San Huan New Materials High Tech, Inc. v. International Trade Com'n

• Decision Date: 20 November 1998
• Docket Number: 98-1159,Nos. 98-1091,s. 98-1091
• Parties: SAN HUAN NEW MATERIALS HIGH TECH, INC., Ningbo Konit Industries, Inc., and Tridus International, Inc., Appellants, v. INTERNATIONAL TRADE COMMISSION, Appellee, and YBM Magnex, Inc. (Successor in interest to Crucible Materials Corporation), Intervenor.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1347

161 F.3d 1347

48 U.S.P.Q.2d 1865

SAN HUAN NEW MATERIALS HIGH TECH, INC., Ningbo Konit

Industries, Inc., and Tridus International, Inc., Appellants, v. INTERNATIONAL TRADE COMMISSION, Appellee, and YBM Magnex, Inc. (Successor in interest to Crucible

Materials Corporation), Intervenor.

Nos. 98-1091, 98-1159.

United States Court of Appeals, Federal Circuit.

Nov. 20, 1998.

Rehearing Denied; Suggestion for Rehearing In Banc

Declined Jan. 28, 1999.

Gary M. Hnath, Venable, Baetjer, Howard & Civiletti, LLP, Washington, DC, argued, for appellants. With him on the brief was Michael P. Leary. Of counsel was E. Brandan Magrab.

Jay H. Reiziss, Attorney, Office of the General Counsel, U.S. International Trade Commission, Washington, DC, argued, for appellee. With him on the brief were Lyn M. Schlitt, General Counsel, and James A. Toupin, Deputy General Counsel.

Darrel C. Karl, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., Washington, DC, argued, for intervenor. With him on the brief were Ford F. Farabow, Jr., Roger D. Taylor, Wayne W. Herrington, and Michael J. Flibbert.

Before RICH, NEWMAN, and MICHEL, Circuit Judges.

NEWMAN, Circuit Judge.

San Huan New Materials High Tech, Ningbo Konit Industries, and Tridus International appeal the decision of the United States International Trade Commission imposing civil penalties for violation of a Consent Order issued in Investigation No. 337-TA-372, conducted under Section 337 of the Tariff Act of 1930 as amended, 19 U.S.C. § 1337, relating to Certain Neodymium-Iron-Boron Magnets, Magnet Alloys, and Articles Containing Same. ¹ We affirm the decision of the Commission.

BACKGROUND

YBM Magnex, successor in interest to Crucible Materials Corporation, is the owner of United States Patent No. 4,588,439 (the '439 patent). In February 1995 YBM filed a complaint with the International Trade Commission, charging that importation by eight companies of certain neodymium-iron-boron-oxygen permanent magnets infringed the '439 patent. The Commission instituted an investigation, naming San Huan New Materials, Ningbo Konit Industries, Tridus International, and five other companies as respondents.

On October 10, 1995 San Huan, Ningbo, and Tridus entered into a Consent Order, and the investigation was terminated as to them. The Consent Order included the following provisions:

(1) The Respondents shall not sell for importation, import into the United States or sell in the United States after importation ... neodymium-iron-boron magnets which infringe any of claims 1-3 of the '439 Patent, or articles or products which contain such magnets, except under consent or license from Crucible;

(2) The Respondents shall be precluded from seeking judicial review or otherwise challenging or contesting the validity of the Consent Order;

* * *

(4) Respondents San Huan, Ningbo, and Tridus shall not seek to challenge and are precluded from any challenges to the validity or enforceability of claims 1-3 of the '439 patent in any administrative or judicial proceeding to enforce the Consent Order;

* * *

(9) This investigation is hereby terminated with respect to San Huan, Ningbo and Tridus, and San Huan, Ningbo, and Tridus are hereby dismissed as named Respondents in this investigation; provided, however, that enforcement, modification, or revocation of the Consent Order shall be carried out pursuant to Subpart I of the Commission's Rules of Practice and Procedure, 19 C.F.R. Part 210.

Certain Neodymium-Iron-Boron Magnets, Magnet Alloys, and Articles Containing Same, Inv. No. 337-TA-372 (Int'l Trade Comm'n Oct. 11, 1995).

The investigation continued as to the five remaining respondents. The administrative law judge determined that there was violation of Section 337, Certain Neodymium-Iron-Boron Magnets, Magnet Alloys, and Articles Containing Same, USITC Pub. 2964, Inv. No. 337-TA-372 (May 1996) (Final Initial and Recommended Determinations, Dec. 11, 1995), finding that the '439 patent was infringed by certain of the imported magnets, either literally or under the doctrine of equivalents. The ALJ's Determinations duly became the holding of the Commission, in accordance with 19 C.F.R. § 210.42(h)(2); see Notice Not to Review Initial Determination, 61 Fed.Reg. 6863 (Feb. 22, 1996).

On March 4, 1996 YBM filed an enforcement complaint against San Huan, Ningbo, and Tridus, charging that they had violated the Consent Order by continuing to import and sell infringing magnets. The Commission referred the enforcement proceeding to the ALJ for a recommended determination consistent with the Commission's findings in the original investigation. The ALJ conducted a four-day evidentiary hearing, received briefs and arguments, and issued a 179-page Recommended Determination. Certain Neodymium-Iron-Boron Magnets, Magnet Alloys, and Articles Containing Same, Inv. No. 337-TA-372 (Int'l Trade Comm'n Jan. 17, 1997) (Recommended Determination). The ALJ held that San Huan, Ningbo, and Tridus had violated the Consent Order in bad faith by continuing unabated infringement after entering into the Consent Order. The ALJ recommended that the Commission impose an aggregate civil penalty ² of $1,625,000, based on violations of the Consent Order on The parties filed exceptions, and the Commission adopted the ALJ's recommended determinations with three exceptions. First, the Commission ruled that Maxwell v. J. Baker, Inc., 86 F.3d 1098, 39 USPQ2d 1001 (Fed.Cir.1996) precluded access to the doctrine of equivalents, a ruling that was reversed in YBM Magnex, Inc. v. Int'l Trade Comm'n, 145 F.3d 1317, 46 USPQ2d 1843 (Fed.Cir.1998). Second, the Commission held that the ALJ misconstrued the claim phrase "consisting essentially of in weight percent, 30 to 36 of at least one rare earth element." Because of this ruling, the Commission found no violation on one day for which the ALJ had recommended a determination of violation. Finally, the Commission determined that the date from which the San Huan respondents were required to cease importation and sales of magnets which infringed under the doctrine of equivalents was the date on which the public version of the final initial determination was issued, i.e., February 5, 1996. Because of this determination, the Commission found no violation on a second day for which the ALJ had recommended a determination of violation. Thus the Commission held that San Huan, Ningbo, and Tridus had violated the consent order on thirty-one of the thirty-three days recommended by the ALJ. After further proceedings on the issue and amount of the penalty, the Commission imposed on San Huan, Ningbo, and Tridus a civil penalty of $50,000 per violation day, for a total of $1,550,000.

thirty-three days of the period between October 11, 1995 and October 10, 1996.

San Huan, Ningbo, and Tridus (hereinafter collectively San Huan) bring this appeal, arguing that the Commission has no authority to impose civil penalties. San Huan also asserts that it has a right to a trial de novo in district court on the issues of law and fact relating to patent infringement and whether the Consent Order was violated, and the amount of any penalty. San Huan argues, alternatively, that even if it has no right to a trial de novo, the Commission has no authority to impose civil penalties for violation of a consent order, as opposed to violation of a cease and desist order. On this appeal San Huan challenges the Commission's findings of fact and conclusions of law in the original investigation. San Huan also argues that there was not substantial evidence to support the Commission's infringement determinations for certain imported magnets. San Huan argues that the amount of penalty imposed is constitutionally excessive and without reasoned basis. ³

DISCUSSION

I

San Huan states that the Commission has no authority to impose penalties for violation of a Commission order. San Huan states that although the Commission may find a violation and suggest a penalty amount, should San Huan choose not to pay the penalty then the Commission must bring an action in district court, where San Huan is entitled to trial de novo on the issues of fact and law relating to both liability and the amount of the penalty. San Huan states that 19 U.S.C. § 1337(f) so provides:

§ 337(f) Cease and desist orders; civil penalty for violation of orders.

(1) ... the Commission may issue and cause to be served on any person violating this section, or believed to be violating this section, as the case may be, an order directing such person to cease and desist from engaging in the unfair methods or acts involved ...

(2) Any person who violates an order issued by the Commission under paragraph (1) after it has become final shall forfeit and pay to the United States a civil penalty for each day on which an importation of articles, or their sale, occurs in violation of the order of not more than the greater of $100,000 or twice the domestic value of the articles entered or sold on such day in violation of the order. Such penalty shall accrue to the United States and may be recovered for the United States in a civil action brought by the Commission in the Federal District Court for the District of Columbia or for the district in which the violation occurs. In such actions, the United States district courts may issue mandatory injunctions incorporating the relief sought by the Commission as they deem appropriate in the enforcement of such final orders of the Commission.

(Emphasis added.)

The Commission and YBM state that the Commission plainly is authorized to assess a civil penalty, and that the action in district court is a collection action, not a trial de novo of the underlying case. The Commission states that the word "recover[ ]" in § 337(f)(2), see supra, means that a district court is the forum for recovery of the penalty, not determination of the amount of penalty. The Commission interprets the statute as providing a mechanism whereby the United States...