While the overwhelming majority of Section 337 investigations at the U.S. International Trade Commission involve patent infringement claims, the ITC is empowered to prohibit an extremely broad set of unfair trade practices and unfair methods of competition. In fact, courts have noted that Section 337 is "broad enough to prevent every type and form of unfair practice" associated with the importation of goods into the United States. On this episode of Talkin' Trade, Ropes & Gray IP litigators Matt Rizzolo, Cassandra Roth, Matt Shapiro, and Brendan McLaughlin discuss the wide variety of claims that may be brought under this subsection of the statute and address some unique aspects of how the ITC adjudicates them.
Transcript:
Matt Rizzolo: Welcome back to Talkin' Trade, a podcast where we explore the ins and outs of Section 337 investigations at the U.S. International Trade Commission. I'm Matt Rizzolo, and with me today are my fellow Ropes & Gray IP attorneys Matt Shapiro, Brendan McLaughlin, and—making her Talkin' Trade debut—Cassandra Roth. Glad to have everyone here.
In the last 15 years, the ITC has become an increasingly important forum for patent litigation, and a popular choice for many patent owners. However, the ITC is not merely a patent litigation forum—as Commissioners and ALJs are quick to remind folks, it is a trade forum. On this episode, we're going to spend some time talking about the variety of so-called "non-statutory claims" that can be brought under Section 337(a)(1)(A). But before we do that, Brendan, what's new at the Commission?
Brendan McLaughlin: Thanks, Matt. It's been a little while since our last episode, but since the beginning of April, the Commission has only received seven new complaints, and it has instituted only 11 new investigations. ALJs have issued public final initial determinations (FIDs) in the -1304, -1288, -1293, and -1308 investigations. And the Commission has issued three new opinions in the -1252, -1281, and -1185 investigations. But there have been some interesting developments worth noting. First, in the -1313 investigation, respondent Hugel filed a motion to terminate based upon both parties' failure to obtain discovery out of Korea due to the governmental restrictions. These restrictions caused several delays to the procedural schedule, and Hugel argued that the investigation should have been terminated, or at the very least, stayed until the parties obtained the sought after discovery. The ALJ ultimately denied the motion as moot because the Korean regulatory authority allowed the discovery, but this was an interesting theory—and it provides a good example of some of the complications that can come from foreign discovery.
Next, the Commission instituted a rare 100-day proceeding in the -1352 investigation, ordering an early initial determination to determine whether the complainant, who alleged trade secret misappropriation, could satisfy the domestic industry and injury portions of the statute. However, CALJ Cheney declined to issue an initial determination at the end of the 100-days because the respondent failed to produce discovery in violation of one of the CALJ's orders and indisputably prejudiced the complainant. He further noted that "[t]he stated purpose of an expedited 100-day proceeding is to allow for the early resolution of a potentially case-dispositive issue, which in turn could potentially avoid the costs and burdens of litigating all issues in an investigation. But due to [respondent's] actions, any savings contemplated by the 100-day proceeding in this investigation have been frustrated." The upshot of the CALJ's decision is that you should not request entry into the 100-day program unless you're ready to move really quickly (but, in this case, it's also worth noting that the Commission placed this investigation into the 100-day program even though respondent did not request doing so).
Finally, there was a really interesting Order out of D.C. District Court, in Sidak v. ITC, regarding the constitutionality of ALJ appointments prior to 2018. Sidak had served as an expert for complainant Qualcomm in the -1066 investigation, and he claimed that the ALJ presiding over the investigation made "unjustified and injudicious comments" about him that damaged his reputation. After the investigation ended and the parties to the investigation settled the dispute, Sidak filed FOIA requests to unseal redacted sections of the transcript. The ITC denied these requests, and then notified Sidak that it was launching a sanctions proceeding to investigate a possible breach of the -1066 protective order because his FOIA requests included pin point citations, indicating that he might not have destroyed confidential information once the investigation ended. After some back-and-forth with the Commission, Sidak filed a complaint with D.C. District Court and requested an injunction barring the sanctions proceeding because, at the time, ALJ Pender entered the protective order in the investigation, he had been unconstitutionally appointed. The Commission conceded this point, and the Court found that dispositive. There's a lot more to this Order worth checking out—and as far as legal opinions go, it's a pretty fun read. We'll include a link with the transcript.
Matt, any further thoughts?
Matt Rizzolo: Thanks, Brendan. That Sidak opinion really is fascinating, and, as you said, it's a fun read—and it could arguably call into question all exclusion orders that were issued by the Commission before the Commission fixed its ALJ Appointments Clause issue back in 2018. Many of those exclusion orders are still in effect today, but we may discuss this some more in a future episode.
I also wanted to briefly note that there is ITC-related legislation now pending on Capitol Hill—the Advancing America's Interests Act, which aims to restrict non-practicing entity access to the ITC, was re-introduced to the House this spring. I think this is the third time we've seen this bill be introduced in the last few years—we'll see if it fares any better this time around.
Now, onto today's main topic: so-called "non-statutory claims" brought under 337(a)(1)(A). Matt Shapiro, what is the significance of these types of claims as opposed to the statutory IP claims, such as patent infringement, copyright infringement or trademark infringement?
Matt Shapiro: As we've discussed on prior episodes, Section 337 recites a set of statutory IP claims, including the ones you just named: infringement of patents, copyrights, trademarks, etc. For these statutory IP claims, a complainant is required to satisfy the domestic industry requirement. But a different portion of the statute, Section 337(a)(1)(A), permits a complainant to assert claims for "unfair methods of competition and unfair acts in the importation of articles." These (a)(1)(A) claims are sometimes referred to as "non-statutory claims" because the permitted causes of action are not spelled out in Section 337. And unlike statutory IP claims, non-statutory claims do not require a complainant to satisfy the technical prong of the domestic industry requirement. Instead, a complainant is required to show one of the following: (i) an injury to the domestic industry, (ii) the prevention of the establishment of a domestic industry, or (iii) the restraint of trade or commerce in the United States.
Matt Rizzolo: This portion of the statute really sounds incredibly broad. Can you tell us what types of claims it actually captures?
Matt Shapiro: Under (a)(1)(A), the Commission has considered a broad range of claims, such as trade secret misappropriation, common law trademark infringement, Lanham Act violations, and antitrust law. Such claims make up roughly 10% of the claims that are brought at the ITC in recent years.
But it's important to note that these are merely examples—the Commission has not applied a strict limiting principle to the types of claims that it may consider under (a)(1)(A)—and courts have noted that this provision is "broad enough to prevent every type and form of unfair practice."
Matt Rizzolo: That statement you quoted actually comes from the legislative history surrounding Section 337—that's something we'll get into in a bit. But for now, let's focus on trade secret misappropriation cases you mentioned—in recent years, those have been the most common type of (a)(1)(A) claims. What can you tell us about those?
Matt Shapiro: As you said, ITC trade secret misappropriation claims have grown tremendously over the past decade and are likely to continue to grow.
Now, a little context is important here. Unlike patent law, prior to 2016 there was no federal law governing civil claims for trade secret misappropriation and such claims were subject to state laws and regulations.
As the ITC must look to existing law to determine the scope of claims under (a)(1)(A), this naturally led to the question of: Which state laws control at the ITC? Back in 2011, the Federal Circuit answered this question in its seminal TianRui decision, and the answer is: no state's law controls. Instead, the Federal Circuit found that a single federal standard should be applied to claims of trade secret misappropriation at the ITC. The Court went on and held that this federal standard should be derived from sources such as the Restatement of Unfair Competition, the Uniform Trade Secrets Act, and the federal criminal statute governing the theft of trade secrets.
In 2016, Congress passed the Defend Trade Secrets Act, and after its passage, the Commission has also considered how federal courts have applied the Act to civil actions when adjudicating trade secret claims.
Matt Rizzolo: While TianRui provided some needed clarity in interpreting Section 337, it really wasn't all that shocking—and it did not substantially change how the Commission decided trade secret cases. As the Federal Circuit acknowledged in that decision, trade secret law ultimately varies little state to state. But, perhaps more critically, the Federal Circuit found that a "federal standard" applies to all (a)(1)(A) claims, not just trade secret misappropriation claims. That seems to be at least some significant limit on possible (a)(1)(A) claims. Is there anything else worth noting in TianRui?
Matt Shapiro: Yes, it actually addresses a really important and interesting question on extraterritoriality under (a)(1)(A). So, we know that a patent infringement claim at the ITC is based upon federal patent law, which requires that infringement must occur in the United States. But the same is not necessarily true for trade secret misappropriation or other types of "unfair methods of competition."
As the Federal Circuit reiterated in TianRui, legislation is presumed to apply only within the territorial jurisdiction of the United States, unless a contrary intent appears. The Court determined that Section 337 includes such a contrary intent because it concerns unfair acts "in the importation of articles" and it is not used to sanction purely domestic conduct because the extraterritorial conduct results in a domestic industry.
Essentially, the Court found that the actual unfair method of competition or unfair act does not necessarily need to occur in the United States—instead, the unfair methods of competition or unfair acts may occur entirely abroad so long as they concern the importation of articles and fulfill other statutory requirements, such as causing an injury to a domestic industry.
And the Commission somewhat recently addressed the interplay between extraterritorial acts and the domestic industry in the -1145 investigation, finding that the requirements of Section 337 are satisfied if the importation injures a domestic industry, even if the industry is not directly linked to the alleged unfair act.
Matt Rizzolo: This aspect of TianRui was a significant development, and it opened the door to considering different types of conduct that might violate Section 337 (a)(1)(A)—we'll get to that in a couple of minutes. We could easily do a whole episode just on trade secret misappropriation at the ITC, but I think we'll hold it here for now. Note that anybody who's looking for good reading on ITC trade secret misappropriation claims should look to the Commission's decision in the -1145 investigation (Certain Botulinum Toxin Products) and its interpretation of TianRui there.
Moving on—Cassandra, what can you tell us about some of the other types of (a)(1)(A) claims at the Commission?
Cassandra Roth: As Matt mentioned earlier, the Commission has already recognized quite a few different types of causes of action.
First, the Commission recognizes claims of common law trademark infringement. But typically, a complainant asserts such claims along with claims of infringement of a federally registered trademark under 337(a)(1)(C)—that's an example of a statutory IP claim under Section 337—so, there is not much remarkable about common law trademark infringement under (a)(1)(A).
Much more interesting are claims that fall within other parts of the Lanham Act, including trade dress infringement, trademark dilution, false advertising, and false designation of origin to name a few. Complaints asserting such claims are less common, but they are not unheard of. For example, in the -1132 investigation, the Commission found respondents infringed the Jeep trade dress and issued exclusion and cease and desist orders.
Matt Rizzolo: It's true that these types of investigations may be less common, but it goes to show the breadth of (a)(1)(A) claims—arguably, any cognizable Lanham Act claim can also be brought at the ITC, as long as other Section 337 requirements, such as importation and domestic industry, are met.
What else do you have for us, Cassandra?
Cassandra Roth: One rare type of (a)(1)(A) claim is violation of Federal antitrust laws. These come up maybe once every few years, but when it does, it's always worth monitoring. For the Commission's latest word on antitrust, check out its opinion in the -1002 investigation, which illuminates the standards applied in Section 337 investigations to antitrust claims, and provides helpful guidance to Section 337(a)(1)(A) in general.
In that -1002 investigation, the Commission found that a complainant alleging a violation of Section 337 based on the Sherman Act, Section 1 specifically, needs to allege so-called "antitrust injury" in addition to fulfilling Section 337's domestic industry requirement. The complainant conceded that it would not be able to allege an antitrust injury because, as their counsel put it, the "standard is virtually impossible to satisfy in Federal Court...and the reality is that we couldn't."
Matt Rizzolo: Like you said, antitrust-based investigations at the Commission are really rare, and I think the direct practical implication of the Commission's Opinion in the -1002 investigation may be somewhat limited. But I completely agree that the opinion there provides tremendous insight into (a)(1)(A) generally, and what a complainant needs to do to adequately plead such a claim and build a case.
On that note, now that we know of some of the types of claims that have been brought under (a)(1)(A), are there any clear limits on what types of claims can't be brought under this subsection?
Cassandra Roth: The one area where the ITC has drawn a hard line is where complainants have alleged violations of the Food, Drug, and Cosmetics Act (FDCA). The ITC has said that because the FDA has exclusive authority to enforce the provisions of the FDCA, a complainant can't bring an ITC action based on a violation of that act. But other than that, no. In fact, some have argued that the Commission's authority is much, much more expansive than has been realized to date. For example, could a complainant use (a)(1)(A) to push a social agenda based on unfair acts, such as the use of child labor to produce goods?
I'd also encourage our listeners to check out an article we published a few months ago in Law360, discussing the intersection between the FTC's consumer protection role and the ITC's Section 337 role. Sometimes, the ITC looks to FTC's industry guidance when considering Lanham Act false advertising claims.
Matt Rizzolo: Yes, as the Federal Circuit explained in TianRui, the ITC's and the FTC's statutory language mirror each other in that they both prohibit "unfair methods of competition." On the one hand, the FTC, by statute, is allowed to make rules and issue guidance on what it believes constitute "unfair methods of competition," and on the other, the ITC does not have such authority and must look to common law. Given that Section 337 requires the ITC to consult with the FTC during investigations, it seems natural that the ITC should seriously consider how to apply the FTC's guidance in at least some (a)(1)(A) claims.
But turning back to Cassandra's main point, it sounds as though there are very few limits on the types of (a)(1)(A) claims that a complainant can bring at the ITC. So, the question is: Why aren't more claims brought?
Matt Shapiro: One of the big reasons is likely the domestic industry and injury requirements for (a)(1)(A) claims—that's what we touched upon earlier and on a previous episode.
A complainant asserting an (a)(1)(A) claim needs to show "injury" to the domestic industry—in other words, that the domestic industry has been substantially injured or destroyed by the unfair acts. This can be shown through, as examples, loss of profits, price erosion, or loss of employment. Depending on the case and the facts involved, this "injury" question can be very complex by itself and is possibly one of the biggest deterrents to filing a Section 337(a)(1)(A) complaint.
On the other hand, there are some potential benefits to asserting a non-statutory claim instead of (or in addition to) a statutory claim.
First, because there's no technical prong requirement, a trade secret complainant doesn't need to show that it actually practices or uses the trade secrets at issue. For further reading on this point, it's a good idea to check out the Commission's opinion in the -1145 investigation.
Second, domestic industry investments don't need to fall into one of the specific "buckets," such as plant and equipment, labor and capital, or research/development and engineering, as is required for statutory claims. Instead, the investments just need to be such that they go beyond a "mere importer"—for example, they're more than just basic sales and marketing activities.
Matt Rizzolo: Right—as always, the domestic industry requirement makes issues much more complicated than they may appear at first blush. That takes us to the end of today's episode of Talkin' Trade. Thanks all for joining me—Cassandra, thanks especially for your first time on the podcast. To all of our listeners, you can find this podcast and other Ropes & Gray podcasts on Apple Podcasts, Spotify, or ropesgray.com/podcasts. I'm Matt Rizzolo, and on behalf of Matt Shapiro, Brendan McLaughlin, and Cassandra Roth, thank you all for listening.
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