2012 OFII General Counsel Conference Washington, D.C. Intellectual Property Protection & Supply Chain Risks

2012 OFII General Counsel Conference Washington, D.C. Intellectual Property Protection & Supply Chain Risks Sec. 337 (19 U.S.C. 1337) – “Unfair Practices in Import Trade” –International Trade Commission Practice – Trends, Characteristics and Framework –International Trade Commission – The Investigation –U.S. Customs and Border Protection – Enforcement and the Supply Chain 1

2012 OFII General Counsel Conference Washington, D.C. International Trade Commission Practice - Trends, Characteristics and Framework 2

2012 OFII General Counsel Conference Washington, D.C. Overview Growth in ITC Investigations Distinguishing Characteristics Statutory Framework 3

2012 OFII General Counsel Conference Washington, D.C. Growth in ITC 337 Investigations 4 Data obtained from via S. Alex Lasher, The Evolution of the Domestic Industry Requirement in Section 337 Investigations Before the United States International Trade Commission, 18 U. Balt. Intell. Prop. L.J. 157, n130 (2010)

2012 OFII General Counsel Conference Washington, D.C. Growth in Foreign Complainants 5 AIPLA 2012

2012 OFII General Counsel Conference Washington, D.C. Distinguishing Characteristics 6

2012 OFII General Counsel Conference Washington, D.C. The Forum Independent, nonpartisan federal admin. agency Not a court Headed by six Commissioners Investigations instituted by majority or tie vote of the Commissioners 7

2012 OFII General Counsel Conference Washington, D.C. Office of Unfair Import Investigations (“OUII”) a/k/a “Commission Investigative Staff” or “Staff Attorney” Section 337 actions are gov’t investigations; OUII acts as a neutral third party representing public interest Participate in all aspects of investigation In May 2011, the Commission announced it would reduce the role of OUII due to budget constraints –OUII now participate in approx. 65% of investigations 8

2012 OFII General Counsel Conference Washington, D.C. Filing the Complaint 30 day informal review by Commission, after which a formal investigation may be instituted Complainants must gather evidence before filing –See Certain Zero-Mercury-Added Alkaline Batteries, Inv. No. 337-TA-493, Order No. 16 at 5 (Aug. 20, 2003) –Denied motion to amend complaint where “[Complainant] provide[d] no explanation of why it did not wait until all testing was completed before filing the complaint.... [Complainant] was in complete control of the timing of filing the complaint[.]”) 9

2012 OFII General Counsel Conference Washington, D.C. Length of Investigation Section 337(b)(1): Commission will “conclude any such investigation... at the earliest practicable time” 10

2012 OFII General Counsel Conference Washington, D.C. Strict Adherence to Deadlines & Rules No good cause to file objections one day late where counsel attempted to file on the due date and encountered unexpected computer problems. Certain Inkjet Cartridges, Inv. 723 (Rogers) (Mar. 2011) Motion to file responses to objections “one minute late” was granted “only [] because it is unopposed.” Certain Computer Forensic Devices, Inv. No. 799 (Bullock) (Aug. 2012) Motion to compel denied for failure to comply with meet and confer requirements. Certain Hydraulic Excavators, Inv. No. 582 (Barton) (Dec. 2006) 11

2012 OFII General Counsel Conference Washington, D.C. Statutory Framework: Elements of Proof An unfair act or unfair method of competition (for example, patent infringement) Relating to an imported product Where the intellectual property in question is being exploited by an existing domestic industry 12

2012 OFII General Counsel Conference Washington, D.C. Domestic Industry Requirement: Two Prongs Technical Prong –Complainant must practice one claim of asserted patent –Practiced claim need not be the infringed claim –Determined using infringement analysis Economic Prong –Significant investment in equipment –Significant employment of labor or capital –Significant investment in exploitation, including licensing 13

2012 OFII General Counsel Conference Washington, D.C. Economic Domestic Industry: Licensing Certain Semiconductor Chips, Inv. No. 432 (June 2002) First case to find the existence of a domestic industry based solely on licensing activities of NPE Found clear intent by Congress to allow entities actively licensing in the U.S. to meet the domestic industry requirement without showing the existence of an article covered by the asserted patents Complainant had extensive licensing activity in this case 14

2012 OFII General Counsel Conference Washington, D.C. Economic Domestic Industry: Licensing Certain Electronic Devices Including Handheld Wireless Communication Devices, Inv. Nos. 667 & 673 (2009) NPE complainant licensed patents to Motorola, which produced articles covered by the patents in the U.S. When complaint was filed, complainant had not received any revenue from its licensing activities Still, complainant met the domestic industry requirement based on the investment in engineering activities of its U.S. licensee, Motorola 15

2012 OFII General Counsel Conference Washington, D.C. Economic Domestic Industry: U.S. Subsidiaries Certain Integrated Circuits, Inv. No. 450 (2002) Taiwanese complainant satisfied domestic industry requirement based on activities of its U.S. sales subsidiary Domestic industry confirmed by: –complainant’s leasing office space, –providing engineering support to customers and third party vendors, and –employing engineers to perform that assistance in the U.S. 16

2012 OFII General Counsel Conference Washington, D.C. International Trade Commission – The Investigation 17

2012 OFII General Counsel Conference Washington, D.C. Investigation Initiation – The Complaint ITC process initiated by the filing of a complaint by Complainant(s) Complaint must set forth all elements of a Section 337 action in detail as set forth in Commission Rules –Must show a prima facie case of infringement of independent claims by providing claim charts –Must show prima facie case of domestic industry with claim chart of at least one claim and declaration showing economic investments Advisable to provide Office of Unfair Import Investigations (“Staff”) with confidential draft at least 2-3 weeks before filing –Staff will meet with complainant and provide advice as to potential deficiencies to minimize need to supplement complaint 18

2012 OFII General Counsel Conference Washington, D.C. Commission Review of Complaint Commission will solicit public interest comments –Respondents should consider providing comments as it is first opportunity to tell story, particularly in cases involving NPEs Commissioners vote whether to “institute” an investigation and must do so within 30 days from filing –ITC may ask for supplementation; could delay institution –If investigation instituted, Notice of Investigation is published in the Federal Register and defines the scope of investigation, including whether ALJ will be permitted to consider public interest Investigations typically instituted Respondents should use this time to consider counterstrike and to get discovery in order 19

2012 OFII General Counsel Conference Washington, D.C. Complaint Response Due approximately 3 weeks after Investigation instituted Generally, respondent may assert all defenses that would be available in a district court action –Additional defenses: no domestic industry and/or no importation –No 271(g) defenses at ITC Rules suggest that invalidity claim charts should be submitted with response, but not necessary Although rules provide for counterclaims, they are very rarely filed because must be removed to district court If respondent wants to “counterclaim” for infringement, then must file complaint for another investigation 20

2012 OFII General Counsel Conference Washington, D.C. Early Investigation Fact discovery starts within a few days of institution –Very broad, few limits, and 10-day response time –Complainant has early advantage — if planned properly, Complainant collected significant discovery before it filed complaint –Respondent must get its discovery house in order very quickly –Critical to get any redesigns “in the case” during discovery; the earlier, the better Protective Order – standard and issued by ALJ within days of institution –No source code provisions and prohibits disclosure to parties, including in-house counsel –Can be modified through motion, but still unlikely to get a provision allowing sharing of information with in-house counsel Ground Rules – Each ALJ has own set of “local” rules Target Date – ALJ sets date by which investigation must be completed –A “line in the sand” for Respondents to plan their business operations 21

2012 OFII General Counsel Conference Washington, D.C. Mid-Investigation Notice of Prior Art –Must disclose all prior art upon which respondent intends to rely –Can only be supplemented with showing of “good cause” so critical to complete prior art investigation as early as possible Expert Discovery –Does not differ significantly from district court –If opinion not in report, then very likely excluded at hearing Motion practice –Types of motions do not differ significantly from those in district court –Only 10-day response time and shorter in some instances –Motions for summary determination must be filed no less than 60 days before hearing begins, but the earlier, the better Stipulations – consider stipulations to address issues not in controversy Markman – less common than in district court 22

2012 OFII General Counsel Conference Washington, D.C. Important Pre-Hearing Filings Pre-hearing brief (about 4-6 weeks before hearing) –Must include all of party’s contentions or will not be permitted to raise at hearing; if contention not in brief, then very likely excluded –Typically lengthy; but, very important to streamline the case and focus on important issues and winnable theories Exhibits (about 4-6 weeks before hearing) –Exchange includes witness statements and demonstratives –Supplementation not likely so critical to include all potential exhibits –With 5 of the current 6 ALJs, entire direct case (aside from adverse and 3rd party witnesses) goes in “on paper” in advance of hearing –Very important to plan key witnesses’ schedules around these dates Motions in limine –Reserve for most important evidentiary objections –Motions relating to “scope” (expert reports and prehearing brief) are most likely types to be granted 23

2012 OFII General Counsel Conference Washington, D.C. Hearing Typically occurs 8-10 months after investigation is instituted ALJ presides over hearing – no jury Conducted pursuant to the Administrative Procedures Act –Evidentiary rules are more liberal –Hearsay is generally admissible Testimony –With 5 of 6 ALJs, live direct examinations usually only from third parties and adverse witness because directs submitted on paper –Scope of cross examination limited by direct and so on –Not uncommon for direct testimony of adverse party witnesses to be combined with cross examination so that witness only appears once Typically, hearing lasts 1-2 weeks 24

2012 OFII General Counsel Conference Washington, D.C. Post-Hearing Submissions Post-hearing briefs –Simultaneous briefing that addresses each issue in investigation –Short turnaround – opening briefs typically filed within 2 weeks of close of evidentiary hearing and response 1-2 weeks later –Brief length usually limited –Advisable to begin briefing during hearing Proposed findings of fact/conclusions of law –Simultaneous submission with post-hearing briefs and rebuttals/responses with responsive post-hearing brief –Addresses each issue in investigation –Typically not limited in number and often in the hundreds of pages –Some ALJs no longer require parties to submit –Time consuming; if ALJ requires, it is critical that process start as soon as possible, including before hearing 25

2012 OFII General Counsel Conference Washington, D.C. ALL Initial Determination and Next Steps ALJ issues Initial Determination (“ID”) no less than 4 months before Target Date –ALJ’s ID addresses each issue in the investigation –ALJ must also issue Recommended Determination on remedy and bond within 14 days of ID, but ALJs often include as part of ID Petitions for review –Non-prevailing party (including Staff) must file a petition for review of the ID to the full Commission –Must file a petition for review to preserve issues for appeal; if an issue is not in petition, it is waived –Briefing period is short: petitions for review are due 12 days after service of ID and response is due 8 days later –Prevailing party should also file petition (often called a “contingent” petition) addressing issues on which the ALJ ruled against it 26

2012 OFII General Counsel Conference Washington, D.C. Commission Review/Remedy Briefing Commission has 60 days from ID issuance date to grant or deny petition for review –Standard: clearly erroneous finding of material fact; erroneous legal conclusion; or affects ITC policy If petition(s) granted –Commission will typically issue a briefing schedule and a list of issues being reviewed –Often, commission sets forth a list of questions/issues that the briefing must address Remedy Briefs –Commission will issue notice requesting briefing on remedy, bonding, and the public interest –Parties and other interested persons can file briefs –In some instances, helpful to garner support from Congress 27

2012 OFII General Counsel Conference Washington, D.C. Commission’s Final Determination If petition(s) was denied, the ALJ’s ID becomes the final determination If petition granted, –Commission can adopt, modify, or reverse the ALJ’s ID –In some instances, Commission may remand the investigation back to the ALJ –If Commission only reviews part of an ID, the unreviewed portions become part of the Final Determination If Commission finds a violation, Commission issues exclusion order (either LEO or GEO), often a cease and desist order, and sets a bond 28

2012 OFII General Counsel Conference Washington, D.C. Post-Final Determination Presidential Review period –60-day period in which the Commission’s exclusion order is reviewed by a committee headed by the U.S. Trade Representative’s Office –Opportunity for respondents to persuade committee that relief against public interest –Respondents can still import during this period by posting a bond, which is subject to forfeiture –Very rare for review to result in reversal of remedy; has only happened five times, the last one being over 20 years ago –Although can lobby committee, such efforts have largely failed Commission’s Final Determination appealable to the U.S. Court of Appeals for the Federal Circuit 29

2012 OFII General Counsel Conference Washington, D.C. Remedies General Exclusion Order (“GEO”) — bars importation of accused products regardless of source –Commission must find one of the statutory requirements is met –GEO allows complainant to avoid piecemeal and repeated litigation against numerous infringers Limited Exclusion Order (“LEO”) — bars entry of infringing products of the named respondent(s) –May include downstream products (i.e., products containing an infringing component) –Since Federal Circuit’s decision in Kyocera, which barred application of LEOs to downstream products of non-respondents, cases involving respondent’s customers have increased as have requests for GEOs Cease and Desist Order — bars use and sale of imported infringing products already in U.S. –Proving entitlement to cease and desist order important to obtaining complete relief 30

2012 OFII General Counsel Conference Washington, D.C. Terminating Before Final Determination Settlement Agreements –Like district court litigation, the private parties can enter into a settlement agreement –In such a situation, parties jointly file a motion to terminate the investigation –Parties must disclose all agreements to the ITC –Must file redacted public version of all agreements Consent Orders –Any party may file a motion to terminate the investigation based upon a consent order –Can be via agreement between private parties or unilateral –Typically will be granted if meets Commission’s requirements 31

2012 OFII General Counsel Conference Washington, D.C. Enforcement of Exclusion Orders (EO) by U.S. Customs and Border Protection (CBP) and the Supply Chain 32

2012 OFII General Counsel Conference Washington, D.C. CBP EO Proceedings – General Characteristics IPR Enforcement is Priority Trade Issue (PTI) CBP Proceedings are Somewhat Opaque Not as Visible or Well Known as ITC Proceedings Fewer Decision-Making Deadlines Most Interactions are Ex Parte Protected by Trade Secrets Act 33

2012 OFII General Counsel Conference Washington, D.C. EO Issuance – ITC Handoff to CBP ITC Notifies CBP of Exclusion Order CBP Prepares “Exclusion Order Notice” to Ports of Entry –Information on How to Identify Excluded Products –Not Public CBP Officers Must Decide Whether Individual Shipments are Within Scope of Order 34

2012 OFII General Counsel Conference Washington, D.C. Supply Chain Impact – First 60 Days During Presidential Review Period, Covered Products can be Imported Under Bond Bond Amount Set by ITC Bond is Later Forfeited to Complainant or Released, Depending on Presidential Review Outcome After Presidential Review, Importations are Prohibited 35

2012 OFII General Counsel Conference Washington, D.C. Supply Chain Impact – Complainant’s Steps Meeting with CBP Headquarters to Explain Your View of EO to Legal Staff Go to Port(s) of Entry –Prepare and Present Training Materials –Consciousness Raising Ex Parte and Informal Trade Secrets Act Impact – Import Details are Confidential –Consider Private Investigator 36

2012 OFII General Counsel Conference Washington, D.C. Supply Chain Impact – Importer’s Considerations Accelerate Imports Before EO Issuance? –But caveat if there is Cease and Desist Order Accelerate Imports During Presidential Review Period? –But Consider Bond Forfeiture Redesign? 37

2012 OFII General Counsel Conference Washington, D.C. Supply Chain Impact - Importer and CBP Informal Advice on Scope from CBP Port Office –Quick –Non-Binding –Usually, Port will Exclude if Gray Area Formal Ruling Request under 19 CFR Part 177 –Prospectively Binding on all CBP Personnel, unless/until Modified or Revoked –Ex Parte, but Written Ruling is Published –But Could Take Days or More –Most Common for Redesigns 38

2012 OFII General Counsel Conference Washington, D.C. Supply Chain Impact – Importer and CBP (cont’d.) Exclusion of Goods can be Protested and then Litigated at U.S. Court of International Trade (CIT) Complainant Does Not Have Standing at CIT CBP Policy is to Refrain from Issuing a Ruling under Part 177 if Importer Protests or Files for Advisory Opinion at ITC 39

2012 OFII General Counsel Conference Washington, D.C. Supply Chain Impact – Product Identification Important for any Out-of-Scope Goods, Particularly Redesigns Clear and Consistent Invoice Descriptions and Markings Certification Sometimes Utilized CBP Labs Will Analyze Heavy Penalties under 19 USC 1592 for Material False Statements or Omissions – Seizure/Forfeiture Plus Fines up to U.S. Wholesale Value 40

2012 OFII General Counsel Conference Washington, D.C. Supply Chain Impact – Other Considerations CBP Can Recall (“Redelivery Demand”) Goods it has Previously Released – Liquidated Damages if not Redelivered ITC Can Trump CBP Ruling or Determination on Whether Good is Within Scope ITC has Granted Mitigation, but not Exoneration, for Respondent “Incorrectly” Relying on CBP Ruling 41