2004).

Moreover, plaintiffs’ position herein does not entail any

of the elements set forth in subsection 1581(i)(1) or (i)(2),

supra. As for subsection (i)(3), neither an embargo nor

quantitative restriction is at bar. See, e.g., K Mart Corp. v.

Cartier, Inc., 485 U.S. 176 (1988). Which leaves subsection

(i)(4), but that provision conjoins subsections (1)-(3) with

subsection 1581(h), each of which is not apposite in this matter.

The plaintiffs rely on Conoco, Inc., v. U.S. Foreign-

Trade Zones Bd., 18 F.3d 1581, 1588 (Fed.Cir. 1994), to the effect

that 28 U.S.C. §1581(i) gives the Court of International Trade

“broad residual authority over civil actions arising out of federal
Court No. 09-00374 Page 13

statutes governing import transactions”. That it does. The court

of appeals has subsequently reaffirmed, however, that the

Court of International Trade, like all federal courts, is
a court of limited jurisdiction. Norsk Hydro Can., Inc.
v. United States, 472 F.3d 1347, 1355 (Fed.Cir. 2006).
It possesses only that power authorized by the
Constitution and federal statutes, which is not to be
expanded by judicial decree. Kokkonen v. Guardian Life
Ins. Co. of Am., 511 U.S. 375, 377 . . . (1994). In
Conoco, we did not hold that the appellants were entitled
to “non-statutory, judicially-granted” review. Instead,
starting from the presumption that agency action is
subject to judicial review, we analyzed various federal
statutes in order to determine which statute provided
jurisdiction over the appellants’ case and, thus, where
jurisdiction was proper (i.e., in the Court of
International Trade or in the appropriate district
court). Conoco, 18 F.3d at 1585-1590. Conoco provides
no support for Sakar’s concept of “non-statutory,
judicially-granted” review.

Sakar Int’l, Inc. v. United States, 516 F.3d 1340, 1349 (Fed.Cir.

2008). As was true when plaintiffs Conoco, Inc. and Citgo

Petroleum Corp. appeared before the Court of International Trade,

the “restrictive statutory scheme of §1581(a)-(h) and its

relationship to §1581(i) should be re-examined”8, but that process

remains the province of higher authority.

8
Conoco Inc. v. U.S. Foreign-Trade Zones Bd., 16 CIT 231,
243, 790 F.Supp. 279, 289 (1992).
Court No. 09-00374 Page 14

III

All that is clearly within the jurisdiction of this court

nisi prius in view of the foregoing is to grant defendants’ motion

to dismiss plaintiffs’ complaint.9 Judgment will enter

accordingly.

So ordered.

Decided: New York, New York
October 6, 2009

/s/ Thomas J. Aquilino, Jr.
Senior Judge

9
The court did not grant a temporary restraining order as a
result of the hearing on September 3, 2009. Given the required
final disposition now, plaintiffs’ application for a preliminary
injunction must be, and it hereby is, denied. Moreover, the
pending motions of Vizio, Inc., AmTran Technology Co., Ltd., AmTran
Logistics, Inc., TPV Technology, Ltd., TPV International (USA),
Inc., Top Victory Electronics (Taiwan) Co., Ltd., Envision
Peripherals, Inc., and Tatung Co. for leave to intervene as party
defendants, as well as plaintiffs’ motion for leave to file a sur-
reply to some of them, can be, and each hereby is, dismissed.

Also, Defendant’s Motion to Strike Portions of Plaintiffs’
September 22, 2009 Filing can be, and it hereby is, dismissed.