AMERICAN STATUTORY PROTECTION
AGAINST INFRINGING IMPORTS
by John L. Cooper and Jeffrey Fisher
Farella Braun + Martel LLP, San Francisco
TABLE OF CONTENTS
I.
The Problem of Patent-Infringing Imports............................................................ 1
II.
The Dual Statutory Framework in the United States............................................ 3
III.
No International Remedy for Patent Infringement................................................ 7
IV.
The Patent Enforcement Framework................................................................... 8
V.
Interception of Patent-Infringing Imports............................................................ 13
VI.
Other Relief from the International Trade Commission...................................... 15
VII.
Trademarks and Trade Dress............................................................................ 17
VIII.
Copyrights ......................................................................................................... 22
IX.
Trade Secrets .................................................................................................... 24
X.
Unfair Competition............................................................................................. 26
XI.
Antitrust Issues .................................................................................................. 27
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Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
AMERICAN STATUTORY PROTECTION
AGAINST INFRINGING IMPORTS
by John L. Cooper and Jeffrey Fisher*
Farella Braun + Martel LLP, San Francisco
I.
THE PROBLEM OF PATENT-INFRINGING IMPORTS
A.
The territorial basis of patent protection
1.
“Currently national patents protect property rights to new
technologies but are only enforceable within the borders of the
nation granting the patent. When a single competitor infringes
the same patent in different countries, the patent holder must
sue for each infringement in each individual nation where the
patent has allegedly been infringed. If the courts find for the
plaintiff that the patent is infringed, the remedy will vary from
country to country depending on the national policy standards
to prevent patent infringement. Once a judgment has been
entered, the patent holder must enforce the judgment to obtain
any remedy. This antiquated process is time-consuming,
expensive, and inefficient in today's global economy.” John
Gladstone Mills III, “A Transnational Patent Convention for the
Acquisition and Enforcement of International Rights,” 84
Journal of the Patent and Trademark Office Society 83, 84
(2002).
a)
*
There is a historical basis for this restriction. A patent is
a monopoly, circumscribed by conditions and limits but
a monopoly nevertheless. Monopoly is an exercise of
John L. Cooper is a senior litigation partner at the San Francisco firm of Farella
Braun + Martel LLP, specializing in trial of intellectual property cases. He holds
university degrees in engineering, law, and law & economics. John Cooper is a
Regent and Fellow of the American College of Trial Lawyers. His practice also
includes concentrations in technology and antitrust litigation. He can be reached
at 415-954-4410, or by e-mail at jcooper@fbm.com.
Jeffrey M. Fisher chairs the Intellectual Property and Technology Group at
Farella Braun + Martel LLP. His practice includes counseling, litigation and
appeals on patent, trademark, copyright, trade secret, antitrust and unfair
competition issues. Jeff Fisher can be reached at 415-954-4912, or by e-mail at
jfisher@fbm.com.
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Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
1
sovereignty and was one of the traditional economic
techniques of the royal power, throughout history but
especially during the emergence of the modern national
states of Europe. A sovereign could of course grant a
monopoly only as to territory he controlled – England
could not forbid or license the practice of any art in
France, and vice versa.
2.
This vestige of the nation-state-based mercantile system is
obsolete in a global marketplace. National boundaries are
ceasing to be useful in defining economic territories. The
Internet is universalizing access to intellectual property. A
patent regime requiring an inventor to obtain separate national
patent protection in every jurisdiction in the world, and litigate
and enforce his rights separately in each one, no longer
makes any sense in the 21st Century.
a)
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Attempts to remedy this situation by supra-national
agreement are proceeding but (except in Europe) have
not yet had much practical effect. Results of trilateral
cooperation among the United States, Europe and
Japan, ongoing for decades, have been palliative only,
leaving the fundamental problem of the nation-state
patent nearly untouched in the Asian context. For more
on this see the EPO [European Patent Office] Trilateral
website at www.trilateral.net.
3.
In the meantime, the territorial doctrine makes it almost
impossible to recover damages for infringement of a foreign
patent, except in the courts of the issuing country, or to
recover for infringement of domestic patents by imported
products until they are actually imported. And for economic
reasons it is usually impractical to protect intellectual property
in every jurisdiction in the world, especially where the local
market it relatively slight.
4.
This leads to a situation where the inventor (or corporation
holding his patents) does not secure a domestic counterpart
patent in a certain foreign country (for example a developing
country) because the local market is negligible. A local
entrepreneur then manufactures the product (or a component
of it) locally, without authorization but without violating
domestic law. He then exports it to a country, for example the
United States where a patent is in force. What recourse does
the patent-holder have to protect his American market against
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
2
this infringing product, which in the absence of a local patent
was not infringing at its point of manufacture?
II.
THE DUAL STATUTORY FRAMEWORK IN THE UNITED STATES
A.
Two parallel statutes. There are two parallel statutes offering
protection to patent-holders against infringing imports into the United
States. One provides for relief in the International Trade
Commission, and the other for relief in the U.S. District Court.
B.
The International Trade Commission route. Section 1337 of Title 19
of the U.S. Code makes unlawful “the importation into the United
States, the sale for importation, or the sale within the United States
after importation by the owner, importer, or consignee, of articles
that (i) infringe a valid and enforceable United States patent … or (ii)
are made, produced, processed, or mined under, or by means of, a
process covered by the claims of a valid and enforceable United
States patent.” 19 U.S.C. § 1337(a)(1)(B) (emphasis added). In the
literature this provision is usually called § 337 because that was its
original section number in the Tariff Act of 1930.
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1.
The statute applies also to protected copyrights, trademarks,
mask works, and designs. Although the statute also reaches
other “unfair” import practices, such as subsidies and
“dumping,” most of the cases decided under this section are
intellectual property cases.
2.
When goods are made outside the United States, with
technology patented in the United States but not locally, this
statute forbids their export to the United States.
3.
To show a violation of the patent provisions of this section “a
complainant can prove three elements: (1) the importation of
goods into the United States or sales of imported goods within
the United States; (2) infringement by those goods or sales of
a valid and enforceable United States patent; and (3) an
industry in the United States marketing the patented articles.”
Alloc, Inc. v. International Trade Commission, 342 F.3d 1361,
1365 (Fed.Cir. 2003).
a)
A contract to sell can be a “sale for importation” for
purposes of this statute – there does not have to be
actual delivery in the United States. See Enercon
GmbH v. International Trade Commission, 151 F.3d
1376, 1381-1383 (Fed.Cir. 1998).
b)
“In actions alleging infringement of a process patent
based on the importation, sale or use of a product which
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
3
is made from a process patented in the United States, if
the court finds – (1) that a substantial likelihood exists
that the product was made by the patented process,
and (2) that the plaintiff has made a reasonable effort to
determine the process actually used in the production of
the product and was unable so to determine, [then] the
product shall be presumed to have been so made, and
the burden of establishing that the product was not
made by the process shall be on the party asserting that
it was not so made.” 35 U.S.C. § 295.
c)
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The domestic industry requirement mentioned earlier is
jurisdictional, but is met “if there is in the United States,
with respect to the articles protected by the patent …
concerned – (A) significant investment in plant and
equipment; (B) significant employment of labor or
capital; or (C) substantial investment in its exploitation,
including engineering, research and development, or
licensing.” 19 U.S.C. § 1337(a)(1)(E)(3) (emphasis
added).
(1)
The domestic industry can be “in the process of
being established.” 19 U.S.C. § 1337(a)(1)(E)(2).
(2)
Foreign companies are permitted to use their
domestic subsidiaries to meet the domestic
industry requirement.
(3)
“[T]he amount of U.S. activity required [to show a
domestic industry] is truly minimal, allowing
patent owners of any size to sue. Although some
of the frequent Section 337 players [include] …
Intel and 3M …, [one case] was brought by a
family business employing ten people in the
manufacture of clay-throwing machines for skeet
shooting. * * * The minimal nature of the
required activity has been an especially strong
magnet to small licensing outfits trying to gain
leverage against much larger foes. In [one case
an administrative law judge] found a domestic
industry based on the licensing activities of a fiveperson shop and its expenditures (including legal
fees) relating to litigation of the patent in suit.”
Bryan A. Schwartz, “Where the Patent Trials Are:
How the U.S. International Trade Commission Hit
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
4
the Big Time as a Patent Litigation Forum,” 20
Intellectual Property Law Newsletter No. 2, at 4
(Winter 2002).
(4)
C.
4.
The ITC is authorized to issue subpoenas, take depositions,
and otherwise gather information by compulsory means when
investigating matters under its jurisdiction. See 19 U.S.C.
§ 1332. For a case study involving enforcement of an ITC
subpoena, see U.S. International Trade Commission v. ASAT,
Inc., 411 F.3d 245 (D.C. Circuit 2005).
5.
For a good overview of the current trend toward using the ITC
procedure against foreign infringing activities, see Lyle Vander
Schaaf, “ITC Cases are on the Rise: U.S. International Trade
Commission is Used to Stop Infringing Imports,” National Law
Journal, December 6, 2004.
The District Court route. A different law, 35 U.S.C. § 271(g), which
is a subsection of the main patent infringement statute, provides that
“[w]hoever without authority imports into the United States or offers
to sell, sells, or uses within the United States a product which is
made by a process patented in the United States shall be liable as
an infringer, if the importation, offer to sell, sale, or use of the
product occurs during the term of such process patent.”
1.
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A § 337 proceeding “is not designed simply to
protect a patent owner from loss. That truism is
readily apparent from the statutory scheme which
provides no protection for a patent owner in the
absence of a domestic industry. The patentee in
that situation suffers a real loss from infringing
imports, at least to the extent of the loss of
possible royalties, but is relegated to private
remedies.” Corning Glass Works v. U.S.
International Trade Commission, 799 F.2d 1559,
1567 (Fed.Cir. 1986).
“The Process Patent Amendments Act of 1988 was enacted to
close a perceived loophole in the statutory scheme for
protecting owners of United States patents. Prior to the
enactment of the 1988 statute, a patentee holding a process
patent could sue for infringement if others used the process in
this country, but had no cause of action if such persons used
the patented process abroad to manufacture products, and
then imported, used, or sold the products in this country. In
that setting, the process patent owner's only legal recourse
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
5
was to seek an exclusion order for such products from the
International Trade Commission under section 337a of the
Tariff Act of 1930, 19 U.S.C. § 1337a (1982). By enacting the
Process Patent Amendments Act, the principal portion of
which is codified as 35 U.S.C. § 271(g), Congress changed
the law by making it an act of infringement to import into the
United States, or to sell or use within the United States ‘a
product which is made by a process patented in the United
States ... if the importation, sale, or use of the product occurs
during the term of such process patent.’” Eli Lilly & Co. v.
American Cyanamid Co., 82 F.3d 1568, 1571-1572 (Fed.Cir.
1996).
2.
3.
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“A concern raised during Congress's consideration of the
process patent legislation was whether and to what extent the
new legislation would affect products other than the direct and
unaltered products of patented processes – that is, whether
the new statute would apply when a product was produced
abroad by a patented process but then modified or
incorporated into other products before being imported into
this country. Congress addressed that issue by providing that
a product that is ‘made by’ a patented process within the
meaning of the statute ‘will ... not be considered to be so
made after – (1) it is materially changed by subsequent
processes; or (2) it becomes a trivial and nonessential
component of another product." Id., 82 F.3d at 1572, quoting
35 U.S.C. § 271(g).
a)
These § 271(g) defenses are not available in a § 337
action. See Kinik Co. v. International Trade
Commission, 362 F.3d 1359, 1362-3 (Fed. Cir. 2004).
b)
The conditions mentioned in § 271(g) are questions of
fact rather than law. See, e.g., Biotec Biologische
Naturverpackungen GmbH & Co. KG v. Biocorp, Inc.,
249 F.3d 1341, 1352 (Fed.Cir. 2001). The Eli Lilly case
is a useful case study on a changed product.
“The statute requires that the allegedly infringing product have
been ‘made by a process patented in the United States.’ * * *
Thus, the process must be used directly in the manufacture of
the product, and not merely as a predicate process to identify
the product to be manufactured. A drug product, the
characteristics of which were studied using the claimed
research processes, therefore, is not a product "made by"
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
6
those claimed processes.” Bayer AG v. Housey
Pharmaceuticals, Inc., 340 F.3d 1367, 1377-1378 (Fed.Cir.
2003).
III.
4.
“Section 271(g) by its terms applies to unauthorized actions
within the United States; it is irrelevant that the product was
authorized to be produced outside of the United States. When
the process used abroad is the same as the process covered
by a United States patent, liability for infringement arises only
upon importation, sale or offers, or use in the United States as
set forth in § 271(g).” Ajinomoto Co., Inc. v. Archer-DanielsMidland Co., 228 F.3d 1338, 1348 (Fed.Cir. 2000).
5.
To invoke the provision of § 271(a) that an infringing process
be “used” in the United States, the whole process must take
place there. Thus the statute did not apply to a wireless
e-mail system where the relay component was located in
Canada. See NTP, Inc. v. Research In Motion, Ltd., --- F.3d
---, 2005 WL 1806123, *29 (Fed.Cir.).
NO INTERNATIONAL REMEDY FOR PATENT INFRINGEMENT
A.
In the absence of an international forum for intellectual property
cases, or a truly international patent protection system such as the
Europeans are moving toward, domestic procedures for local
enforcement offer a patent-holder’s only remedy.
B.
The Trade-Related Aspects of Intellectual Property Rights, called
TRIPS for short, established in the Uruguay Round of GATT trade
negotiations in 1994, tried to deal with the problem of international
enforcement by mandating certain levels of intellectual property
protection, including details of enforcement, to which every adhering
country would pledge itself to conform.
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1.
United States law already met most of the TRIPS
requirements. In some instances American domestic law was
changed to conform to TRIPS – for example, GATT article 33
required a 20-year patent term, and 35 U.S.C. § 154 provided
for a 17-year term, so the domestic statute was amended.
2.
But TRIPS does not affect the territorial basis of patent or
other intellectual property rights.
3.
Moreover, the WTO dispute resolution facilities apply only
“when a member government believes another member
government is violating an agreement or a commitment that it
has made in the WTO.” [From the WTO website at
www.wto.net.] And only member states can bring
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
7
proceedings. Neither WTO not TRIPS affords any forum for
infringement complaints by private individuals or companies.
IV.
THE PATENT ENFORCEMENT FRAMEWORK
A.
In general. As discussed in Part I, there are two independent
statutory remedies against patent-infringing imports.
1.
The enforcement path for a § 271(g) action is indistinguishable
from any other district court enforcement action. But the
enforcement path under § 337 lies through an “investigation”
in the U.S. International Trade Commission (ITC). The
Commission is an administrative court rather than one
established directly under the U.S. Constitution. As a result
both procedures and remedies are different from, and in some
ways simpler than, those in district courts. Administrative law
judges (rather than federal judges appointed for life) preside
over the proceedings. In practice these administrative law
judges are career specialists in § 337 proceedings. Appeal is
to the Federal Circuit.
2.
“Through its complaint, the patent owner asks the ITC to
initiate an investigation that looks into alleged unfair import
practices. [These include] importation of products that
infringe a U.S. patent or the importation of products made by a
process patented in the United States. In its complaint, the
patentee further asks for a remedy in the form of an exclusion
order against continued importation of the accused products
(essentially an injunction against importation of the alleged
infringing products) and a cease and desist order against the
continued sale of accused, imported products (analogous to
an injunction that precludes the continued sale of accused
product that has already entered the United States).” Kenneth
R. Adamo et al., PATENT LITIGATION § 14:4:1, at 14-32 to 14-33
(PLI Reference, 2003).
a)
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“With twenty-nine new investigations commenced in
2001 under Section 337 (the trade law prohibiting unfair
competition in imports), the U.S. International Trade
Commission docket … suddenly exploded into a fullfledged patent litigation behemoth. The activity has
been so startling that even the popular legal press has
been forced to take notice, dubbing the ITC's Section
337 caseload the ‘docket that ate Washington.’ * * * A
second, perhaps less well known, fact is that Section
337 cases go to trial. Indeed, they go to trial nearly 25
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
8
percent of the time, as compared to the 3 percent to 4
percent for cases in district court.” Bryan A. Schwartz,
“Where the Patent Trials Are: How the U.S. International
Trade Commission Hit the Big Time as a Patent
Litigation Forum,” 20 Intellectual Property Law
Newsletter No. 2, at 1 (Winter 2002).
B.
Differences between ITC and district court actions.
1.
As for other cases of infringement, enforcement of § 271(g) is
by an action in the U.S. District Court. Available relief includes
injunction, damages and declaratory judgment, but not an
exclusion order of the type the U.S. Customs executes.
a)
Before the passage of § 271(g), the district court had
“no jurisdiction over the importation of articles in
commerce. In short, the Congress has created two
separate jurisdictions: One with jurisdiction over ‘unfair
acts’ in connection with the importation of articles from
abroad (the [International Trade] Commission), and the
other with jurisdiction over the validity of domestic
patents (the district court). There is no authority … for
either jurisdiction to review the actions and decisions of
the other.” Ashlow Ltd. v. Morgan Construction Co.,
672 F.2d 371, 375 (4th Cir. 1982).
b)
Appeal in both kinds of patent cases is to the U.S. Court
of Appeals for the Federal Circuit (the form Court of
Customs and Patent Appeals), which has exclusive
jurisdiction over patent appeals.
(1)
2.
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The ITC “is entitled to appropriate deference to its
interpretation of the statute,” and the Federal
Circuit will uphold its interpretation of § 337 “if it is
reasonable in light of the language, policies and
legislative history of the statute." VastFame
Camera, Ltd. v. International Trade Commission,
386 F.3d 1108, 1111 (Fed. Cir. 2004) (citations
omitted) (vacating enforcement decision after
finding ITC’s refusal to hear invalidity defense
was not supported by statute).
For § 337, remedies available from the ITC are limited to
exclusion and cease-and-desist orders – and in extreme
cases seizure and forfeiture orders – money damages are
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
9
unavailable. But exclusion orders, available from the ITC, are
not ordinarily available from district courts.
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a)
Where relief is urgent the ITC offers “temporary relief”
similar to a preliminary injunction. See, e.g., 19 C.F.R.
§§ 210.52 to 210.70.
b)
Exclusion orders, and subsequent seizure and forfeiture
orders, are enforced by U.S. Customs – see 19 C.F.R.
§ 12.39. Under some circumstances goods previously
excluded, or whose owner, importer or consignee
previously tried to import them or similar goods, may be
seized by Customs authorities under a separate order
and forfeited. See 19 C.F.R. § 12.39(c).
c)
“Whenever the Commission issues an exclusion order,
the Commission may require any person to report facts
available to that person that will help the Commission
assist the U.S. Customs Service in determining whether
and to what extent there is compliance with the order or
whether and to what extent the conditions that led to the
order are changed. Similarly, whenever the Commission
issues a cease and desist order or a consent order, it
may require any person to report facts available to that
person that will aid the Commission in determining
whether and to what extent there is compliance with the
order or whether and to what extent the conditions that
led to the order are changed.” 19 C.F.R. § 210.71(a)(1).
3.
“A general exclusion order broadly prohibits entry of articles
that infringe the relevant claims of a listed patent without
regard to whether the persons importing such articles were
parties to, or were related to parties to, the investigation that
led to issuance of the general exclusion order. By contrast,
district court injunctions are generally limited to the parties
entering appearances before the court or those aiding and
abetting or acting in concert or participation with a party before
the court.” VastFame Camera, Ltd. v. International Trade
Commission, 386 F.3d 1108, 1114 (Fed. Cir. 2004) (citations
omitted).
4.
“Upon request of any person, the Commission may, upon
such investigation as it deems necessary, issue an advisory
opinion as to whether the person's proposed course of action
or conduct would violate a Commission exclusion order, cease
and desist order, or consent order.” 19 C.F.R. § 210.79(a).
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
10
This is a usefully streamlined way to determine in advance
whether a proposed course of conduct is illegal, and is a
feature of the administrative process – advisory opinions are
not, of course, available from a district court.
5.
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Jurisdiction under § 337 is in rem – that is, directed against
the goods themselves rather than at persons or corporations.
This avoids the problems of personal jurisdiction and foreign
service which often complicate district court actions in transnational cases, and permits infringement by many different
products and parties to be addressed in a single relatively
uncomplicated action.
a)
“An exclusion order operates against goods, not parties.
Accordingly, [the] order was not contingent upon a
determination of personal or ‘in personam’ jurisdiction
over a foreign manufacturer. The Tariff Act of 1930
[was] intended to provide an adequate remedy for
domestic industries against unfair methods of
competition and unfair acts instigated by foreign
concerns operating beyond the in personam jurisdiction
of domestic courts.” Sealed Air Corp. v. U. S.
International Trade Commission, 645 F.2d 976, 985
(C.C.P.A. 1981).
b)
The Court (of Customs and Patent Appeals, a
predecessor to the Federal Circuit) continued: “the ITC,
upon investigation and determination of a violation,
could exclude products sold by a domestic
owner/importer/consignee, under its subject matter
jurisdiction, whether or not it named the foreign
manufacturer as a respondent or gave notice to that
foreign manufacturer. When the imported product is
alleged to infringe patent claims drawn to a product, the
truth of that allegation can be tested by comparison of
the product with the claims. * * * Thus … a product
found to be itself an infringement, and all products
identical to it, may be excluded, without regard to which
foreign manufacturer was exporting it to the United
States, and without regard to how it was made. Id. at
986.
c)
In rem proceedings before the ITC do not include
counterclaims, which avoids another potential
complication of a district court action. “In section 337
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11
investigations a ‘counterclaim’ is not permitted. Thus,
as part of the implementation of the Uruguay Round
Agreement, Congress in the mid-1990s enacted several
statutory changes in § 337. While one of those changes
allowed counterclaims by a respondent, such
counterclaims by statute must be removed to a district
court for adjudication.” In the Matter of Certain Power
Saving Integrated Circuits…, No. 337-TA-463, Order
No. 6 n.1 (ITC), 2001 WL 1646181 n.1 Although this
does not the remove counterclaims from dispute
between the parties, it does help keep the ITC
proceedings more tightly focused.
6.
Relief comes faster in the ITC than in the district court – ITC
personnel aim at completing a case within 15 months or even
less – and on a relatively predictable timetable.
a)
7.
As mentioned, exclusion orders (and related seizure and
forfeiture orders) are enforced by U.S. Customs – see 19
C.F.R. § 1239. This is a far more efficient and intimidating
enforcement mechanism than bringing contempt motions in
district court, to be enforced by the U.S. Marshals, and is
nearly cost-free to the complainant.
8.
Because of these and other differences the ITC remedy is
increasingly popular. It is common for parties who need to be
in district court (for example to seek damages) to undertake
parallel proceedings in both tribunals at the same time. One
veteran practitioner lists other advantages of the ITC
procedure as including rapid and broad discovery, a focused
docket, a focused proceeding, a predictable time to final
judgment, and a “legitimate shot at success.” Schwartz, 20
Intellectual Property Law Newsletter No. 2, at 6-8.
a)
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Absent special circumstances, the initial determination
“whether the complaint is properly filed and whether an
investigation should be instituted on the basis of the
complaint” is supposed to be made within 30 days of
filing. 19 C.F.R. § 210.10.
A decision of the ITC under § 337 does not have claimpreclusive effect in a district count under § 271(g),
because the ITC cannot offer the same relief the district
court can offer, particularly not damages for
infringement. See, e.g., Bio-Technology General Corp.
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
12
v. Genentech, Inc., 80 F.3d 1553, 1563-1564 (Fed.Cir.
1996).
9.
V.
For more on ITC proceedings under § 337, see the standard
treatise by David Knox Duvall and Phillip J. McCabe, UNFAIR
COMPETITION AND THE ITC – ACTIONS BEFORE THE
INTERNATIONAL TRADE COMMISSION UNDER SECTION 337 OF THE
TARIFF ACT OF 1930 (2003). Available on Westlaw are two
useful articles: Bryan A. Schwartz, “Remedy and Bonding Law
under Section 337: A Primer for the Patent Litigator,” 81
Journal of the Patent & Trademark Office Society 623 (1999),
and William P. Atkins, “Appreciating 337 Actions at the ITC: A
Primer on Intellectual Property Issues and Procedures at The
U.S. International Trade Commission,” 5 University of
Baltimore Intellectual Property Law Journal 103 (1997).
Schwartz’s article “Where the Patent Trials Are: How the U.S.
International Trade Commission Hit the Big Time as a Patent
Litigation Forum,” 20 Intellectual Property Law Newsletter No.
2 (Winter 2002), written in a popular style for a professional
audience, is a very user-friendly introduction to this arcane
area of practice.
INTERCEPTION OF PATENT-INFRINGING IMPORTS
A.
“If the Commission finds a violation of section 337, or reason to
believe that a violation exists, it may direct the Secretary of the
Treasury to exclude from entry into the United States the articles
concerned which are imported by the person violating or suspected
of violating section 337.” 19 C.F.R. § 1239(b)(1).
1.
B.
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Note that “[a]s of March 1, 2003, the U.S. Customs Service
became the Bureau of Customs and Border Protection in the
Department of Homeland Security. The Department of the
Treasury still retains authority over Customs' revenue
functions including enforcement of 19 U.S.C. § 1337.
Homeland Security Act of 2002, Pub. L. 107-296, §§ 412,
415.” VastFame Camera, Ltd. v. International Trade
Commission, 386 F.3d 1108, 1110 (Fed. Cir. 2004).
“Customs can protect a patent only after the International Trade
Commission … issues an exclusion order. Once the order is
received, Customs seizes or releases infringing articles according to
the requirements of the exclusion order. Customs is not authorized
to make a determination of patent infringement. The procedure for
determining patent infringement is more complicated than the
processes for determining copyright or trademark infringement
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
13
because a simple visual comparison of an original and a copy may
not serve as an adequate test for patent infringement. The ITC
makes a patent infringement decision only after a formal
adjudication, which is different from the informal agency action
conducted by Customs for copyright or trademark infringement.”
Ancel W. Lewis, Jr., et al., “U.S. Customs Service Enforcement of
Intellectual Property Rights,” 22 Colorado Lawyer 519, 521 (1993).
C.
“There are two types of exclusion orders: general exclusion orders
and limited exclusion orders. The general exclusion order directs
the Customs Service to deny from entry into the United States all
infringing articles regardless of their source. A limited exclusion
order, on the other hand, directs the Customs Service to deny entry
of all infringing articles that originate from a specified company that
was a respondent in the ITC investigation. After issuing a notice to
its field offices, the Customs Service will coordinate with the ITC
regarding the scope of the order.” Terence Ross, INTELLECTUAL
PROPERTY LAW: DAMAGES AND REMEDIES § 12.05[2] (2005)
(footnotes omitted).
1.
D.
07345\821312.4
“A limited exclusion order applies to goods manufactured,
imported, and sold by the parties actually named as
respondents in the ITC proceeding. A general exclusion order
is broader, and prevents any infringing articles from entering
the United States, regardless of source. Thus, a general
exclusion order is not limited to the parties named as
respondents at the ITC, and is the strongest and most
effective remedy available under Section 337. As stated by
the Commission in Certain Airless Paint Spray Pumps, [216
U.S.P.Q. 465 (1981),] general exclusion orders are available
as remedies because a complainant ‘should not be compelled
to file a series of separate complaints against several
individual foreign manufacturers as it becomes aware of their
products in the U.S. market. Such a practice would not only
waste the resources of the complainant, it would also burden
the Commission with redundant investigations.’” Gary M.
Hnath, “General Exclusion Orders under Section 337,” 25
Northwestern Journal of International Law and Business 349,
351-2 (2005) (footnotes omitted). This article, by a veteran
practitioner, is an excellent statement of the substantive and
procedural law of general exclusion orders.
U.S. Customs has many ways of learning whether a shipment
contains offending goods. The shipping manifests are only one
source – information from the aggrieved party is another, as are
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
14
other intelligence techniques. And of course Customs has the right
to open and examine all shipments entering the United States from
any commercial source.
E.
VI.
1.
“An invaluable resource in the enforcement of intellectual
property rights is the centralized recordation system. This
system is the tool by which information is distributed servicewide. The Automated Commercial System Intellectual
Property Rights (IPR) Module was designed to make it simpler
for import specialists, inspectors and other Customs personnel
to quickly find information related to intellectual property as it
pertains to imported merchandise. All Customs personnel
who have a computer properly connected may access the
system. The IPR module is an annotated electronic index to
recordations of intellectual property currently on file with the
United States Customs Service. Through the system’s
keyword and other search capabilities, import specialists,
inspectors, agents and Customs attorneys can quickly locate
basic intellectual property rights information. The IPR module
contains information on all … International Trade Commission
exclusion orders recorded with Customs. The IPR module
also incorporates imaging technology. Photographs, drawings
and graphics convey the nature of the intellectual property
more effectively than words.” Customs Enforcement of
Intellectual Property Rights 7 (2001), on the U.S. Customs
website at www.customs.gov. (At this writing in August 2005
this link still works even though the U.S. Customs Service has
been reorganized.)
2.
As of August 12, 2005, there were 29,240 “searchable IPR
recordations” in this database. It is searchable on line at
http://iprs.cbp.gov/help.asp
Until 2004, at a patent-holder’s request Customs would search for
offending items even before an exclusion order, under a procedure
called a ”patent survey, see 19 C.F.R. § 1239a(c). Patent surveys
have been abolished.
OTHER RELIEF FROM THE INTERNATIONAL TRADE COMMISSION
A.
07345\821312.4
The ITC can also issue cease-and-desist orders, forbidding sale of
offending articles already within the United States. These are
backed up with civil penalties of $100,000 a day or twice the value of
the articles. See 19 U.S.C. § 1337(f)(2).
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
15
B.
“In addition to issuing Exclusion Orders, the ITC may also issue
Seizure and Forfeiture Orders where the importer attempts, after
previously having had the same goods denied entry pursuant to an
Exclusion Order, and having been notified by Customs that seizure
and forfeiture could result from future attempted entries, a
subsequent importation of similar goods which are the subject of the
Exclusion Order.” Customs Directive No. 2310-006A, § 3.4 (1999),
searchable by number on the U.S. Customs website at
www.customs.gov.
C.
“Exclusion orders have been interpreted to cover next-generation
products. In other words, if a plaintiff obtains an exclusion order
against a respondent with respect to a particular product that
infringes a patent, the exclusion order will also prohibit any other
products manufactured by the respondent in the future that infringe
on that patent. The burden of establishing whether a next
generation product falls within the scope of an exclusion order may
shift between the petitioner and respondent(s) depending on the
circumstances. While the Commission has the authority to include
downstream products in an exclusion order, not every situation
warrants such a broad order. The petitioner's interest must be
balanced against the disruption of legitimate trade that the exclusion
of downstream products may create.” Ibid.
D.
“In determining whether to exclude downstream products, the
Commission considers the following factors: (1) the value of the
infringing articles compared to the value of the downstream products
in which they are incorporated; (2) the identity of the manufacturer of
the downstream products; (3) the incremental value to the
complainant for excluding the downstream products; (4) the
incremental detriment to respondents if the products are excluded;
(5) the burden borne by third parties as a result of excluding
downstream products; (6) the availability of alternative downstream
products that do not contain the infringing articles; (7) the likelihood
that the downstream products actually contain the infringing article
and, thus, are subject to the exclusion order; (8) the opportunity for
evasion of an exclusion order; (9) the enforceability of an order by
Customs; and (10) any other factors that the Commission
determines to be relevant.” In the Matter of Certain HSP Modems
…, No. 337-TA-439 (ITC), 2001 WL 1441692.
E.
“While not often written to cover finished commercial goods (such
as, for example, personal computers containing infringing
semiconductors), downstream orders have been used to block
importation of intermediate products (such as motherboards) that
07345\821312.4
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16
contain the infringing good. Moreover, even though seldom
employed, the mere prospect of downstream exclusion of finished
goods can have substantial in terrorem effect on customers and
suppliers who might be concerned that their products might become
entangled in the Section 337 web.” Schwartz, 20 Intellectual
Property Law Newsletter No 2, at 6.
VII.
F.
For a case example of a downstream exclusion order, see Hyundai
Electronics Industries Co., Ltd. v. U.S. International Trade
Commission, 899 F.2d 1204 (Fed.Cir. 1990) (order excluding
infringing EPROM memories extended to company’s computers,
computer peripherals, telecommunications equipment, and
automotive electronic equipment containing infringing EPROMs).
G.
For more information on exclusion orders and seizure and forfeiture
orders, search for the official publication “Customs Enforcement of
Intellectual Property Rights” (2001), on the U.S. Customs website at
www.customs.gov. Customs Directive No. 2310-006A (1999) and
others in that series, available on the Customs website at
www.customs.gov/xp/cgov/toolbox/legal, are also useful.
TRADEMARKS AND TRADE DRESS
A.
Goods created in violation of existing patent rights, or in a jurisdiction
where there is no counterpart patent, may also infringe trademarks
by counterfeit labeling, by mimicking trade dress, or otherwise. This
may form an independent basis for action against the infringer
and/or the goods.
B.
Trademarks.
1.
Unlawful use of an American trademark is actionable in
America.
a)
07345\821312.4
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),
provides: “Any person who, on or in connection with any
goods or services, or any container for goods, uses in
commerce any word, term, name, symbol, or device or
any combination thereof, or any false designation of
origin, false or misleading description of fact, or false or
misleading representation of fact which – (A) is likely to
cause confusion, or to cause mistake, or to deceive as
to the affiliation, connection, or association of such
person with another person, or as to the origin,
sponsorship, or approval of his or her goods, services,
or commercial activities by another person ... shall be
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
17
liable in a civil action by any person who believes that
he or she is likely to be damaged by such act.”
2.
But “[a] trademark is inherently territorial and it exists in each
country solely according to that particular country's statutory
scheme." Calzaturificio Rangoni S.p.A. v. U.S. Shoe Corp.,
868 F. Supp. 1414, 1418 (S.D.N.Y. 1994). As the trademark
is territorial, some American activity or effect is required for
jurisdiction.
a)
The best-known test for extra-territorial application of
the Lanham Act is called the Vanity Fair test, after
Vanity Fair Mills v. T. Eaton Co., 234 F.2d 633, 642- 43
(2d Cir.1956). It asks whether the defendant is an
American citizen, whether the defendant's actions have
a substantial effect on United States commerce, and
whether relief would create a conflict with foreign law.
Exact formulations vary by circuit.
b)
In McBee v. Delica Co., Ltd., 417 F.3d 107, 111 (1st Cir.
2005), the court rejected comity as an element of the
test, and held that “subject matter jurisdiction under the
Lanham Act is proper only if the complained-of activities
have a substantial effect on United States commerce,
viewed in light of the purposes of the Lanham Act.” It
defined these purposes as “both to protect the ability of
American consumers to avoid confusion and to help
assure a trademark's owner that it will reap the financial
and reputational rewards associated with having a
desirable name or product.”
(1)
c)
3.
07345\821312.4
In McBee a Japanese company appropriated the
name of an American musician for its clothing
line, which it advertised on the Internet in
Japanese. The American impact of this activity
was not enough to ground jurisdiction.
There are a number of international conventions for
registration of trademarks, such as the Madrid Protocol,
the Madrid Arrangement, and the Trademark
Registration Treaty, but for various reasons the United
States was not an active member of any of them until it
joined the Madrid Protocol in November 2003.
Articles bearing false trademarks or other markings can be
excluded from the United States. 15 U.S.C. § 1124 provides:
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18
“No article of imported merchandise which shall copy or
simulate the name of any domestic manufacture, or
manufacturer, or trader, or of any manufacturer or trader
located in any foreign country which, by treaty, convention, or
law affords similar privileges to citizens of the United States,
or which shall copy or simulate a trademark registered in
accordance with the provisions of this chapter or shall bear a
name or mark calculated to induce the public to believe that
the article is manufactured in the United States, or that it is
manufactured in any foreign country or locality other than the
country or locality in which it is in fact manufactured, shall be
admitted to entry at any customhouse of the United States …”
See also 15 U.S.C. § 1126 (seizure and forfeiture of good
bearing counterfeit mark).
a)
C.
Trade dress is also subject to infringement if the result tends to
confusion.
1.
“Trade dress is part of the broader law of trademark and unfair
competition, and has historically referred to the packaging and
labeling of goods, or in other words, the way the product is
dressed up for market.” Jeff Resnick, “Comment: Trade Dress
Law: The Conflicts Between Product Design and Product
Packaging,” 24 Whittier Law Review 253, 253 (2002).
2.
“The rationale of the Lanham Act is to secure to the owner of
the mark the goodwill of his business and to protect the ability
of consumers to distinguish among competing producers.
Trade dress is defined by the Eleventh Circuit as a product's
total image ... includ[ing] features such as size, shape, color or
color combinations, texture, graphics, or even particular sales
techniques." Carillon Importers Ltd. v. Frank Pesce Group,
Inc., 913 F.Supp. 1559, 1562 (S.D.Fla. 1996) (citations
omitted), aff’d 112 F.3d 1125 (99th Cir. 1997).
a)
07345\821312.4
For a case study in Customs exclusion for a trademark
violation, see United States v. 10,510 Packaged
Computer Towers …, 152 F.Supp.2d 1189 (N.D.Cal.
2001) (false Underwriters Laboratories certification
marks).
“In a trade dress infringement case, likelihood of
success on the merits requires proof to a
preponderance of the evidence that (1) the trade dress
is inherently distinctive or has acquired secondary
meaning; (2) it is primarily non-functional; and (3) the
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19
defendant's trade dress is confusingly similar.” Id. at
1563.
07345\821312.4
b)
“[A]s a matter of law, trade dress is a form protection
accorded to a product distinct from trademark
protection. The Lanham Act creates a separate cause
of action for trade dress infringement. Although many of
the analyses of trademark law also apply to trade dress,
no trademark is needed to prove trade dress
infringement.” Id. at 1567 (citations omitted).
c)
The Carillon case just mentioned, which concerned
vodka bottles, is a good case study of infringing trade
dress.
3.
Infringing trade dress should not be confused with infringing a
design patent. Both are actionable but the theories behind
them are different. A design patent is based on novelty,
originality and ornamentality – see 35 U.S.C. § 171 – while
trade dress protection is based on preventing confusion. The
trade dress law “protects consumers by ensuring that they
receive the quality goods they desire at competitive prices.
However, it also protects business by securing the advantages
of reputation, and protecting their interests from those who
seek to trade on their good will.” Resnick, 24 Whittier Law
Review at 254.
4.
“Trade dress protection for product configuration is the legal
arena where patent and trademark laws collide and, perhaps
one legal arena where the very foundation of our competitive,
free market economy is challenged. This collision is highly
ironic because both patent and trademark laws have a
common goal: to encourage free trade and competition. The
conflict occurs because certain product configurations may be
able to obtain both patent protection and trademark protection.
Once a utility patent expires on an item, firms may seek to
extend their monopoly into eternity by obtaining trademark
protection of the product's configuration, thus preventing
others from copying that particular design of a product and
entering the competitive market for that product. Conversely,
certain items that cannot meet patent requirements may
nonetheless receive patent-like protection, such as trade
dress protection via product configuration.” Timothy M.
Barber, “High Court Takes Right Turn in Traffix, but Stops
Short of The Finish Line: An Economic Critique of Trade Dress
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20
Protection for Product Configuration,” 7 Marquette Intellectual
Property Law Review 259, 260-261 (2003) (footnotes omitted;
emphasis added).
D.
07345\821312.4
Enforcement.
1.
Although an action will lie in the ITC under § 337, Customs will
also exclude trademark-infringing imports on a simple
recordation of the mark without the need for a § 337 action.
2.
“Recordation is a remedy which Congress deemed
appropriate in order to protect domestic manufacturers against
encroachment upon their trademarks and to protect the public
from the imposition of imported articles assuming domestic
names. Merchandise bearing a trademark which has been
duly recorded with the Commissioner of Customs may not be
lawfully imported into the United States without the consent of
the trademark owner. Unauthorized merchandise is subject to
seizure … and forfeiture. Forfeiture is effected by civil action
in a U.S. district court brought by the United States in rem
against the merchandise previously seized by the Customs
Service. The statutes relating to the prohibition against the
unauthorized importation of merchandise that copies or
simulates a U.S. trademark are Lanham Act § 42, 15 U.S.C.A.
§ 1124, and the Tariff Act of 1930, § 526, 19 U.S.C.A. § 1526.
U.S. Customs Service regulations that implement these
statutes interpret these statutes as not barring importation
where certain affiliations – specified in the regulations – exist
between the foreign manufacturer and the holder of the U.S.
trademark rights. The validity of the regulations involving
exceptions to the ban against importation has been the
subject of considerable litigation.” Mills, 1 PATENT LAW
FUNDAMENTALS 2d § 5:115 (1993; last supplemented 2005).
3.
For details on recordation of trademark and trade names, and
subsequent enforcement actions, see 9 C.F.R. §§ 133.1-27.
For a thorough treatment of Customs enforcement in the
trademark context, search for Customs Directive No. 2310008A, “Trademark and Trade Name Protection,” by number on
the Customs website at www.cbp.gov/xp/cgov/toolbox/legal.
4.
For a comparison of ITC investigative practices in trademark
and patent cases, by an American Patent & Trademark Office
examiner, see Vivek Koppikar, “Evaluating the International
Trade Commission's Section 337 Investigation,” 86 Journal of
the Patent & Trademark Office Society 432 (2004).
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21
5.
Protests against Customs actions in this area are heard by the
U.S. Court of International Trade (formerly the U.S. Customs
Court; not the U.S. International Trade Commission) with
appeal to the Federal Circuit. For a case example see Jazz
Photo Corp. v. United States, 2005 WL 189741 (C.I.T. 2005).
VIII. COPYRIGHTS
A.
Patent-related infringing imports may also violate copyright
protection, which can be an independent path to redress.
B.
Computer programs are entitled to copyright protection.
07345\821312.4
1.
“Computer software is subject to copyright protection. 17
U.S.C. § 101. A computer program is made up of several
different components, including the source and object code,
the structure, sequence and/or organization of the program,
the user interface, and the function, or purpose, of the
program. Whether a particular component of a program is
protected by a copyright depends on whether it qualifies as an
‘expression’ of an idea, rather than the idea itself.” Johnson
Controls, Inc. v. Phoenix Control Systems, Inc., 886 F.2d
1173, 1175 (9th Cir. 1989) (citations omitted) (computer
programs for controlling wastewater treatment plants).
2.
The court continued: “Where an idea and the expression
‘merge,’ or are ‘inseparable,’ the expression is not given
copyright protection. In addition, where an expression is, as a
practical matter, indispensable, or at least standard, in the
treatment of a given idea, the expression is protected only
against verbatim, or virtually identical copying. Source and
object code, the literal components of a program, are
consistently held protected by a copyright on the program.
Whether the non-literal components of a program, including
the structure, sequence and organization and user interface,
are protected depends on whether, on the particular facts of
each case, the component in question qualifies as an
expression of an idea, or an idea itself.” Ibid.
3.
The expression is copyright protectible, the idea itself is not –
this is the key to understanding in this area. The language of
the basic copyright statute, 17 U.S.C. § 102, “illumined by the
related legislative history, manifests that the statute extends
copyright protection to expressive elements of computer
programs, but not to the ideas, processes, and methods
embodied in computer programs. This dichotomy – which is
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22
often referred to as the "idea-expression distinction," and
which embraces also the process-expression, methodexpression, and useful-expressive distinctions, – has long
been a fundamental part of our copyright law.” Lotus
Development Corp. v. Paperback Software International, 740
F.Supp. 37, 53 (D.Mass. 1990) (citations omitted).
4.
C.
D.
“As a general rule, U.S. copyright law has no extraterritorial effect
and cannot be invoked to secure relief for acts of infringement
occurring outside of the United States. Infringing acts that take
place entirely outside of the territory of the United States are not
cognizable under the U.S. Copyright Act – even where authorization
for the infringing acts takes place within the United States. United
States copyright law cannot be applied to wholly foreign acts of
infringement merely because foreign infringement will have adverse
effects within the United States. A plaintiff can only state a claim
fully cognizable under U.S. copyright law by alleging an act of
infringement within the United States.” Mills, 2 PATENT LAW
FUNDAMENTALS 2d § 6:139 (1993; last supplemented 2005).
1.
“More generally, in dealing with transborder conduct, it is
advisable to analyze it down into discrete component acts
country by country, before asking which law or laws should
apply to which acts." Paul E. Geller & Melville B. Nimmer,
eds., 1 INTERNATIONAL COPYRIGHT LAW AND PRACTICE,
Introduction § 3[b][i] (6th ed. 1994), quoted in, e.g., Curb v.
MCA Records, Inc., 898 F.Supp. 586, 594 (M.D.Tenn. 1998).
2.
For example, in Palmer v. Braun, 376 F.3d 1254, 1258 (11th
Cir. 2004), Braun published a work which infringed Palmer’s
copyright. He defended on the basis that the work was done
in France, but the court held that importing 25 copies with
intent to sell them was sufficient to support federal copyright
jurisdiction.
Enforcement. Most of what has been said above for trademarks is
true for copyrights as well.
1.
07345\821312.4
Specialized rights also accrue under the Semiconductor Chip
Protection Act, 19 U.S.C. §§ 900-910, and the Vessel Hull
Design Protection Act, 17 U.S.C. § 1301-1332. Wrapping and
packaging material may have copyright protection apart from
its contents.
The Copyright Act [17 U.S.C. § 602] both: (1) makes
importation into the United States an act of infringement of the
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23
exclusive right of the owner of copyright to distribute copies
…, and (2) prohibits importation of copies unless the copies …
were ‘lawfully made.’ Thus a copyright owner has two
possible avenues to combat the importation of infringing
copies …: (1) An in rem avenue, which involves stopping
importation of infringing copies … at U.S. borders; and/or (2)
An in personam avenue, which involves suing the importer for
copyright infringement in a civil action.” Mills, 2 PATENT LAW
FUNDAMENTALS 2d § 6:141 (1993; last supplemented 2005).
IX.
a)
As with patents, the in personam route lies in U.S.
District Court, and the in rem route lies in the U.S.
International Trade Commission under provisions of 19
U.S.C. § 1337 relating specifically to copyrights, with its
accelerated procedures, more restricted remedies, and
unique access to Customs enforcement.
b)
As for trademarks and trade names, an additional in
rem route to enforcement is provided by the simpler
action of recording a copyright (or a trademark or trade
name) with U.S. Customs. For details on recordation of
trademark and trade names, and subsequent
enforcement actions, see 19 C.F.R. §§ 133.31-46. For
details on Customs enforcement search for Customs
Directive 2310-010A, “Detention and Seizure Authority
for Copyright and Trademark Violations,” on the
Customs website at www.cbp.gov/xp/cgov/toolbox/legal.
For a useful survey of this topic see Christopher N.
Bolinger, “Using U.S. Customs to Help Police
Trademarks,” 16 Journal of Proprietary Rights (April
2004), at 21.
TRADE SECRETS
A.
07345\821312.4
Intellectual property not subject to patent protection may be
protectible as a trade secret instead.
1.
In the United States trade secret protection is a matter of state
law. The most important definition is that of the Uniform Trade
Secrets Act (“UTSA”), adopted in slightly varying form in most
states, including California where the high technology industry
is centered.
2.
Under the UTSA trade secret means “information, including a
formula, pattern, compilation, program, device, method,
technique, or process, that: (i) derives independent economic
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24
value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or
use; and (ii) is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.” UTSA § 1(4); and
see, e.g., California Civil Code § 3426.1(d).
B.
07345\821312.4
3.
A California court has stated this definition more economically,
saying “the definition consists of three elements: (a)
information (b) which is valuable because unknown to others
and (c) which the owner has attempted to keep secret.” ABBA
Rubber Co. v. Seaquist, 235 Cal.App.3d 1, 18 (1991).
4.
Trade secret protection is easier to invoke procedurally than
patent protection, because it rests on theories of contract and
conversion rather than monopoly and is not limited territorially
in the same way.
However, trade secrecy will usually be ineffective as a substitute for
patent protection because “infringing” uses – for example
manufacture in a country where a national patent has not been
timely sought – are typically based on patents or patent applications
published in the markets where the invention is protected. As the
details have been published, the art is not a secret, and therefore
cannot be a trade secret.
1.
Under American trade secret law, if information is not secret, it
cannot be a trade secret. “Public disclosure, that is the
absence of secrecy, is fatal to the existence of a trade secret.”
In re Providian Credit Card Cases, 96 Cal.App.4th 292, 304
(2002). “The crucial characteristic of a trade secret is secrecy
rather than novelty.” Dionne v. Southeast Foam Converting &
Packaging, Inc., 240 Va. 297, 302 (1990). When the secret is
publicly disclosed “it loses any status it ever had as a trade
secret.” State ex rel. Lucas County. Board of Commissioners
v. Ohio Environmental Protection Agency, 88 Ohio St.3d 166,
174 (2000).
2.
Even if the infringing use is not based on a published patent
but merely on an example of the patented device, the
publication necessary to gain the patent will have destroyed
the secrecy of the invention.
3.
“Trade secret law and patent law – both aspects of the elusive
concept of intellectual property – serve quite different
functions. Patent protection, which is often difficult and costly
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25
to obtain, gives the patent holder the right to exclude others
from using the patented device, process, etc., for a limited
time period. Trade secret law, on the other hand, protects a
person’s right to keep certain information ‘secret,’ by providing
a cause of action against anyone who misappropriates a
reasonably-protected secret.” Pioneer Hi-Bred International v.
Holden Foundation Seeds, Inc., 35 F.3d 1226, 1239 n.42 (8th
Cir. 1994).
X.
UNFAIR COMPETITION
A.
It is tempting to regard violation of a foreign patent as unfair
competition, but American courts disagree that it is unfair
competition in the legal sense required to maintain an action for it.
As a result this is not a promising theory for redressing infringement
of foreign patents, at least in the American federal courts, unless
there is an additional element such as trademark violation or passing
off.
1.
2.
07345\821312.4
“The common law concept of ‘unfair competition’ has not been
confined to any rigid definition and encompasses a variety of
types of commercial or business conduct considered ‘contrary
to good conscience,’ including acts of trademark and trade
dress infringement, false advertising, dilution, and trade secret
theft. However, infringement of patent rights, domestic or
foreign, is not generally recognized as coming within the rubric
of ‘unfair competition.’" Mars Inc. v. Kabushiki-Kaisha Nippon
Conlux, 24 F.3d 1368, 1372-1373 (Fed.Cir. 1994) (citations
omitted).
a)
The court went on to “hold as a matter of law that a
claim of infringement of a foreign patent does not
constitute a claim of unfair competition” within the
meaning of the federal jurisdictional statute. Id. at 1373.
b)
It also rejected, on case-specific grounds, the lower
court’s assumption that it could entertain the foreign
infringement case under supplemental jurisdiction. The
lower court had declined jurisdiction as a discretionary
matter but the appellate court held this was mandatory
under the circumstances.
“Patent infringement is, in terms of unfair competition, the
misappropriation of a competitor's intangible value in his
invention. In principle, it should be inconsequential whether
that value arises out of a patented invention or one kept in
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
26
secrecy. Procedurally, of course, there is a crucial distinction,
since a patent is protected by the special provisions of the
federal patent law, and that law would doubtless preempt any
attempt to use state unfair competition law to enforce rights to
any non-secret and functional features which are either
eligible for patent protection or barred from protection by the
patent law. When a competitive relationship exists between
the patentee and the infringer, however, the trespass upon the
exclusive right should also be considered in the light of that
relationship.” Louis Altman, 1A CALLMANN ON UNFAIR
COMPETITION, TRADEMARKS AND MONOPOLIES § 4:58 (4th Ed.)
(1990, last updated 2005) (footnotes omitted)
B.
XI.
Circumstances where a competitor is passing off unauthorized
merchandise as authorized might be approached by an unfair
competition theory, or through an action based on infringement of
trademark, trade dress or a design patent.
ANTITRUST ISSUES
A.
Although American antitrust laws can be important considerations in
international patent-based business, they are not generally a remedy
for infringing imports. However, for completeness some mention is
merited here.
B.
Unlike American patents, which as noted are strictly limited in
territorial effect, American antitrust laws are not so limited.
1.
“It is well established … that the Sherman Act applies to
foreign conduct that was meant to produce and did in fact
produce some substantial effect in the United States,” even if
the conduct was lawful where it occurred, and even if the
foreign country where the conduct took place has a policy
encouraging the conduct. Hartford Fire Insurance Co. v.
California, 509 U.S. 764, 796 (1993).
2.
The distinguished patent law commentator John Gladstone
Mills III has written that a United States patent "gives its owner
no legal right to limit foreign manufacture, use, or sale of the
patented product. Consequently, an agreement between the
United States patent owner and a foreign manufacturer to do
so is not immune from United States antitrust laws....” Mills et
al., 3 PATENT LAW FUNDAMENTALS 2d, § 19:2 (1993; last
supplemented 2003).
a)
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Case authority bearing directly on the issue is sparse,
perhaps because controversies in this area tend to be
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
27
settled before reaching the stage of an appellate
decision. But the rule is consistent with the territorial
principle of patent law -- as the limited lawful monopoly
which the patent provides stops at the water's edge, so
does its use as a defense against a charge of unlawful
monopoly.
b)
C.
The following are some representative patent-related activities which
could lead to antitrust exposure.
1.
Agreements to divide territory, under which certain firms or
subsidiaries are excluded from competing in given markets.
2.
Agreements to refuse to deal, under which certain players are
frozen out of competition when other players agree (or are
required to agree) not to deal with them.
3.
A refusal to license, if is part of a scheme to foreclose
competition or create a monopoly, or where the patentee has
significant market power.
4.
Agreements to fix resale prices in the American market.
5.
Tying agreements which restrain trade by requiring a licensee
to buy particular products or services as a condition of the
license.
6.
Fencing off (sometimes called “fencing in”) – that is, obtaining
lawful patents for the unlawful purpose of restricting further
development of an invention or process. The term “blocking
patents” has the same connotation.
7.
Patent acquisitions “accompanied by an illegitimate purpose
or anticompetitive consequences beyond those encompassed
by the patent grant in question.”
a)
8.
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Antitrust issues involving patents are not within the
exclusive competence of the Federal Circuit, and so are
decided (either by a geographically based Court of
Appeals or by the Federal Circuit) according to the law
of the appropriate circuit.
The phrase is from Julian O. von Kalinowski et al., ed.,
ANTITRUST LAWS AND TRADE REGULATION § 73.01[1][a]
(2d ed. 1999).
Where a patent is defective, and especially where, because of
misconduct such as fraud on a patent office, patent protection
is vitiated, anti-competitive actions taken in reliance on the
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
28
patent’s legitimate monopoly can turn out to be antitrust
violations.
D.
It depends on the fact pattern in a particular case which of these
additional elements might be present so as to ground jurisdiction
and enforcement powers in addition to the ones designed for patent
infringement. Depending on the facts, other tort remedies might be
available as well, and relief can be pursued in other national
systems.
September 2005
07345\821312.4
Copyright © 2005 John L. Cooper; Jeffrey M. Fisher; Farella Braun + Martel LLP. All rights reserved.
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