ITC Litigation in the U.S.

MIP Global IP Briefing

August 26, 2015, Singapore

22

Presenters

• Shaobin Zhu (朱韶斌): Moderator

Attorney at Law, Shanghai Representative Office

Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

• Jason Loh

Head of IP Group (ASEA)

Panasonic

• Shang-Jyh Liu （劉尚志）Dean of Law School

National Chiao Tung University, Taiwan

• Tony Piotrowski

General Counsel

MPEG LA, LLC

2

33

U.S. ITC: Statutory Authority

• 19 U.S. Code § 1337 gives the ITC the power to stop importations into the U.S.

of:

– Section (A) − goods that are involved in unfair methods of competition that threaten

to destroy or substantially injure a U.S. industry

– Section (B) − goods that infringe a U.S. patent or registered copyright that is also

used by a domestic industry in the U.S.

– Section (C) − goods that infringe a U.S. registered trademark

– Section (D) − semiconductors that infringe a registered mask work

– Section (E) − goods that infringe a U.S. design

44

U.S. International Trade Commission(500 E Street SW, Washington D.C.)

55

Related Government Entities/Courts

66

337 Investigations: Institution by Year

77

337 Investigations: Accused Products

88

Perspectives from an Operating Entity

1. Since 2011 (69 investigations instituted), about 40 or less cases are

instituted each year. What are the reasons causing the decreases?

2. What percentage of the ITC cases were filed by operating entities

vs. NPEs each year? How can an NPE satisfy the domestic industry

requirement?

3. Why would a company choose the ITC forum, instead of a federal

district court, to stop IP infringement?

99

Some Empirical Findings of ITC

Litigation: Perspective of Asian Enterprises

1. What are your findings of ITC litigations from the perspective of

Asian enterprises?

2. In the past 5 years, more than 1/3 of the respondents in the ITC

were Asian enterprises. Why were so many Asian enterprises sued

at the ITC?

3. How can Asian enterprises change this trend?

1010

Standard-Essential Patents and FRAND Defense at the ITC

1. What are the advantages and disadvantages to enforce SEPs in the

ITC?

2. Since the ITC has no jurisdiction in determining damages, how can

the ITC determine whether the patentee of a SEP meet the FRAND

requirement, including the FRAND royalty?

3. How can a respondent assert a FRAND defense in the ITC?

1111

Questions?

• Questions from the audience:

ITC Litigation in the USA

Perspectives from an Operating Entity

August 26, 2015

MIP Global Intellectual Property Briefing 2015

Marina Bay Sands, Singapore

Content

Disclaimer

Brief Overview of ITC Litigation

Why choose ITC Litigation?

DISCLAIMER

Disclaimer

• The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of Panasonic Corporation.

BRIEF OVERVIEW OF ITC LITIGATION

Comparison between ITC and District Court Litigation

Litigation Element Section 337 ITC Litigation District Court Patent Litigation

Jurisdiction and Importation In Rem jurisdiction over products imported into the US

Court must have personal jurisdiction over defendant and subject matter jurisdiction over the action.

Parties Complainants and Respondents Plaintiffs and Defendants

Judge One of six Administrative Law Judges (ALJs) assigned to the ITC

Article III judge or magistrate judge.

Domestic Industry All complainants must demonstrate domestic exploitation of the asserted IPR

Not required

Applicable Procedural Rules Commission Rules of Practice and Procedure and ALJ’s Ground Rules.

Federal Rules of Civil Procedure, Local Rules

Response to Discovery 10 days 30 days

Response to Motions 10 days Varies (2-4 weeks)

Time Frame to Resolution 15-18 months 2-3 years or even more

Possible Remedies Exclusion order, cease-and-desist order Damages, injunction if eBay factors met

Appellate Review Federal Circuit Federal Circuit

Comparison between ITC and District Court Litigation

ITC Fed. District Ct.

Average Litigation Cost

$1-10M: $1,967,000$10-25M: $3,410,000

>$25M: $6,242,000

$1-10M: $2,100,000$10-25M: $3,554,000

>$25M: $5,911,000

Source : AIPLA Economic survey (2013)

Exemplary Cost Breakdown

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Typical ITC Patent Suit Budget

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10

Federal Court and ITC Budget Comparison

ITC suit duration

Majority of litigation costs are incurred in Discovery

Front end loaded Costs

Source : AIPLA Economic survey (2013)

ITC Remedies• Two types of remedies available upon a finding of violation: exclusion orders and

cease-and-desist orders. Both are injunctive in nature and prospective in scope.Money damages are not available at the ITC, although civil penalties may beassessed in certain narrow circumstances.

Remedy

1. Exclusion

1a. General exclusion

1b. Limited exclusion

2. Cease-and-desist

ITC orders are enforced by the U.S. Customs and Border Protection (CBP), a component of the Department of Homeland Security.

Note: Remedies at ITC can be both Cease-and-Desist Order and Exclusion Order.

ITC (US)

337-TA-xxx

337-TA-xxx (SEPs)

DC (US)

2:15-cv-xxx (SEPs)

2:15-cv-xxx

2:15-cv-xxx

2:15-cv-xxx

2:15-cv-xxx

2:15-cv-xxx

2:15-cv-xxx

xx D

ate

Xx

Dat

e Netherlands

Both SEPs and Non-SEPs

UK

Both SEPs and Non-SEPs

Germany

Both SEPs and Non-SEPs

ITC Can go in Parallel with DC Litigations

WHY CHOOSE ITC LITIGATION?

Any importation to the U.S.?

Owns a valid U.S. patent, copyright or trademark?

Complainant satisfy Domestic Industry requirement?

Against multiple parties over multiple jurisdictions?

Nation wide or worldwide discovery necessary?

Is time of essence?

When to Choose ITC for Litigation?

Extremely expedited proceedings

Single case, multiple respondents, different Jurisdictions

In Rem jurisdiction over foreign manufacturers

Potentially Stronger Injunction Equivalent

Immediate and significant threat (60-day after presidential review)

No Jury concerns

Why to File Cases at ITC?

Front-end loaded costs

Domestic Industry requirement for the complainant

Significant public interest issues considerations

Stricter in finding violations of NPE complainants

Very rare SEP related remedial orders

Limitations of ITC Litigation

ITC’s decisions are not binding on a US district court

THANK YOU

USITC IP Litigation: Some Empirical Findings

& the Perspective of Asian Enterprises

LIU Shang-JyhNational Chiao Tung University, Taiwan

劉尚志國立交通大學 (台灣)

Section 337

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ITC District Court

Length ≤ 18 months Average of 3 years

Parties multiple parties without joinder

restrictions;

ITC Office of Unfair Import

Investigations may participate

AIA new joinder rules apply

Discovery Broad; nation-wide subpoena

power; short discovery deadlines

Federal Rules apply; limited

subpoena power; slow discovery

Judges 6 Administrative Law Judges

handling only IP cases

677 judges with diverse caseload

Confidentiality Strictly policed, one-level

(highest) protective order

Inconsistent enforcement of

protective orders

Remedy Automatic injunction (“exclusion

order”) barring infringing imports

if successful

Injunction potential, but must first

satisfy eBay factors

Review/Appeals Federal Circuit Federal Circuit (patents)

Other Circuits (trademarks, etc.)

The Increasing Use of Section 337

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0

10

20

30

40

50

60

70

1990 1995 2000 2005 2010 2013

Kyocera, eBay (S.Ct. 2006) & NPEs

30

1/3

Domestic Industry

July 2011，ITC 337-TA-694 Investigation

Pioneer v.Honeywell & Garmin

FD v. ID

Industry-Creating, Production Driven

Oct. , 2011 John Mezzalingua Associates, Inc. v. ITC, 2011

WL 4552462 (Fed. Cir. 2011).

Patent Portfolio

Licensing Negotiation before Litigation

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No Violation

Violation

Terminated Due to

Arbitration

Settled

Complaint

Withdrawn

Complaint

Withdrawn13%

No Violation19%

Violation20%Settled

47%

Dispositions 2004 – 201332

Terminated Dueto Arbitration

1%

Geographic Distribution of Respondents

(2010-2013)

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16%EUROPE

69%

ASIA

2%

Other

China 24%

Taiwan 15%

Japan 12%

Korea 9%

Hong Kong 6%

Malaysia 2%

Singapore 1%

Macao <1%

Details for Asia Data:

Section 337 Usage by

Non-U.S. Based Complainants

34

0

10

20

30

40

50

60

70 Non-U.S. Based Complainants

U.S. Complainants 29%

36%

39%

30%

35%

20%

28%

27%

33%

15%

5%

12%

17%

0%

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

Representative Usage (2012 - 2013)

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Non-U.S. Based Complainants

Australia ResMed Ltd (2013)

Belgium Federal-Mogul S.A. (2013)

Canada Neptune Technologies & Bioresources Inc., Acasta Pharma

Inc. (2013)

China Fellowes Office Products (2012)

Finland Nokia (2012 and 2013)

Germany MT.Derm GmbH (2012), Linear Actuators and Dewert Okin

GmbH (2013)

Israel Human Eyes Technologies, Ltd. (2012)

Japan Canon Inc., Hitachi Metals, Ltd., (2012), Toyo Tire & Rubber

Co., Ltd. (2013)

Korea Samsung (2012)

Norway Navico Holding AS (2013)

Singapore Avago Technologies Fiber IP, Avago Technologies General

IP (2012)

Switzerland Merck & Cie (2012)

Taiwan ITRI, Realtek Semiconductor (2012)

UK Mondis Technology, Ltd. (2012)

ITC Adjudications

36

American Firms

RespondentsEqually with foreign

firms

Complainants Winning Rate: 2 times

Favorable

Intellectual Property Rights

37

The key is ownership and use of IP

Establish a domestic industry

Domestic Industry Standard for IP-Based

Investigations 19 U.S.C. §1337(a)(3)

A. Significant investment in plant and equipment;

B. Significant employment of labor or capital; or

C. Substantial investment in its exploitation, including

engineering, research & development, or licensing

Early Planning to Avoid Adverse Impact

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Products at risk likely to be broader than

model numbers accused in the

Complaint

Notice of Investigation controls scope of

potential remedial order

o Caption of case reveals products at risk

Request Complainant to Disclose

Contentions of Products at Risk

Products under development at risk

Remedial Orders

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General Exclusion Order

Limited Exclusion Order

Cease and Desist Order

Seizure or forfeiture

Enforcement of Exclusion Orders

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U.S. Customs & Border Protection - (formerly Customs

Service) within the U.S. Department of Homeland Security

Office of International Trade

o Regulations & Rulings; IPR Branch

Educate Customs

o Provide samples of infringing goods

o Provide patent excerpts, technology tutorial

Provide industry intelligence to Customs - e.g., preferred

ports, likely means of importation

Alternative Strategies

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Settlement

o License

o Joint venture

o Technology exchange

Prepare to Withdraw from U.S. Market

Default

Fight the charges to stay in the U.S. market

Prepare a counter offensive using your IP

o Cross-licensing