Source: http://www.itcblog.com/component/tags/tag/did-you-know
Timestamp: 2018-05-20 17:40:48
Document Index: 135909089

Matched Legal Cases: ['§ 271', '§ 271', '§ 271', '§ 271', '§ 271', '§ 1659', '§ 1337', '§ 1337', '§ 1391', '§ 1368', '§ 1446', '§ 1391', '§177', '§ 177', '§ 1337', '§ 1337', '§ 703', '§ 1337', '§ 1337', '§ 210', '§ 210', '§ 210', '§ 210', '§ 210', '§ 210', '§ 1337', '§ 1659', '§ 1659', '§ 1659', '§ 1659', '§ 1659', '§ 1659', '§ 1659', '§ 210', '§ 210', '§ 210', '§ 210', '§ 210', '§ 152', '§ 210', '§ 210', '§ 1337', '§ 210', '§ 1337', '§ 1337']

When asked to identify the major differences between patent litigation in the ITC and in federal district court, most practitioners would likely identify 1) the domestic industry requirement and 2) the form of relief (injunctive relief but no money damages). Another difference is that certain defenses to infringement are not available to respondents in the ITC. In Certain Abrasive Products Made Using a Process for Making Powder Preforms, and Products Containing Same (Inv. No. 337-TA-449), the ITC determined that with respect to the offshore practice of a patented product, the defenses to infringement under 35 U.S.C. § 271(g) are not available to respondents in infringement actions before the ITC. Respondent Kinik asserted a defense to infringement under § 271(g) because even if its process were found to include all of the steps of the patent claims, it asserted that the product of those steps was “materially changed by subsequent processes” and thus placed Kinik within the exception of § 271(g)(1). In rendering its decision, the ITC relied primarily upon the legislative history of the Process Patent Amendments Act of 1988 which states, in adding § 271(g), that “the amendments made by this subtitle shall not deprive a patent owner of any remedies available . . . under section 337 of the Tariff Act of 1930, or under any other provision of the law.” The ITC also cited legislative history in which it was stated that the statute was intended to provide patent owners with a new right to sue for damages “in Federal district court when someone, without authorization, uses or sells in the United States, or imports into the United States a product made by their patented process.” The ITC further relied upon the Senate Report which provided that there was no “intention for these provisions to limit in any way the ability of process patent owners to obtain relief from the U.S. International Trade Commission.” On appeal to the Federal Circuit, Kinik argued that the defenses of § 271(g) should apply in Section 337 actions because Section 337(c) states that all legal and equitable defenses may be presented in ITC actions. Kinik also argued that it was anomalous to create a legislative distinction in the defenses available in different tribunals. As set forth in Kinik Co. v. ITC, 362 F.3d 1359 (Fed. Cir. 2004), the Federal Circuit disagreed with Kinik, and affirmed the ITC’s ruling. It found that the ITC’s interpretation of the statute was supported by the text, the legislative history, and by precedent. It also noted that, to the extent there was any uncertainty or ambiguity in the interpretation of the statute, deference should be given to the view of the agency that is charged with its administration.
In many ways, section 337 practice is similar to patent litigation in the federal district courts. However, there are a number of subtle, yet important, distinctions. By way of just one example, hearsay is generally admissible in section 337 proceedings at the ITC. “‘Hearsay’ is a statement, other than one made by the declarant while testifying at trial or hearing, offered in evidence to prove the truth of the matter asserted.” Fed. R. Evid. 801(c). Pursuant to Rule 802, “[h]earsay is not admissible except as provided by these rules or by other rules prescribed by the Supreme Court pursuant to statutory authority or by Act of Congress.” Fed. R. Evid. 802. Under Commission Rule 210.37(b), “relevant, material, and reliable evidence shall be admitted,” and “irrelevant, immaterial, unreliable, or unduly repetitious evidence shall be excluded.” This includes the admission of hearsay statements. In Certain Light-Emitting Diodes and Products Containing Same (Inv. No. 337-TA-512 ), ALJ Bullock stated that “hearsay evidence is not per se excludable in administrative proceedings but is an argument affecting the weight to be given certain evidence.” This is very different from district court, where judges are bound by the strict requirements of the Federal Rules of Evidence. In district court, hearsay must qualify under one of the enumerated exceptions if it is to be admitted. In the ITC, in contrast, ALJs have wide discretion in determining whether or not to admit hearsay evidence. In exercising this discretion, ALJs often admit the hearsay evidence and state that any objections to the hearsay’s reliability will go to the weight of the evidence rather than its admissibility. After all, there are no juries in section 337 proceedings, and each ALJ works to create as complete a record as possible for the Commission. In certain circumstances, ALJs will cite one of the hearsay exceptions from the Federal Rules of Evidence in order to justify their decision to admit a particular piece of evidence, but this is not necessary. In fact, ALJs will often issue ground rules specifically stating that hearsay is admissible. For example, ALJ Luckern’s ground rules in Certain Video Game Machines and Related Three-Dimensional Pointing Devices (Inv. No. 337-TA-658) state that “section 337 investigation hearings are governed by the Administrative Procedure Act (the APA) and hearsay may be admissible.” However, if the proffered evidence is clearly unreliable, it may still be excluded. For example, in Certain Integrated Circuit and Telecommunications Chips (Inv. No. 337-TA-337), ALJ Luckern held that “out of court declarations by counsel for other respondents whose interests may not be the same as that of [present respondents], and which could not be tested…were not sufficiently reliable to allow their admission into evidence.” Thus, while there is no per se rule excluding hearsay evidence in the ITC, ALJs do have the discretion to exclude such evidence if they believe that it is unreliable. Accordingly, ITC litigants should be prepared for hearsay evidence to be admitted. Traditional arguments from district court practice that hearsay evidence should be automatically excluded based on the Federal Rules of Evidence are not likely to succeed at the ITC.
Patent owners often simultaneously file suits in both the ITC and district court on the same patent(s). If an ITC investigation is ongoing, an accused infringer can request, as a matter of right, a stay of the parallel district court action under 28 U.S.C. § 1659. Even if the accused infringer does not request a stay, the ITC investigation typically will conclude before (and sometimes well before) a trial in district court. After the ITC issues a final determination on infringement, validity, and/or enforceability of a U.S. patent, one might think this ruling would be binding on a district court. This is not the case, however, because the doctrine of res judicata does not apply to ITC determinations concerning patents. The doctrine of res judicata, which is also referred to as claim preclusion, means “the thing has been decided.” The doctrine is rooted in the principle that once a competent court has rendered its final judgment on a matter, that judgment has a conclusive effect upon subsequent litigation between the parties regarding the same cause of action. However the Federal Circuit has held that “ITC findings neither purport to be, nor can they be, regarded as binding interpretations of the U.S. patent laws in particular factual contexts. Therefore, it seems clear that any disposition of a Commission action by a federal court should not have a res judicata or collateral estoppel effect in cases before such courts.” Tandon Corp. v. U.S.I.T.C., 831 F.2d 1017, 1018 (Fed. Cir. 1987). The reason often cited for lack of a preclusive effect for ITC holdings is that Congress intended the ITC to be primarily responsible for administrating the trade laws and not the patent laws which is specifically referenced in the legislative history of Section 337. Texas Instruments v. Cypress Semiconductor Corp., 90 F.3d 1558 (Fed. Cir. 1996). Without the aid of res judicata, ITC determinations of non-infringement, invalidity, and/or unenforceability of a patent do not provide a complete barrier for a patent holder seeking to assert the same patent rights in district court. However, while the ruling of the ITC is not binding on the district court, it can be used as persuasive evidence. In Texas Instruments, the plaintiff initiated an ITC action against the defendants alleging unfair competition based on importation and sale of encapsulated circuits produced by processes covered by the plaintiffs’ patent claims. The Federal Circuit held that even in the absence of res judicata the district court has broad interpretive discretion. 90 F.3d at 1569. The Federal Circuit determined that, “[T]he district court can attribute whatever preclusive value to the prior ITC decision as it considers justified.” Id. But cf. In re Convertible Rowing Exerciser Patent Litigation, 721 F.Supp. 596, 603-604 (D. Del. 1989) (denying defendants’ motion for summary judgment of invalidity despite prior ITC determination of no violation of section 337 based on invalidity).
Did You Know…Existing English Language Translations of Documents Must Be Produced During Discovery At The ITC?
At the ITC, each of the Administrative Law Judges (“ALJ”) employ their own unique set of Ground Rules. Most ALJs have a ground rule that requires production of existing English language translations of any document produced during discovery. See, e.g., Chief ALJ Luckern Ground Rule 4(v) in Certain Video Game Machines and Related Three-Dimensional Pointing Devices (337-TA-658). The bounds of this particular ground rule were tested in Certain Microlithographic Machines and Components Thereof (Inv. No. 337-TA-468) (Order No. 8). In that investigation, respondent ASML (citing Ground Rule 4(v)) sought to compel all existing English language translations of more than 100,000 pages of Japanese language documents produced in discovery by complainant Nikon. In response, Nikon argued that of the approximately 32,000 documents (totaling around 600,000 pages) that it produced, its counsel selected and compiled 304 of those documents to be translated for further study and use in the litigation. Nikon further argued that the selection and compilation of these documents represented Nikon’s counsel’s work product and thus were immune from discovery. ALJ Bullock disagreed and ordered Nikon to produce English language translations for all of subject documents. Specifically, ALJ Bullock determined that “[i]f during discovery the supplier of a document has it translated in order to aid in screening its contents for relevance, materiality, and non-privilege prior to production, and the supplier determines at the conclusion of that process that the original document should be produced, it follows that all copies of that document, and thus all translations, are equally relevant, material and non-privileged, and are therefore subject to production as well. If that were not the case, then the original document would not have to be produced either.” Different results may occur in district court litigation where translations withheld under similar assertions of the attorney work-product doctrine may be given protection against challenges for their disclosure. By way of comparison, in Fleischmann v. McDonald’s Corp., 244 F.R.D. 434 (N.D. Ill. 2007), McDonald's similarly asserted that translations created at the direction of an attorney in preparation of litigation constituted attorney work-product. There, the district court agreed with McDonald’s. See also Brunetti v. Federal Bureau of Investigation, 357 F. Supp. 2d 97, 110 (D.D.C. 2004) (holding that a letter translated into Italian qualified as work-product, as it was prepared by an attorney in anticipation of litigation); In re Air Crash Disaster Near Warsaw, Poland on May 9, 1987, 1996 U.S. Dist. LEXIS 22712 (E.D.N.Y. Nov. 19, 1996) (holding that because English translations were prepared in anticipation of litigation at the direction of attorneys, those documents constituted attorney work-product and were thus immune from discovery). Accordingly, ITC litigants should be aware that when preparing English language translations of foreign-language documents produced in discovery, such English language translations may be required to be produced.
Public interest factors can override the finding of a violation of Section 337 at the ITC. Upon finding a violation, the administrative law judge (“ALJ") considers the impact that exclusion orders would have upon (1) the public health and welfare, (2) competitive conditions in the U.S. economy, (3) the production of like or directly competitive articles in the U.S., and (4) U.S. consumers. The ALJ next weighs these factors against the public interest in protecting U.S. intellectual property rights by excluding infringing imports. In making this public interest determination, the ALJ considers whether there are alternative sources (such as the complainant or its licensees) for the accused products that can adequately meet the demands of the U.S. market, whether there are alternative and non-infringing products that would not be subject to the remedial order, and the effect such an order would have on U.S. consumers. See Certain Circuit Telecommunications Chips, Inv. No. 337-TA-337. Although relatively uncommon, the ITC has, on four occasions, limited remedies due to public interest factors despite finding Section 337 violations. For example, during an oil shortage in late 1979, the ITC found that it was not in the public interest to exclude the importation of crankpin grinders (which are used to make pins on crankshafts for internal combustion motors) because of an overriding national interest in the supply of fuel efficient automobiles, where domestic industry was unable to supply domestic demand. See Certain Automatic Crankpin Grinders, Inv. No. 337-TA-60. By way of further example, the ITC also denied relief in Certain Inclined Field Acceleration Tubes due to an overriding public interest in continuing basic atomic research using imported acceleration tubes which were of higher quality than the domestic product. See Certain Inclined Field Acceleration Tubes, Inv. No. 337-TA-67. Four years later, the ITC denied relief in Certain Fluidized Supporting Apparatus, finding it was not in the public interest to exclude the importation of specialized hospital beds for burn patients, where the domestic producer could not supply beds within a commercially reasonable time and where no therapeutically comparable substitute was available. See Certain Fluidized Supporting Apparatus, Inv. No. 337-TA-182/188. More recently, the ITC has cited the public interest factors in crafting an exclusion order to reduce the burdens such order imposed on third parties and consumers. In Certain Baseband Processor Chips, Broadcom asserted a patent regarding power saving features of mobile wireless communications devices against Qualcomm, and several mobile phone manufacturers and service providers intervened. See Certain Baseband Processor Chips and Chipsets, Transmitter and Receiver (Radio) Chips, Power Control Chips, and Products Containing Same, including Cellular Telephone Handsets, Inv. No. 337-TA-543. For its part, Qualcomm argued that an exclusion order would operate against the public interest by decreasing the effectiveness of first responders during an emergency. In response, the ITC limited its remedy regarding infringing chips and chipsets for 3G wireless communication devices, including mobile phones and PDAs, by excepting previously imported models from the exclusion order. The ITC cited this limitation as “necessary to reduce the burdens imposed on third parties and consumers particularly in light of the limited availability of alternative devices that do not contain infringing chips or chipsets.” The ITC further determined that, “while exclusion of handheld wireless communications would have some impact on the public interest, particularly the public health and welfare, competitive conditions in the U.S. economy, and U.S. consumers, the exemption for previously imported models sufficiently reduced this impact such that the exclusion order should issue.” Other respondents have been less successful with their public interest arguments. For example, in Certain Automotive Parts, Taiwanese auto parts manufacturers argued that eliminating the importation of infringing replacement automotive parts would harm the public interest by eliminating all competition for replacement parts for Ford F-150 trucks, creating a monopoly for Ford in parts for repairing those trucks. The ITC determined, however, that “[e]vidence that an exclusion order could lead to higher prices is not dispositive of the public interest.” See Certain Automotive Parts, Inv. No. 337-TA-557. In addition, after the ITC finds a Section 337 violation and issues an exclusion order, public interest factors may further be considered during the 60-day Presidential Review period. During this period, the U.S. Trade Representative may disapprove of the ITC’s order “for policy reasons.” 19 USC § 1337 (j); Presidential Memo of July 21, 2005, 70 Fed. Reg. 43251 (July 26, 2005) (assigning this power to the U.S. Trade Representative). This Presidential power has been exercised five times. See Certain Dynamic Random Access Memories, Inv. No. 337-TA-242; Certain Alkaline Batteries, Inv. No. 337-TA-165; Certain Molded-In Sandwich Panel Inserts, Inv. No. 337-TA-99; Certain Multi-Ply Headboxes, Inv. No. 337-TA-82; Welded Stainless Steel Pipe and Tubes, Inv. No. 337-TA-29. Accordingly, prospective respondents should consider the public interest factors that may favor their case, and complainants should be prepared to respond to such arguments.
Did You Know . . . Importation Is A Separate Requirement In Section 337 Cases?
Section 337 of the Tariff Act of 1930, codified at 19 U.S.C. § 1337, authorizes the ITC to declare unlawful the “importation into the United States, the sale for importation, or the sale within the United States after importation. . . 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.” Actions under this statute only require the ITC to have in rem jurisdiction over the imported articles at issue. Unlike the personal jurisdiction requirement to bring an infringement case in a U.S. district court, the ITC does not need personal jurisdiction over any party. The explicit requirement in section 337 is often referred to as the importation requirement. In the ITC, a complainant must establish that infringing articles have been, or imminently will be, imported into the United States in order to prevail. In contrast, establishing importation is not required when initiating a patent infringement case in a U.S. district court. Proving importation in a section 337 proceeding is not typically arduous. Parties often stipulate to this element while, in other cases, importation is decided by the ITC on summary determination. Importation of an article into the U.S. does not have to actually occur in order to bring a complaint before the ITC, but it must at least be imminent. In this respect, the Commission has previously recognized that there could be an imminent importation without a sale. See, e.g., Certain Variable Speed Wind Turbines and Components Thereof (Inv. No. 337-TA-376). For example, a contract for future sale for importation into the U.S. has been deemed sufficient to establish importation. Id. Further, a complainant can satisfy the importation requirement even if the sale was made outside the U.S. by a foreign manufacturer to an intermediary. See Ride-On Toy Vehicles (Inv. No. 337-TA-314) (importation established through sale to trading company outside the U.S.). Moreover, if accused articles are imported into the U.S., even a small quantity will satisfy the importation requirement, such as samples for a trade show. See, e.g., Acesulfame Potassium and Blends (Inv. No. 337-TA-403). Also, products such as software can be imported electronically and thus are still considered as imported goods under section 337. See, e.g., Hardware Logic Emulation Systems (Inv. No. 337-TA-383). The ITC has even found importation when the very act of infringement occurs inside the U.S., if the accused article is exported from the U.S. and is later reimported. See, e.g., Sputtered Carbon Coated Computer Disks (Inv. No. 337-TA-350). With the increased popularity of the ITC as a forum for enforcing intellectual property rights, it is important to be cognizant of the importation requirement, even if it presents a relatively low hurdle for complainants in 337 investigations. * Chad Gorka is a summer associate at Oblon Spivak
Respondents involved in patent infringement investigations at the ITC typically raise affirmative defenses in response to a Section 337 complaint. Similar to district court practice, respondents may also assert counterclaims. In Section 337 actions, however, counterclaims are automatically removed to a U.S. District Court of appropriate venue so as not to delay the ITC investigation. By way of background, a counterclaim is a claim that “(1) arises out of the transaction of occurrence that is the subject matter of the opposing party’s claim and (2) does not require adding another party over whom the court cannot acquire jurisdiction.” Fed. R. Civ. P. 13. In a Section 337 investigation, under Commission Rule 210.14(e), the filing of any counterclaim must occur 10 days prior to the commencement of the evidentiary hearing. In conjunction with the ITC filing, the respondent must file a notice of removal with the U.S. district court in which venue exists under 28 U.S.C. § 1391. Section 337(c) addresses this in the same manner -- “immediately after a counterclaim is received by the Commission, the respondent raising such counterclaim shall file a notice of removal with a United States district court in which venue for any of the counterclaims raised by the party would exist under section 1391 of title 28.” Section 1391 addresses the venue requirements that must be satisfied in order for a civil action. Furthermore, Title 28 addresses section 337 claims in Section 1368 and 1446(f). Section 1368 provides that the district courts have original jurisdiction of any civil action based on a counterclaim raised under Section 337(c). 28 U.S.C. § 1368. Section 1446(f) explains that the district court shall resolve a counterclaim in the same manner as an original complaint and that the date of the counterclaim relates back to the date of the original ITC complaint. 28 U.S.C. § 1446(f). By way of example, in Certain Nitrile Gloves (Inv. No. 337-TA-608), respondent Ansell Healthcare Products LLC filed a notice of counterclaim with the ITC under 210.14(e) and filed a notice of removal with the United States District Court for the District of Columbia. Upon removal to the district court, counterclaim-defendant Tillotson Corporation then filed a Motion to Dismiss for Improper Venue or in the Alternative to Transfer. Ansell Healthcare Products LLC v. Tillotson Corp., 567 F. Supp. 2d. 196, 201 (D.D.C. 2008). The District of Columbia district court found that it was not the appropriate venue and transferred the counterclaims filed in its court to the District Court in Delaware where Ansell had previously field suit against Tillotson seeking declaratory judgment. “Venue in that District [of Delaware] is proper under 28 U.S.C. § 1391(a)(2), which allows in a case based on diversity of citizenship, venue in any judicial district where a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated.” Id. at 201. Due to the complex nature of Section 337 cases, prospective complainants should anticipate that counterclaims may be raised by respondents but, if so, litigants should be ready and prepared to litigate such counterclaims in the appropriate district court and not at the ITC. * Gregory Redmann is a summer associate at Oblon Spivak
In Section 337 actions, the domestic industry requirement includes two prongs: (1) the economic prong, which involves investment activities, and (2) the technical prong, which involves the practice of the asserted intellectual property right. Subsection 337(a)(3) defines domestic industry as follows:
An industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design 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.
The domestic industry requirement can be met by satisfying any one of these three criteria. Certain Integrated Circuit Chipsets and Products Containing Same, Inv. No. 337-TA-428, Order No. 10, Initial Determination (May 4, 2000), citing Certain Variable Speed Wind Turbines and Components Thereof, Inv. No. 337-TA-376, Comm’n Op., USITC Pub. 3003 (Nov. 1996). If a complainant relies on either Subsection (A) or (B) to prove domestic industry, it must also show satisfaction of the technical prong. Certain Set-Top Boxes and Components Thereof, Inv. No. 337-TA-454, Initial Determination, USITC Pub. 3564 (Nov. 2002). If, however, a complainant relies on Subsection (C) to prove domestic industry, it is not always necessary to show satisfaction of the technical prong. Subsection (C) was added to Section 337 in 1988, making it possible to demonstrate domestic industry using proof of exploitation of the intellectual property right, including if a complainant patent owner makes U.S. investments in the licensing of its patent(s), domestic industry may exist under Subsection 337(a)(3)(C). See Certain Digital Satellite System (DSS) Receivers and Components Thereof, Inv. No. 337-TA-392, Initial Determination (Oct. 20, 1997) (complainant satisfied the domestic industry requirement solely through investment of money in a patent licensing program); Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same, Inv. No. 337-TA-432, Order No. 13, Initial Determination (Jan. 24, 2001) (summary determination granted in favor of complainant on the existence of domestic industry based solely on activities related to licensing); Certain Zero-Mercury-Added Alkaline Batteries, Parts Thereof and Products Containing Same, Inv. No. 337-TA-493, Initial Determination (Jun. 2, 2004) (U.S. investment in exploitation of patent through licensing alone satisfied Subsection 337(a)(3)(C) for domestic industry); Certain 3G Mobile Handsets and Components Thereof, Inv. No. 337-TA-613, Order No. 42, Initial Determination (Mar. 10, 2009) (grant of summary determination of domestic industry based on licensing activities alone). When domestic industry exists under Subsection (C) due to investments made in the licensing of a patent, it is unnecessary to show that complainant patent holder or its licensee(s) are involved in actual domestic production to satisfy the technical prong. Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same, Inv. No. 337-TA-432, Order No. 13, Initial Determination (Jan. 24, 2001). It is, however, necessary to show a nexus between the licensing activities relied on by complainant under Subsection 337(a)(3)(C) and the asserted patent(s). Certain Microlithographic Machines and Components Thereof, Inv. No. 337-TA-468, Initial Determination (Jan. 29, 2003). In addition, a complainant must actually receive some revenue, such as a lump sum payment or royalty payments, from its licensing activities in the U.S., Certain Digital Processors and Digital Processing Systems, Components Thereof and Products Containing Same, Inv. No. 337-TA-559, Order No. 24, Initial Determination (May 11, 2007), and the investment in licensing activities must be substantial to alone satisfy domestic industry under Subsection 337(a)(3)(C). Certain Stringed Musical Instruments and Components Thereof, Inv. No. 337-TA-586, Initial Determination (Dec. 3, 2007). As summarized recently by Chief ALJ Paul J. Luckern, “[u]nder 337(a)(3)(C), a complainant may satisfy the domestic industry requirement solely by relying on licensing activities that relate to the patent(s) asserted in the investigation, even if the complainant (or a licensee of the complainant) does not manufacture patented products in the United States. … [C]omplainant need only demonstrate that (1) it has made a substantial investment in its licensing program and (2) there is a sufficient nexus between the patent at issue and the alleged domestic licensing industry.” Certain Short-Wavelength Light Emitting Diodes, Laser Diodes and Products Containing Same, Inv. No. 337-TA-640, Order No. 72, Initial Determination (May 8, 2009).
Did You Know…Parties May Obtain Clearance To Import Redesigned Products After Issuance Of An Exclusion Order?
Following the issuance of an exclusion order by the Commission in a Section 337 investigation, any person seeking a determination that its redesigned products do not violate such exclusion order may seek (1) an advisory opinion under Commission Rule 210.79; and/or (2) an administrative ruling from U.S. Customs under 19 C.F.R. §177. Under Commission Rule 210.79, any person may request an advisory opinion from the Commission to determine whether a proposed course of action or conduct would violate a Commission order. The party requesting the advisory opinion must establish standing by showing that the proposed course of action is not hypothetical, that it has a compelling business need for the advice, and that the request was made as fully and as accurately as possible. The Commission also takes into consideration whether an advisory opinion would facilitate the enforcement of Section 337, would be in the public interest, and would benefit consumers and competitive conditions in the United States. Although the Commission’s rules do not require that an Administrative Law Judge (“ALJ”) issue an advisory opinion within a certain timeframe, the Commission can require that an ALJ set an abbreviated procedural schedule. Typically, the Commission requires that the ALJ issue an initial advisory opinion within nine months of the publication date of the Commission’s Notice of Advisory Opinion Proceedings. See, e.g., Certain Lens-Fitted Film Packages, Inv. No. 337-TA-406, Notice of Formal Enforcement and Advisory Opinion Proceedings and Accompanying Order (July 31, 2001) (9-months after notice publication). Advisory Opinion proceedings are not subject to the requirements of the Administrative Procedures Act and thus the ALJ has discretion concerning the course of the advisory opinion proceeding, including taking evidence beyond what is already in the record, whether or not to hold an evidentiary hearing, and the scheduling for the proceeding. Further, an advisory opinion by the Commission is not appealable as it does not represent a final determination. Alternatively, persons who desire clarification about whether a redesigned product is covered by an exclusion order may request a ruling under 19 C.F.R. § 177 by sending a written request to U.S. Customs. Requests are normally processed by U.S. Customs in the order received and as quickly as possible, usually within two to six months. If U.S. Customs finds that the redesigned product falls outside the scope of the exclusion order, it will issue a ruling to that effect and permit the articles to enter the United States. On the other hand, in the event that U.S. Customs denies entry of a redesigned product in light of an existing exclusion order, U.S. Customs will issue a ruling. Such a ruling is subject to a right to appeal to the U.S. Court of International Trade (“CIT”). Appeals from final decisions of the CIT may be taken to the U.S. Court of Appeals for the Federal Circuit and, ultimately, to the Supreme Court of the United States.
Section 337(c) states that “all legal and equitable defenses may be presented in all cases” before the ITC. The Federal Circuit has explained that the Commission recognizes the same defenses and applies the same burdens of proof in patent cases as do the district courts. Lannom Mfg. Co. v. United States Int’l Trade Comm’n, 799 F.2d 1572, 1578 (Fed. Cir. 1986). Nevertheless, due to the remedies available in the ITC and the legislative history behind amendments to U.S. patent law, not all defenses that are available to defendants in district court are available to respondents in the ITC. If the Commission finds a violation of Section 337, then it is authorized to issue two types of remedial orders: exclusion orders and cease and desist orders. 19 U.S.C. § 1337(d)-(f). An award of money damages is not available as a remedy in the ITC. The available remedies in the ITC are therefore prospective in nature. The defense of laches in patent cases, on the other hand, is retrospective in nature: if the defendant proves by a preponderance of the evidence that the patentee delayed filing suit for an unreasonable length of time from when it new or should have known of the claim against the defendant, and that the defendant suffered either economic or evidentiary prejudice as a result of the delay, then the patentee is barred from recovering pre-filing monetary damages. Thus, “laches as it pertains to patent-based cases does not, as a matter of law, work to curtail the type of prospective relief sought in 337 cases.” Certain Personal Watercraft and Components Thereof, Inv. No. 337-TA-452, Order No. 54 at 2, Initial Determination (Sept. 19, 2007) (citing Certain EPROM, EEPROM, Flash Memory and Flash Microcontroller Semiconductor Devices and Products Containing Same, Inv. No. 337-TA-395, Comm’n Op., Suppl. Views of Chairman Bragg at 11, n.65 (July 9, 1998)). It should be noted that while “ordinary” laches is not an available as a defense, respondents in the ITC may assert prosecution laches. See Certain Data Storage Systems and Components Thereof, Inv. No. 337-TA-471, Order No. 42 (Jan. 4, 2003). The two-prong test for prosecution laches requires (1) an unreasonable and inexcusable delay by the patentee in prosecuting the patent, and (2) material prejudice to the defendant attributable to the delay. If prosecution laches applies, then the patent is rendered unenforceable. Thus, unlike a laches defense to limit damages, a prosecution laches defense is not retrospective and will impact the type of prospective relief sought by patentees in the ITC.
Did You Know…The Prevailing Party In A Section 337 Investigation Is Not Automatically A Party On Appeal At The Federal Circuit?
In Section 337 investigations, the party that prevails before the Commission is not entitled to appeal to the U.S. Court of Appeals for the Federal Circuit the Commission’s final determination, and is not automatically a party to an appeal brought by the party that lost before the Commission. However, the prevailing party is entitled to intervene if the losing party appeals the Commission’s determination. Under Section 337, an appeal of an adverse Commission determination must be made “in accordance with chapter 7 of title 5.” 19 U.S.C. § 1337(c). Chapter 7 of title 5, in turn, only provides for appellate actions “against the United States, the [federal] agency by its official title, or the appropriate officer.” 5 U.S.C. § 703. Accordingly, appeals of adverse determinations at the ITC in connection with Section 337 actions cannot be brought against the other party to the investigation directly; rather, they must be brought against the ITC. Further, only parties who are “adversely affected” by a final determination of the ITC have standing to appeal to the Federal Circuit. 19 U.S.C. § 1337(c). This statutory “adversely affected” language has been interpreted narrowly, in that only the ultimate outcome of the investigation is taken into account. Surface Tech., Inc. v. U.S. Int’l Trade Comm’n, 780 F.2d 29, 30 (Fed. Cir. 1985); Krupp Int’l, Inc. v. U.S. Int’l Trade Comm’n, 626 F.2d 844, 846 (CCPA 1980). This means that, e.g., respondents cannot appeal a determination that section 337 has not been violated. See Krupp, 626 F.2d at 846; Surface Tech., 780 F.2d at 30; Tanabe Seiyaku Co., Ltd. v. U.S. Int’l Trade Comm’n, 1995 U.S. App. LEXIS 40961, at *2 (Fed. Cir. 1995). However, in order to mitigate this harsh rule, the Federal Circuit has repeatedly held that if the losing party appeals the Commission’s decision, then the prevailing party has the right to intervene and raise any available arguments in support of the Commission’s final determination. See, e.g., Krupp, 626 F.2d at 846 (allowing respondent to intervene in complainant’s appeal in order to, inter alia, challenge the Commission’s findings related to four patents, even though the Commission had found no violation of Section 337, due to non-infringement for one of the patents and invalidity for the other three); see also Rule 15(d) of the Federal Rules of Appellate Procedure (providing further information regarding the required substance and timing for a motion to intervene at the Federal Circuit). Thus, as a practical matter, the prevailing party can argue against unfavorable Commission findings on appeal, as long as the losing party appeals the overall final determination first.
Did You Know…Section 337 Settlement Agreements Must Be Approved By The ITC?
When parties to a Section 337 investigation settle their dispute, whether through a license agreement or otherwise, the parties may terminate the investigation by filing a motion under Commission Rule 210.21(a)(2). However, any motion to terminate the investigation based on a settlement agreement must include: (1) copies of the licensing or other settlement agreements, (2) any supplemental agreements, and (3) a statement that there are no other agreements, written or oral between the parties concerning the subject matter of the investigation. If the licensing or settlement agreements contain confidential information, such information can be removed from the public versions of these documents. Indeed, if fewer than all parties settle the investigation, the settling parties might be able to maintain the confidentiality of the financial settlement terms from the non-settling parties. See, e.g., Certain Machine Vision Software, Inv. No. 337-TA-680, Order 18 (October 29, 2009) (finding that the policy of encouraging settlement through maintaining financial terms secret trumps non-settling parties’ alleged need of such information for remedy issues). However, keeping financial settlement terms from non-settling parties is not uniformly followed in all cases. See, e.g., Certain Zero-Mercury-Added Alkaline Batteries, Inv. No. 337-TA-493, Order 35 (October 30, 2003) (while redacted financial information would be kept from non-settling respondents, ALJ denied complainant’s request to keep such information from outside counsel of non-settling respondents, because existing protective order was sufficient). According to the Commission Rules, the Administrative Law Judge (“ALJ”) is directed to consider and make appropriate findings regarding the effect of the proposed settlement on the public health and welfare, competitive conditions in the U.S., the production of like or directly competitive articles in the U.S., and U.S. consumers. See Commission Rule 210.50(b)(2). Although the ALJ may conduct a hearing on these public interest factors, the ALJ’s findings on this issue are normally made solely on the information submitted by the parties. If the ALJ grants the motion to terminate the investigation based upon settlement, the ALJ then certifies to the full Commission the motion papers and agreements, with an initial determination terminating the proceeding for the affected parties. Again, if confidential information is contained within the initial determination, agreements, and motion papers, then confidential and public versions of these papers are forwarded to the Commission. Under Commission Rule 210.42(e), notice of the initial determination based on settlement is provided to the U.S. Department of Health and Human Services, the U.S. Department of Justice, the Federal Trade Commission, the U.S. Customs Service, and any other departments or agencies that the Commission deems appropriate. These institutions are permitted ten days after service of the notice to provide comments regarding the initial determination. The Commission then has an opportunity to review the settlement agreements along with any other comments provided by the parties, Commission Investigative Attorney, ALJ, and any agencies or departments. The Commission can then take action as it sees fit, or more commonly, it will decide not to review the initial determination, in which case it will issue a notice to the public and the parties of its decision, and the investigation will terminate as to the affected parties.
Under Section 337, complainants may seek and obtain temporary relief within a short time period. Where such a motion for temporary relief is filed, and an investigation is instituted, the time period until a final determination by the Commission on the motion for temporary relief is extremely short, 90 days in most cases, and 150 days in “more complicated” cases. Although Section 337 complainants rarely seek this form of relief, the Commission is currently considering such a motion in Certain Silicon Microphone Packages (Inv. No. 337-TA-695). See our November 17, December 18 and 23 posts for more information. Temporary relief may be granted, under Section 337, to a party to “the same extent as preliminary injunctions and temporary restraining orders may be granted under the Federal Rules of Civil Procedure.” 19 U.S.C. § 1337(e)(3). In order to obtain temporary relief, a party must show (1) reasonable likelihood of success on the merits, (2) irreparable harm caused if relief is not granted, (3) balance of hardships tipping in the requesting party’s favor, and (4) the public interest does not preclude issuance of relief. Reasonable likelihood of success on the merits, in Section 337 cases, includes demonstration that a valid and enforceable intellectual property right has been infringed and that a domestic industry exists, or is in the process of being established, that practices the asserted intellectual property right. If a party wishes to file for temporary relief, in most cases, the complainant must do so at the time of the complaint. 19 C.F.R. § 210.52. In certain circumstances, however, a motion for temporary relief may be filed after the complaint, but before the institution of an investigation. 19 C.F.R. § 210.53. This requires a party to prove that extraordinary circumstances, warranting temporary relief, exist and that the party was not aware, and with due diligence would not have been aware, of those circumstances at the time the complaint was filed. Id. Regardless of whether the motion is filed with the complaint or afterward, it must be accompanied by (1) a memorandum of points and authorities in support of the motion; (2) affidavits of persons with knowledge of the facts alleged; (3) all documentary information and other evidence intended to be submitted in support of the motion; (4) a detailed statement of facts bearing on whether the complainant should be required to post a bond; and if so required, (5) the appropriate amount of that bond. 19 C.F.R. § 210.52. Once a proper motion for temporary relief has been made, the opposing party has 10 days after the service of the motion to file a response. 19 C.F.R. § 210.59. In the response, the opposing party will attempt to show that the complainant lacks a reasonable likelihood of success on the merits, that no irreparable harm will be caused if relief is not granted, that the balance of hardships tips in the opposing party’s favor, and that the public interest precludes issuance of relief. Like the motion for temporary relief, the response should also include a memorandum of points and authorities; affidavits, where possible; and address the complainant’s bond assertions. Id. After the complaint, the motion for temporary relief, and the response have been filed, the Commission will determine whether to institute an investigation. This determination must be made within 35 days of the filing of the complaint and motion for temporary relief. 19 C.F.R. § 210.10. If an investigation is instituted, the motion for temporary relief is provisionally accepted and forwarded to an ALJ who will make an initial determination (“ID”) as to whether there has been a violation of Section 337 and whether temporary relief is appropriate. The ALJ then has 70 days after the institution of the investigation to issue the ID. 19 C.F.R. § 210.58. Like other Section 337 proceedings, the ALJ may deem the temporary relief portion of the investigation “more complicated,” thus extending the deadline for the ID to 120 days from the institution of the investigation. Id. By way of example, and as indicated in our December 23 post, ALJ Rogers designated the investigation “more complicated” in Certain Silicon Microphone Packages. After the ALJ issues an ID on the issue of temporary relief, the Commission has 20 days (30 days in “more complicated” cases) in which to modify or vacate the ID. 19 U.S.C. § 1337(e)(2). Within that 20 day (or 30 day) period, the parties have the opportunity to submit commentary on any perceived errors in the ID. If the Commission chooses to award temporary relief, they may do so either in the form of a temporary exclusion order or a temporary cease and desist order.
Under 28 U.S.C. § 1659(a), upon timely request of a Section 337 Respondent, who is also a party in a civil action, a “district court shall stay, until the determination of the Commission becomes final, proceedings in the civil action with respect to any claim that involves the same issues involved in the proceeding before the Commission.” A Respondent’s request for a stay is deemed timely only if made within (1) 30 days after being named as a respondent in the ITC proceeding, or (2) 30 days after the district court action is filed, whichever is later. In addition to making a timely request, a Respondent also must show that the claims in the district court action involve the same issues before the ITC. This similarity of issues requirement has been interpreted by some district courts to require that the patents asserted in both forums be identical. By way of example, in Saxon Innovations, LLC v. Palm, Inc., 2009 U.S. Dist. LEXIS 105928 (E.D. Tx. Nov. 4, 2009), the plaintiff Saxon accused Palm of infringing its ‘873 patent. Saxon had also asserted its ‘873 patent in a parallel ITC investigation. Although Palm was a respondent in that parallel ITC investigation, Saxon did not assert its ‘873 patent against Palm in that forum. The district court denied Palm’s request to stay the district court action against it finding that “[t]he claims against Palm in this case and the claims against Palm in the ITC investigation are not ‘identical parallel claims.’” In explaining its ruling, the court noted the fact that the ITC will not consider Palm’s alleged infringement of the ‘873 patent nor will it consider Palm’s invalidity theories of the ‘873 patent, if any. Similarly, in Micron Tech., Inc. v. Mosel Vitelic Corp., 1999 U.S. Dist. LEXIS 4792 (D. Id. Mar. 31, 1999), the district court denied the defendants’ request to stay under § 1659(a) a consolidated action in its entirety where only four of eleven patent infringement claims were asserted in the ITC. The district court rejected the defendants’ assertions that the seven patent infringement claims not before the ITC were so related to the four patent infringement claims before the ITC that they implicated substantially similar legal and factual issues, including the fact that the plaintiff alleged the same products infringed all eleven patents. Although the district court refused to stay the action with respect to the seven patent infringement claims not before the ITC, the court granted the defendants’ motion to stay the remaining four patent infringement claims until such time as the resolution of the ITC action became final. Other district courts have determined that although § 1659 may not be applicable, it can use its discretionary authority to stay any non-identical patent infringement claims. For example, in SanDisk Corp. v. Phison Elec. Corp., 538 F.Supp.2d 1060 (W.D. Wis. 2008), the district court stayed, under its inherent power, a separate action involving non-identical patent infringement claims filed by the plaintiff against the same defendants/respondents. In staying the separate action, the court noted that the patents shared the same prosecution history and specification of one of the patents asserted in the plaintiff’s other district court action that was stayed under § 1659. Similarly, in Formfactor, Inc. v. Micronics Japan Co., Ltd., 2008 U.S. Dist. LEXIS 131114 (N.D. Cal. Feb. 11, 2008), in addition to staying two patent infringement claims under § 1659, the district court stayed, under its inherent power, two non-identical patent infringement claims. The court noted that the four asserted patents shared at least two common inventors. In staying the entire action, the district court cited the potential duplication of discovery that would occur if the two remaining claims were not stayed and stated that “the similarity of the patents in subject matter [was] sufficient to warrant staying the matter . . . in order to gain the additional knowledge of the ITC proceedings and . . . to benefit from litigating the four patents in this action together.” In the event that a district court ultimately determines to stay a civil action under 28 U.S.C. § 1659(a), the civil action is stayed “until the determination of the Commission becomes final.” This statutory language has been interpreted by the Federal Circuit to mean that “§ 1659 requires that the stay of district court proceedings continue until the Commission proceedings are no longer subject to judicial review.” In re Princo Corp., 478 F.3d 1345, 1355 (Fed. Cir. 2007).
Did You Know…The Office Of Unfair Import Investigations Is An Independent Third Party In Section 337 Actions?
In Section 337 actions before the International Trade Commission (the “Commission”), the Office of Unfair Import Investigations (the “Commission Investigative Staff” or “OUII”) serves as an independent third party representing the public interest. OUII’s principal task is to help create a complete record on all contested issues so that the Commission can properly enforce the provisions of Section 337. This is necessary because, unlike with district court litigation, a Section 337 action “is not purely private litigation ‘between the parties’ but rather is an ‘investigation’ by the Government into unfair methods of competition or unfair acts in the importation of articles into the United States.” Young Eng’rs, Inc. v. U.S. Int’l Trade Comm’n, 721 F.2d 1305, 1315 (Fed. Cir. 1983). OUII can trace its origins back to the Trade Act of 1974 (the “Trade Act”), which instituted significant changes in the procedures for Section 337 actions. Prior to the passage of the Trade Act, the provisions of the Administrative Procedure Act (“APA”) did not apply to Section 337 actions, and there was therefore very limited participation by the private parties after institution of an investigation -- the Commission investigated complaints directly. This changed drastically after the enactment of the Trade Act. The private parties suddenly had substantial new rights to participate directly in Section 337 proceedings. The problem, however, was that now the Commission could not directly communicate with the private parties ex parte because it was serving as an administrative fact-finder. To remedy this situation, OUII (originally known as the Unfair Import Investigations Division or “UIID”) was created so as to represent the public interest in the proceeding and help the Commission reach a correct and fully informed determination. OUII plays a number of critical roles in Section 337 investigations, beginning even before a complaint is filed. Complainants typically consult with OUII before filing in order to ensure the technical sufficiency of the draft complaint and to improve the likelihood of having the Commission institute an investigation based on the complaint. During the 30-day period following the filing of the complaint, OUII consults with the Complainant and proposed Respondents and then makes a recommendation to the Commission on whether to institute an investigation. Once the Commission institutes an investigation, OUII’s primary role is to aid in the creation of a complete record in order to support the public’s interest in a correct and fully-informed decision by the Commission. To this end, OUII can propound written discovery and participate in depositions just like the private parties. OUII independently briefs the issues relevant to the public interest and will generally take a position on most of the critical legal issues in the investigation. After an ALJ issues an Initial Determination, OUII remains an independent third party to the investigation and participates in briefing during review by the Commission. If the Commission’s Final Determination is appealed to the Federal Circuit, however, it is the job of the Office of the General Counsel to represent the Commission on appeal. OUII continues to play a role in the enforcement of the Commission’s determination, and participates in any formal enforcement proceedings.
Did You Know … ITC Remedial Orders Can Be Modified Or Rescinded?
Under Commission Rule 210.76, any person who believes that “changed conditions of fact or law, or the public interest” require that an exclusion order, cease and desist order, or consent order be modified or set aside can petition the Commission for such relief. The petition must state the changes sought and the changed circumstances warranting such action, together with supporting materials and argument. The Commission can also consider such action sua sponte. The Commission may provisionally accept the petition, at which point notice will be published in the Federal Register and service of both the petition and the notice will be made on the former parties to the investigation. Any person may file an opposition to the petition within 10 days of service. See 19 C.F.R. § 210.76(a)(1). If the petitioner was previously found in violation of Section 337 and requests a determination that it is no longer in violation, or requests modification or rescission of an order issued pursuant to Section 337(d), (e), (f), (g), or (i), the burden of proof is on the petitioner. See 19 C.F.R. § 210.76(a)(2). A public hearing on the petition may be held either before the Commission, or before an ALJ who then issues a recommended determination (RD) to the Commission. After considering the information placed on the record, the Commission will take such action as it deems appropriate. See 19 C.F.R. § 210.76(b). Importantly, there are no statutory or regulatory time limits on Rule 210.76 proceedings. In certain cases, a Commission order modifying an exclusion order may be appealed to the Federal Circuit. See, e.g., Allied Corp. v. ITC, 850 F.2d 1573, 1579-80 (Fed. Cir. 1988). In addition, under Rule 210.77, the Commission may, in the event of a temporary emergency with formal enforcement proceedings pending, immediately modify or rescind a prior order without hearing or notice. Such immediate action would be taken when necessary to prevent the violation of a Commission order and when “subsequent action by the Commission would not adequately repair substantial harm caused by such violation.” 19 C.F.R. § 210.77(a). However, before taking such action, the Commission must consider the effect of such action on “the public health and welfare, competitive conditions in the U.S. economy, the production of like or directly competitive articles in the United States, and U.S. consumers.” 19 C.F.R. § 210.77(b). There have been several examples of modification proceedings in practice. For instance, in Certain Steel Rod Treating Apparatus and Components Thereof (Inv. No. 337-TA-97), the Commission invoked its power under Section 337(h) to modify or rescind orders due to changed conditions. In that investigation, the Commission had issued an exclusion order based in part on the finding that the subject patent was valid. Thereafter, respondents successfully argued in district court that the patent was invalid and unenforceable. As a result, the Commission revoked the exclusion order. Likewise, in Certain Composite Wear Components and Welding Products Containing Same (Inv. No. 337-TA-644), the Commission recently temporarily rescinded its limited exclusion order and cease and desist order against respondents pending resolution of the validity of the subject patent by the Federal Circuit. The patent had been declared invalid by a district court in a declaratory judgment action brought by respondents. See our January 20, 2011 and February 14, 2011 posts for more details. The Commission may not, however, modify the remedy while parallel litigation is still pending in district court. For example, in Certain Integrated Repeaters, Switches, Transceivers and Products Containing Same (Inv. No. 337-TA-435), the Commission did not delay issuing a limited exclusion order when there was a concurrent district court action involving the subject patent, noting that “the Commission’s rules provide adequate means for modification of an exclusion order if and when that should become necessary.” Comm’n Op. on Remedy, Public Interest and Bonding at 22 (Aug. 16, 2002). Design-arounds frequently give rise to modification proceedings. For example, in Certain Amorphous Metals and Amorphous Metal Articles (Inv. No. 337-TA-143), the Commission had commenced Section 337 proceedings against several importers of steel products to determine whether the processes used to make the imported products would infringe a patent held by Allied Corporation. That investigation led to the issuance of a general exclusion order for the importation or sale of amorphous metal articles or alloys made by the infringing processes. The Commission then granted petitions for advisory opinion proceedings filed by respondents who sought advice that the importation of articles made by their “newly-developed” processes would not violate the exclusion order. The Commission also sua sponte initiated exclusion order modification proceedings, which were consolidated with the advisory opinion proceedings for hearing. The presiding ALJ issued an initial advisory opinion (IAO) and RD that the new processes did not infringe Allied’s patent, and recommended modification of the exclusion order. Allied petitioned the Commission to review the ALJ’s IAO and RD. Upon review, the Commission issued an advisory opinion supplementing the ALJ’s IAO, as well as an order modifying the exclusion order. The modified order set out procedures to be followed by those desiring to import articles covered by the order, which included: (1) petitioning the Commission to institute further proceedings as appropriate to determine whether the amorphous metal articles sought to be imported fall outside the scope of the order and therefore allowed entry into the U.S., and (2) certifying to the U.S. Customs Service that the articles sought to be imported were manufactured by a process that the Commission determined to be outside the scope of the order. On appeal, the Federal Circuit affirmed the Commission’s modified exclusion order, but held that the advisory opinion was not a final determination and thus not reviewable. Allied Corp., 850 F.2d at 1578-80. Similarly, in Certain Wire Electrical Discharge Machining Apparatus and Components Thereof (Inv. No. 337-TA-290), the Commission had instituted formal enforcement proceedings to determine whether respondents’ newly-designed wire electrical discharge machining apparatus infringed certain claims of complainant’s patent, in violation of earlier cease and desist orders. Those proceedings were terminated on respondents’ motion after a district court granted partial summary judgment that the newly-designed apparatus did not infringe the claims of the patent covered by the Commission’s cease and desist orders. See Notice of Termination of Formal Enforcement Proceeding, 55 Fed. Reg. 51356 (1990). Additional examples of “changed conditions of fact or law” giving rise to modification proceedings are set forth below: In Certain Miniature Plug-In Blade Fuses (Inv. No. 337-TA-114), the Commission had issued a general exclusion order for imported miniature plug-in blade fuses having a “product configuration and/or packaging” that simulated complainant’s trade dress. Thirteen years later, a German company not involved in the original investigation challenged the validity of complainant’s trademark registrations in district court, successfully arguing that the individual features of complainant’s fuse housing and the overall configuration of those features were functional, thus rendering the registrations invalid and unenforceable. The Commission instituted a modification proceeding sua sponte and solicited submissions from interested persons and entities, but did not hold a public hearing or delegate the proceeding to an ALJ. Having found that the conditions which led to the general exclusion order no longer exist, the Commission modified the order by deleting the reference to product configuration. See Notice of Exclusion Order Modification (Mar. 20, 2002). In Certain Novelty Glasses (Inv. No. 337-TA-55), the Commission had conducted an investigation of the alleged unauthorized importation of certain novelty beverage glasses that infringed complainants’ trademarks and trade dress, finding a violation of Section 337 and issuing an exclusion order. The exclusion order required complainants to report to the Commission, on a semi-annual basis, whether complainants were continuing to use the subject trade dress. When complainants failed to submit the required reports, the Commission ordered complainants to show cause why the exclusion order should not be rescinded pursuant to Interim Rule 211.57. Thereafter, the Commission modified the exclusion order to state that, if complainants fail in the future to timely comply with the reporting requirement, and if they also fail to submit the required information within thirty days of receiving written notice from the Commission that the reporting requirement has been violated, then the Commission may rescind the exclusion order without further notice or proceedings. See Comm’n Notice of Modified Exclusion Order, 57 Fed. Reg. 12339 (1992). In Certain Plastic Encapsulated Integrated Circuits (Inv. No. 337-TA-315), the Commission had issued a limited exclusion order and cease and desist orders upon finding a violation of Section 337 in the unlicensed importation of circuits manufactured by an infringing process. The orders did not explicitly cover licensed products, and the limited exclusion order allowed entry of products that the manufacturer or importer certified were covered by a license. The cease and desist orders contained quarterly reporting requirements. Complainant Texas Instruments (TI) petitioned for modification of the orders, asking the Commission to decide the dollar amount of patented product respondent Analog could import under a limited license Analog had acquired when it purchased a cross-licensee (PMI) of TI. Pursuant to Interim Rule 211.57, the Commission provisionally accepted TI’s position that Analog could only sell up to the amount of PMI’s sales of licensed plastic encapsulated integrated circuits at the time of its acquisition ($15 million), and published a notice in the Federal Register setting a schedule for responses. Analog and the Commission Investigative Staff argued in opposition that, under the cross-license, Analog could sell patented product up to the amount of PMI’s sales of all licensed products at the time of acquisition, or $94 million. The Commission decided in favor of Analog, but agreed with TI that the reporting provision in the cease and desist orders should be modified to ensure that Analog’s sales do not exceed the $94 million ceiling. See Modified Order to Cease and Desist (July 2, 1993). In Certain Hardware Logic Emulation Systems and Components Thereof (Inv. No. 337-TA-383), complainant Quickturn had filed a motion for temporary relief simultaneously with its complaint, which was provisionally accepted by the Commission. The ALJ subsequently issued an initial determination granting Quickturn’s motion, which was adopted by the Commission. The Commission determined that a temporary limited exclusion order and a temporary cease and desist order directed to respondents was the appropriate form of temporary relief, and that bond would be set at 43% of the entered value of the imported articles. Quickturn later petitioned the Commission under Rule 210.76 for an increase in respondents’ TEO bond rate from 43% to 180% of entered value of the subject emulation systems in light of the entered values that respondents had declared to the U.S. Customs Service, arguing that evidence gathered during the permanent relief phase of the investigation revealed that the TEO bond rate established during the temporary relief phase was inadequate to protect Quickturn from injury. The Commission amended the temporary exclusion order to increase the TEO bond rate to 180% when the entered value did not equal the transaction value as defined in 19 C.F.R. § 152.103. See Comm’n Op. on Pet. to Modify Temporary Relief Bond (Sept. 27, 1997).
Investigations at the ITC already move very quickly, but did you know that the parties can make investigations move even more rapidly? For example, under 19 C.F.R. § 210.15(c), parties to an ITC investigation have 10 days after service of any written motion to respond, unless a longer or shorter time is designated by the presiding Administrative Law Judge (“ALJ”) or the Commission. Accordingly, most Ground Rules provide that a party may request a shortened response time during which the opposing party may respond to its motion. By way of example, ALJ Gildea’s Ground Rule 3.7 states that “[a] motion shall include any request to shorten the period of time during which other parties may respond to the motion. The fact that a shortened response time is requested shall be noted in the title of the motion and the motion shall include an explanation of the grounds for such a request. A request for a shortened response time shall not be made through a separate motion.” See also Chief ALJ Bullock Ground Rule 3.7, ALJ Essex Ground Rule 3.7, ALJ Rogers Ground Rule 3.7, and ALJ Pender Ground Rule 5.1.3. Typically, the movant’s request for a shortened response period is granted when an expedited response is required to meet the deadlines imposed by the ALJ’s procedural schedule or the time set for the hearing is near. See, e.g., Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, Inv. No. 337-TA-794, Order No. 29 (Feb. 13, 2012) (granting shortened response time for motion for protective order in light of the “fast approaching deadline for discovery”); Certain Video Game Systems and Wireless Controllers and Components Thereof, Inv. No. 337-TA-770, Order No. 25 (October 17, 2011) (granting shortened response time for motion to amend the trial schedule in light of the “upcoming deadlines related to expert disclosures”); Certain Microprocessors, Components Thereof, and Products Containing Same, Inv. No. 337-TA-781, Order No. 12 (Sept. 26, 2011) (granting shortened response time for motion to amend the procedural schedule in light of the “impending Markman deadlines in this Investigation”); Certain Polyimide Films, Products Containing Same, and Related Methods, Inv. No. 337-TA-772, Order No. 32 (February 27, 2012) (granting shortened response time for motion for sanctions due, in part, to the “short time left before the start of the hearing in this matter”); Certain Wind and Solar-Powered Light Posts and Street Lamps, Inv. No. 337-TA-736, Order No. 17 (July 27, 2011) (granting shortened response time for motion to terminate “[b]ecause the hearing is set to commence next week”). When no such exigent circumstances exist, or other good cause is not shown, motions for a shortened response period are frequently denied. See, e.g., Certain Electronic Devices With Graphics Data Processing Systems, Components Thereof, and Associated Software, Inv. No. 337-TA-813, Order No. 5 (Feb. 13, 2012) (denying request for shortened response time with respect to motion to compel document production in light of the fact that fact discovery is ongoing and does not close for four months); Certain Mobile Telephones and Modems, Inv. No. 337-TA-758, Order No. 11 (June 24, 2011) (denying request for shortened response time with respect to motion to compel production of witnesses as a result of the movant’s failure to show good cause); Certain Electronic Devices, Including Mobile Phones, Portable Music Players, and Computers, Inv. No. 337-TA-701, Order No. 21 (July 16, 2010) (denying request for shortened response time where “there has been insufficient demonstration of exigent circumstances outweighing the appearance of prejudice to the other parties”). Thus, while a request for a shortened response time may accompany any motion at the ITC, use of this procedure may be best reserved for instances where an expedited response is required to maintain the integrity of the ALJ’s procedural schedule or the hearing process.
The Federal Circuit recently issued a precedential opinion in General Electric Co. v. ITC, 670 F.3d 1206 (Fed. Cir. 2012). See our March 1, 2012 post. In this opinion, the Court addressed its 1984 decision in Beloit, which gave the Commission the “liberty to reach a ‘no violation’ determination on a single dispositive issue,” such as non-infringement. Beloit Corp. v. Valment Oy, 742 F.3d 1421, 1423 (Fed. Cir. 1984). In other words, under Beloit, the Commission could dispose of investigations by reaching final determinations as to some, but not all dispositive issues. Recognizing that the approach carried a risk of remand, the Court reasoned that the risk was outweighed by the benefits of easing the burden on a Commission that was often faced with “numerous complex issues … within rigid time limits,” and saving “the parties, the Commission, and this court unnecessary cost and effort.” Id. On appeal in Beloit, the Respondent was precluded from arguing the issues of validity and domestic industry, as the Commission only took a position on non-infringement. Id. at 1422-23. This issue of judicial appeal, when the Commission takes no position on certain issues in disposing of a Section 337 action, was addressed by the Federal Circuit in the General Electric case. In the General Electric (“GE”) investigation, the ALJ found that Respondent infringed three patents, including U.S. Patent No. 6,921,985 (the ‘985 patent); that the three patents were unenforceable or invalid; that GE had domestic industry with respect to two of the three patents; and that there was a violation of Section 337. The parties petitioned for review and the Commission issued a Notice of Review, indicating that it would review all issues in the decision, except importation and the intent element of inequitable conduct. With respect to the ‘985 patent, however, the Commission only addressed the technical prong of the domestic industry requirement in reversing the ALJ’s determination and finding no violation of Section 337. See our January 9, 2010 and March 5, 2010 posts for more details on the Commission’s final determination in this investigation. Complainant GE appealed to the Federal Circuit on all issues relating to the ‘985 patent that the Commission noticed for review, including those that the Commission did not take a position on in disposing of the investigation. Relying on Beloit on appeal, the Commission argued that GE had no basis to appeal issues that the Commission noticed for review, but did not address in the Final Determination. General Electric Co., 670 F.3d at 1219 (“The Commission holds that when the full Commission does not review an issue that it noticed for review, that issue is removed from access to judicial review.”). The Commission asserted that this procedure was established by the Federal Circuit in Beloit, and confirmed by 19 C.F.R. § 210.45, which states that the Commission “may take no position on specific issues or portions of the initial determination of the administrative law judge.” The Federal Circuit rejected the Commission’s arguments, stating that “no statutory or regulatory provision contemplates excluding a fully litigated ITC decision from access to judicial review.” Id. Regarding Beloit, the Court explained that “Beloit dealt with the situation in which the prevailing party in the Commission sought judicial review of other issues that the Commission did not reach … [and] held that the prevailing party had no right of appeal, and that issues which had not been reviewed by the Commission were not appealable by the party that prevailed in the Commission.” Id. at 1220 (emphasis added). However, “Beloit did not authorize the Commission to deprive the losing party of its right of judicial appeal.” Id. (emphasis added). The Court relied on 19 U.S.C. § 1337(c), which provides that “[a]ny person adversely affected by a final determination of the Commission … may appeal such a determination … to the United States Court of Appeals for the Federal Circuit.” The Court further relied on 19 C.F.R. § 210.42(h)(2), which provides that “issues decided by Initial Determination and not reviewed by the full Commission become final, and are appealable to the Federal Circuit,” a right that “cannot be negated by taking no position on the issue.” Id. Thus, a losing party at the ITC may appeal any issue noticed for review, irrespective of whether the Commission decided the issue in the Final Determination. In General Electric, the Court remanded to the Commission for “undefined further proceedings, for which one may be confident only of further time and cost in the Commission and upon re-appeal to this court.” Id. Although the practical implications of the Federal Circuit’s decision in General Electric are not yet fully appreciated, the decision may significantly increase the Commission’s workload. Moreover, if the decision requires the Commission to decide every issue noticed for review when disposing of an investigation, in order to avoid a remand, it may make things much more difficult for the ITC to conclude its investigations “at the earliest practicable time” and with “expeditious adjudication,” as required by 19 U.S.C. Section 1337(b)(1).
Any regular reader of this blog will recognize that the vast majority of Section 337 actions involve the importation, sale for importation, and/or sale within the U.S. after importation of articles that allegedly infringe U.S. patents. See 19 U.S.C. § 1337(a)(1)(B). However, patents are not the only form of intellectual property that can form the basis for a Section 337 action. The statute also prohibits, inter alia, “[u]nfair methods of competition and unfair acts in the importation of articles … into the United States, … the threat or effect of which is … to destroy or substantially injure an industry in the United States.” 19 U.S.C. § 1337(a)(1)(A). The ITC has long interpreted this provision of Section 337 to apply to trade secret misappropriation. See TianRui Group Co. v. ITC, 661 F.3d 1322, 1326 (Fed. Cir. 2011). But until the TianRui decision, it was not entirely clear whether Section 337 could prohibit the importation of articles manufactured using misappropriated trade secrets where the acts of misappropriation occurred entirely outside the U.S. By way of background, TianRui was an appeal from the ITC’s finding of a violation of Section 337 in Certain Cast Steel Railway Wheels, Certain Processes For Manufacturing Or Relating To Same And Certain Products Containing Same (Inv. No. 337-TA-655). See our October 19, 2009 and December 4, 2009 posts for more details. Complainant Amsted Industries Inc. (“Amsted”) was an American-based company that developed two secret processes to make cast steel railway wheels. Amsted used one of the processes and licensed the other to companies overseas, including companies in China. The basis of the ITC’s investigation was Amsted’s complaint, filed August 14, 2008, alleging a violation of Section 337 in the importation into the U.S., sale for importation, and sale within the U.S. after importation of certain cast steel railway wheels and products containing the same by reason of misappropriation of Amsted’s trade secrets (the “ABC trade secrets”). The complaint named TianRui Group Company Limited; TianRui Group Foundry Company Limited; Standard Car Truck Company, Inc. and Barber TianRui Railway Supply, LLC (collectively “TianRui”) as Respondents. The ITC instituted an investigation and held a ten day evidentiary hearing, finding that TianRui had misappropriated Amsted’s ABC trade secrets under Illinois trade secret law. Specifically, after TianRui was unsuccessful in obtaining a license, it hired away nine employees of another Chinese Amsted licensee to manufacture wheels using the confidential ABC process. On October 16, 2009, ALJ Charneski issued the Initial Determination (“ID”) finding a violation of Section 337 by TianRui with respect to the ABC trade secrets. The Commission issued a notice determining not to review the ID, and soon after issued a notice of Issuance Of A Limited Exclusion Order and Cease and Desist Order; Termination of the Investigation. See our December 18, 2009 and February 19, 2010 posts for more details. TianRui appealed the decision to the Federal Circuit. One of the main arguments that TianRui raised on appeal was that the ITC had exceeded its authority by applying Illinois trade secret law to find a violation of Section 337 based on acts of misappropriation that occurred entirely in China. Specifically, TianRui argued that Section 337 is only appropriately applied extraterritorially with respect to patents, as there is no express language authorizing the ITC to do the same with trade secrets. The ITC’s primary counter-argument emphasized that it had not applied trade secret law extraterritorially because a key aspect of a Section 337 violation is the domestic element of importation. In the opinion, the Federal Circuit affirmed the ITC’s application of domestic trade secret law (albeit not Illinois law specifically) to conduct occurring in a foreign country. The Court determined that the Congressional presumption against extraterritorial application of legislation does not apply for three reasons. First, Section 337 is specifically directed to importation of articles into the United States, an inherently international transaction, and thus “it is reasonable to assume that Congress was aware, and intended, that the statute would apply to conduct … that may have occurred abroad.” Second, the Court pointed out that the ITC “does not purport to regulate purely foreign conduct.” Rather, the “unfair” activity is only prohibited to the extent that it results in importing goods into the United States and causing domestic injury. Third, the Court determined that the legislative history of Section 337 supports interpreting the statute as permitting the ITC to evaluate conduct that occurs extraterritorially since “Congress intended a … broad and flexible meaning.” The Court also held that the domestic industry injured as a result of the importation need not actually practice the misappropriated trade secrets. See our November 7, 2011 post for more details on the TianRui opinion. In the wake of TianRui, there appear to have been two new Section 337 complaints involving the importation of articles manufactured using misappropriated trade secrets where the acts of misappropriation occurred outside the U.S. The first was filed by Twin-Star International, Inc. of Delray Beach, Florida and TS Investment Holding Corp. of Miami, Florida (collectively, “Twin-Star”) on December 13, 2011. Twin-Star’s complaint alleged that Shenzhen Reliap Industrial Co., Ltd. of China (“Reliap”), Yue Qiu Sheng, a.k.a. Jason Yue of China (“Yue”), and Whalen Furniture Manufacturing Inc. of San Diego, California (“Whalen”) (collectively, the “Electric Fireplaces Respondents”) unlawfully engage in unfair methods of competition and unfair acts in connection with the importation into the U.S., sale for importation, and/or sale within the U.S. after importation of certain electric fireplaces, components thereof, manuals for same, and products containing same and in relation to certain processes for manufacturing or relating to same. According to the complaint, the unfair methods of competition and unfair acts at issue include, inter alia, the Electric Fireplaces Respondents’ misappropriation of Twin-Star’s trade secrets. According to the complaint, Yue was formerly employed by Twin-Star in China and, since the termination of his employment, Yue has misappropriated Twin-Star’s trade secrets in China in connection with the formation of his own new company Reliap. See our December 15, 2011 post for more details. The ITC instituted an investigation based on Twin-Star’s complaint—Certain Electric Fireplaces, Components Thereof, Manuals for Same, and Products Containing Same, Certain Processes for Manufacturing or Relating to Same, and Certain Products Containing Same (Inv. No. 337-TA-826)—on January 13, 2012. See our January 17, 2012 post for more details. The 826 investigation has been consolidated with Inv. No. 337-TA-791. The second post-TianRui Section 337 complaint in this area was filed by SI Group, Inc. of Schenectady, New York (“SI Group”) on May 21, 2012. In its complaint, SI Group alleges that a number of entities are involved in the unlawful importation into the U.S., sale for importation, and/or sale within the U.S. after importation of certain rubber resins made using misappropriated SI Group trade secrets. According to the complaint, a Mr. Xu Jie, a.k.a. Jack Xu (“Xu”), was employed by SI Group (Shanghai) beginning on April 14, 2004, and SI Group started manufacturing SP-1068 tackifier in Shanghai shortly thereafter. The complaint states on information and belief that, by virtue of his employment and position, Xu was the only employee at the SI Group (Shanghai) plant who had access to the entire trade secret processes for making SP-1068 and other resins. On April 30, 2007, Xu resigned from SI Group (Shanghai). While Xu apparently denied that he was leaving to join a competitor, SI Group alleges in the complaint that Xu in fact joined Sino Legend (Zhangjiagang) Chemical Co., Ltd., Sino Legend Holding Group, Inc., Sino Legend Holding Group Ltd., HongKong Sino Legend Group Ltd., Ning Zhang, and Quanhai Yang (collectively, “Sino Legend”). According to the complaint, shortly after Xu joined Sino Legend, Sino Legend started to market its SL-1801 resin, which has specifications substantially the same as those for SI Group’s SP-1068 tackifier. The complaint therefore alleges that Sino Legend misappropriated SI Group’s trade secrets through hiring Xu (or otherwise) to develop SL-1801 and other rubber resins corresponding to SI Group rubber resins. See our May 22, 2012 post for more details. The ITC instituted an investigation based on SI Group’s complaint—Certain Rubber Resins and Processes for Manufacturing Same (Inv. No. 337-TA-849)—on June 20, 2012. See our June 22, 2012 post for more details. In view of the above, it appears that Section 337 actions based on the alleged misappropriation of trade secrets abroad may be becoming more common in the wake of the Federal Circuit’s decision in TianRui. As in TianRui, both Twin-Star’s and SI Group’s recent complaints involve situations where a U.S. company’s trade secrets were allegedly misappropriated in China and used in connection with the importation of articles into the U.S. to the detriment of a domestic industry. Since it is now clear that violations of Section 337 can potentially arise from acts of trade secret misappropriation that occur entirely outside the U.S., companies may be encouraged to bring new Section 337 actions where they believe that their domestic industry is being harmed through the importation of articles manufactured abroad using misappropriated trade secrets. While it is unlikely that the number of new Section 337 actions based on trade secret misappropriation will eclipse the number based on patent infringement, this newly-invigorated basis for seeking relief from the ITC should not be overlooked.
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