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CHAPTER 14: Section 337 Primer

TABLE OF CONTENTS

* * * * * *

This chapter surveys the law governing patent litigation at the International Trade

Commission (“ITC”) under 19 U.S.C. § 1337 (“Section 337”). Section 337, set forth in

Appendix A, prohibits specified unfair practices in the importation of articles that threaten

domestic industries. ITC patent litigation resembles its federal court counterpart in many

respects, particularly with regard to the proof of patent infringement. This chapter examines the

four principal areas in which the forums differ: (1) procedure; (2) liability requirements; (3)

remedies; and (4) review. Before turning to these areas, we briefly summarize the historical

development of the ITC’s Section 337 authority.

14 History – Evolution of Section 337 Authority

14.1.1 Early History: Tariff Act of 1922 and the Smoot-Hawley Tariff Act of 1930

The ITC’s authority to prohibit importation of infringing goods traces back to the

creation of the United States Tariff Commission in 1916 and the Tariff Act of 1922. This was a

time before tariff treaties existed and nations actively used tariffs to protect domestic markets.

The bulk of the 1922 law set tariffs on imported goods. Section 316 of the Act established the

foundation on which modern unfair import proceedings rest by prohibiting “unfair methods of

competition and unfair acts in the importation of articles into the United States, or in their sale by

the owner, importer, consignee, or agent of either . . . .” Tariff Act of 1922, Pub. L. No. 67-318,

§ 316(a), 42 Stat. 858 (1922). As a threshold requirement, the statute applied only to actions that

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threatened to injure a domestic industry that existed or was in the process of being established.

The law authorized the President to levy duties on or exclude imports from the market. Early

cases recognized patent infringement as an “unfair act.”

Section 337 of the Smoot-Hawley Tariff Act of 1930 superseded Section 316 of the

Tariff Act of 1922 and empowered the Tariff Commission to conduct investigations of possibly

unfair trade practices. Few complainants sought to initiate investigations under this provision

due to the lack of formal procedures for obtaining relief. More significantly, the Smoot-Hawley

Tariff Act substantially raised U.S. tariff barriers, which resulted in retaliatory tariffs by U.S.

trading partners. This trade war reduced U.S. imports and exports by more than half in the early

1930s, contributing to the severity of the Great Depression.

14.1.2 Trade Act of 1974

Following World War II, the major trading nations moved toward liberalizing trade

through the Bretton Woods Agreement in 1944 and the General Agreement on Tariffs and Trade

(GATT) in 1947. In the 1960s President Kennedy attempted to further expand free trade, but

political pressures from domestic industries and labor unions stymied the initiative. The Nixon

Administration achieved some success in 1974, however, by offering a compromise path of

liberalizing trade while expanding protection against unfair competition. See President’s

Special Message to Congress Proposing Trade Reform Legislation, 5 Pub. Papers 258, 261 (Apr.

10, 1973); id. at 265 (“To cope with unfair competitive practices in our own markets, [the]

proposed legislation would . . . amend the current statute concerning patent infringement by

subjecting cases involving imports to judicial proceedings similar to those which involve

domestic infringement . . . .”). The Trade Act of 1974 established the International Trade

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Commission as an independent agency and gave it authority to protect domestic industries

against unfair practices. Unlike the predecessor Tariff Commission’s advisory role, the ITC was

granted authority to issue exclusion orders, subject to reversal by the President on policy

grounds. Congress also gave the ITC the power to issue cease-and-desist orders and civil

penalties. Moreover, the 1974 Act required the ITC to conclude its investigations “at the earliest

practicable time, but not later than one year (18 months in more complicated cases)” after

commencement of the investigation. See Trade Act of 1974, Pub. L. No. 93-618, § 341, 88 Stat.

1978, 2053 (1975) (amending § 337(b) of the Tariff Act of 1930). (The 1974 Act also brought

ITC investigations within the formal adjudication provisions of the Administrative Procedure

Act (APA).) These changes provided a more hospitable environment for patent owners and

ushered in the modern era of ITC unfair import investigations.

14.1.3 Omnibus Trade and Competitiveness Act of 1988

Congress amended Section 337 in 1988 to further facilitate the use of ITC investigations

in combating unfair trade practices. See Omnibus Trade and Competitiveness Act of 1988, Pub.

L. No. 100-418, § 1342, 102 Stat. 1107, 1212-16 (codified at 19 U.S.C. § 1337 (1988)). Among

other changes, the 1988 Act eliminated the injury requirement for statutory intellectual property

rights. The House Report noted that:

Unlike dumping or countervailing duties, or even other unfair trade practices such as false advertising or other business torts, the owner of intellectual property has been granted a temporary statutory right to exclude others from making, using, or selling the protected property. The purpose of such temporary protection, which is provided for in Article I, Section 8, Clause 8 of the United States Constitution, is “to promote the Progress of Science and Useful Arts, by securing for limited Times to Authors and Inventors the exclusive Rights to their respective Writings and Discoveries.” In return for temporary protection, the owner agrees to make public the intellectual property in question. It is this trade-off which creates a public interest in the enforcement of protected intellectual property rights. Any

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sale in the United States of an infringing product is a sale that rightfully belongs only to the holder or licensee of that property. The importation of any infringing merchandise derogates from the statutory right, diminishes the value of the intellectual property, and thus indirectly harms the public interest. Under such circumstances, the Committee believes that requiring proof of injury, beyond that shown by proof of the infringement of a valid intellectual property right, should not be necessary.

H.R. Rep. No. 100-40, at 156 (1987).

The 1988 Act also removed the requirement of prior law that the domestic industry be

“efficiently and economically operated,” and expanded the scope of what constitutes a domestic

industry. The 1988 Act provided that complainants could satisfy that requirement either by

showing that domestic industries exist in the United States or “are in the process of being

established.” Section 337(a)(2). The statute also added investment in the exploitation of

intellectual property rights as a possible basis for showing the existence of a domestic industry.

The statute explained that

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, or mask work 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.

Section 337(a)(3). The House Report noted that the domestic industry requirement should not be

interpreted in an “unduly narrow manner” for cases grounded in statutory intellectual property

rights. The House Report states that

This definition does not require actual production of the article in the United States if it can be demonstrated that significant investment and activities of the type enumerated are taking place in the United States. Marketing and sales in the United States alone would not, however, be sufficient to meet the test. The definition could, however, encompass universities and other intellectual property owners who engage in extensive licensing of their rights to manufacturers.

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H.R. Rep. No. 100-40, at 157 (1987). Congress intended “to protect from infringement those

holders of U.S. intellectual property rights who are engaged in activities genuinely designed to

exploit their intellectual property within a reasonable period of time.” Id.

The 1988 Act also expedited enforcement remedies by requiring the ITC to issue

temporary exclusion orders within 90 days (or 150 days in more complex cases) of the

publication of the ITC’s notice of investigation in the Federal Register. Prior practice allowed

the ALJ four months to prepare the initial determination of requests for temporary relief, with no

statutory requirement regarding when the Commission must act. The Act included various other

technical amendments.

14.1.4 Uruguay Round Amendments Act of 1994

In the late 1980s, a GATT panel ruled that aspects of Section 337 violated the national

treatment provision of the General Agreement on Tariffs and Trade. See Report of the Panel,

United States-Section 337 of the Tariff Act of 1930, ¶6.3, L/6439 (Nov. 7, 1989), GATT

B.I.S.D. (36th Supp.) at 345 (1990). The panel found that the ITC’s Section 337 process affords

to imported products alleged to infringe U.S. patents “treatment less favourable” than that

afforded under federal district court procedures to like products of U.S. origin as a result of:

i) the availability to complainants of a choice of forum in which to challenge imported products, whereas no corresponding choice is available to challenge products of United States origin; (ii) the potential disadvantage to producers or importers of challenged products of foreign origin resulting from the tight and fixed time-limits in proceedings under Section 337, when no comparable time-limits apply to producers of challenged products of United States origin; (iii) the non-availability of opportunities in Section 337 proceedings to raise counterclaims, as is possible in proceedings in federal district court;

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(iv) the possibility that general exclusion orders may result from proceedings brought before the USITC under Section 337, given that no comparable remedy is available against infringing products of United States origin; (v) the automatic enforcement of exclusion orders by the United States Customs Service, when injunctive relief obtainable in federal court in respect of infringing products of United States origin requires for its enforcement individual proceedings brought by the successful plaintiff; (vi) the possibility that producers or importers of challenged products of foreign origin may have to defend their products both before the USITC and in federal district court, whereas no corresponding exposure exists with respect to products of United States origin.

Id. at ¶ 5.20. The panel upheld the in rem nature of exclusion orders and the automatic

enforcement of such orders at the border as reasonably necessary for securing compliance with

U.S. law. See id. at ¶ 5.20.

Congress passed legislation in 1994 to bring Section 337 into compliance with the

GATT, including the Agreement on Trade Related Aspects of Intellectual Property (TRIPs)

added during the Uruguay Round. See Uruguay Round Amendments Act of 1994, Pub. L. 103-

465, § 321, 108 Stat. 4809 (1994). The principal changes were: (1) to substitute a directive to

complete investigations “at the earliest practicable time” for the fixed 12- to 18-month limit for

completing ITC investigations; (2) to permit respondents to lodge counterclaims, subject to the

requirement that such counterclaims be removed immediately to a U.S. district court with proper

venue; (3) to require district courts to stay their proceedings at the request of a party who is also

a respondent in a Section 337 proceeding with respect to any claim that involves the same issues;

and (4) to limit the issuance of general exclusion orders to situations where such general

exclusion from entry is necessary to prevent circumvention of the order or where a pattern of

violation exists and the source of infringing products is difficult to identify.

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15 Procedure

The procedural requirements of a Section 337 investigation differ somewhat from the

procedural requirements in federal district court litigation. While Section 337 investigations are

quasi-judicial in nature, they typically follow a much faster timeline and are governed by a

distinctive set of rules.

14.1.5 Rules

Section 210 of Title 19 of the Code of Federal Regulations, reproduced in Appendix B,

contains the rules that govern ITC unfair trade practices investigations. These rules are divided

into subparts:

(A) Rules of General Applicability (B) Commencement and Preinstitution Proceedings and Investigations (C) Pleadings (D) Motions (E) Discovery and Compulsory Process (F) Prehearing Conferences and Hearings (G) Determinations and Actions Taken (H) Temporary Relief (I) Enforcement Procedures and Advisory Opinions

In addition, the ITC’s ALJs have their own presumptive “ground rules.” See Appendix F. These

rules differ in various respects from the Federal Rules of Civil Procedure (F.R.C.P.) and the

Patent Local Rules adopted by many of the district courts with the most active patent dockets.

See, e.g., N.D. Cal. Patent Local Rules (Mar. 2008). Thus, a Section 337 complainant would

make deposition requests pursuant to 19 C.F.R. § 210.28 rather than F.R.C.P. 26–31.

14.1.6 Pleading Requirements

In contrast to the more general notice pleading requirements of the F.R.C.P., the ITC

requires that a Section 337 complaint allege sufficient pertinent facts to support initiation of an

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investigation. See 19 C.F.R. § 210.12. Such fact pleading must include specific allegations of

importation of the accused product, the patent(s) at issue, infringement (including a claim chart

presentation), and the effects on the domestic industry. In addition to identifying any patents at

issue, the complaint must identify ownership, licensees, corresponding foreign patents and

applications (with prosecution status), description of the patented invention(s), and designation

of allegedly infringed claims. See 19 C.F.R. § 210.12(9).

16 Liability

Section 337 contains two categories of unlawful activities: (1) a general unfair acts

provision, § 337(a)(1)(A); and (2) a set of infringing articles provisions, § 337 (a)(1)(B)-(E).

The general provision covers:

(A) Unfair methods of competition and unfair acts in the importation of articles (other than articles provided for in subparagraphs (B), (C), (D), and (E)) into the United States, or in the sale of such articles by the owner, importer, or consignee, the threat or effect of which is— (i) to destroy or substantially injure an industry in the United States;

(ii) to prevent the establishment of such an industry; or (iii) to restrain or monopolize trade and commerce in the United States.

Section 337(a)(1)(A). A complaint pursuant to this provision must prove three elements: (1)

importation; (2) unfair methods of competition or unfair acts relating to imported merchandise;

and (3) injury to a domestic industry in the United States, prevention of the establishment of a

domestic industry, or restraint or monopolization of trade and commerce in the United States.

See H.R. Rep. No. 100-40, 156 (1987); Textron, Inc. v. Int’l Trade Comm’n, 753 F.2d 1019,

1028 (Fed. Cir. 1985). Importantly, this means that a complainant may succeed under the

general provision even when no domestic industry exists if the alleged unfair acts prevent the

establishment of a domestic industry, or restrain or monopolize trade and commerce in the

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United States. Section 337(a)(1)(A) covers numerous actions including antitrust claims,

misappropriation of trade dress, common law trademark infringement, trademark dilution, trade

secret misappropriation, passing off, false designation, unfair competition, and false advertising.

See, e.g., Commission Op., Certain Ink Markers and Packaging Thereof, Inv. No. 337-TA-522,

USITC Pub. 3971, 2007 ITC LEXIS 1448 (Dec. 3, 2007) (misappropriation of trade dress);

Commission Op. at 2, Certain Bearings and Packaging Thereof, Inv. No. 337-TA-469, 2007 ITC

LEXIS 1442 (Dec. 3, 2007) (common law trademarks, trademark dilution, false designation, and

false advertising); Commission Action and Order, Certain Processes for the Manufacture of

Skinless Sausage Casings and Resulting Product, Inv. Nos. 337-TA-148/169, USITC Pub. 1624,

1984 ITC LEXIS 136 (Dec. 1984) (misappropriation of trade secrets).

In addition to the ITC’s general power to reach unfair acts and methods of competition,

Section 337 also reaches infringing articles. See § 337(a)(1)(B)-(E). Part (B) prohibits

importation, sale for importation, or sale within the United States after importation of articles

that infringe U.S. patents and registered U.S. copyrights. Part (C) bars importation, sale for

importation, or sale within the United States after importation of articles that infringe federally

registered, valid, and enforceable U.S. trademarks. Part (D) prohibits importation, sale for

importation, or sale within the United States after importation of semiconductor chip products

that infringe registered mask works protected under Chapter 9 of Title 17 of the U.S. Code. Part

(E) proscribes importation, sale for importation, or sale within the United States after importation

of boat hull designs that infringe a registered design protected under Chapter 13 of Title 17 of the

U.S. Code.

The predominant form of Section 337 investigations has involved allegations of patent

infringement. More than 90 percent of Section 337 cases in recent years involve at least one

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patent infringement claim. See U.S. INT’L TRADE COMM’N, YEAR IN REVIEW: FISCAL YEAR

2009, at 14 (2009) (93% of investigations active in 2009 involved patent infringement claims);

U.S. INT’L TRADE COMM’N, YEAR IN TRADE 2007: OPERATION OF THE TRADE AGREEMENTS

PROGRAM 59TH REPORT 2-10 (2008) (100% of investigations initiated in 2007 involved patent

infringement claims).

This volume focuses specifically on patent investigations pursuant to § 337(a)(1)(B). It

prohibits:

(B) The importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that—

(i) infringe a valid and enforceable United States patent or a valid and enforceable United States copyright registered under Title 17; 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.

A complainant pursuant to this provision must establish three elements: (1) importation;

(2) domestic industry; and (3) infringement of a valid U.S. patent.

14.1.7 Importation Requirement

As a threshold requirement, all ITC actions must implicate trade into the United States.

The general unfair acts provision requires “importation of articles . . . into the United States” or

“the sale of such articles by the owner, importer, or consignee.” See Section 337(a)(1)(A). The

infringing articles provisions encompass “importation,” “sale within the United States after

importation by the owner, importer, or consignee,” as well as “sale for importation,” which can

occur outside of the United States. See, e.g., Section 337(a)(1)(B).

11.1.7.1 Importation into the United States

A complainant can prove the importation requirement simply by showing that a

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respondent imported an infringing article into the United States. Respondents that import

infringing articles are liable. See 19 U.S.C. § 337(a)(1)(B); Op. of Commissioners Minchew,

Moore & Albberger at 11-13, Certain Welded Stainless Steel Pipes and Tubes, USITC Pub. 863,

Inv. No. 337-TA-029 (Feb. 1978). The ITC interprets the importation requirement broadly to

cover all commercial transactions that involve products imported into the United States. Order

No. 15 (Unreviewed Initial Determination), Certain Integrated Circuits, Processes for Making

Same, and Products Containing Same, Inv. No. 337-TA-450, (Nov. 2001) [hereinafter Integrated

Circuits]. Consequently, the ITC has jurisdiction over foreign manufacturers, domestic

companies that manufacture their products offshore and import them into the United States, and

domestic companies that export products that are later re-imported.

In most ITC investigations, parties stipulate to importation or the ITC decides the issue

on summary determination. Thus, importation rarely presents a contested issue. It is generally

sufficient for the complainant to provide photographs of infringing products that are on sale

within the United States or include purchase orders that indicate prior importation. See

Commission Op., Certain Digital Multimeters and Products with Multimeter Functionality, Inv.

No. 337-TA-588, 2008 ITC LEXIS 889 (June 3, 2008). Product markings indicating foreign

manufacture, such as “Made in Taiwan”, usually suffice to establish that a product on sale in the

United States was imported.

The boundaries of the importation requirement are still in flux. The Federal Circuit held

in Amgen, Inc. v. U.S. Int’l Trade Comm’n, 519 F.3d 1343, 1350-51 (Fed. Cir. 2008), vacated en

banc, 564 F.3d 1358 (Fed. Cir. 2009), that the importation requirement applies to circumstances

where there is merely an imminent importation by a party. However, an en banc Federal Circuit

vacated the 2008 decision and allowed the original panel to issue a revised opinion. Amgen Inc.

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v. Int’l Trade Comm’n, 564 F.3d 1358 (Fed. Cir. 2009). This time, the new opinion removed all

discussion of whether the ITC has jurisdiction over non-sales based “imminent importations”

except to note that the resolution of that dispute was “not necessary . . . to decide the case.”1

Amgen Inc. v. Int’l Trade Comm’n, 565 F.3d 846, 853 (Fed. Cir. 2009). That said, the ALJ in

Wind Turbines acknowledged, without holding, that the ITC could hear a case involving

imminent importation without a sale. Initial Determination at 20, Certain Variable Speed Wind

Turbines, Inv. No. 337-TA-376, (May 13, 1996). The ALJ determined that the existence of a

contract for the sale of infringing products intended for importation into the United States was

sufficient to establish jurisdiction, even without actual importation. Id. at 13. Such a situation

may arise, for example, if a respondent owns a stock of infringing goods overseas that is poised

for transport into the United States. But after the revised Amgen opinion, it is unclear whether

imminent importation alone can satisfy the statutory importation requirement.

11.1.7.1.1 Electronic Transmission into the United States

The term “article” typically refers to an imported and allegedly infringing product. An

article often enters the United States through Customs, but Section 337 also reaches articles that

enter the United States in other ways, including software that enters the country through

electronic transmission. See Commission Op. at 26-27, Certain Hardware Logic Emulation

Systems, Inv. No. 337-TA-383, 1996 ITC LEXIS 377 (Oct. 15, 1996). Nonetheless, it is unclear

whether, and to what degree, an electronic transmission must target the United States in order to

confer ITC jurisdiction over infringing articles.

11.1.7.1.2 No Minimum Threshold for Importation

1 Instead, the Federal Circuit applied the safe harbor provisions of 271(e) (1). See also § 11.3.3.2.1.

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The ITC has not set a limit or quota on the number of infringing articles that must be

imported to satisfy the importation requirement of Section 337. While commercial-scale

importation of infringing goods clearly satisfies the importation requirement of Section 337, the

ITC can also reach the importation of a single article. For example, the ITC determined that free

imported product samples at a trade show met the importation requirement. Initial Determination

at 157-58, Certain Acesulfame Potassium and Blends and Products Containing Same, Inv. No.

337-TA-403, 1999 ITC LEXIS 130 (Feb. 10, 1999).

11.1.7.1.3 The Purpose for Importation Does Not Matter, With the Exception of Government Use

The purpose for which a respondent imports an infringing article is generally irrelevant.

With the exception of government use, Section 337 makes no mention of the use to which

infringing articles are to be put. In Certain Integrated Circuits, Process for Making Same, and

Products Containing Same, the ITC declined to review the ALJ’s holding that importing

infringing articles for promotional or noncommercial purposes was sufficient to meet the

importation requirement of Section 337. See Order No. 15 (Unreviewed Initial Determination) at

11, Integrated Circuits, Inv. No. 337-TA-450, (Nov. 2001).

11.1.7.1.3.1 The Government Use Exception to Importation

Section 337(l) exempts the importation of otherwise infringing articles, subject to the

government compensating affected intellectual property owners the “reasonable and entire”

value of the infringing articles in an action before the United States Court of Federal Claims

pursuant to the procedures of Section 1498 of Title 28.

11.1.7.1.4 Importation by Domestic Companies

Section 337 authority extends to infringing articles that are manufactured by domestic

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enterprises so long as they are imported (or re-imported) into the United States. In Certain

Plastic Encapsulated Integrated Circuits, the Commission ordered several California-based chip

manufacturers to cease and desist importing infringing chips because the domestically-

manufactured chips underwent a patent-infringing process abroad. See Inv. No. 337-TA-315,

Comm. Order to Cease and Desist (1992). In Certain Sputtered Carbon Coated Computer Disks,

the ITC held the importation requirement satisfied where infringing articles were manufactured

in the United States, exported out of the country, and later re-imported into the United States.

See Inv. No. 337-TA-350, Comm. Op. 5 (Nov. 1993). The Commission reasoned that limiting

the statutory language of Section 337 to foreign enterprises contravenes Congressional intent.

See id. at 8; S. Rep. No. 100-71, at 128-29 (1987).

11.1.7.1.5 Section 337(a)(1)(B) Covers Method Claims

Section 337 extends to both product and method claims of U.S. patents. See Certain

Circuit Board Testers, ITC Inv. No. 337-TA-342, 3 Init. Determination.

11.1.7.2 Sale for Importation

Section 337 also covers sales of infringing articles for importation, whether or not

importation has yet occurred. This permits the ITC to reach unfair acts by parties that

technically do not import infringing articles. For example, a foreign manufacturer violates

Section 337 by selling infringing articles to another foreign company that exports the articles to

the United States. See Certain Battery-Powered Ride-On Toy Vehicles and Components Thereof,

Inv. No. 337-TA-14, Comm. Op. 4 (April 9, 1991). According to the Commission, a company’s

mere knowledge—or reason to know—that a foreign intermediary exports its infringing products

to the United States satisfies the importation requirement. This prong also extends to unfair acts

in their incipiency. Such incipient acts typically involve nascent contracts under which all or a

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portion of the articles at issue have not yet reached the United States, but are under contract to be

exported to the United States. See Certain Steel Rod Treating Apparatus and Components

Thereof, Inv. No. 337-TA-97, 215 U.S.P.Q. 229, 234 (Comm’n Mem. Op., June 30, 1981);

Certain Variable Speed Wind Turbines, Inv. No. 337-TA-376, 20 Init. Determination (Nov.

1996).

11.1.7.3 Sale After Importation

Section 337 also confers jurisdiction over products sold after importation into the United

States. This usually occurs when U.S. wholesalers and retailers purchase infringing products

from importers or intermediaries to sell the products within the United States. See Certain Pump

Top Insulated Containers, USITC Pub. 1010, Comm'n Op. 7, Inv. No. 337-TA-59 (Nov. 1979).

14.1.8 Domestic Industry Requirement

Complainants alleging violation of the infringing articles provisions must prove that a

domestic industry “exists or is in the process of being established.” § 337(a)(2). For purposes of

this requirement, a domestic industry exists or in the process of being established if

there in the United States, with respect to the articles protected by the patent [or other covered intellectual property right]

(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.

Section 337(a)(3). A valid complaint before the ITC must describe the complainant’s domestic

industry, the complainant’s business and interests in the relevant domestic industry, and

ownership of the intellectual property rights at issue. See 19 C.F.R. §§ 210(a)(6)-(7).

In practice, the domestic industry requirement is relatively easy to meet. See generally

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Jay H. Reiziss, The Distinctive Characteristics of Section 337, 8 JOHN MARSHALL REV. INTELL.

PROP. L. 231 (2009). It does arise, however, where the complainant is not engaged in significant

domestic production based on the patents at issue. The 1988 amendments to § 337 clarified that

substantial investment in the exploitation of the intellectual property right in the United States,

including engineering, research and development, or licensing, satisfies the domestic industry

requirement. The legislative history states that the statutory definition (set forth in § 337(a)(2)-

(3))

does not require actual production of the article in the United States if it can be demonstrated that significant investment and activities of the type enumerated are taking place in the United States. Marketing and sales in the United States alone would not, however, be sufficient to meet the test. The definition could, however, encompass universities and other intellectual property owners who engage in extensive licensing of their rights to manufacturers.

H.R. Rep. No. 100-40, at 157 (1987). Even foreign-based enterprises can meet the domestic

industry test if they have significant U.S. operations.

The domestic industry requirement has two elements: the economic prong and the

technical prong. “The complainant in a patent-based 337 investigation must show that an

industry exists or is being established (economic prong) and that the industry practices at least

one claim of the patent at issue (technical prong).” Certain Display Controllers and Products

Containing Same and Certain Display Controllers With Upscaling Functionality and Products

Containing Same, Comm'n Op. 52, Inv. Nos. 337-TA-491/481 (consolidated) (Feb. 4, 2005),

2005 WL 996252 (citing Certain Variable Speed Wind Turbines and Components Thereof, Inv.

No. 337-TA-376, Commission Opinion at 14 (Sept. 23, 1996)).

11.1.8.1 Economic Prong

As noted above, Section 337(a)(3) provides three disjunctive criteria to determine

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whether a domestic industry exists:

(A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in [an IP right’s] exploitation, including

engineering, research and development, or licensing.

Thus, a complainant satisfies the economic prong of the domestic industry requirement by

meeting any of the three criteria. Certain Integrated Circuit Chipsets and Products Containing

Same, Final Initial and Recommended Determinations 138, Inv. No. 337-TA-428 (Feb. 13,

2007), 2007 ITC LEXIS 377, at *224 (public version Apr. 9, 2007) (citing In re Certain Variable

Speed Wind Turbines and Components Thereof, USITC Pub. 3003, Comm'n Op. 15, Inv. No.

337-TA-376 (Nov. 1996)).

By their inherent nature, patent investigations focus on the market for products using

patented technology and the licensing of such technology. Therefore, the statute requires that the

domestic industry relate to “articles protected by” the patent(s) at issue. Hence, the ITC has

“generally defined the domestic industry in such cases as the domestic operations of the

complainant and its licensees devoted to exploitation of the patent[s at issue].” See Certain

Feathered Fur Coats and Pelts, and Process for the Manufacture Thereof, USITC Pub. 2085,

Initial Determination 14, Inv. No. 337-TA-260 (May 1988), 1988 ITC LEXIS 36, at *55 (citing

Schaper Mfg. Co. v. U.S. Int'l Trade Comm'n., 717 F.2d 1368, 1371 (Fed. Cir. 1983)).

The ITC does not adhere to any rigid formula when evaluating these criteria. The

Commission makes its determination “by ‘an examination of the facts in each investigation, the

article of commerce, and the realities of the marketplace.’” Certain Male Prophylactic Devices,

USITC Pub. 4005, Comm'n Op. 39, Inv. No. 337-TA-546 (Aug. 2007), 2008 ITC LEXIS 1268,

at *62 (citing In re Certain Double-Sided Floppy Disk Drives and Components Thereof, USITC

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Pub. 1860, Views of the Comm'n 21, Inv. No. 337-TA-215 (May 1986), 1986 ITC LEXIS 303,

at *25). There is no quantitative minimum threshold. Certain Audible Alarm Devices for

Drivers, USITC Pub. 2903, Initial Determination 50, Inv. No. 337-TA-365 (Aug. 1995), 1995

ITC LEXIS 66, at *73 (stating that “there is no requirement under Section 337 that an industry

be a certain size”).

Before turning to three statutory criteria for analyzing the economic prong of the

domestic industry determination, we examine the threshold question of what it means for a

domestic industry to be “in the process of being established.”

11.1.8.1.1 “In the Process of Being Established”

A domestic industry “is in the process of being established” where the complainant is

“actively engaged in steps leading to the exploitation of the [IP].” Certain Stringed Musical

Instruments and Components Thereof, Comm'n Op. 16, Inv. No. 337-TA-586 (May 16, 2008),

2008 ITC LEXIS 755, at *26 (quoting H.R. Rep. No. 100-40, at 157 (1987)). Congress intended

that the Commission should determine “whether the steps indicate a significant likelihood that

the industry requirement will be met in the near future.” Id. “[H]ow far along complainant must

be before it will be in the process of establishing a domestic industry” is a question of fact.

Certain Scanning Multiple-Beam Equalization Systems for Chest Radiography and Components

Thereof, Order No. 23, Inv. No. 337-TA-326 (Aug. 20, 1991), 1991 ITC LEXIS 922, at *5-6.

11.1.8.1.2 Significant Investment in Plant and Equipment

A complainant can establish the existence of a domestic industry under § 337(a)(3)(A) by

proving significant investment in plant and equipment. For example, in Certain Plastic Molding

Machines with Control Systems Having Programmable Operator Interfaces Incorporating

General Purpose Computers and Components Thereof II, the Commission found that a capital

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investment of $49 million and equipment purchases totaling nearly $30 million satisfied the

economic prong of the domestic industry requirement. See USITC Pub. No. 3609, Inv. No. 337-

TA-462 (July 2003), 2003 ITC LEXIS 417.

Where a complainant produces a single product or product line incorporating the patented

technology at issue in a domestic factory, it is relatively easy to attribute the investments in plant

and equipment to the domestic industry. But connecting expenditures on plant and equipment to

particular patents becomes more difficult where the complainant produces multiple products and

where the product at issue is manufactured in stages both inside and outside the United States.

Such cases require the ITC to determine what portion of the domestic investment in plant and

equipment can be attributed to patented technology at issue.

Given the highly contextual nature of such an assessment, the ITC has looked to a variety

of considerations and applied a flexible standard in determining whether investments in domestic

plant and equipment relating to patents are significant. Some investigations have considered the

importance of the domestic activities to the complainant’s business, including their effects on the

complainant’s ability to meet special market needs. See, e.g., Certain Plastic Encapsulated

Integrated Circuits, USITC Pub. 2574, Initial Determination 90-92, Inv. No. 337-TA-315 (Nov.

1992), 1992 ITC LEXIS 738 (part 3 of 6), at *77-78; Certain Dynamic Random Access

Memories, Components Thereof and Products Containing Same, USITC Pub. 2034, Comm'n Op.

On Violation, Remedy, Bonding, and Public Interest 68-69, Inv. No. 337-TA-242 (Nov. 1987),

1987 ITC LEXIS 170, at *101.

Where the complainant has both domestic and foreign activities, the following factors

can come into play:

• the nature of the domestic activities and their significance to the product, see, e.g.,

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Certain Plastic Encapsulated Integrated Circuits, USITC Pub. 2574, Initial Determination 93, Inv. No. 337-TA-315 (Nov. 1992), 1992 ITC LEXIS 738 (part 3 of 6), at *77; Certain Concealed Cabinet Hinges and Mounting Plates, Comm'n Op., Inv. No. 337-TA-289 (Jan. 9, 1990), 1990 ITC LEXIS 3, at *30-33;

• the role of subcontractors within the United States, see, e.g., Certain Home Vacuum Packaging Products, USITC Pub. 3681, Order No. 36, at 143, Inv. No. 337-TA-496 (Mar. 2004), 2004 ITC LEXIS 332, at *267-68; Certain Portable On-Car Disc Brake Lathes and Components Thereof, USITC Pub. 2889, Initial Determination 17-18, Inv. No. 337-TA-361 (May 1995), 1995 ITC LEXIS 564, at *86-87; Certain Methods of Making Carbonated Candy Prods., USITC Pub. 2390, Initial Determination 142, Inv. No. 337-TA-292 (June 1991), 1991 ITC LEXIS 925, at *242; Certain Feathered Fur Coats and Pelts, and Process for the Manufacture Thereof, USITC Pub. 2085, Initial Determination 16-17, Inv. 337-TA-260 (May 1988), 1988 ITC LEXIS 36, at *58-61; Certain Static Random Access Memories and Components Thereof, and Products Containing Same, Order No. 9, at 5-6, Inv. No. 337-TA-325 (May 14, 1991), 1991 ITC LEXIS 418, at *2;

• the value that a complainant’s domestic activities add to a finished article, see, e.g., Certain In-Line Roller Skates with Ventilated Boots and In-Line Roller Skates with Axle Aperture Plugs and Component Parts Thereof, Order No. 7, Inv. No. 337-TA-348 (June 7, 1993), 1993 ITC LEXIS 271, at *6;

• the relative significance of domestic versus foreign investment relating to the article at issue, see, e.g., Certain Concealed Cabinet Hinges and Mounting Plates, Inv. No. 337-TA-289, Commission Op. at 22-23, 1990 WL 710375 (Jan. 8, 1990) (where imported product was covered by the patent and the only domestic manufacture involved the addition of an optional feature outside of the patented invention, the domestic investment allocable to the product relative to the overall activities in exploitation of patented invention was not “significant” within meaning of § 337(a)(3)); Certain Microlithographic Machines and Components Thereof, Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Bond 343, Inv. No. 337-TA-468 (Jan. 29, 2003), 2003 ITC LEXIS 307, at *155-58; Certain Personal Computers, Server Computers, and Components Thereof, USITC Pub. 1504, Comm'n Action and Order 41-43, Inv. No. 337-TA-140 (Mar. 1984), 1984 ITC LEXIS 218, at *50-52.2

• the nature of the patented invention, see, e.g., Certain Diltiazem Hydrochloride and Diltiazem Preparations, Inv. No. 337-TA-349, U.S.I.T.C. Pub. No. 2902, Initial Determination at 144-45 (February 1, 1995), unreviewed in relevant part, Notice of Commission Decision to Review Portions of an Initial Determination,

2 The extent to which the Commission itself endorses a comparative analysis of domestic and foreign investment remains unclear. See Jay H. Reiziss, The Distinctive Characteristics of Section 337, 8 JOHN MARSHALL REV. INTELL. PROP. L. 231, 241 n.62 (2009) (observing that the Commission did not render a determination regarding comparative analysis in Certain Microlithographic Machines and Components Thereof and did not reach the issue in Certain Personal Computers, Server Computers, and Components Thereof). It raises the question of whether the determination of “significant” is an absolute or relative standard.

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60 Fed. Reg. 17366 (April 5, 1995) (where the complainant has performed the patented process entirely abroad but incorporated the resulting product into the final product in the United States, the U.S. activities were deemed a domestic industry under all three criteria of the economic prong without requiring any comparative analysis of the complainant’s domestic and foreign activities); Certain Salinomycin Biomass and Preparations Containing Same, Inv. No. 337-TA-370, USITC Pub. No. 2978, 1996 WL 1056309 (July 1996), Initial Determination at 122-28 (November 6, 1995) (final decision without Commission review).

Ultimately, the ITC seeks to determine the extent of domestic investment in plant and equipment

attributable to the patented technology and whether such domestic investment is “significant.”

11.1.8.1.3 Significant Employment of Labor or Capital

The second test for determining the economic prong of the domestic industry requirement

focuses on the employment of labor or capital in the United States. This test overlaps the

analytical framework of the first test – significant investment in domestic plant and equipment.

As with that test, the ITC must assess the nexus between the domestic economic activity and the

patented technology, the extent of such domestic economic activity, and the “significance” of the

domestic economic activity. For example, the Commission considered the involvement of 275

out of approximately 800 employees in the direct assembly of the products at issue significant

and found a domestic industry. See Certain Molding Machines with Control Systems Having

Programmable Operator Interfaces Incorporating General Purpose Computers and Components

Thereof II, Order No. 9: Init Determination 3-4, Inv. No. 337-TA-462 (Nov. 1, 2001), 2001 ITC

Lexis 763, at *4-5. If a complainant demonstrates that its domestic employment of personnel

and capital plays a significant role in its worldwide enterprise, the ITC will likely find a domestic

industry. Because the Commission looks at the overall significance of a complainant’s domestic

activities, the domestic activities of subcontractors may also establish a domestic industry.

Certain Portable On-Car Disc Brake Lathes and Components Thereof, USITC Pub. 2889, Init.

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Determination 17-18, Inv. 337-TA-361 (May 1995), 1995 ITC LEXIS 564, at *86-87.

As with the plant and equipment test, the ITC has not clearly resolved whether the

“significance” determination regarding employment of labor and capital is an absolute or relative

standard in the context of products that have both domestic and foreign production. In Certain

In-Line Roller Skates with Ventilated Boots and In-Line Roller Skates with Axle Aperture Plugs

and Component Parts Thereof, Order No. 7, Inv. No. 337-TA-348 (July 30, 1993), 1993 ITC

LEXIS 565, at *6-9, the ALJ granted partial determination in favor of the complainant based on

the employment of five persons in the United States engaged in quality assurance. The ALJ

considered this level of employment to be significant in light of the relatively small size of the

in-line roller skate industry. The Commission reversed and remanded this decision, see 1993

ITC LEXIS 534 (Aug. 31, 1993), and the matter was terminated before any subsequent

assessment, see 1993 ITC LEXIS 632 (Oct. 4, 1993).

11.1.8.1.4 Substantial Investment Including Engineering, Research and Development, or Licensing

Complainants can also establish a domestic industry under § 337(a)(3)(C) by making

substantial investments in their domestic activities. This section permits a complainant to

establish a domestic industry with non-manufacturing activities including engineering, research

and development, and licensing. Congress amended Section 337 to add paragraph (C) in the

Omnibus Trade and Competitiveness Act of 1988. Pub. L. No. 100-418, 102 Stat. 1107 (1988).

The legislative history indicates that Congress added paragraph (C) to allow universities and

small businesses to satisfy the domestic industry requirement. H.R. Rep. No. 100-40, at 157.

Although paragraph (C) permits intellectual property owners to satisfy the domestic industry

requirement based solely on extensive licensing activities, Congress did not intend to eliminate

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the domestic industry requirement entirely. The legislative history states that mere patent

ownership or marketing efforts do not satisfy the test. Id. Rather, a complainant must exploit or

prepare to exploit its intellectual property in some way, which includes engineering, research,

design, or other similar activities. Id. A complainant must establish a nexus between the

complainant’s domestic activities and the asserted patents. For example, an ALJ found a nexus

between the asserted patents and substantial investments in U.S. office space and in assisting

U.S. customers with circuit designs, circuit testing, design modifications, and design assistance.

Certain Integrated Circuits, Processes for Making Same, and Products Containing Same, Init.

Determination 154-55, 2003 ITC LEXIS 510, at *448-50.

Paragraph (C) emphasizes the size of investments in research and development. This

allows foreign companies to establish a foothold as a domestic industry for purposes of Section

337 enforcement through their investments in domestic engineering, research and development,

or licensing. See Certain Microlithographic Machines and Components Thereof, USITC, Inv.

No. 337-TA-468, at 365 (April 1, 2003).

11.1.8.1.4.1 Licensing Alone Can Establish a Domestic Industry

As noted above, the standard laid out in paragraph (C) is disjunctive and consequently a

complainant can establish a domestic industry through its licensing activities alone. In some

cases, including those involving small businesses and Hollywood studios, Congress clearly

intended this outcome. Certain Digital Processors and Digital Processing Systems, Components

Thereof and Products Containing Same, Init. Determination 89, Inv. No. 337-TA-559 (June 21,

2007) (quoting 132 Cong. Rec. H1783 (daily ed. Apr. 10, 1986) (statement of Rep.

Kastenmeier)). To establish a domestic industry based solely on licensing, a complainant must

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generally derive revenue through a lump sum or royalty payments as a result of its licensing

activities. See Certain Digital Processors and Digital Processing Systems, Components

Thereof, and Products Containing Same, Init. Determination 93-94, Inv. No. 337-TA-559 (June

21, 2007). Furthermore, the complainant must demonstrate a nexus between its licensing

activities and its intellectual property rights. When a complainant has relied primarily on

licensing endeavors but cannot demonstrate revenue from those endeavors, the Commission has

declined to recognize a domestic industry. See Certain Stringed Musical Instruments and

Components Thereof, Comm'n Determination Regarding Violation, Inv. No. 337-TA-586 (Apr.

24, 2008) (declining to review the ALJ’s determination, thereby affirming the ALJ’s finding of

no domestic industry). However, the ALJ in Certain Digital Satellite Systems (DSS) Receivers

and Components Thereof found that the complainants satisfied the domestic industry

requirement under paragraph (C) with a very limited licensing program featuring only five

employees engaged solely in prosecuting patents, attempting to license patents, and searching for

joint business partners. See Init. Determination, Inv. No. 337-TA-392, 446 (October 20, 1997);

Thomas A. Broughan, III, Modernizing § 337’s Domestic Industry Requirement for the Global

Economy, 19 FED. CIR. B.J. 41, 54-55 (2006).

In Certain Coaxial Cable Connectors and Components Thereof and Products Containing

Same, the Commission addressed whether litigation activities are sufficient to satisfy the

economic prong of the domestic industry requirement under § 337(a)(3)(C). Inv. No. 337-TA-

650, Comm’n Op. (Apr. 14 2010). Specifically, the Commission held that “patent infringement

activities alone, i.e., patent infringement litigation activities that are not related to engineering,

research and development, or licensing, do not satisfy the requirement s of section 337(a)(3)(C).”

Id. at 43-44. Yet, the Commission went on to note that “litigation activities (including patent

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infringement lawsuits) may satisfy [337(a)(3)(C)] if a complainant can prove that these activities

are related to licensing and pertain to the patent at issue, and can document the associated costs.”

Id. at 44. The Commission even provided concrete examples of acceptable activities – “drafting

and sending cease and desist letters, filing and conducting a patent infringement litigation,

conducting settlement negotiations, and negotiating, drafting, and executing a license” – so long

as the complainant can clearly link each activity to licensing the asserted patent. Id. at 50-51.

As a result, the door may be open for non-practicing entities (i.e. patent owners who do not

manufacture a patented article) to meet the domestic industry requirements of the ITC, provided

they can successfully tie litigation expenses to licensing activities.

11.1.8.2 Technical Prong

The technical prong requires the complainant to establish that the domestic article of

commerce is protected by the intellectual property right asserted. Thus in a patent investigation,

the complainant must establish by a preponderance of the evidence that the domestic product

practices one or more claims of the patent at issue either literally or under the doctrine of

equivalents. The complainant need only show that the domestic industry practices at least one

claim of each patent asserted. The complainant need not show that it practices each asserted

claim of each asserted patent. See Certain Ammonium Octamolytidate Isomers, USITC Pub.

3668, Comm'n Op. 55, Inv. No. 337-TA-477 (Jan. 2004), 2004 ITC LEXIS 105 at *94; see also

Certain Microsphere Adhesives, Process for Making Same, and Products Containing Same,

Including Self-Stick Repositionable Notes, ITC Inv. No. 337-TA-366, Comm. Op. at 16 (January

16, 1996), aff’d sub nom. Minnesota Mining & Mfg. Co. v. Int'l Trade Comm'n, 91 F.3d 171

(Fed. Cir. 1996) (Judge Saxon, overruling Chemiluminescent Compositions, ITC Inv. No. 337-

TA-285, Initial Determination (March 22, 1989)).

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11.1.8.2.1 Licensing of a Patent Can Suffice if There is Sufficient Nexus

In investigations based on licensing activity, the complainant can satisfy the technical

prong of the domestic industry inquiry by showing an adequate nexus between the licensing

activities and the patent(s) at issue. In Certain Semiconductor Chips with Minimized Chip

Package Size and Products Containing Same (III), the complainant (Tessera), a large technology

licensing company, based its complaint on patents contained within a large portfolio that it had

licensed to more than 60 companies. Order No. 31: Init. Determination, Inv. No. 337-TA-630

(Sept. 16, 2008), 2008 ITC LEXIS 1700, at *5-6. As part of the technical prong determination,

the respondent argued that the complainant was required to identify and segregate the amount of

licensing activities and revenues to the patents at issue. The ALJ rejected the argument on the

following grounds:

Tessera is only required to show that there is a ‘nexus’ between its licensing activities and the patents in suit. (See Certain Digital Processors and Digital Processing Systems, Components Thereof and Products Containing Same, Inv. No. 337-TA-559, Initial Determination at 92 (May 11, 2007) (In relying on licensing activities to satisfy subsection (C), the complainant need not show that it or one of its licensees practices the patent-in-suit in order to establish a domestic industry, but there must be a ‘nexus’ between the activities upon which it relies and the asserted patents.) Here, Tessera relies on its licensing activities and revenues related to TCC Technology. The ʼ977 Patent, the ʼ627 Patent, and the ʼ106 Patent are part of Tessera’s TCC Technology license portfolio. Therefore, the ALJ finds that a sufficient nexus exists between Tessera’s TCC Technology licensing activities and revenues and the asserted patents, which are part of the TCC technology license portfolio.

Id. at *11-12.

14.1.9 Patent Infringement

11.1.9.1 Applicable Law

Subject to several exceptions, the ITC applies substantive federal patent law, 35 U.S.C.

§ 1 et. seq., as interpreted by the federal courts, to determine whether a patent is valid and has

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been infringed. We survey substantive patent law in Chapter 12. The exceptions relate to

several defenses to patent infringement which are not available in ITC proceedings. Thus, the

scope of patent liability can be somewhat broader in ITC investigations than federal court

proceedings.

With regard to remedies, Section 337 diverges substantially from the provisions of the

Patent Act. The ITC does not award monetary compensation for patent infringement. In

addition, it applies somewhat different standards with regard to injunctive relief—referred to

under Section 337 as exclusion orders. We examine the remedies available under Section 337 in

§ 15.3.

11.1.9.2 Exceptions to Application of Federal Patent Law in ITC Proceedings

Although Section 337(c) states that “all legal and equitable defenses may be presented in

all cases,” the Federal Circuit and the ITC have held that some defenses to patent infringement

are not available in Section 337 investigations. In particular, respondents in ITC proceedings

cannot invoke the 35 U.S.C. § 271(g) safe harbors or the laches defense.3

11.1.9.2.1 Defenses to Section 271(g)

Congress added the Process Patent Amendments Act, codified at 35 U.S.C. § 271(g), in

1988. Section 271(g) extends patent liability to anyone who, without authority, “imports into the

United States or offers to sell, sells, or uses within the United States a product which is made by

a process patented in the United States.” Nonetheless, Congress excused “for purposes of this

3 But note that innocent misnaming of one or more inventors is a defense at the ITC because the ITC, unlike District Courts (see 35 U.S.C. § 256 (“Correction of Named Inventor”); FSU v. Am. Bioscience, Inc., 333 F.3d 1330, 1338 (Fed. Cir. 2003)), cannot correct mistakes in a patent document. See Certain Home Vacuum Packaging Products, Inv. No.337-TA-496, Comm’n Op. at 140 (Mar. 2004) (“The Commission has no power in Section 337 investigations to correct inventorship.”) Accordingly, the ITC has held “[a] patent with incorrect inventorship is unenforceable until the inventorship is corrected.” Certain Methods for Making Carbonated Candy Products, Inv. No. 337-TA-292, Comm'n Op. at 14 (March 1990).

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title,” products made by a patented process that are “materially changed by subsequent

processes” or “become[] a trivial and nonessential component of another product.” 35 U.S.C.

§ 271(g)(1)-(2). In Kinik v. Int’l Trade Comm’n, 362 F.3d 1359 (Fed. Cir. 2004), the Federal

Circuit held that although § 337(c) states that “[a]ll legal and equitable defenses may be

presented in all cases,” the safe harbors set forth in 35 U.S.C. § 271(g) could not be asserted

under § 337 because Congress limited these defenses to “purposes under this title,” i.e., Title 35.

Yet the Federal Circuit in Amgen Inc. v. Int’l Trade Comm’n specifically held that the 35

U.S.C. § 271(e)(1) safe harbor, which excuses infringing activities that “reasonably relate to the

development and submission of information under a Federal Rule which regulates the

manufacture, use, or sale of drugs” does in fact apply to ITC proceedings. 565 F.3d 846, 853

(Fed. Cir. 2009). The Federal Circuit concluded that the application of § 271(e)(1) at the ITC

“is in consonance with congressional policy as set forth in the enactment of § 271 (g), and as

elaborated by the Supreme Court in its applications of the safe harbor statute.” Id. at 856.

Indeed, the Supreme Court in Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005)

made clear that “§ 271(e)(1)’s exemption from infringement extends to all uses of patented

inventions that are reasonably related to the development and submission of any information

under the [Federal Food, Drug, and Cosmetic Act].” Id. at 202.

11.1.9.2.2 Laches

The laches defense applies in federal court proceedings when a defendant proves both

that the patentee delayed filing its lawsuit for an unreasonably long time and that the defendant

suffered either economic or evidentiary harm as a result of that delay. If the defendant succeeds

with its laches defense, the patentee cannot recover retrospective monetary damages for harms

that occurred prior to the filing day of the lawsuit. Because money damages are not available to

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complainants under § 337, the laches defense “does not, as 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, Init. 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)). Note that this exception only applies to the laches defense that

provides retrospective monetary damages. The prosecution laches defense, which renders a

patent unenforceable, is still available to respondents at the ITC.

17 Remedies

Upon finding a violation of Section 337, the Commission must determine the appropriate

remedy. Notably, Section 337 does not provide a patent owner the authority to pursue monetary

damages. Instead, the only type of remedy available at the ITC is injunctive relief stemming

from the ITC’s jurisdiction over infringing articles. For example, § 337(d)(1) mandates that any

articles in violation of Section 337 shall “be excluded from entry into the United States . . . .” In

fashioning remedial orders, the Commission not only receives recommendations from the ALJ,

but also makes its own judgment based on facts presented to the ALJ and the Commission. See

Baseband Processor Chips, Inv. No. 337-TA-543, Comm’n Op. (June 7, 2007).

Courts have recognized the Commission’s broad authority to fashion remedies for

Section 337 violations. See Hyundai Elecs. Indus. Co. Ltd. v. United States, 899 F.2d 1204,

1209 (Fed. Cir. 1990). That said, the Commission’s authority is dependent upon the

consideration of several statutory public interest factors. First, the Commission identifies the

appropriate action to remedy a given violation of § 337. Next, the Commission determines

whether the statutory public interest factors warrant the issuance of the remedy under

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consideration. Baseband Processor Chips, Inv. No. 337-TA-543, Comm’n Op. at 17. Indeed,

every remedy issued by the Commission must be weighed against “the public health and welfare,

competitive conditions in the United States Economy, the production of like or directly

competitive articles in the Unites States, and United States consumers.” 19 U.S.C. § 1337 (d)(1),

(e)(1), and (f)(1).

In practice, the public interest factors rarely bar relief. See Foam Masking Tape, USITC

Pub. 3968, Inv. No. 337-TA-528 at PAGE n.7 (Dec. 2007) (noting that the ITC “has declined to

issue a remedy based on public interest in only three investigations”). The most recent denial

of an exclusion order because of public interest factors occurred in 1984. See Fluidized

Supporting Apparatus USITC Inv. No. 337-TA-182/188 (Dec. 1984). In that case, the

Commission denied relief where the patents at issue covered beds for burn victims that were in

short supply and the patentee was unable to manufacture enough beds to meet the public need.

The two other cases where public interest factors trumped patent enforcement involved national

emergencies. Inclined-Field Acceleration Tubes was decided in 1980 at the height of the Cold

War. USITC Pub. 119, Inv. No. 337-TA-67 (Dec. 1980). The patents involved covered devices

used in weapons development and no suitable alternative was available. Id. The ITC also

refused to grant relief in Automatic Crankpin Grinders where the Commission found that a

shortage of a patented auto part was preventing the automotive industry from improving fuel

economy during the 1979 energy crisis. USITC Pub. 1022, Inv. No. 337-TA-60 (Dec. 1979).

But absent these rare and dramatic exceptions, the ITC will not deny a remedy on public interest

grounds. Rather, the Commission strives to exercise authority “in a measured fashion” and order

“only such relief as is adequate to redress the harm caused by the prohibited imports.” Certain

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Devices for Connecting Computers Via Telephone Lines, Inv. No. 337-TA-360, USITC Pub.

2843, Comm’n Op. at 9 (Dec. 12, 1994).

The Commission has authority to issue four types of remedial orders for violations of

§ 337: (1) temporary relief orders; (2) exclusion orders; (3) cease and desist orders; and (4)

consent orders. The ITC’s emphasis on exclusion orders in Section 337 proceedings may be

attracting greater interest in the aftermath of the Supreme Court’s decision in eBay Inc. v.

MercExchange, L.L.C, 47 U.S. 388 (2006), rejecting routine grants of injunctive relief where

patent liability has been established in federal court proceedings. The Supreme Court held that

courts must carefully apply the four traditional criteria – (1) irreparable injury; (2) adequacy of

remedies at law, i.e., monetary relief; (3) balance of hardships; and (4) public interest – in

determining whether to order injunctive remedies. In 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, Comm’n Op.,

at 63 n.230 (June 19, 2007), the Commission indicated that eBay does not apply to ITC

proceedings. First, the Commission took the position that the Tariff Act of 1930 replaced the

monetary remedy of § 316 of the Tariff Act of 1922 and therefore “represents a legislative

determination that there is an inadequate remedy at law for infringement by importation.” Id.

Second, the Commission noted that the removal of the requirement of proof of harm to domestic

industry in 1988 “represents a legislative determination that it is unnecessary to show irreparable

harm to a patentee in the case of infringement by importation.” Id. The Commission further

determined that “[t]he remaining factors, those of balance of hardships and public interest, are

analyzed by the Commission in its EPROMs factors and public interest analysis.” Id. See also

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§ 15.4.3. Because Congress has consistently treated importation differently than domestic

activity, the Commission chose not to apply the eBay four factor test.

14.1.10Temporary Exclusion Orders (Preliminary Relief)

The Commission has authority to issue expedited relief in the form of temporary

exclusion orders and/or cease and desist orders. See 19 U.S.C. § 1337(e). A complainant can

file a motion for a temporary exclusion order simultaneously with a Section 337 complaint. The

motion must contain a detailed statement of facts bearing on “whether the complainant should be

required to post a bond” and “the appropriate amount of the bond.” 19 C.F.R. § 210.52(b). If the

Commission later determines that the respondent has not violated the provisions of Section 337,

the bond may be forfeited to the respondent. The ITC also requires a detailed memorandum of

facts and affidavits in support of the motion. Id. § 210.52 (b), (d).

11.1.10.1 Timing

The Commission must determine whether to accept a motion for temporary relief

provisionally and institute an investigation within 35 days after the complaint and motion are

filed. 19 C.F.R. § 210.58. Typically, a response motion must be filed within 10 days after the

service of the temporary relief motion. Id. § 210.59(a). The Commission must make a

determination whether to grant relief “by no later than the 90th day after the date on which the

Commission’s notice of investigation is published in the Federal Register.” However, if the case

is “more complicated,” the Commission can extend for an additional 60 days. § 337(e)(2).

11.1.10.2 Standard

In deciding whether to grant temporary relief, “the Commission will apply the standards

the U.S. Court of Appeals for the Federal Circuit uses in determining to affirm lower court

decisions granting preliminary injunctions.” 19 C.F.R. § 210.52 (a). Therefore, in concert with

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Federal Circuit practice under 35 U.S.C. § 283, a complainant seeking temporary relief under

Section 337 must establish: (1) a reasonable likelihood of success on the merits; (2) irreparable

harm if temporary relief is not granted; (3) a balance of hardships tipping in its favor; and (4) the

temporary relief’s favorable impact on the public interest. See Amazon.com, Inc. v.

Barnesandnoble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001). Motions for preliminary relief

in Section 337 cases are rare because the expedited scheduling at the ITC already provides for a

rapid resolution and the burden on the complainant is high. “As a general rule . . . such relief is

an extraordinary remedy to be granted only where the right to relief is clear and unequivocal.”

Certain Vacuum Packaging Machines, Inv. No. 334-TA-496, Initial Determination Concerning

Temporary Relief Proceeding (Dec. 16, 2003).

14.1.11Exclusion Orders

After investigating and finding a violation of Section 337, the Commission “shall direct

that the articles concerned . . . be excluded from entry into the United States . . . .” § 337(d)(1).

An exclusion order directs U.S. Customs and Border Protection to exclude from entry into the

United States articles that violate Section 337. As discussed above in § 15.3, the Commission

must consider the statutory public interest factors in crafting an exclusion order, but these factors

rarely prohibit relief.

There are two kinds of exclusion orders – a limited exclusion order and a general

exclusion order. A limited exclusion order is limited to the named respondents. A general

exclusion order covers all infringing products. As initially enacted, Section 337 did not

distinguish between limited and general exclusion orders. The distinction and accompanying

requirements were added in 1994 as part of an amendment to ensure compliance with the

General Agreement on Tariffs and Trade. See S. Rep. No. 103-412, at 120 (1994); H.R. Rep.

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No. 103-826, at 140-42 (1994), codified at § 337 (d)(2) (“The amendments are necessary to

ensure that U.S. procedures for dealing with alleged infringements by imported products

comported with GATT 1994 ‘national treatment’ rules, while providing for the effective

enforcement of intellectual property rights at the border.”).

11.1.11.1 General Exclusion Order

A general exclusion order is the most powerful remedy available at the ITC. Indeed, the

general exclusion order sets the ITC apart from other venues for patent disputes because it

provides relief against all infringing products, whether or not they originate from a named

respondent in the ITC investigation. See VastFame Camera, Ltd. v. ITC, 386 F.3d 1108, 1114

(Fed. Cir. 2004). The requirements for obtaining such broad relief are higher than for limited

exclusion orders. General exclusion orders can only be granted if “(A) [general exclusion] is

necessary to prevent circumvention of an exclusion order limited to products of named persons;

or (B) there is a pattern of violation of [Section 337] and it is difficult to identify the source of

infringing products.” § 337(d)(2)(A)-(B).

Prior to 1994, general exclusion orders were not defined by statute. The Commission

decided whether to issue a general exclusion order based upon (1) “a widespread pattern of

unauthorized use,” and (2) “business conditions from which one might reasonably infer that

foreign manufacturers other than the respondents to the investigation may attempt to enter the

United States market with infringing articles.” Certain Airless Paint Spray Pumps and

Components Thereof, Inv. No. 337-TA-90, USITC Pub. 1199, Comm’n Op. (Nov. 1981); see

also Certain Agricultural Tractors Under 50 Power Take-Off Horsepower, Inv. 337-TA-380,

USITC Pub. 3026, Comm’n Op. at 19-20 (Mar. 1997).

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To establish a “widespread pattern of unauthorized use” under Spray Pumps, at least one

of the following had to be established:

(1) a Commission determination of unauthorized importation of the infringing article into the United States by numerous foreign manufacturers; [or]

(2) the pendency of foreign infringement suits based on foreign counterparts to the U.S. intellectual property right at issue; [or]

(3) other evidence that demonstrates a history of unauthorized foreign use of the intellectual property right.

Spray Pumps, Inv. No. 337-TA-90, Comm’n Op. at 18-19.

In addition to proving a widespread pattern of unauthorized use, the complainant also had

to demonstrate “business conditions from which one might reasonably infer that foreign

manufacturers other than the respondents to the investigation may attempt to enter the United

States market with infringing articles.” The Commission has held that the following factors are

relevant:

(1) the existence of an established demand for the article in the U.S. market and conditions for the world market;

(2) the availability to foreign manufacturers of U.S. marketing and distribution networks;

(3) the cost for foreign entrepreneurs whose facilities could be converted to manufacture articles protected by the intellectual property right at issue;

(4) the number of foreign manufacturers whose facilities could be converted to manufacture the protected article at issue; and

(5) the foreign manufacturers’ ability to convert a facility to produce the protected articles.

While the Commission still at times references the Spray Pump factors when evaluating

whether to issue a general exclusion order, it now focuses “principally on the statutory language

itself in light of recent Federal Circuit decisions.” Certain Ground Fault Circuit Interrupters and

Products Containing Same, 337-TA-615 (Mar. 26, 2009). Specifically, the Federal Circuit in

Vastfame Camera, Ltd. v. ITC explained that “Congress’s intent in adding § 1337(d)(2) was to

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comply with its obligations under the General Agreement on Tariffs and Trade, not to adopt the

Commission’s policy objectives as announced in Certain Airless Paint Spray Pumps.” 386 F.3d

1108, 1113 (Fed. Cir. 2004). Yet, the Commission still considers Spray Pump-related arguments

that “reasonably bear on the language of Section 337(d)(2).” Id. That said, the Commission’s

decision whether to grant a general exclusion order now focuses on the text of Section

372(d)(A)–(B).

11.1.11.1.1Downstream Products

Until the Federal Circuit ruled in its 2008 Kyocera decision that the ITC lacks authority

to exclude downstream products of non-respondent third parties, the ITC routinely issued limited

exclusion orders barring not only the importation of a respondent’s infringing products, but also

downstream products containing the respondent’s product, irrespective of the identify of the

downstream manufacturer. This downstream relief was based on the Commission’s decision in

Certain Erasable Programmable Read-Only Memories (EPROMs), which identified nine factors

to be considered when issuing a limited exclusion order affecting unnamed respondents.4

4 Certain Erasable Programmable Read-Only Memories, Components Thereof, Products Containing Such Memories, and Processes for Making Such Memories, USITC Pub. 2169, Inv. No. 337-TA-276, at 125 (May 1989). The EPROM Factors are:

1. the value of the infringing articles compared to the value of the downstream products in which they are incorporated;

2. the identity of the manufacturer of the downstream products (i.e., are the downstream products manufactured by the party found to have committed the unfair act, or by third parties?);

3. the incremental value to complainant of the exclusion of downstream products; 4. the incremental detriment to respondents of the exclusion of downstream products; 5. the burdens imposed on third parties resulting from exclusion of downstream products; 6. the availability of alternative downstream products which do not contain the infringing

articles; 7. the likelihood that imported downstream products actually contain the infringing articles

and are thereby subject to exclusion; 8. the opportunity for evasion of an exclusion order which does not include downstream

products; and 9. the enforceability of an order by Customs.

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For example, the Commission issued a limited exclusion order covering downstream

products containing infringing chips in Certain Integrated Circuit Telecommunications Chips

and Products Containing Same Including Dialing Apparatus, USITC Pub. 22670, Inv. No. 337-

TA-337 (Aug. 1993). In that case, the downstream products included telephones manufactured

by companies not named as respondents in the investigation. Id. at 32. The Commission

reasoned that because “virtually all tone dialer chips are imported into the United States already

installed in telephones, it would be inequitable to deprive [the complainant] of relief merely

because it did not name all possible telephone manufacturers as respondents.” Id. at 28. The

Commission also insisted that while the source or manufacturer is “a factor . . . in determining

whether the exclusion of those products is warranted,” that alone “does not turn the order into a

general exclusion order.” Id. Thus, a limited exclusion order could exclude articles

manufactured by unnamed respondents without satisfying the heightened statutory requirements

of a general exclusion order.

The Federal Circuit overturned this interpretation in Kyocera Wireless Corp. v.

International Trade Commission, 545 F.3d 1340 (Fed. Cir. 2008), holding that the ITC lacks

statutory authority to issue a limited exclusion order encompassing the downstream products of

any non-respondent third party. The Kyocera decision stemmed from a limited exclusion order

that not only blocked respondent Qualcomm’s infringing chips, but also certain downstream

products manufactured by non-respondent third parties that contained the infringing chips.

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 (June 2007). Applying the first stage of Chevron U.S.A., Inc. v. National

Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984) (“a reviewing court must first ask

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‘whether Congress has directly spoken to the precise question at issue’”), the Federal Circuit

determined that Section 337(d)(2) would not permit limited exclusion orders to reach

downstream products imported by unnamed parties:

According to the plain language of the statute, Congress created two distinct forms of exclusion orders: one limited and one general. The default exclusion remedy “shall be limited to persons determined by the Commission to be violating this section.” . . . Thus, on its face, the statutory context limits [limited exclusion orders] to named respondents that the Commission finds in violation of Section 337.

Kyocera, 545 F.3d at 1356. Therefore, “[i]f a complainant wishes to obtain an exclusion order

operative against articles of non-respondents, it must seek a general exclusion order by satisfying

the heightened burdens of § 1337(d)(2)(A) and (B).” Id.

Since Kyocera, the Commission has acknowledged that it cannot issue limited exclusion

orders that exclude downstream articles manufactured by non-parties:

The Commission has further determined to limit the scope of the exclusion order to products of named respondents and to deny Complainant’s request for ‘downstream’ relief against non-respondents. The Federal Circuit recently concluded in Kyocera Wireless Corp. that the Commission has no authority to issue a limited exclusion order directed to downstream products of non-respondents. Kyocera, 545 F.3d at 1356. Accordingly, the Commission will no longer issue such orders.

Certain GPS Devices and Products Containing Same, ITC Inv. No. 337-TA-602, Comm’n

Opinion at 17 (Jan. 27, 2009). The Commission noted, however, that Kyocera did not limit its

ability to issue a limited exclusion order excluding articles imported by non-parties as long as the

articles being imported were manufactured by respondents:

We do not view the Court’s opinion in Kyocera as affecting the issuance of limited exclusion orders that exclude infringing products made by respondents found to be violating Section 337, but imported by another entity. The exclusionary language in this regard that is traditionally included in limited

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exclusion orders is consistent with 19 U.S.C. § 1337(a)(l)(B)-(D) and 19 U.S.C. § 1337(d)(l).

Id. at 17 n.6.

11.1.11.2 Limited Exclusion Order

Section 337(d)(2) restricts limited exclusion orders to “persons determined by the

Commission to be violating [Section 337].” As a result, limited exclusion orders only exclude

the products of a manufacture or importer specifically identified in an ITC action. See, e.g.,

Certain Display Controllers with Upscaling Functionality and Products Containing Same, Inv.

No. 337-TA-481, Limited Exclusion Order (Aug. 20, 2004). Typically, a limited exclusion order

will employ broad language intended to catch all products that infringe certain claims of the

patents at issue rather than simply listing the product numbers evaluated during the investigation.

See, e.g., Certain Optical Disk Controller Chips and Chipsets and Products Containing Same,

Including DVD Players and PC Optical Storage Devices, Inv. No. 337-TA-506, Comm’n Op. at

56-57 (Sept. 28, 2005). This strategy prevents an infringer from circumventing an exclusion

order by simply changing model numbers. Id.

Despite its narrow applicability, limited exclusion orders have several advantages.

Because of the more limited relief, the scope of the inquiry and hence the litigation costs can be

somewhat less than the costs of seeking general exclusion orders. Moreover, because infringing

manufacturers and importers are specifically identified in limited exclusion orders, they are less

likely to disrupt legitimate or licensed imports and sales.

Limited exclusion orders may, however, be inadequate to enforce patent infringement.

They cannot reach infringers not named as respondents from selling or importing goods into the

United States. Relatedly, named respondents can evade or circumvent them by changing,

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reincorporating, or re-locating their business.

14.1.12Cease and Desist Orders

The Commission can also require a violating respondent to “cease and desist from

engaging in the unfair methods or acts” found to violate Section 337. Section 337(f)(1). Notably,

a cease and desist order can be taken in addition to, or in lieu of, other remedies. In fact, cease

and desist orders are frequently granted in conjunction with exclusion orders where the

Commission finds that a respondent possesses commercially significant inventory of infringing

products in the United States. See Certain Crystalline Cefadroxil Monohydrate, Inv. No. 337-

TA-293, Comm’n Op. at 6 (Jan 19, 1990).

Exclusion orders do not affect infringing articles already within the United States. To

that end, cease and desist orders are effective in limiting the sales of such infringing articles.

Moreover, any person who violates a cease and desist order faces severe penalties: “for each day

on which an importation of articles, or their sale, occurs in violation of the order” the violating

party must pay the United States up to the greater of: “$100,000 or twice the domestic value of

the articles entered or sold on such day in violation of the order.” 19 U.S.C. § 1337 (f)(2). As

noted above, § 15.3.1, a preliminary cease and desist order may require the complainant to post a

bond. See Section 337 (f)(1).

See Certain Ink Cartridges and Components Thereof, ITC Inv. No. 337-TA-565

(Consolidated Enforcement Proceeding and Enforcement Proceeding II), Comm’n Op. at 17

(Sept. 24, 2009). In determining the amount of the penalty that should be imposed, “the

Commission [takes] into account the ‘three overarching considerations enumerated by Congress

in the legislative history [of Section 337(f)(2)], viz., the desire to deter violations, the intentional

or unintentional nature of any violations, and the public interest.” San Huan New Materials High

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Tech. v. ITC, 161 F.3d 1347, 1362 (Fed. Cir. 1998) (citations omitted). The Commission

traditionally applies an analysis balancing six factors, which have been termed the EPROMs

factors,5 to determine the appropriate level of the civil penalty. See EPROMs, ITC Inv. No. 337-

TA-276, Comm’n Op. at 23-29 (Aug. 1, 1991); Certain Ink Cartridges and Components Thereof

(“Ink Cartridges”), ITC Inv. No. 337-TA-565, Initial Determination at 63-100 (July 13, 2009)

and Comm’n Op. at 17-38 (Sept. 24, 2009). The six factors are:

(1) the good or bad faith of the respondent; (2) the injury to the public; (3) the respondent’s ability to pay; (4) the extent to which respondent has benefited from the violation; (5) the need to vindicate the authority of the Commission; and (6) the public interest

It is worth noting that penalties for violations of cease and desist orders apply mainly to

sales and imports of infringing goods after such orders issue. Although cease and desist orders

often prohibit such actions as advertising or marketing infringing goods, relatively few

enforcement cases have involved violators of such prohibitions. See Certain Baseband Processor

Chips and Chipsets, Inv. No. 337-TA-543 (pending enforcement complaint against continued

marketing of infringing products). The Office of Unfair Import Investigations advises, however,

that violations of marketing and advertising prohibitions coupled with prohibited sales or imports

of infringing goods may constitute “aggravated” violations of cease and desist orders.

14.1.13Consent Orders

5 Said EPROMs factors are distinguishable from the nine EPROMs factors enunciated by the Commission and formerly used to determine whether an exclusion order should extend to a respondent’s downstream products. See Certain Erasable Programmable Read-Only Memories, Components Thereof Products Containing Such Memories, and Processes For Making Such Memories (EPROMs), Inv. No. 337-TA-276, Comm’n Op. (May 1989), aff’d sub nom, Hyundai Elec. Indus. Co. v. U.S. Int’l Trade Comm’n, 899 F.2d 1204 (Fed. Cir. 1990).

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Any party to a Section 337 investigation may move at any time for an order to terminate

the investigation, in whole or in part, on the basis of a consent order, arbitration agreement,

settlement agreement, or licensing agreement. Section 337(c); 19 C.F.R. § 210.21(a)(2). Unlike

arbitration, settlement, or licensing agreements, the parties to a consent order agree to remain

under the jurisdiction of the Commission. Consequently, the Commission retains authority to

enforce the terms agreed by the parties. However, the terms and remedies of the consent order

must not exceed the jurisdictional and remedial bounds of Section 337. See Section 337(a)-(c).

For that reason, where parties agree to the entry of a consent order, they agree that the

Commission retains jurisdiction to utilize its toolbox of enforcement mechanisms. See Section

337(d) (exclusion orders); Section 337(f) (cease and desist orders; civil penalties); Section 337(i)

(seizure and forfeiture); 19 C.F.R. § 210.75 (enforcement proceedings). For example, the

Commission can mandate that the consenting respondent “shall not sell for importation, import

into the United States or sell in the United States after importation, [the infringing articles] . . .

except under consent or license from the Complainant, its successors or assigns.” Certain

Coupler Devices for Power Supply Facilities, Components Thereof, and Products Containing

Same, Notice of Commission Decision Not to Review Initial Determination Granting Motion for

Order Terminating Investigation Based on Consent Order, at 2, Inv. No. 337-TA-590 (Sept. 14,

2007).

14.1.14Litigation Sanctions

Like federal court, the ITC can order litigation sanctions to remedy various abuses of the

investigation process. See Section 337(h). Any party may file a motion for sanctions for abuse

of process, abuse of discovery, failure to make or cooperate in discovery, or violation of a

protective order. 19 C.F.R. § 210.25(a)(1).

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As with the Patent Office, practitioners owe a duty of candor to the Commission. See 19

C.F.R. § 210.4. Specifically, Rule 210.4(b) requires practitioners to verify all submissions to the

Commission. In so doing, the practitioner attests pursuant to Commission Rule 210.4(c) that:

(1) It is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of the investigation or related proceeding;

(2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

Commission Rule 210.4 generally limits sanctions to amounts “sufficient to deter

repetition of such conduct or comparable conduct similarly situated.” 19 C.F.R. § 210.4(d)(2).

Motions for sanctions can be served by any of the parties, the Commission, or the ALJs. At the

same time, a “safe harbor” affords the served party an opportunity to withdraw the disputed

items so as to avoid potential sanctions. Id. at 19 C.F.R. § 210.4(d)(1).

If a motion for sanctions requests attorney’s fees, the ALJ may calculate a “sufficient”

amount of attorney’s fees to award. For example, in Salinomycin, the ALJ recommended that the

Commission impose sanctions on a complainant and his counsel for bringing a frivolous action

to the Commission. Inv. No. 337-TA-370, recommended Determination Concerning

Respondents’ Motion for Sanctions (May 14, 1997). In order to “deter such conduct,” the ALJ

recommended that the complainant and counsel pay double the respondent’s costs and attorney

fees. Id. at 53.

18 Effect of Prior District Court Rulings and Prior Commission Determination

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14.1.15Stays

Patent holders often seek relief before the ITC and U.S. district courts simultaneously.

Under 28 U.S.C. § 1659(a), parties to a civil action that are also respondents in a parallel

proceeding before the ITC can move for a stay of the district court action as a matter of right:

(a) Stay. - In a civil action involving parties that are also parties to a proceeding before the United States International Trade Commission under section 337 of the Tariff Act of 1930, at the request of a party to the civil action that is also a respondent in the proceeding before the Commission, the 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, but only if such request is made within - (1) 30 days after the party is named as a respondent in the proceeding before the Commission, or (2) 30 days after the district court action is filed, whichever is later.

Id. As noted in the statute, the stay remains in effect until the determination of the Commission

becomes final. After the dissolution of the stay, 28 U.S.C. § 1659(b) allows the parties to use the

ITC investigation record in the district court proceeding.

(b) Use of Commission Record. - Notwithstanding section 337(n)(1) of the Tariff Act of 1930, after dissolution of a stay under subsection (a), the record of the proceeding before the United States International Trade Commission shall be transmitted to the district court and shall be admissible in the civil action, subject to such protective order as the district court determines necessary, to the extent permitted under the Federal Rules of Evidence and the Federal Rules of Civil Procedure.

Id.

In deciding whether to stay a proceeding under 28 U.S.C. § 1659 (a), the district court

will typically balance several factors. For example, in FormFactor, Inc. v. Micronics Japan Co.,

Ltd., the district court granted a motion to stay pursuant to 28 U.S.C. § 1659(a) only after

considering “(1) possible damage which may result from the granting of a stay; (2) the hardship

or inequity which a party may suffer in being required to go forward; and (3) the orderly course

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of justice measured in terms of the simplifying or complicating of issues, proof, and questions of

law which could be expected to result from a stay.” 2008 WL 361128 (N.D. Cal. 2008).

Similarly, the court in ILJIN U.S.A. v. NTN Corp. found that numerous factors weighed in favor

of granting a stay, including the following:

(1) the ITC claim was filed before the district court complaint; (2) the proceedings were more advanced in the ITC case than in the district

court; (3) there had not been substantial discovery in the case; (4) indisputably, it would conserve judicial resources to allow the ITC

investigation to at least narrow the issues before the district court case proceeded, with the added benefit of potentially avoiding conflicting decisions;

(5) the ITC is more experienced in deciding patent disputes than the district court; and

(6) the complainant did not present any persuasive reason why a stay should not issue.

2006 WL 568351 (E.D. Mich. 2006).

A district court must also decide whether to stay its proceedings as to all of the claims at

issue, even if only a portion of those claims are involved in a Section 337 investigation. For

example, in Micron Technology, Inc. v. Mosel Vitelic Corp., the defendants moved to stay the

district court proceedings for all the claims that were not at issue before the Commission. 1999

WL 458168 (D. Idaho 1999). The defendants argued that due to the substantial overlap of legal

and factual issues, a stay of all the claims, including those not at issue before the Commission,

“would enhance judicial economy” as well as “provide the Court with the benefit of the findings,

conclusions and views of the ITC.” Id. at *4. Moreover, the defendants insisted that while they

would be prejudiced by litigating in multiple forums, the plaintiff would not be prejudiced by a

stay because it will obtain a timely resolution of the claims before the ITC. Id. Yet in denying

the motion, the court concluded that the defendants failed to establish that a stay of the instant

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proceedings was “necessary to prevent undue hardship or injustice.” Id. at *5. The court further

noted that a party moving for a stay “must make out a clear case of hardship or inequity in being

required to go forward, if there is even a fair possibility that the stay for which he prays will

work damage to some one else.” Id. at *4 (quoting Landis v. N. Am. Co., 299 U.S. 248, 255

(1936)). In sum, the Micron court denied the motion to stay and ordered discovery with respect

to the claims not before the ITC. Id. at *5

In contrast, the court in Alloc, Inc. v. Unilin Décor, N.V. took the alternative approach

and entered a stay for all the claims. 2003 WL 21640372 (D. Del. 2003). The court noted that

“even though the ʼ579 patent does not contain precisely the same claims of the other patents that

are under review or reexamination, there is a sufficient correlation among all of the patents for

the court to conclude that a stay is appropriate.” In this case, the ʼ579 patent was not part of the

ITC proceeding, but rather, was a continuation of an earlier ʼ621 patent which was part of the

ITC proceeding. Id. at *1. In issuing the stay, the court noted that it “would benefit from a

narrowing of the numerous complex issues relating to the claims.” Id. at *2. Moreover, the

court noted that discovery had not yet begun, nor had a trial date been set. Id. at *3. Indeed,

neither party had incurred substantial litigation related expenses. Id.

Thus despite the statutory mandate of 28 U.S.C. § 1659(a), a respondent may still be

required to make out a clear case of hardship or inequity before a stay will be entered. But where

the patent before the district court is a continuation of a patent before the ITC, a court might

enter a stay in order to narrow complex issues and avoid duplicative discovery.

14.1.16Distinguishing Among Preclusion and Estoppel Doctrines

After the dissolution of a stay, a district court must still decide what deference to grant to

a Commission determination. The ALJ and the Commission must similarly determine what

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standard of deference should be given to a prior district court ruling. Before turning to the

particular legal standards for according deference, it will be useful to clarify the relevant

terminology. There are four distinct concepts: (1) claim preclusion (and the related concept of

res judicata); (2) issue preclusion (and the related concepts of collateral and direct estoppel); (3)

judicial estoppel; and (4) stare decisis.

Although res judicata has historically been interpreted broadly to encompass the binding

effect of a judgment in a prior case on claims asserted in pending litigation (and hence

encompassing both claim and issue preclusion), the modern trend limits res judicata to claim

preclusion. See Moore’s Federal Practice § 131.10[1][b]. “Claim preclusion refers to the effect

of a judgment in foreclosing litigation of a matter that never has been litigated, because of a

determination that it should have been advanced in an earlier suit. Claim preclusion therefore

encompasses the law of merger and bar.” Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S.

75, 77 n.1 (1984).6 When a plaintiff prevails in a lawsuit arising from a particular transaction, all

of the claims that the plaintiff raised or could have raised “merge” into that judgment and are

“barred” from further litigation. See Waid v. Merrill Area Public Schools, 91 F.3d 857, 863 (7th

Cir. 1996). If the plaintiff attempts to litigate any of those claims again, the judgment itself will

serve as a defense.

The related doctrine of issue preclusion “refers to the effect of a judgment in foreclosing

the relitigation of a matter that has been litigated and decided. This effect is also referred to as

direct or collateral estoppel.” Migra, 465 U.S. at 77 n.1; see also Pharmacia & Upjohn Co. v.

Mylan Pharm., Inc., 170 F.3d 1373, 1379 (Fed. Cir. 1999). For example, where a patentee

6 The Restatement (Second) of Judgments adheres to the broader definition of res judicata as encompassing both claim and issue preclusion. See Restatement (Second) of Judgments, ch. 3 intro. note (1982).

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(including those in privity with her) has previously litigated the scope of a patent claim term, a

defendant in a subsequent lawsuit relating to the same patent claim term might assert issue

preclusion to foreclose relitigation of that matter.7

Judicial estoppel is an equitable doctrine that precludes a party from adopting a position

that is inconsistent with a position taken in prior lawsuit, whether or not that issue had been

actually litigated in the prior proceeding party. See generally Moore’s Federal Practice § 18-

134.30. “Where a party assumes a certain position in a legal proceeding, and succeeds in

maintaining that position, he may not thereafter, simply because his interests have changed,

assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in

the position formerly taken by him.” New Hampshire v. Maine, 532 U.S. 742, 749 (2001)

(quoting Davis v. Wakelee, 156 U.S. 680, 689 (1895)). The purpose of the doctrine is “to protect

the integrity of the judicial process by prohibiting parties from deliberately changing positions

according to the exigencies of the moment.” Id. at 749-50 (internal quotation marks omitted).

The doctrine of stare decisis promotes adherence to decided matters of law so as to foster

stability and equal treatment. It takes its name from the Latin maxim stare decisis et non quieta

movere or “to abide by the precedents and not to disturb settled points.” The strength of such

adherence depends on the source of the prior decision. Stare decisis compels lower courts to

follow the decisions of higher courts on questions of law, whether applied to parties (or those in

privity) or complete strangers to the prior proceeding. The decision of a district court is not

binding precedent on a different judicial district, the same judicial district, or even the same

7 A patentee cannot use issue preclusion offensively to foreclose a defendant who was not party to that prior litigation from litigating the scope of the patent claim. See Tex. Instruments, Inc. v. Linear Techs. Corp., 182 F. Supp. 2d 580, 590 (E.D. Tex. 2002). Had the Federal Circuit construed that claim term, however, the defendant might be bound under the doctrine of stare decisis.

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judge in a different case under the doctrine of stare decisis. Rather, stare decisis requires only

that the later court encountering the issue give consideration and careful analysis to that sister

court’s decision where applicable to a similar fact pattern. See United States v. Rodriguez-

Pacheco, 475 F.3d 434, 441 (1st Cir. 2007).

In Certain Hybrid Electric Vehicles and Components Thereof, the Commission

specifically addressed claim preclusion and issue preclusion. Inv. No. 337-TA-688, Comm’n

Op. (Apr. 2, 2010); Inv. No. 337-TA-688, Comm’n Op. (June 23, 2010). We discuss these two

doctrines and how each relates to parallel ITC and district court proceeding in turn.

14.1.17Claim Preclusion at the ITC

The Federal Circuit held in Young Engineers, Inc. v. International Trade Commission

that where a claim “which is the basis for the Section 337 investigation is a claim which would

be barred by a prior judgment if asserted in a second infringement suit, that . . . claim may also

be barred in a § 1337 proceeding.” 721 F.2d 1305, 1361 (Fed. Cir. 1983). Simply put, prior U.S.

district court decisions have a preclusive effect on subsequent Section 337 investigations. That

said, preclusion might not exist where the specific product at issue in the investigation is

materially different from the product at issue in the preceding district court litigation. See Foster

v. Hallco Mfg. Co., Inc., 947 F.2d 469 (Fed. Cir. 1991).

As previously discussed, claim preclusion prevents litigation of a matter that never has

been litigated, because of a determination that it should have been advanced in an earlier suit.

Claim preclusion therefore encompasses the law of merger and bar. Like the Federal Circuit, the

Commission has embraced the definitions of merger, bar, and claim preclusion set forth in the

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Restatement (Second) of Judgments (1982) (“Restatement”). 8 See Certain Hybrid Electric

Vehicles and Components Thereof (“Hybrid Electric Vehicles”), Inv. No. 337-TA-688, Comm’n

Op. at 4-8 (Apr. 2, 2010).

The Commission applied the Restatement definitions for claim preclusion in Certain

Hybrid Electric Vehicles and Components Thereof. Id. This ITC investigation followed district

court litigation in which certain Toyota hybrid vehicles were found to infringe Paice’s ‘970

patent. Id. at 1 (citing Paice LLC v. Toyota Motor Corp., 2006 WL 2385139, at *1, *3 (E.D.

Tex. 2006), aff’d in part, vacated in part, and remanded by 504 F.3d 1293 (Fed. Cir. 2007)).

Both parties agreed that the earlier district court case should be afforded some preclusive effect

but disagreed as to the extent. Id. at 2. In his initial determination, the ALJ concluded that all of

the factors necessary for claim preclusion had been met with regard to validity, enforceability,

and infringement. Id. at 3. Upon review, however, the Commission determined that “the variant

of claim preclusion successfully urged upon the ALJ by Paice . . . constitute[d] legal error.” Id.

at 4. Specifically, the Commission observed that “the only claim presented in this investigation

is Paice’s, . . . and if the doctrine is to be applied at all in this investigation (upon which we take

no position), it is to be applied against Paice.” Id. The Commission further commented that

“[f]or present purposes, it is sufficient to note that if this investigation is part of the same ‘claim’

8 See Restatement (Second) of Judgments (1982) § 17. Effects of Former Adjudication—General Rules:

A valid and final personal judgment is conclusive between the parties, except on appeal or other direct review, to the following extent: (1) If the judgment is in favor of the plaintiff, the claim is extinguished and merged in the judgment and a new claim may arise on the judgment (see § 18); (2) If the judgment is in favor of the defendant, the claim is extinguished and the judgment bars a subsequent action on that claim (see § 19); (3) A judgment in favor of either the plaintiff or the defendant is conclusive, in a subsequent action between them on the same or a different claim, with respect to any issue actually litigated and determined if its determination was essential to that judgment (see § 27).

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as the district court action, and if no exception to claim preclusion applies, then this investigation

is precluded altogether. If this investigation is not part of the same ‘claim’ as the district court

action, or if an exception to claim preclusion exists, then claim preclusion does not apply at all.”

Id. at 9. In other words, “claim preclusion [could] not be applied as a sword by Paice against

Toyota.” Id. at 6. Finally, the Commission remanded the investigation to the ALJ “to determine

whether and to what extent arguments regarding infringement and validity are barred by the

doctrine of issue preclusion.” Id. at 15.

14.1.18Issue Preclusion at the ITC

The general standard for issue preclusion requires the party seeking to foreclose

relitigation of an issue to prove that: (1) the issue sought to be precluded is identical to the issue

decided in the prior action; (2) the issue was actually litigated in that action; (3) the party against

whom collateral estoppel is sought had a full and fair opportunity to litigate the issue in the prior

action; and (4) the determination was essential to the final judgment of the prior action. See

Innovad Inc. v. Microsoft Corp., 260 F.3d 1326, 1334 (Fed. Cir. 2001) (citing In re Freeman, 30

F.3d 1459, 1465 (Fed. Cir. 1994)). Courts apply the collateral estoppel standard of the regional

circuit since issue preclusion is a procedural matter. See RF Del., Inc. v. Pac. Keystone Tech.,

Inc., 326 F.3d 1255, 1261 (Fed. Cir. 2003).

As noted earlier, the Commission in Certain Hybrid Electric Vehicles and Components

Thereof remanded the investigation to the ALJ to determine whether issue preclusion applied.

Inv. No. 337-TA-688, Comm’n Op. at 15 (Apr. 2, 2010). On remand, there was “no genuine

dispute that Paice made out a prima facie case for issue preclusion.” Certain Hybrid Electric

Vehicles and Components Thereof, Inv. No. 337-TA-688, Comm’n Op. at 3 (June 23, 2010).

Rather, the parties only disputed whether to apply an exception to issue preclusion, namely,

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whether the Supreme Court’s decision in KSR International Co. v. Teleflex Inc., 550 U.S. 398

(2007) warranted the retrial of issues previously handled by the district court. In determining

that this exception did not apply, the Commission observed that even if KSR constituted a change

in the law for purposes of providing an exception to issue preclusion, Toyota had not raised any

genuine issues of material fact in opposition of Paice’s motion. As a result, Toyota did not

satisfy its burden to support an exception to issue preclusion. Specifically, Toyota relied only on

an erroneous jury instruction. The Commission noted that a “mere error in a jury instruction,

while enough in some cases to warrant a new trial on direct review, cannot suffice to enable

collateral review of a final judgment.” Certain Hybrid Electric Vehicles and Components

Thereof, Inv. No. 337-TA-688, Comm’n Op. at 4 (June 23, 2010). The Commission further

determined that because the jury instruction in question did not require an express motivation to

combine, it did not conflict with the KSR decision. Id. Moreover, the Commission found that

“Toyota knew or should have known to challenge the obviousness determination directly in its

district court litigation instead of collaterally” before the ITC. Id. At its core, Certain Hybrid

Electric Vehicles and Components Thereof shows that the Commission is very much willing to

apply the doctrine of issue preclusion.

Regarding claim construction, the Commission has held that district court findings are

afforded preclusive effect, but only to the extent that the findings were essential to a final

judgment on questions of infringement or validity. See Certain Universal Transmitters for

Garage Door Openers, Inv. No. 337-TA-497, Order No. 14, at 10 (Jan. 14, 2004). To have a

preclusive effect, the earlier court’s interpretation of the particular claim had to be the reason for

the previous outcome. Jackson Jordan, Inc. v. Plasser Am. Corp., 747 F.2d 1567, 1577 (Fed. Cir.

1984).

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14.1.19Preclusion at the District Court

The Federal Circuit has established that the Commission’s determinations on various

patent issues, i.e., validity and infringement, are not entitled to preclusive effect in subsequent

district court litigation. See Texas Instruments, Inc. v. Cypress Semiconductor Corp., 90 F.3d

1558, 1568-69 (Fed. Cir. 1996). This holding also encompasses patent-based defenses. Indeed,

any other approach would directly conflict with the plain language of 28 U.S.C. § 1338, which

grants federal courts original and exclusive jurisdiction of civil actions “arising under any Act of

Congress relating to patents.”

19 Review

At the conclusion of each hearing, the ALJ must certify the record and file an Initial

Determination on the merits of the case. 19 C.F.R. § 210.42(f). The Initial Determination

includes:

[A]n opinion stating findings . . . and conclusions and the reasons or bases therefore necessary for the disposition of all material issues of fact, law, or discretion presented in the record; and a statement that . . . the initial determination shall become the determination of the Commission unless a party files a petition for review of the initial determination . . . or the Commission . . . orders on its own motion a review of the initial determination or certain issues therein.

19 C.F.R. § 210.42(d). An Initial Determination will become the Commission’s determination

forty-five days after its date of service unless the Commission orders a review. See 19 C.F.R.

§ 210.42(h)(1)-(3).

14.1.20Commission Review

Parties have a right under Section 337 to petition the full Commission for review an

ALJ’s Initial Determination. 19 C.F.R. § 210.43(a). The petition for review from an Initial

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Determination on the merits must be filed within 10 days after the service of the Initial

Determination.

A petition for review may request relief on one or more of the following grounds: (1) that

a finding or conclusion of material fact is clearly erroneous; (2) that a legal conclusion is

erroneous, without governing precedent, rule or law, or constitutes an abuse of discretion; or (3)

that the determination is one affecting Commission policy. See 19 C.F.R. § 210.43 (b)(1). Any

issue not raised in this petition to the ITC Commission will not be considered by the Federal

Circuit on review. See Texas Instruments, Inc. v. U.S. Int’l Trade Comm’n, 988 F.2d 115, 1176

(Fed. Cir. 1993). The ITC Staff also has the right to petition review. Such petitions generally

increase the likelihood that the Commission will take review of the Initial Determination.

Within 60 days after service of the Initial Determination, the Commission decides

whether to review some or all of the Initial Determination based upon the petition for review, the

replies, and its own motions. Only one vote from any participating Commission is required to

order review of an initial determination. See 19 C.F.R. § 210.43(d)(3).

If the Commission decides to grant review, it issues a notice setting forth the scope and

issues it will review. In rare cases, the Commission can hold oral arguments for the issues under

review. 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 (June 2007). The Commission has the authority to affirm, set

aside, or modify any portion of the Initial Determination under review. Yet, because of the

heavy evidentiary burden required to overturn the ALJ (e.g., “clearly erroneous” and “abuse of

discretion”), the Initial Determination is usually upheld.

14.1.21Presidential Review

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If the Commission determines that a violation of Section 337 has occurred and adopts a

remedy, then the case is passed to the President of the United States. Section 337(j)(1). Within a

60 day period, the President may disapprove the Commission order for “policy reasons.” Section

337(j)(2). Presidential disapproval of an ITC order is rare and has not occurred since the

administration of President Reagan. During the Presidential review period, respondents may

continue to import and sell infringing articles provided the respondent posts a bond with the

Customs Service in an amount determined by the Commission. However, if the President does

not disapprove of the Commission’s remedial order, the bond may be forfeited to the

complainant. Section 337(j)(3).

14.1.22Appellate Review

A Commission decision that is not vacated by the President is appealable to the Federal

Circuit by “[a]ny person adversely affected.” Section 337(c). The Commission must produce a

“final . . . decision on the merits, excluding or refusing to exclude articles from entry” before an

appeal will be granted. Block v. U.S. Int’l Trade Comm’n, 777 F.2d 1568, 1571 (Fed. Cir. 1985).

The Federal Circuit can, however, adjudicate Commission dismissals for lack of subject matter

jurisdiction and interlocutory orders. See Amgen, Inc. v. U.S. Int’l Trade Comm’n, 902 F.2d

1532, 1537 (Fed. Cir. 1990); see also 28 U.S.C. § 1292(c)(1). In appeals of ITC decisions under

Section 337, the ITC is the respondent and defends its decision. Even so, prevailing parties

commonly intervene to support the Commission’s final determination on appeal.

In reviewing a Commission decision, the Federal Circuit applies the Administrative

Procedure Act’s “substantial evidence” standard. SKF USA, Inc. v. Int’l Trade Comm’n, 423

F.3d 1307, 1312 (Fed. Cir. 2005); see also Section 337(c); 5 U.S.C. § 706(2)(E). Thus, the

Federal Circuit will not overturn the ITC’s factual findings “if they are supported by such

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relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” SKF,

423 F.3d at 1312 (citation omitted). However, legal conclusions of the ITC are reviewed de

novo. Id. (citing 5 U.S.C. § 706(A)(2)(A)). Accordingly, the Commission “has broad discretion

in selecting the form, scope, and extent of the remedy and judicial review of its choice of remedy

necessarily is limited.” Viscofan, S.A. v. U.S. Int’l Trade Comm’n, 787 F.2d 544, 548 (Fed. Cir.

1986).