The U.S. International Trade Commission is the federal agency tasked with investigating violations of Section 337 of the Tariff Act of 1930, which prohibits unfair methods of competition and unfair acts in the importation of articles into the United States.1 Although the ITC does not have authority to impose monetary sanctions if a violation of Section 337 is found, if it finds during an investigation that certain imported goods would injure a domestic industry or infringe a valid registered intellectual property right, the commission has the extraordinary power to slam the gate on said imports: that is, it can exclude goods at the border or before they enter U.S. commerce.

Partly due to this extraordinary power, the frequency of Section 337 investigations has increased significantly in past years. And the ITC continues to be a popular venue despite recent legal precedent establishing a more stringent test for licensing entities to qualify for relief at the ITC. Parties including Apple Inc. and Samsung Electronics Co. Ltd. have recently taken their IP battles to the ITC for resolution, apparently to benefit from the advantages the ITC has over the district courts — not least of which is its expedited adjudication process.

While Section 337 was designed to cover a broad range of unfair acts, investigations based on infringement of U.S. intellectual property rights became the most popular type of investigation over time, and patent infringement actions predominate over all others. Unlike patent infringement litigation in district courts, the statute that establishes the purview of the commission requires complainants to show not only that imported articles infringe a valid patent, but also that a domestic industry exists or is in the process of being established with respect to articles protected by the patent or exploiting the patent. Historically, the domestic industry requirement in the statute has played a central role in Section 337 investigations; complainants typically meet this requirement by showing significant investments in domestic manufacture of products that practice an asserted patent, or investments in licensing or research and development that exploit the patent.

Specifically with respect to licensing-based domestic industries, the commission has clarified in the past few years the legal standard applicable to complainants who base their domestic industry allegations on activities directed to licensing an entire patent portfolio as opposed to the individual asserted patents. In 2011, in its Navigation Devices investigation, the commission laid out a nonexclusive list of factors for evaluating the strength of the connection between portfolio-wide licensing activities and a patent asserted in an investigation, including whether the patent is prominent in licensing negotiations or valuable to the complainant's portfolio.2

Later in 2012, in the Semiconductor Chips investigation, the commission clarified that a complainant that relies on portfolio-wide activities to argue that a domestic industry exists must not only prove an adequate connection between those portfolio-wide activities and an asserted patent, but must also provide sufficient evidence regarding the portion of its investments in such activities that are properly attributable to licensing the patent, so the commission can evaluate whether the investments are substantial as required by the statute.3

Despite this recent precedent, inasmuch as it sets forth a stricter interpretation of the domestic industry requirement for licensing-based domestic industries, the ITC remains an attractive forum for patent owners. The commission recently confirmed in its Kinesiotherapy Devices investigation4 that the standard for qualification as a domestic industry for engineering, research and development, and production-related activity in the United States is quite relaxed. Moreover, unlike district court patent-infringement cases that may take years before trial or other dispute resolution, Section 337 investigations are statutorily required to be completed as early as practicable.5 An evidentiary hearing in an ITC investigation will occur generally within 11 months of a complaint being filed, and a final decision is generally issued within 15 to 18 months after filing.

This relatively prompt adjudication process — one characteristic of Section 337 investigations — is particularly advantageous to complainants in industries where technology evolves rapidly and the pace of competitors' innovation dictates whether companies realize a market advantage on new ideas quickly. Reflecting this, computer and telecommunications products accounted for about 25 percent of new investigations instituted in calendar year 2011 and about 30 percent of new investigations in 2012.6

The ITC is an attractive venue for another reason as well: The traditional four-part test for proving "irreparable harm," as laid out by the U.S. Supreme Court in eBayv. MercExchange,7 does not apply to remedy determinations at the ITC.8 Unlike in district court, complainants at the ITC do not have to prove irreparable harm to obtain an exclusion order banning importation of infringing articles. Since the eBay decision, roughly 20 percent of Section 337 investigations have been instituted based on a complaint filed by licensing entities that do not manufacture products that practice the patents, including patent-holding companies, inventors and research institutions.9

The ITC also has nationwide jurisdiction over IP infringement claims brought before it involving imports. This can be a huge advantage when dealing with an accused infringer over whom some district courts might not have jurisdiction. Because the ITC's jurisdiction is in rem over the imported article, it does not face the same jurisdictional limitations as the district courts.

The ITC also can serve as a forum in which the owner of an intellectual property right can enforce all of its IP rights against multiple accused infringers in a single proceeding. Local rules in many jurisdictions inhibit this type of action; since passage of the America Invents Act, these sorts of proceedings are significantly constrained in district courts, and judges' orders can limit them also. In contrast, multiple respondents can be named in an ITC complaint even if the respondents are unrelated to each other and have distinct imported articles for which separate and distinct bases of infringement must be demonstrated. Moreover, the ITC places no limits on the number of patents and patent claims a complainant may assert in an investigation, unlike what is being proposed by the Federal Circuit Advisory Council in the model order limiting excess patent claims and prior art.10

The ITC's broad scope of discovery also serves as an advantage over federal courts for IP owners seeking redress for infringement by imports. Only recently did the ITC implement new rules limiting certain electronic discovery and imposed limitations on depositions and interrogatories, and its new restrictions now allow the ITC's administrative law judges to impose limits on requests for certain e-discovery if the information sought is not reasonably accessible because of undue burden or cost.11

However, these new restrictions are much less limiting than those existing in district court, and for the most part, the ITC's new e-discovery rules simply place it in harmony with some of the many restrictions that have existed for some time in district courts. They certainly are less limiting than the Federal Circuit Advisory Council's e-discovery model order.12

To give an example: Federal procedure rules limit depositions to 10 per side and no longer in duration than seven hours each. But the ITC's new rules limit a complainant to a maximum of five fact depositions per respondent or no more than 20 fact depositions in multiple-respondent proceedings, whichever is greater, and limit a respondents as a group to a maximum of 20 fact depositions total.13 Federal rules limit a party to only 25 interrogatory requests; but the ITC's new rules restrict a party to 175 interrogatory requests. Moreover, the ITC places no limit on the number of requests for production of documents and things or requests for admission that a party may serve and does not constrain the number of subpoenas that it will issue to third parties.

The vetting process conducted by decision-makers inside the ITC also can offer a significant advantage over the district courts. Unlike in district court where only the judge and jury decide the case, at the ITC, an initial determination is made by the administrative law judge assigned to the case and then reviewed by the six commissioners. The commissioners are aided in their tasks by the Office of General Counsel's attorney and the supervisory attorney assigned to the investigation, as well as by the commissioners' own attorney-adviser. An attorney from the Office of Unfair Import Investigations also participates in the proceeding, taking part in discovery, filing papers and taking positions on behalf of the public interest on most issues in the proceeding.

In sum, due not only to its ability to provide injunctive relief quickly through an import ban but also to the speed with which decisions get made and procedural rules that favor complainants, the ITC remains an attractive forum for enforcing IP rights against infringing imports and can be used by any U.S. IP owner, so long as it can meet the ITC's requirements for a domestic industry.

Originally published in Law360, New York (August 08, 2013, 12:52 PM ET)

Footnotes

1. 19 U.S.C. § 1337(a)(1)(A).

2. Certain Multimedia Display & Navigation Devices & Systems, Components Thereof, & Products Containing Same, Inv. No. 337-TA-694, Comm'n Op. at 9-11 (Aug. 8, 2011). These factors include: (1) the number of patents in the portfolio, (2) the relative value contributed by the asserted patent to the portfolio, (3) the prominence of the asserted patent in licensing discussions, negotiations and any resulting license agreement, and (4) the scope of technology covered by the portfolio compared to the scope of the asserted patent. Id. at 10. With respect to the second factor—the relative value contributed by the asserted patent to the portfolio—the Commission may consider whether the asserted patent (1) was discussed during the licensing negotiation process, (2) has been successfully litigated before by the complainant, (3) relates to a technology industry standard, (4) is a base patent or a pioneering patent, (5) is infringed or practiced in the United States, or (6) the market recognizes its value in some other way. Id. at 10-11.

3. Certain Semiconductor Chips and Prods. Containing Same, Inv. No. 337-TA-753, Comm'n Op. at 46-49 (Aug. 17, 2012). See also Certain Integrated Circuits, Chipsets, and Products Containing Same Including Televisions, Inv. No. 337-TA-786, Comm'n Op. at 28-30 (Oct. 10, 2012).

4. Certain Kinesiotherapy Devices and Components Thereof, Inv. No. 337-TA-823, Comm'n Op. at 21-35 (July 12, 2013).

5. 19 U.S.C. § 1337(b)(1).

6. U.S. international Trade Commission, Facts and Trends Regarding USITC Section 337 Investigations (Apr. 15, 2013) (available at http://www.usitc.gov/press_room/documents/featured_news/sec337factsupdate.pdf) ("Facts and Trends")

7. eBay Inc. v. MercExchange LLC, 547 U.S. 388 (20060.

8. Spansion Inc. v. Int'l Trade Commission, 629 F.3d 1331 (Fed. Cir. 2010).

9. USITC Facts and Trends, at 2.

10. http://www.cafc.uscourts.gov/images/stories/the-court/Excess%20Claims%20Model%20Order.pdf

11. 78 Fed. Reg. 29618 (May 21, 2013).

12. http://www.cafc.uscourts.gov/images/stories/announcements/Ediscovery_Model_Order.pdf

13. 78 Fed. Reg. 23474 (Apr. 19, 2103).

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