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
2012 OFII General Counsel Conference
Washington, D.C.
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International Trade Commission Practice Trends, Characteristics and Framework
2012 OFII General Counsel Conference
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Overview
• Growth in ITC Investigations
• Distinguishing Characteristics
• Statutory Framework
2012 OFII General Counsel Conference
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Growth in ITC 337 Investigations
35%
29.3%
30%
25%
19.8%
20%
15.8%
15%
10%
6.3%
5%
0%
'89-'94
'95-'99
'00-'04
'05-'09
Data obtained from www.usitc.gov, 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
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Growth in Foreign Complainants
80
71
70
60
52
50
43
40
20
10
26
24
30
17
17
29
33
36
31
18
9
0
AIPLA 2012
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Distinguishing Characteristics
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The Forum
• Independent, nonpartisan
federal admin. agency
• Not a court
• Headed by six
Commissioners
• Investigations instituted
by majority or tie vote of
the Commissioners
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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
2012 OFII General Counsel Conference
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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[.]”)
2012 OFII General Counsel Conference
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Length of Investigation
•
Section 337(b)(1): Commission will “conclude any such investigation . . . at
the earliest practicable time”
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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)
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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
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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
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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
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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
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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.
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International Trade Commission –
The Investigation
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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
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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
2012 OFII General Counsel Conference
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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
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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
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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
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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
2012 OFII General Counsel Conference
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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
2012 OFII General Counsel Conference
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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
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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
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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
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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
2012 OFII General Counsel Conference
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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
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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
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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
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Enforcement of Exclusion Orders (EO)
by U.S. Customs and Border Protection
(CBP) and the Supply Chain
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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
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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
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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
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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
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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?
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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 90-180 Days or More
– Most Common for Redesigns
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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
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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
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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
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