Friend or Foe: Section 337 IP Infringement Investigations at the United States International Trade Commission. Steven E. Adkins

2 “A Section 337 investigation is not mere litigation among private parties.” –Order No. 10, Certain Gel-Filled Wrist Rests and Products Containing Same, Inv. No. 337‑TA‑456

3 Overview Section 337 The Regulatory Framework The Parties The Process Remedies Enforcing ITC Orders Statistics, Unique Characteristics & Tips for Practice Before the ITC Strategic Considerations

4 Section 337

5 Products Excluded from U.S. if ITC finds that: 1.There is a U.S. industry using valid IP right, and 2.Product is imported/to be imported into U.S., and 3.Goods infringe valid U.S. IP right.

6 The Regulatory Framework

7 The Regulatory Framework The ITC Administrative agency Office of Unfair Import Investigations Four administrative law judges General Counsel’s Office Six Commissioners

8 The Regulatory Framework Investigation Requirements Importation Sale for importation Sale after importation Domestic industry Economic prong Technical prong

9 The Regulatory Framework Section Bases 1. Infringement of Statutory Intellectual Property Rights –Patents (over 90% of Section 337 cases) –Trademarks, Copyrights, Mask works 2. Other Unfair Methods of Competition or Acts

10 The Parties

11 The Parties Who Can File a Complaint? Owner or exclusive licensee of U.S. IP rights U.S. presence not required, but IP rights must be used in U.S. Certain production in U.S. IP licensing business in U.S.

12 The Parties Who Can Be Sued? Manufacturers of products sold to be imported into U.S. Sales using foreign distributors Manufacturer need not know of importation Importers of products into U.S. U.S. distributors/retailers of imported products

13 The Parties Office of Unfair Import Investigations ITC Investigative Staff Attorneys –Before Filing a Complaint: Available to discuss prospective complaints –Upon Filing the Complaint: Advise Commission on sufficiency of complaint –Upon Institution of an Investigation: Participates as an independent party to represent public interest

14 The Parties Non U.S. Complainants Europe SGS-Thomson, SRAMs (No. 341) Siemens, Sortation Systems (No. 460) Philips, Recordable CDs (No. 474) OSRAM GmBH, Light-emitting Diodes (No. 512) Unilin, Laminated Flooring Panels (No. 545)

15 The Parties Non U.S. Complainants Japan Ricoh, Facsimile Machines (No. 367) Kubota,Tractors (No. 380) Fujistsu, Integrated Circuits (No. 402) Fuji, Lens-Fitted Film Packages (No. 406) Sumitomo, Magnets (No. 413) Funai, VCRs (No. 464) Rohm, LEDs (No. 444)

16 The Parties Non U.S. Complainants Korea Samsung, SDRAMs (No. 404) Hong Kong Tal Apparel Limited, Pucker-free Shirts (No. 517)

17 The Parties Non U.S. Complainants Taiwan UMC, Integrated Circuits (No. 450) Mosel Vitelic, Memory Devices (No. 470) MediaTek, Optical Disks (No. 523) TSMC, Semiconductors (No. 525)

18 The Process

19 The Process Part 1: Complaint filed 30 days later: Investigation Starts –Detailed Response to Complaint Filed Part 2: Fact Discovery (4-5 months) –Produce documents –Produce witnesses –Obtain documents –Examine witnesses

20 The Process Part 3: Experts 5-7 Months After Service of Complaint (1 month) –Produce expert reports –Produce expert for deposition Part 4: Trial 6-9 Months After Service of Complaint (1-2 weeks) –Witnesses examined –Experts examined

21 The Process Part 5: Post-Trial Submissions (1 month) –Submit Briefs Addressing Issues Raised –Legal Arguments –Evidence –Submit Proposed Findings of Fact –Submit Proposed Conclusions of Law

22 The Process Part 6: Judge’s Initial Determination Approximately 45 Days from hearing conclusion (usually 3 months before decision by ITC) Typically pages –Detailed legal analysis –Findings of Fact –Conclusions of Law Recommended determination on remedy & bond (if violation found)

23 The Process Part 7: Petitions to ITC To Review Judge’s ID Within 10 days from ID –Losing party petitions –Winning party may petition Part 8: ITC Decision to Review Within 45 days from ID –ITC affirms decision/asks for briefs regarding remedy and bond during Presidential Review Period –ITC reviews Judge’s ID and Enters Final Determination

24 The Process Part 9: Presidential Review Period 60 Days After Determination by ITC –President (U.S. Trade Representative) Considers Impact of Remedy –Can Deny Remedy –Very Rarely Does –Public interest considered –ITC Determination Becomes Final if No Action or Early Approval by President –Respondent/importer can post bond to keep importing

25 The Process Part 10: Appeal to Federal Circuit Notice of Appeal Due 60 Days After Final Determination – No Violation--60-day period starts –Violation-60-day period starts after Presidential Review period –Mixed violation and no violation--different appeal periods ITC becomes party to appeal Winner at ITC intervenes in appeal

26 Remedies

27 Remedies Exclusion Orders Limited: –bar imports from an identified source –most common General: –bar all imports from any source –maker need not be a respondent in investigation –less common--only available if source of goods difficult to identify or if necessary to give effective remedy

28 Remedies Cease and Desist Orders Bar entity from engaging in infringing activity related to imported article within U.S. (inventory) Penalty for violation of up to $100,000 per day

29 Enforcement of ITC Orders

30 Enforcement Customs Meet with Customs informally to discuss scope of Exclusion Orders Prepare submission to IPR Branch of Customs Provide industry intelligence to Customs Who is importing Which ports Meet with Customs Port Directors and Import Specialists to explain Exclusion Order and assist in tracking imports

31 Statistics, Unique Characteristics & Tips

32 At least 90% based on patent infringement Approximately 50% involve electronics devices (including semiconductor chips) Approximately 40% of cases settle 40-45% of all investigations are tried before ALJ Of the cases tried before the ALJ, patentee/complainant wins approximately 45% Approximately 40% involve China/Taiwan-based respondents Statistics

33 Unique Characteristics Speed The statute directs the ITC to conclude each investigation “at the earliest practicable time.” The ITC strives for 12-to-15 month target dates to resolve each investigation.

34 Unique Characteristics Jurisdiction – nationwide In rem--- jurisdiction over products, no matter where made, to bar infringing products Nationwide jurisdiction in discovery and for trial purposes No venue fights

35 Unique Characteristics Broad discovery No limits on depositions Few limits on interrogatories

36 Unique Characteristics Effective Protective Orders High degree of protection for confidential information Strictly enforced; significant penalties for violations

37 Unique Characteristics Experienced, Specialized Judges –Judge Harris –Appointed in 1984 –Former antitrust litigator –Presided over more than 100 Section 337 investigations –Judge Luckern –Appointed in 1984 –Former patent examiner at U.S. Patent Office –Former patent litigator –Presided over more than 100 Section 337 investigations

38 Unique Characteristics Experienced, Specialized Judges Judge Bullock –Appointed in 2002 –Experienced administrative judge –Presided over approximately 15 IP infringement cases Judge Barton –Appointed in 2005 –Experienced administrative law judge since 1988 –Presiding over several patent infringement cases

39 Unique Characteristics Patent Claim Interpretations ITC determinations appealable directly to the Federal Circuit Court of Appeals 56 cases decided on the merits (FY 1995 to 10/15/2004) 24 appeals to the Federal Circuit –16 affirmed in total –4 affirmed in major part –2 reversed in part –1 vacated in part –1 vacated and remanded

40 Unique Characteristics Fewer Defenses to Infringement Safe harbor defenses to infringement of process patents by offshore production "do not apply to infringement actions before the International Trade Commission." Kinik Co. v. Int'l Trade Comm'n, 362 F.3d 1359, 1361 (Fed. Cir. 2004).

41 Tips Experts 1.Find/retain before Complaint is filed 2.Eye-to-eye 3.Inform up front of time commitment 4.Retainer in writing 5.Working with the expert; no s 6.Will methods survive gatekeeper?

42 Tips Ground Rules 1. Particular to the Administrative Law Judge 2. Read them 3. Study them 4. Know them 5. Use them

43 Tips ITC Staff ITC Investigative Staff Attorneys –Before Filing a Complaint: Available to discuss prospective complaints –Upon Filing the Complaint: Advise Commission on sufficiency of complaint –Upon Institution of an Investigation: Participates as an independent party to represent public interest

44 Tips Discovery 1. Prepare before Complaint is filed 2. Serve immediately when investigation instituted 3. Set internal dates to move to compel

45 Tips Initiating an Investigation Due diligence Working with USITC Staff lawyers Prepare client files for discovery Prepare discovery requests to be served Prepare federal district court complaint

46 Tips Responding to an Investigation Assess cost of license versus cost of litigating Complainants always have head start Respondents must catch up immediately Begin preparing defense as soon as possible Focus on avoiding one part of each patent claim

47 Tips Responding to an Investigation Locate an expert Gather documents Locate witnesses Meet with ITC Investigative Staff Lawyers

48 Tips Responding to an Investigation Stay parallel district court action (or not) Consider design around options Prepare for remedy

49 Strategic Considerations Section 337 and Hong Kong Company Hong Kong companies must consider Section 337 in developing new products to be sold in the United States Understand competitors and IP rights in the area before new products developed Establish a U.S. patent portfolio to cover your products and/or to exclude others

50 Strategic Considerations Section 337 and the Hong Kong Company To use Section 337 offensively, Hong Kong companies need to establish a U.S. industry: Manufacturing in U.S. Develop a licensing business in U.S. Activity in U.S. of licensee can be U.S. industry under Section 337

51 Strategic Considerations Section 337 and the Hong Kong Company Avoiding a Section 337 Investigation: Establish a patent portfolio to prevent ITC actions Obtain opinions from U.S. patent counsel before developing new products or investing in new products of others Maintain strict control over data sheets and customer documents; screening by inside or outside counsel to avoid incorrect statements that support infringement finding Monitor ITC filings (new cases)

52 – Section 337 resources website p/index.htm – View public filings in other investigations

53 Questions? For additional information, please contact: Steven E. Adkins Jones Day 51 Louisiana Avenue, NW Washington, D.C

54 WAI v1