ITC Section 337 Investigations: An Alternative Battleground AIPLA Corporate Practice Committee DeAnn F. Smith, Esq.

Overview of the ITC Independent federal agency that investigates the impact of imports on US industries Six Commissioners Washington, DC Not Political (Equal Party Split) Six Administrative Law Judges Office of Unfair Import Investigations General Counsel

Overview of the ITC The Commission Bipartisan group of Six Commissioners, Appointed by President and Confirmed by Senate Vote on institution of a Sec. 337 investigation Review Decisions of the Administrative Law Judge Issue Final Decision, including exclusion or cease and desist order

Overview of the ITC Six Administrative Law Judges (ALJ) Preside over Section 337 Actions Oversee discovery, issue orders that may be enforced in District Court if needed Hold evidentiary hearings Issue Initial Determination on the merits of a case, including recommendation on remedy and bonding

Overview of the ITC Office of Unfair Import Investigations (OUII)) Independent party to Section 337 Actions Recommend to Commission whether to institute an investigation Thereafter participate in case as a party representing the public interest

An Increasingly Popular Forum for Patentees… Source: U.S. Int’l Trade Comm’n, “USITC Section 337 Investigations – Facts and Trends Regarding Caseload and Parties” (June 2014), available at http://www.usitc.gov/press_room/documents/featured_news/337facts.pdf

Coverage of Section 337 “Unfair methods of competition and unfair acts in the importation of articles…into the United States” Since 1922 1988 AMENDMENT Specified infringement of patents, registered trademarks, copyrights and registered semiconductor mask works Expanded domestic industry test Eliminated injury test

Proving Violation of Section 337 In order to prove a violation of Section 337, the Complainant must show: Infringement of a valid, enforceable intellectual property right Importation, sale for importation, or sale after importation Relevant domestic industry

Overview of ITC Proceedings Procedures All legal and equitable defenses are available. Counterclaims may be filed but are automatically removed to federal district court. Bench trial. ALJs with considerable patent experience, though generally not in biotech. Speedy: Initial determination by an ALJ within 10-12 months, Commission opinion and remedial order issued within 14-16 months, and review by president within 16-18 months. Losing party can appeal to the Federal Circuit.

Overview of ITC Proceedings Procedures Broad discovery (including international if parties are ex-U.S.). Recent (2013) amendments to ITC rules more align ITC discovery practice with federal district court practice with respect to e-discovery and limiting duplicative or overly burdensome discovery. ITC decisions have no preclusive effect in district court. Parallel district court proceedings are possible. Respondents have a right to a statutory stay of a parallel district court case. Active participation of government through the Office of Unfair Import Investigations. Can result in a powerful ally (or adversary)

Proving a Section 337 Violation To show a violation of Section 337 under a patent infringement theory, a Complainant must prove: Infringement: Articles that infringe a patent or which are produced by means of a process covered by a patent; Importation: An importation, sale for importation or sale after importation of the articles; and Domestic Industry: A domestic industry exists (or is in the process of being established). 19 U.S.C. §§ 1337(a)(1)(B) and 1337(a)(2).

Domestic Industry Requirement Complainant must prove a domestic industry exists (or is in the process of being established). Economic prong. With respect to products protected by the patent any of: Significant investment in plant and equipment; Significant employment of labor or capital; or Substantial investment in exploitation, including engineering, R&D, or licensing Technical prong: Complainant or a licensee is practicing at least one claim of the patent with respect to the economic prong activity. 19 U.S.C. § 1337(a)(3). Economic prong turns on whether investment was “significant”/“substantial”

Domestic Industry Requirement: Economic Prong How to meet the economic prong: Requires a showing of a significant / substantial domestic investment Activities of licensees are relevant. In re Certain Variable Speed Wind Turbines and Components Thereof, 337-TA-376, ITC Pub. No. 3072, 1997 ITC LEXIS 382 at *20 (1997) Investments in litigation generally are not considered. John Mezzalingua Assocs. v. ITC, 660 F.3d 1322 (Fed. Cir. 2011) Only litigation activities specifically “directed toward” licensing count. E.g., offers to license, cease and desist letters, settlement or licensing negotiations during a lawsuit.

Domestic Industry Requirement: Technical Prong How to meet the technical prong: Complainant’s economic prong activity (or that of its licensee) must be directed to a product that practices at least one claim of the asserted patent (does not need to be the asserted claim) 19 U.S.C. § 1337(a)(3). A licensed product need not be manufactured domestically, as long as the Complainant’s own investment in licensing is domestic and sufficiently substantial. Interdigital Communs., LLC v. ITC, 707 F.3d 1295 (2013) (Fed. Cir. 2013).

Public Interest – ITC Rules A Complainant must file, with the complaint, a separate statement on how issuance of relief could affect the public interest. 19 CFR § 210.8(b). The Commission, in instituting the investigation may order the ALJ to take evidence and issue a recommended determination on the public interest. Even if it does so, discovery on public interest issues is limited and may not delay the investigation. Otherwise, discovery is not allowed on public interest issues. 19 CFR § 210.10(b).

Overview of ITC Remedies No damages available Remedies are injunctive in nature

Overview of ITC Remedies Available remedies General exclusion order prohibiting importation of infringing products by any manufacturer Limited exclusion order prohibiting importation of infringing products by specific individuals Cease and desist order enjoining offending activities in U.S. prior to determination of Section 337 violation

Overview of ITC Remedies Available remedies Temporary exclusion order Rarely sought and even more rarely granted. Federal court standards and precedent for preliminary injunctions and TROs apply. However, motion for temporary relief must be filed with the complaint or before institution of the investigation. [19 C.F.R. § 210.53.] Proceedings occur on an extremely expedited schedule (e.g. initial determination within 70-120 days of the notice of investigation). [19 C.F.R. §§ 210.66.] ITC may require Complainant to post a bond. [19 C.F.R. § 210.68.]

Exclusion Order: Public Interest Factors Prior to issuing an exclusion order, the Commission must consider the impact of such exclusion on: Public health and welfare; Competitive conditions in the United States economy; The production of like or directly competitive articles in the United States; and United States consumers 19 U.S.C. § 1337 (d)(1).

Exclusion Order: Public Interest Factors ITC rarely denies relief based on public interest factors. Instances of public interest found: In re Certain Fluidized Supporting Apparatus, 337-TA-182/188, USITC Pub. 1667 (1984) special hospital beds for burn victims provided benefits unavailable from any other device the Complainant could not meet the demand to ensure that burn victims were not left without beds But TEO denied on other factors

Exclusion Order: Public Interest Factors Instances of public interest found(cont’d): In re Certain Automatic Crankpin Grinders, 337-TA-60, USITC Pub. 1022 (1979) domestic manufacturers could not meet demand for crankpin grinders critical in the manufacture of cars that met Congressionally-mandated fuel economy standards In re Certain Inclined-Field Acceleration Tubes, 337-TA-67, USITC Pub. 1119 (1980) infringing tubes were essential to basic nuclear research programs because they were greatly superior in performance to Complainant’s tubes Complainant showed little interest in producing equivalent tubes

Summary: Advantages of Section 337 Resolution “Earliest Practicable Time” Target Date Broad Discovery Foreign Party Discovery (No Hague Convention Concerns) Nationwide Subpoena Power Experienced ALJs Automatic Protective Order Effective Remedy

U.S. District Court: Comparison Damages Recoverable Jury Trial Available Expenses Over Longer Period of Time No Domestic Industry Requirement No Public Interest Considerations No Presidential Review Discovery Delays Personal Jurisdiction Issues Suing Multiple U.S. Defendants Obtaining Jurisdiction over Foreign Defendants Difficult to Obtain Prompt Relief in Most Jurisdictions

When to Consider ITC Is the infringing good imported? If not, go to USDC. Is it difficult to obtain jurisdiction over all infringers in one district court action? Is the true infringer overseas?

Related Issues to Consider Transfer of Record to District Court No res judicata for patent determinations Validity Infringement Stay of Parallel Proceedings

Why Bring a Sec. 377 Action? Effective Relief Exclusion orders run to products, not parties, making enforcement against foreign entities easier Injunctive relief powerful remedy in protecting IP rights. Damages available in later / parallel district court proceeding.

ITC Investigation Time Line 12-15 months Complaint filed Commission renders a final decision Commission decides whether to investigate complaint Commission’s final decision becomes effective ALJ renders an initial decision Respondents respond to complaint Discovery ends 30 days 20 days after notice and service of complaint Discovery takes ~ 5 mo. 60 day period where president can disapprove final decision

For additional information, please contact: Thank you! For additional information, please contact: DeAnn F. Smith, Esq dsmith@foleyhoag.com 617-832-1264