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Sealing the Border: Procedures and Practices of a Section 337
Proceeding in the U.S. International Trade Commission
July 19, 2016
Mike Newman, Member
Jim Wodarski, Member
IP Summer Academy 2016
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Overview
2
•Background on the International Trade Commission (ITC) and Section 337
Investigations
•Advantages/Disadvantages of Patent Litigation at the ITC
•Procedural Overview of a Section 337 Case
•Enforcement
•Hot Topics at the ITC
– Domestic Industry and Non-Practicing Entities (NPE) at the ITC
– SSO, SEP, and F/RAND
– Indirect infringement of method claims
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
3
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
4
• The USITC is an independent, quasi–judicial federal administrative agency with broad
investigative responsibilities on matters of trade.
• Established by Congress in1916 as the U.S. Tariff Commission. In 1974, the name was changed
to U.S. International Trade Commission.
• Mission:
– Consistent with its statutory mandate, the Commission makes determinations in proceeding involving
imports claimed to injure a domestic industry or violate U.S. Intellectual property rights;
– Provide the President, USTR, and Congress with independent quality analysis, information, and support on
matters relating to tariffs and international trade and competitiveness;
– Maintain the Harmonized Tariff Schedule of the United States (HTS).
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
5
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
6
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
7
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
8
• Six Commissioners
– Serve overlapping terms of nine years each
– New term every 18 months
– Not political – equal political party representation
• Six Administrative Law Judges (ALJ)
– Chief ALJ Charles E. Bullock
– ALJ Theodore R. Essex
– ALJ E. James Gildea
– ALJ Thomas B. Pender
– ALJ David P. Shaw
– ALJ Dee Lord
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
9
• Office of Unfair Import Investigations (OUII)
– Advises ITC on whether to commence an investigation
• Offers informal pre-filing advice to Complainant on compliance with pleading rules
– Participates as an independent party in an investigation on behalf of the public interest
• Serves discovery
• Takes positions on motions
• Examines witnesses at depositions and trial
• Takes position on merits of case
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
10
Section 337
– Section 337 of the Tariff Act of 1930, as amended (19 U.S.C. § 1337) authorizes the ITC to investigate unfair
methods of competition and unfair acts, including IP infringement, in the importation of articles into the
United States.
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
11
History of Section 337
1916 1922 1974 1930 1988 1994
U.S. Tariff
Commission
created
Section 316 replaced by
Section 337 of Tariff Act of 1930;
CCPA (predecessor of CAFC)
allows use of §337 for patent cases
Distinguishes infringement of
patents, from other unfair acts;
expands DI test; eliminates injury
requirement for statutory IP
Section 316 of Tariff Act of 1922:
“Unfair methods of competition
and unfair acts in the importation
of articles … into the United States”
Amendment applies APA;
changes name to International
Trade Commission; gives ITC
authority to issue remedy;
sets time limit of 12 months
for most investigations
Eliminates statutory time
limits and establishes target
dates
Background on ITC and Section 337
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
12
• Violations of Section 337
– Importation
– Infringement
– Domestic Industry
• Remedies under Section 337
– General Exclusion Order (GEO)
– Limited Exclusion Order (LEO)
– Cease and Desist Order (C&D)
• Presidential Review
• Appeals to the Court of Appeals for the Federal Circuit (CAFC)
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
13
• Patent Litigation at the ITC vs. District Court
• Procedures similar to Federal Civil Procedure and District Court practice
– Procedural rules similar to Fed. Rules (19 C.F.R. Chapter II, Part 210)
– Judges Ground Rules provide key guidance
– Number of discovery requests
• Trials similar to District Court bench trials except:
– ITC Judges follow but not bound to Federal Rules of Evidence
– ITC Judges more likely to admit hearsay
– ITC evidentiary record typically voluminous
• ITC Judges render “Initial Determinations” that are subject to full Commission review and
render an opinion on all issues
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
14
Patent Litigation at the ITC vs. District Court
ITC District Court
Length ≤18 months average of 3 years
Jurisdiction in rem (articles) in personam (people)
Discovery broad Federal Rules apply
Judges
Six ALJs with predominantly
patent caseload 677 judges with diverse caseload
Confidentiality
automatic administrative
protective order public by default
Remedy
exclusion orders/cease and
desist orders
monetary damages only, unless
eBay factors also allow injunction
Background on ITC and Section 337
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
15
Terminology ITC vs. District Court
ITC District Court
Complainant Plaintiff
Respondent Defendant
Summary Determination Summary Judgment
Hearing Trial
Initial Determination Magistrate’s Decision
Petition for Review
Commission Opinion District Judge’s Opinion
Background on ITC and Section 337
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Background on ITC and Section 337
16
• Bermuda
• British Virgin Islands
• Canada
• Finland
• France
• German
• Israel
• Japan
• Korea
• Switzerland
• Taiwan
• UK
Usage by Non-U.S. Based Complainants
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July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
17
Background on ITC and Section 337
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
18
Background on ITC and Section 337
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
19
Background on ITC and Section 337
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
20
Dispositions at the ITC since 2004
12%
21%
22%
1%
44%
Complaint
withdrawn
No violation
Violation
Terminated due to
arbitration
Settled
Background on ITC and Section 337
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages and Disadvantages of Patent Litigation at the ITC
21
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages/Disadvantages of Patent Litigation at the ITC
22
• Speed
• IP Expertise
• Broad Injunctive Relief
• Domestic Industry
• Other Pros and Cons
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages/Disadvantages of Patent Litigation at the ITC
23
Speed
– Statutory responsibility to complete cases quickly
– Statutory/rule responsibility to adhere to target dates for completion
– Investigation commenced within 30 days after complaint is filed
– ITC serves the complaint and Notice of Investigation
– Protective Order issues immediately upon institution
– Discovery commences immediately
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages/Disadvantages of Patent Litigation at the ITC
24
Speed (cont.)
– Judge conducts initial discovery conference
– Discovery/motions proceed on short deadlines
– Judges available to resolve discovery disputes
– Average time to trial = 10 months
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
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© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages/Disadvantages of Patent Litigation at the ITC
25
IP Expertise
– Statutory responsibility to conduct IP investigations
– Approximately 90% of cases are patent cases
– ITC has internal review process
• Multiple attorneys involved in determining whether to adopt or modify Judge’s opinion before issuance of final ITC
opinion
– ITC defends its own opinions at the Federal Circuit
– Higher Percentage of ITC decisions affirmed by Federal Circuit
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages/Disadvantages of Patent Litigation at the ITC
26
Broad Injunctive Relief
– Exclusion Orders
• Directs U.S. Customs Service to stop entry of infringing articles at all U.S. ports
• Framework for Customs Service seizure and forfeiture
• In Rem Jurisdiction – Functions without regard to personal jurisdiction
• ITC procedures available to Complainant to broaden Customs enforcement (advisory opinion procedures,
enforcement procedures, modification procedures)
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages/Disadvantages of Patent Litigation at the ITC
27
Broad Injunctive Relief (cont.)
–Limited Exclusion Orders (LEO)
•Bars importation of the accused product from Respondents named in the
Investigation
• Issued by ITC in the typical case
–General Exclusion Orders (GEO)
•Bars infringing products from all sources (even sources that were not parties to the
investigation) See, e.g., Certain LED Photographic Lighting Devices , Inv. No. 337-
TA-804 (January 17, 2013)
•Rare and highly coveted. Higher statutory standard requires:
– Proof of widespread infringement; difficulty identifying the source; and/or ease of evading a LEO
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July 11 – 22, 2016
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Advantages/Disadvantages of Patent Litigation at the ITC
28
Broad Injunctive Relief (cont.)
– eBay, Inc. v. MercExchange, LLC, 126 S.Ct. 1837 (2006) does not apply
• Commission finds eBay not applicable to Section 337 cases
– Tariff Act of 1930 contains legislative determination that there is an inadequate remedy at law for unfair acts in import commerce
– Amendments to remove injury requirement confirm that irreparable harm need not be proven
– Balance of harms and public interest analysis as part of ITC analytical framework
– Importation activity governed differently under the trade laws
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July 11 – 22, 2016
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Advantages/Disadvantages of Patent Litigation at the ITC
29
Other Pros and Cons
– No counterclaims
• Case focused on allegations in Complaint and ITC Notice
• ITC directed by statute to not consider counterclaims
• Counterclaims, if any, must be removed to District Court
– Nationwide subpoena power
– No issues with personal service of Complaint
– No laches defense
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
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Advantages/Disadvantages of Patent Litigation at the ITC
30
Other Pros and Cons
– Proceeds quicker than Inter Partes Review (IPR)
• Cannot be stayed pending IPR
– Rare to have an early Markman decision
– No monetary damages
– President can disapprove or delay on public policy grounds
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages/Disadvantages of Patent Litigation at the ITC
31
Other Pros and Cons
– Automatic protective order
– Third party discovery
– Mediation program
– Mandatory settlement conferences
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Advantages/Disadvantages of Patent Litigation at the ITC
32
Other Pros and Cons
– Parallel District Court cases usually filed
• Defendant can stay case as a matter of right while ITC investigation will proceed to conclusion
• District Court stay can be lifted and case tried again, for money damages
• Commission determination on infringement and validity is persuasive but not res judicata
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Procedural Overview of a Section 337 Case
33
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
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Requirements of Section 337
34
• Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337):
– “(a)(1)(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 [is declared unlawful]”
– “(a)(2) Subparagraphs (B) … apply only if an industry in the United States, relating to the articles protected
by the patent … exists or is in the process of being established.”
• To show a violation of Section 337, a complainant must therefore establish:
– The accused products have been imported into the United States;
– The accused products infringe at least one valid, enforceable claim of a U.S. patent;
– There exists a domestic industry in the United States related to the patent that is infringed.
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July 11 – 22, 2016
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Requirements of Section 337 - Importation
35
• First element – Importation
– “Bringing of goods within the jurisdictional limits of the U.S. with the intention to unlade them.”
– Section 337 on its face requires
• Importation;
• Sale for importation; or
• Sale within the United States after importation
– Purely domestic activity is not covered
– Products that do not infringe until assembled domestically, or require end-user in order to infringe (e.g.
method claims), can only infringe via inducement or contributory infringement
– Jurisdiction in rem – over the thing imported
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July 11 – 22, 2016
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Requirements of Section 337 - Infringement
36
• Second element – Infringement of a Valid and Enforceable Patent (IP)
– Patent owner must make the same showing of infringement as in a civil case, e.g., accused product or
process must meet every limitation of one or more valid claims
– Infringement can either be direct or indirect (e.g., contributory infringement or inducement), and can be
literal or by equivalents
– Accused infringer can raise same invalidity and enforceability defenses as in a federal case
– Legal standards are identical to federal case: claims are construed per Markman and Philips
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July 11 – 22, 2016
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Requirements of Section 337 - Infringement
37
• Second element – Infringement of a Valid and Enforceable Patent (IP)(Continued)
– Infringement is measured at the time of importation Suprema, Inc. v. USITC (2013)
• Precludes finding of violation based on induced infringement of a method claim where no direct infringement at
time of importation of software
• Preference for apparatus/system claims where a product infringes as it sits
– Methods of manufacture/process claims are viable pursuant to statute
• May require plant inspections on foreign soil
– Some countries will categorically not allow this type of discovery (e.g. China)
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July 11 – 22, 2016
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© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Requirements of Section 337 – Domestic Industry Test
38
• Third element – “Domestic Industry”
– U.S. and foreign entities may file at ITC if “Domestic Industry Test” is satisfied for standing
• Same rules apply regardless of whether the complainant is American or foreign
• Caution: The ITC is a political body, and political considerations may affect outcome
– Two prongs of the Domestic Industry requirement:
• Economic Prong ─ Under 337(a)(3) a US domestic industry shall be considered to exist if there is, with respect to
patented article (actual product covered by patent):
– significant investment in plant or equipment
– significant employment of labor or capital
– substantial investment in exploitation of patented article, including engineering, R&D or licensing
• Technical Prong – the domestic industry product(s) must practice the asserted patent
– Any claim of the patent can be practiced (whether asserted against Respondents in the investigation or not) to establish
the technical DI
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July 11 – 22, 2016
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Requirements of Section 337 – Domestic Industry
39
• Third element – “Domestic Industry” (Continued)
– Ways of establishing a domestic industry:
• Complainant itself can establish a domestic industry through investment in labor and capital (337(a)(3)(A)), plant
and equipment (337(a)(3)(B)), or engineering, research and development, or licensing (337(a)(3)(C))
– E.g., complainant employs 100 people to develop technology related to products it sells, complainant built a factory and
utilizes a significant amount of equipment to run the factory, complainant has invested $50 million in research related to
developing patented technology
– Complainant can also show that it has attempted to establish a domestic industry
• Complainant can rely on the activities of its licensees
– 19 U.S.C. § 1337 does not limit the domestic industry to only the complainant – limited to protected articles which can be
made by licensee
– Actions of subsidiaries or licensees may be sufficient, but must show existence of articles covered by the patents-at-issue. In
re Computers and Computer Peripheral Devices (337 TA 841 – Jan. 9, 2014)
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Requirements of Section 337 – Domestic Industry
40
• Third element – “Domestic Industry” (Continued)
– Ways of establishing a domestic industry:
• Under “technical prong” of domestic industry test, domestic product or process “must be covered by the asserted
claims; the test ‘is essentially the same as that for infringement, i.e., a comparison of domestic products to the
asserted claims.’” Osram GmbH v. International Trade Comm’n, 505 F.3d 1351 (Fed. Cir. 2007)
• Recent cases extend domestic industry test out to non-practicing entities (primarily licensing) – efforts to negotiate
(NPE such as Walker Digital) – but trying to limit under new cases
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July 11 – 22, 2016
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Requirements of Section 337 – Domestic Industry
41
• Third element – “Domestic Industry” (Continued)
– Non-Practicing Entities (NPEs) can establish a domestic industry
• Activities of licensees for any prong
• Investments in engineering and/or R&D under 337(a)(3)(C)
• Investments in licensing also under 337(a)(3)(C)
– The ITC has imposed more hurdles for a licensing based DI
– Unlike injunctions under eBay standard, non-practicing entities (NPEs) can establish a domestic industry through licensing
and litigation efforts
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July 11 – 22, 2016
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© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Requirements of Section 337 – Domestic Industry
42
• Third element – “Domestic Industry” via Licensing
– For licensing based DI, litigation costs may be included as investment
• John Mezzalingua Associates (d/b/a PPC, Inc.) v. International Trade Commission (Fed. Cir. 2011)
– Expenditures on patent litigation alone do not qualify as establishing a domestic industry
– However, efforts to negotiate a license before and during litigation may be used to establish domestic industry if they are
“substantial”
– Patent owner must establish “nexus between its litigation expenses and licensing”
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July 11 – 22, 2016
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Requirements of Section 337 – Domestic Industry
43
• Third element – “Domestic Industry” via Licensing
– ITC has sought to limit its applicability to NPEs. Three requirements directed at curtailing a licensing based
domestic industry:
• The licensing activities being relied upon must constitute an actual “investment”;
– Not sufficient for an activity to merely relate to licensing, the activity must be an “investment” in licensing.
• The investment must be attributable to the asserted patent; and
– Not just the portfolio as a whole
• The investment attributed to the patent must be “substantial.”
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Requirements of Section 337 – Domestic Industry
44
• Third element – “Domestic Industry” via Licensing
– The Licensing Investment Must Be Attributable to the Asserted Patents
• Must show a “nexus” between the investments and the asserted patents – need allocation to specific patents.
– Nexus between investments and patent portfolio is NOT sufficient
• Company that holds many patents organized in different portfolios must be able to track its activities and
expenditures in order to allocate them to the appropriate license.
• Companies who both engage only in revenue-driven licensing and do not allocate licensing expenditures specific
to the asserted patents will have a difficult time meeting the domestic industry requirement via licensing acitivies.
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July 11 – 22, 2016
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Requirements of Section 337 – Domestic Industry
45
• Third element – “Domestic Industry” via Licensing
– The Licensing Investment Must Be "Substantial" as opposed to "Significant"
• 337(a)(3)(A and B) provide for "significant" investments, while 337(a)(3)(C) provides for "substantial" investments
• Whether an investment is considered to be “substantial” depends on the realities of the marketplace. Determine
on a case-by-case basis, both quantitative and qualitative.
• In analyzing whether an investment in a licensing-based industry is substantial, the Commission distinguishes
between investments in “revenue-driven licensing” and investments in “production-driven licensing.”
• Revenue-driven licensing “takes advantage of the patent right solely to derive revenue by targeting existing
production;” whereas production–driven licensing “encourages adoption and use of the patented technology to
create new products and/or industries.”
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ALJ’s Initial Determination/
Recommended
Determination
Background on ITC and Section 337
46
MONTHS -1 0 7–9 10–12 14–16 16–18
Complaint filed
Public Interest
Investigation Instituted
Discovery &
Prehearing Filings
Hearing
Posthearing Filings
Commission
Opinion and
Remedial Order(s)
Issued
Entry Only
Under Bond
Executive
Branch
Review/
Review/
Exclusion
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Section 337 – Initial Procedure
47
• File Detailed Complaint (19 C.F.R. §§ 210.4, 210.8-210.9):
– Front loaded and expensive
– Identify allegedly infringing products
– Claim charts showing infringement
– Certified copies of asserted patents
– Certified prosecution histories and copies of all cited references
– Identify foreign counterparts
– Summary of related litigation
– Physical samples (where practical)
– Facts sufficient to demonstrate domestic industry
• Answer due in 20 days
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Background on ITC and Section 337
48
ITC pre-filing review
of complaint
Mandatory settlement
conference
January February March April May June
ITC votes to institute
investigation
ITC serves complaint
and notice
Judge issues
protective
order
Response to
complaint
(domestic parties)
Complaint filed
Confidential treatment
request filed
Response
to complaint
(foreign
parties)
File discovery
statement
Discovery
conference
Judge issues
ground rules
Judge
issues
target date
Discovery served
Notice of
Investigation
published
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Background on ITC and Section 337
49
July August Oct. Sept. Nov. Dec. Jan. June
Cut-offs for:
- Sum. det. motions;
- Fact discovery; and
- Expert discovery
Pre-trial
briefs
Pre-trial
conference
TRIAL
(2 weeks)
Tutorial
Expert report
served
Expert rebuttal
served
Expert identified
Prior art notice
Objections to
rebuttal exhibits
Objections to
exhibits
Rebuttal exhibits
Reply briefs
objections to findings
reply findings
Post-trials briefs
Post-trial findings
of Fact
Motion(s) for
summary
determination
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Background on ITC and Section 337
50
Jan. Feb. Apr. Mar. May June
Briefs on Remedy, Public
Interest, Bonding
(per date in ITC notice) Presidential
Review
CAFC
Appeal
Petitions for
Review
Initial
Determination
(after 4:00 pm)
Reply to
Petitions
Commission
Notice on
Review
Final
Commission
Determination
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July 11 – 22, 2016
Sealing the Border
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Section 337 – Remedies
51
• Primary remedy: (seal the border) exclusion order directing US Customs to stop infringing goods
from entering US until patent(s) expire
– General Exclusion Order (Section 337(d)(2)): applies to all infringing goods, regardless of origin – must show:
(1) pattern of violation; and (2) difficult to identify source or necessary to prevent circumvention of limited
exclusion order
• Compels U.S. CBP to stop at the border any and all products that meet certain Harmonized Tariff schedules as
defined in the exclusion order
– Limited Exclusion Order (Section 337(d)(1)): applies only to infringing goods from named respondent
(usually manufacturers and importers) – targeted
• Exclusion orders function as an automatic injunction
– But no money damages
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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Section 337 – Remedies
52
• Other Remedies
– Cease and desist orders (Section 337(f)): can bar sales of goods already in US – targeted – similar to an
injunction
• Discovery in Investigation encompasses quantity of accused goods already in the U.S.
– If quantity is "commercially significant," complainant can obtain a cease and desist order
– Bond: if the Commission institutes an exclusion order, during the Presidential Review period the respondents
may continue to import if they post the required bond
• Discovery in Investigation encompasses an appropriate bond amount
– Temporary exclusion orders are available in exceptional cases
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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Section 337 – Remedies: General Exclusion Order Evidence
53
• Evidence for unauthorized pattern:
– Importation by numerous manufacturers
– Foreign infringement suits based on counterpart patents
– History of unauthorized foreign use.
• Evidence for business conditions:
– Established US demand for product
– Availability of marketing & distribution networks in US.
• Evidence for foreign manufacturers
– Low cost to make product outside US – e.g., earplugs
– Large number of possible foreign manufacturers
– Difficulty of identifying source of products
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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General vs. Limited Exclusion Orders
54
• Limited Exclusion Orders “only apply to the specific parties before the Commission in the
investigation.” Fuji Photo Film Co. v. ITC, 474 F.3d 1281, 1286 (Fed.Cir.2007)
• By contrast, General Exclusion Orders “bar the importation of infringing products by anyone,
regardless of whether they were a respondent in the Commission's investigation.” Id.
• “A general exclusion order broadly prohibits entry of articles that infringe the relevant claims of
a listed patent without regard to whether the persons importing such articles were parties to, or
were related to parties to, the investigation that led to issuance of the general exclusion
order.” VastFame Camera, Ltd. v. ITC, 386 F.3d 1108, 1114 (Fed.Cir.2004).
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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General vs. Limited Exclusion Orders
55
• Kyocera Wireless Corporation v. International Trade Commission (Fed. Cir. 2008)
– Commission cannot issue limited exclusion order covering downstream products incorporating infringing
components if downstream offenders are not named as respondents
– Facts: importer’s chip used in handheld communications devices is found to infringe a U.S. patent, but
handheld manufacturers are not named as respondents; Commission cannot prevent importation of
devices by non-respondent manufacturers even if they contain infringing chips
– Patent owner’s remedy is to name every “downstream” importer or obtain general exclusion order (subject
to heightened standards as discussed above)
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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Background on ITC and Section 337
56
• Appeal of an Initial Determination
– Following petitions filed by either party, the Commission will decide whether to review the Initial
Determination
– If the Commission elects to review, it may request additional briefing
– Following review the Commission may:
• reverse the Initial Determination;
• reverse it in part; remand for further hearing and/or briefing
– The Commission issues a Final Determination
– Remedies enforceable after issuance of Final Determination even if appealed
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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Enforcement
58
• Orders are enforced by the U.S. Customs and Border Protection (CBP), a component of the
Department of Homeland Security
• ITC sends a copy of the exclusion order to the IP Rights Branch at CBP Headquarters in Washington, D.C.
• After consulting with the ITC about the language of the order and any technical issues, the order is forwarded to CBP Office of Field Operations, where it is entered into an electronic
database and becomes available to CBP officers at all U.S. ports of entry
• U.S. ports are concerned with trade facilitation, so a customs strategy may help a complainant get maximum exclusion of infringing products
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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Enforcement
59
• Attorneys can consult with CBP to ensure that the exclusion orders are effective.
• These communications can be ex parte.
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Hot topics at the ITC
60
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
61
Non-Practicing Entities
– How can non-practicing entitles satisfy the domestic industry requirement?
SSOs, F/RAND and SEP
– Should an exclusion order issue if the asserted patent is a F/RAND encumbered SEP?
Indirect Infringement
– What happens if infringement of a method claim is divided between foreign and domestic activities.
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
62
Non-Practicing Entities
– Domestic Industry Standard
– Assessed at the time complaint is filed
– 19 U.S.C. § 1337(a)(3)
An industry in the United States shall be considered to exist if there is in the United States, with respect to the
articles protected by the patent, copyright, trademark, mask work or design concerned –
(A) Significant investment in plant and equipment;
(B) Significant employment of labor or capital; or
(C) Substantial investment in its exploitation, including engineering, research & development, or licensing
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
63
Non-Practicing Entities
– Domestic Industry Test
• Economic Prong
– Significant U.S. investment in plan and capital;
– Significant U.S. investment in labor or capital;
– Substantial U.S. investment in its exploitation, including engineering, research and development, or licensing
• Technical Prong
– Infringement analysis
– At least one claim of each asserted patent must be practiced
– Only applies where complainant manufactures and sells a commercial product
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
64
Non-Practicing Entities
– 1988 amendments to Section 337 refers to non-practicing entities ("NPE"") – those companies that have
patents but do not make products
• Congress gave examples of NPEs that should be allowed in the ITC
• "universities an other intellectual property owners who engage in extensive licensing of their rights to
manufacturers"
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July 11 – 22, 2016
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Hot Topics at the ITC
65
Non-Practicing Entities
– Types of NPEs
• Category 1 NPE
– Universities, intellectual property owners who engage in extensive research and development and license their patent rights
to manufacturers
• Category 2 NPE
– Companies who purchase patents from others, and then assert those patents
– Many companies function as both as a practicing entity and an NPE
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
66
Non-Practicing Entities
– Licensing as a domestic Industry
• Must have a nexus to the individual asserted patent
• Claimed activities must relate to licensing
• Investment must be domestic
– Investment must be substantial
• Factors include:
– Number of licensees
– Amount of revenue generated from license agreements
– Number of U.S. Employees involved in the relevant licensing efforts
– Litigation expense, alone, are not sufficient
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July 11 – 22, 2016
Sealing the Border
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Investment in asserted
patents
Investment relates to licensing
Hot Topics at the ITC
67
• Non-Practicing Entities – Proving DI through licensing under 19 U.S.C. § 1337(a)(3)(C)
“Because the statute
requires that
investment activities
satisfy all three
of these requirements,
the absence of a
connection to any one
of them will defeat
complainant’s attempt
to rely on those
activities to satisfy the
domestic industry
requirement.”
Inv. No. 337-TA-694
Investment in the U.S.
SUBSTANTIAL?
IP Summer Academy 2016
Boston, Massachusetts
July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
68
Non-Practicing Entities
– Proving DI through research and development under 19 U.S.C. §1337(a)(3)(C)
• Can you include plant and equipment and labor and capital?
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
69
SSOs, F/RAND and SEP
– Standard Setting Organizations ("SSO")
– Standard Essential Patents ("SEP")
– SSOs usually require that owners of SEPs license those patents under Fair, Reasonable, and non-
discriminatory ("F/RAND") terms.
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
70
SSOs, F/RAND and SEP
– If the ITC finds a SEP valid and infringed is an exclusion order appropriate?
– ITC has authority and discretion to consider alternatives
• Can tailor a remedy to fit with circumstances in each investigation involving F/RAND encumbered SEPs.
• Can force arbitration or mediation by threatening enforcement or vacation or an exclusion order to give parties
incentive to agree on F/RAND terms.
• Commission can also issue an exclusion order, and leave it to the U.S. Trade Representative to allow or deny relief
based upon policy concerns.
• Patent hold-up vs. Patent hold-out
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July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
71
Indirect Infringement
– Suprema, Inc. v. ITC:
• Complainant Cross Match Techs., Inc. filed complaint alleging patent infringement by Suprema, Inc. and Mentalix,
Inc.
• Suprema’s optical fingerprint scanners were imported without accused software.
• Mentalix argued that the scanners did not infringe at the time of importation, only after.
• Cross Match argued that direct infringement was complete once Mentalix loaded its software on Suprema’s
scanners in the U.S.
• Suprema optical scanners were capable of substantial noninfringing uses (i.e., being loaded with other companies’
software).
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July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
72
Indirect Infringement
– Suprema, Inc. v. ITC:
• Claim at issue
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July 11 – 22, 2016
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Hot Topics at the ITC
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Indirect Infringement
– Suprema, Inc. v. ITC:
• Commission found that Mentalix directly infringed by using its own software with Suprema
optical scanners
• Direct infringement only completed after importation when software was loaded in the U.S.
• The Commission found that Suprema induced infringement of the method claim under 35
U.S.C. § 271(b)
• Issued exclusion orders and cease & desist orders
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July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
74
Indirect Infringement
– Suprema, Inc. v. ITC:
•the Federal Circuit’s 2-1 Panel Opinion (now Vacated)
– Statutory construction of § 337(a)(1)(B)(i) shows that “articles that infringe” is
limited to articles that infringe at time of importation.
– “We conclude that § 337(a)(1)(B)(i), by tying the Commission’s authority to
the importation, sale for importation, or sale within the U.S. after importation
of articles that infringe a valid and enforceable U.S. patent, leaves the
Commission powerless to remedy acts of induced infringement in these
circumstances.”
– “[A]n exclusion order based on a violation of 19 U.S.C. § 1337(a)(1)(B)(i) may
not be predicated on a theory of induced infringement under 35 U.S.C. §
271(b) where direct infringement does not occur until after importation of the
articles the exclusion order would bar.
• Vacated exclusion and cease & desist orders
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July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
75
Indirect Infringement
– Suprema, Inc. v. ITC:
• Two camps:
– Reinstate the panel decision (find in favor of Suprema): O’Malley*, Prost*, Dyk
– Reverse the panel decision (find in favor of ITC): Reyna*, Taranto, Wallach
• If Congress intended to carve out § 271(b) why not say so expressly?
• Under the Chevron doctrine, is “articles that infringe” ambiguous and, if so, is the ITC’s interpretation reasonable.
• Is it possible to police/enforce “intent”?
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July 11 – 22, 2016
Sealing the Border
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Hot Topics at the ITC
76
Indirect Infringement
– What Suprema does not cover:
• Contributory infringement claims
• Inducement claims where direct infringement is perfected before the time of importation
• Infringement of method claims where infringement is perfected by the time of importation
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July 11 – 22, 2016
Sealing the Border
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When to Consider ITC as a Complainant
77
• Are the accused products imported?
• Do you have a domestic industry?
– Do you have significant investments in U.S. related to manufacturing the protected article?
– Do you have significant investments in the U.S. related to research and development or licensing of the
patented technology?
• Is time of the essence?
• Do you expect to face inter partes review?
• Is an injunction important?
• Are there indirect infringement of method claims?
IP Summer Academy 2016
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July 11 – 22, 2016
Sealing the Border
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ITC Exclusion Orders: An Alternative to a Federal Lawsuit
78
• When foreign goods are imported into the United States that infringe a U.S. Patent, the patent
owner has two choices:
– Sue the importer and manufacturer in Federal Court; or
– Obtain an exclusion order from the International Trade Commission (“ITC”)
• Why not just sue in Federal Court?
– Can be difficult or impossible to obtain jurisdiction over, discovery from foreign defendant
– Obtaining a permanent injunction can take years, and is subject to eBay standard of irreparable harm
– Enforcing an injunction against foreign importer is practically impossible: the manufacturer can always find
a new importer who will have to be sued again and will not be subject to collateral estoppel
• ITC offers faster remedy, with broad discovery
– Time to hearing in ITC is 8-13 months
– If Respondents refuse to participate, default exclusion orders will issue if Complainant can show a domestic
industry
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July 11 – 22, 2016
Sealing the Border
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Conclusion
79
• Complainant should prepare its case well in advance ─
line up all facts, witnesses and discovery as well as have offensive and defensive teams ─
preparation, preparation, preparation
– ITC will want complainant's domestic industry proof to be available early on
• Complainant should consider viability of bringing and then staying a companion district court
action to preserve damages claim
• Respondent should try to work with other respondents and proceed to develop targeted
discovery and defenses and consider reexamination in the USPTO
– Though ITC will likely not stay an investigation due to an IPR
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Questions?
Questions?
80
© 2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Thank you for joining us!
James Wodarski, Member
Michael Newman, Member
81