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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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 months, Commission opinion and remedial order issued within months, and review by president within months.
Losing party can appeal to the Federal Circuit.

10. 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)

11. 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).

12. 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”

13. 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.

14. 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).

15. 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 § (b).

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

17. 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

18. 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. § ]
Proceedings occur on an extremely expedited schedule (e.g. initial determination within days of the notice of investigation). [19 C.F.R. §§ ]
ITC may require Complainant to post a bond. [19 C.F.R. § ]

19. 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).

20. 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 (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

21. Exclusion Order: Public Interest Factors
Instances of public interest found(cont’d):
In re Certain Automatic Crankpin Grinders, 337-TA-60, USITC Pub (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 (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

22. 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

23. 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

24. 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?

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

26. 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.

27. 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

28. For additional information, please contact:
Thank you!
For additional information, please contact:
DeAnn F. Smith, Esq