PUBLIC VERSION
`
`UNITED STATES INTERNATIONAL TRADE COMMISSION
`
`Washington, D.C.
`
`In the Matter of
`
`CERTAIN INDUSTRIAL AUTOMATION
`SYSTEMS AND COMPONENTS THEREOF
`INCLUDING CONTROL SYSTEMS,
`CONTROLLERS, VISUALIZATION
`HARDWARE, MOTION CONTROL
`SYSTEMS, NETWORKING EQUIPMENT,
`SAFETY DEVICES, AND POWER
`SUPPLIES
`
`'
`
`Inv. N0. 337-TA-1074
`
`'
`
`ORDER NO. 31:
`‘
`
`DENYING RESPONDENT RADWELL INTERNATIONAL, INC.’S
`MOTION FOR TERMINATION OF FRAUD OR
`MISREPRESENTATION CLAIM, OR, IN THE ALTERNATIVE,
`SUMMARY DETERMINATION OF NO FRAUD OR
`MISREPRESENTATION
`
`(June 27, 2018)
`
`I. BACKGROUND
`
`On October 16, 2017, the Commission instituted this investigation based on a complaint
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`by Rockwell Automation, Inc. (“Rockwell”) for alleged violations of section 337 “based upon
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`the importation into the United States, the sale for importation, and the sale Withinthe United
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`States after importation of certain industrial automation systems and components thereof
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`including control systems, controllers, visualization hardware, motion and motor control
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`systems, networking equipment, safety devices, and power supplies” under subsection (a)(1)(B)
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`and (C) of section 337 by reason of infringement of various copyrights and trademarks, and
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`under subsection (a)(l)(A) of section 337 “by reason of unfair methods of competition[] and
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`unfair acts, the threat or effect of which is to destroy or substantially injure an industry in the
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`

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`PUBLIC VERSION
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`United States.” 83 F.R. 48113-48114 (Oct. 16, 2017). Among other respondents, the complaint
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`names Radwell Intemational, Inc. (“Radwell”).
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`Among the allegations in its complaint, Rockwell claims that Radwell engaged in
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`misrepresentation and fraud in connection with sales in the United States of Rockwell products
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`purchased abroad. Rockwell alleges that Radwell has purchased Rockwell inventory from
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`Rockwell distributors overseas and sold the products thus acquired as “new” on the internet.
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`Comp. at 55. Rockwell alleges that “Radwell and itslagents were purposefully deceiving
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`Rockwell distributors overseas to obtain new Rockwell products.” Id.
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`In April 2015, “after receiving an authorized distributor’s complaint” about Radwell,
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`Rockwell allegedly set up a covert operation to confinn the facts alleged in the complaint. Id.
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`As set forth in the complaint, on April 10, 2015, a buyer in Memphis, Tennessee, “secretly acting
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`on behalf of Rockwell,” ordered a “uniquely configured, new Allen-Bradley® PowerFlex 70
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`from Radwell’s website.” Id. Two Weeks later, the complaint alleges, “a company called
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`Rochester Controls (Wuxi Branch) ordered a new Allen-Bradley® PowerFlex 70 —with
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`precisely the same unique configuration —from Rockwell’s Chinese distributor Witjoint.” Id.
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`Rockwell alleges that on April 29, 2015, “Witjoint placed an order with Rockwell for that
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`uniquely configured Allen-Bradley® PowerFlex 70.” Id. at 56.
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`When Rockwell received the order from Witjoint for equipment matching the unique
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`configuration of the item ordered by the buyer in Memphis, Rockwell inquired of Witjoint “what
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`the purpose was” for the order from Rochester Controls. Id. at 57. Witjoint allegedly responded
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`that Rochester Controls had “represented that it was for an industrial fiirnace project in China —a
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`project that if true would have qualified Rochester Controls for a deep discount on the price,”
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`Rockwell alleges. During this same time frame, Rockwell alleges further, “Radwell told the
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`PUBLIC VERSION
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`Memphis buyer that there was a shipping delay caused by ‘the factory.’” Id. Rockwell asserts
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`that it was able to track “the exact Allen-Bradley® PowerFlex 70 serial number —37462739 —
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`that was the subject” of the Rochester Controls order, from Rockwell’s warehouse in Illinois to
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`its receipt by the Memphis buyer. Id Rockwell alleges that the Memphis buyer thereafter
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`“received the product with a packing slip proving thatithe item came from Radwell.” Id. at 58.
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`RockWell’s complaint asserts that there are several misrepresentations involved in the
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`scenario described above, including that Rochester Controls was a fictitious company whose
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`address in China was an empty apartment (No. 5-3-804, Chang Jiang Bei Lu, Wuxi, Jiangsu,
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`China), and that the product, purportedly ordered for an industrial furnace project in China was
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`delivered to Radwell’s customer in Memphis. Id. at 58-59.
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`Rockwell asserts that but for RadWell’s“misrepresentations and fraud,” Rockwell would
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`have enforced its policies and agreement with its distributors, and the transaction described
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`above would not have happened. Rockwell asserts that there were other “fake” transactions
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`involving the allegedly fictitious Rochester concern, which “has ordered over a million dollars in
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`‘new’ Rockwell products from Witjoint over a two year period.” Id. at 59. Rockwell alleges
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`that, by obtaining Rockwell products overseas at deep discounts and then importing and selling
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`them in the United States, Radwell is able to sell the products in the U.S. for much less than the
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`price charged by Rockwell’s authorized distributors, resulting in “massive harm” “through price
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`erosion, revenue loss and other indicia of economic harm.” Id. at 59-60.
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`On May 25, 2018, Radwell filed a motion for termination of fraud or misrepresentation
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`claim, or, in the alternative, summary determination of no fraud or misrepresentation pursuant to
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`19 C.F.R. §§ 210.21 and 210.18. Motion Docket No. 1074-025 (the “motion”).
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`In the motion,
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`Radwell asserts that Rockwell has not shown that “the elements of fraud have been met” and that
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`V PUBLIC VERSION
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`dismissal therefore is required under Commission Rule 2lO.2l(a) (termination for good cause)'0r
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`210. 18(a) (summary determination). Motion at l-2. Radwell alleges a “complete failure of
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`»
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`proof as to the necessary elements of any fraud claim.” Motion Mem. at l. Radwell notes that
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`various elements of fraud must, in general, be pled with a degree of specificity not required for
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`other causes of action.
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`Radwell asserts that the evidence of a specific incident set forth by Rockwell in its
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`complaint is insufficient because Rockwell has “no evidence‘linking Radwell to Rochester,” the
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`allegedly fake company in China that ordered the PowerFlex 70. Radwell says there is no
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`“evidence of commtmications between Radwell and Rochester Controls Wuxi Branch or
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`Witjoint.” Id. at 13. Radwell asserts further that Rockwell has failed to contend that it has
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`suffered actual economic loss byreason of Radwell’s alleged unfair acts. Id. Radwell says
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`Rockwell does not show the requisite facts with respect to Radwe1l’s alleged receipt of discounts
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`intended by Rockwell for other customers.
`
`"
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`Staff opposes the motion. Staff says Radwell did not seek in its contention
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`interrogatories the disclosures it now tasks Rockwell with failing to make. “Radwell prejudiced
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`itself by failing to seek relevant discovery” from Rockwell, Staff asserts. Staff Response at 3-4.
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`Staff points to the specific details of the transaction involving Rochester Controls and says this
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`transaction is sufficient to support a finding of loss caused by misrepresentation and/or fraud.
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`II. DISCUSSION
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`Federal Rule of Civil Procedure 9(b) requires particularity when pleading fraud or
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`mistake, while allowing malice, intent, knowledge, and other conditions of a person’s mind to be
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`alleged generally. Ashcroft v. Iqbal, 556 U.S. 662, 686-87 (2009). “Where a complaint includes
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`allegations of fraud, Federal Rule of Civil Procedure 9(b) requires an account of the “‘time,
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`PUBLIC VERSION
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`place, and specific content of the false representations as well as the identities of the parties to
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`the misrepresentations.’” In re Verisign, Ina, Derivative Litig., 531 F. Supp. 2d 1173, 1187
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`(N.D. Cal. 2007) (quoting Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir.2007)). Under Rule
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`9(b), “‘allegations of fraud must be specific enough to give defendants notice of the particular
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`misconduct which is alleged to constitute the fraud charged so that they can defend against the
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`charge and not just deny that they have done anything wrong.” Id. (quoting Bly—Mageev.
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`California, 236 F.3d 1014, 1019 (9th Cir.2001)).'
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`In this instance, Rockwell has pleaded at least one instance of alleged fraud in which the
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`circumstances are specific and clear, including facts concerning the particular shipment, the
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`customer, the time of purchase, and the dollar amount involved. See Cooper v. Pickett, 137 F.3d
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`616, 627 (9th cit. 1997), cert denied 516 U.S. 810 (1995) (Overall, the complaint “identifies
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`the circumstances of the alleged fraud so that defendants can prepare an adequate answer.
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`2::
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`)
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`(quoting Warshaw v.Xoma C0rp., 74 F.3d 955, 960 (9th Cir. 1994)). If Rockwell cannot prove
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`any additional facts at hearing, there still will be an adequate factual basis to permit a fact finder
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`to infer that fraud has been connnitted.
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`V
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`Rockwell claimed in its responses to Radwell’s interrogatories that “Radwell has induced
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`its vendors to misrepresent to Rockwell and its Authorized Distributors the true purpose,
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`customer and destination for the products that it induces its vendors to purchase on its behalf”
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`1Radwell seeks dismissal under Cormnission Rule 210.21(a). The Commission has held that an
`ALJ may dismiss an insufficient complaint, as under Rule 12(b)(6), Fed. R. Civ. P. Certain
`Carbon and Alloy Steel Products, Inv. No. 337-TA-1002, Comm’n Op., at 8 (Mar. 27, 2017)
`(“[W]e agree [] that the Commission determination to institute an investigation does not preclude
`an ALJ from terminating a claim for failure to state a viable cause of action"). Radwell also has
`moved under Commission Rule 210.18(a), which is analogous to a motion for summary
`judgment under Rule 56, Fed. R. Civ. P. Certain Carbon and Alloy Steel Products, Inv. No.
`337-TA-1002, Initial Determination, 2017 WL 5167413 at *11, not reviewed by Commission
`Notice, 2017 WL 6434923 (Nov. 1, 2017).
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`PUBLIC VERSION
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`and that instances identified in the interrogatory responses “resulted in damage to Complainant.”
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`See Opp. at 16-17 (citing Mot. Ex. 3 at 26). While the precise amount of loss may not be
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`specified in the interrogatory response, there can be no question that Rockwell claims damage i
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`resulting from Radwell’s use of discounts that it knew wereintended for other parties, as in the
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`specific example alleged.
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`In particular, as to pecuniary loss, Rockwell has contended from the outset that it has
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`suffered pecuniary harm. Compl. at 60. In interrogatory responses, Rockwell supplied a
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`conservative “estimate of lost sales to gray market products in the United States” of around K
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`annually,andRockwellcomputedthe allegedloss
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`-
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`~
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`Oppat17-18(citingMotE><-3at
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`77-78). Rockwell thus has alleged facts from which it may be inferred reasonably that loss due
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`to alleged fraud has occurred.
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`If it tums out that Rockwell is unable to sustain its burden with respect to the facts
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`alleged in support of its fraud claim, R0ckwell’s claim will fail. But the determination whether
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`particular facts alleged by Rockwell are proven more likely than not must await the outcome of
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`the hearing.
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`Radwell’s arguments rely heavily on the decision in Certain Carbon and Steel Alloy, Inv.
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`No. 337~1002, but that investigation involved a different situation. In Carbon and Steel Alloy,
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`the complainant did not allege even one specific importation of an accused product by any
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`manufacturer respondent. Certain Carbon and Steel Alloy, Inv. No. 337-TA-1002, Initial
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`Determination, 2017 WL 5167413 at *19, not reviewed by Commission Notice, 2017 WL
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`6434923 (Nov. 1, 2017). Here, the complainant has alleged at least one such importation by
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`PUBLIC VERSION
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`Radwell and has provided information as to RadWell’s alleged activities from which more such
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`importations may be ‘inferred.
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`III. CONCLUSION
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`‘
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`Based on the foregoing, Motion Docket N0. 1074-025 is hereby DENIED.
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`This order is being issued with a confidential designation, and pursuant to Ground Rule
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`1.10, each party shall submit to the Administrative Law Judge a statement as to whether or not it
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`seeks to have any portion of this order deleted from the public version within seven (7) days.
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`See l9 C.F.R. § 2lO.5(f). A party seeking to have a portion of the order deleted from the public
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`version thereof must attach to its submissionia copy of the order with red brackets indicating the
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`portion(s) asserted to contain confidential business information.2 The parties’ submissions U11d€I'
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`this subsection need not be filed with the Commission Secretary but shall be submitted by paper
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`copy to the Administrative Law Judge and by e-mail to the Administrative Law Judgeis attorney
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`advisor.
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`SO ORDERED.
`
`A
`
`.
`
`Dee Lord
`Administrative Law Judge
`
`2 Redactions should be limited to avoid depriving the public of the basis for understanding the _
`result and reasoning underlying the decision. Parties who submit excessive redactions may be
`required to provide an additional written statement, supported by declarations from individuals
`with personal knowledge, justifying each proposed redaction and specifically explaining why the
`information sought to be redacted meets the definition for confidential business information set
`forth in Commission Rule 20l.6(a). 19 C.F.R. § 20l.6(a).
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`7
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`

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`CERTAIN INDUSTRIAL AUTOMATION SYSTEMS AND
`COMPONENTS THEREOF INCLUDING CONTROL
`SYSTEMS, CONTROLLERS, VISUALIZATION
`HARDWARE, MOTION CONTROL SYSTEMS,
`NETWORKING EQUIPMENT, SAFETY DEVICES, AND
`POVVERSUPPLIES
`
`PUBLIC CERTIFICATE OF SERVICE
`
`Inv. No. 337-TA-1074
`'
`
`I, Lisa R. Barton, hereby certify that the attached ORDER has been served by hand upon
`the Commission Investigative Attoniey, Brian Koo, Esq., and the following parties as indicated,
`on 7/17/2018
`
`LisaR Barton, ecretary
`U.S. International Trade Commission
`500 E Street, SW, Room 112
`Washington, DC 20436
`
`On Behalf of Complainants Rockwell Automation, Inc.:
`
`Adam D. Swain
`ALSTON & BIRD LLP
`950 F Street NW
`Washington, DC 20004
`
`On Behalf of Respondent Radwell International
`d/b/a PLC Center:
`
`Deanna Tanner Okun
`ADDUCI, MASTRIANI & SCHAUMBERG LLP
`1133 Connecticut Ave., NW
`Washington, DC 20036
`
`Respondents:
`
`Can Electric Limited
`N0. 2 Danan Rd, Yueziu District
`Guangzhou, Guangdong, 510115
`China
`
`Capnil (HK) Company Limited
`Unit 603 6/F Koon Wah Mirrow
`Factory 3 Ind Bldg 5-9 Ka Hing
`Rd Kln Hk
`Hong Kong
`
`III Via Hand Delivery
`@’Via Express Delivery
`U Via First Class Mail
`El Other:
`~ »
`
`U Via Hand Delivery
`E/Via Express Delivery
`U Via First Class Mail
`U Other:
`
`U V'a Hand Delivery
`Lwia Express Delivery
`U Via First Class Mail
`l:| Other:
`
`ya HandDelivery
`Via Express Delivery
`U Via First Class Mail
`U Other:
`
`

`

`CERTAIN INDUSTRIAL AUTOMATION SYSTEMS AND
`COMPONENTS THEREOF INCLUDING CONTROL
`SYSTEMS, CONTROLLERS, VISUALIZATION
`HARDWARE, MOTION CONTROL SYSTEMS,
`NETWORKING EQUIPMENT, SAFETY DEVICES, AND
`POWER SUPPLIES
`
`Inv. N0. 337-TA-1074
`
`Certificate of Service ~ Page 2
`
`Fujian Dahong Trade Co., Ltd. ,
`A15-2303 Taihongyu Pushang Road
`Cangshan Fuzhou Fujian
`Fujian 350008
`China
`
`.
`
`Huang Wei Feng d/b/a A-O-M Industry
`Room 201 No.55 2 Qu;
`Tdngshuiwei, Minzhi,
`Longhua, Boa’An, Shenzhen 511700
`China
`
`PLC-VIP Shop d/b/a VIP Tech Limited
`95 Fuk Wing Street,
`Cheung Sha Wan, Kowloon .
`Hong Kong
`
`Wenzhou Sparker Group C0. Ltd.
`d/b/a Sparker Instruments
`Room 503, Oujiang Masion, Wenzhou Road,
`Wenzhou, 325000, China
`
`Yaspro Electronics (Shanghai) Co., Ltd.
`Room 1808E,,No. 488, Vaohua Road
`Pudong New District
`Shanghai, China
`
`U Via Hand Delivery
`E4/ia Express Delivery
`U Via First Class Mail
`E Other:
`
`III Via Hand Delivery
`El/Via Express Delivery
`U Via First Class Mail
`U Other:
`
`U Via Hand Delivery
`H/Via Express Delivery
`Cl Via First Class Mail
`El Other:
`
`U Via Hand Delivery
`H/Via Express Delivery
`U Via First Class Mail
`U Other:
`
`U Via Hand Delivery
`[Y(ViaExpress Delivery
`[1 Via First Class Mail
`U Other:
`
`­
`