1 October 2011CopyrightCarl C. Charneski

Selecting a forum: ITC versus district court

Q. Sometimes patentees have the option of bringing an infringement challenge in either the ITC or district court. What strategies would you recommend patentees consider in evaluating where to bring an action?

A. Whether you choose to proceed at the International Trade Commission (ITC) or district court generally will depend on consideration of two factors: (1) the remedy that you need in order to resolve your infringement problem; and (2) how fast you need relief. That said, the ITC is a particularly attractive forum because it provides complainants with the opportunity to obtain, with great speed and efficiency, exclusion orders prohibiting the importation of infringing products into the United States.

In that regard, the ITC has the authority under the Tariff Act of 1930 to issue limited exclusion orders (LEOs) and general exclusion orders (GEOs) that are enforced by US Customs and Border Protection. LEOs are directed only to the named respondents’ infringing products.

They are the remedy most often sought by complainants and most often granted by the commission. The commission does have the authority to issue broader GEOs, which cover downstream products of non-respondents. GEOs are more difficult to obtain (and in the words of the Federal Circuit, have “heightened requirements”).

For example, in order to obtain a GEO, you must show either: (1) that a general exclusion from entry of articles is necessary to prevent circumvention of an exclusion order limited to products of named persons; or (2) there is a pattern of violation of Section 337 and it is difficult to identify the source of infringing goods.

In addition to the exclusion orders, the ITC has the authority to issue cease and desist orders with respect to commercially significant inventories of infringing products located within the United States. Unlike district courts, however, the ITC cannot award monetary damages.

The fact of the matter is that an LEO (in the words of the commission, the “usual remedy”), while significant by itself, packs even more of a punch because it may be obtained by an injured complainant far faster than any monetary damage and/or injunctive relief in a district court. In that regard, by any measure of IP litigation speed, the proceedings at the ITC are lightning quick.

Generally, you will go to hearing (i.e. trial) approximately 10 months after the commission issues the notice of investigation. You can expect the Administrative Law Judge (ALJ) to render an initial determination (finding infringement, if supported by the evidence, and recommending a remedy) approximately 12 to 14 months after the investigation is instituted.

Thereafter, the commission has four months to review the judge’s decision. Thus, from start to finish, you’re looking at 16 to 18 months from the time that the commission first acknowledges that you might be suffering from a case of infringement (and institutes the investigation) to the time that it prescribes a cure (an LEO or GEO, possibly topped off with a cease and desist order).

You can only get that speedy resolution at the ITC. While some district courts have a ‘rocket docket’ reputation with respect to patent infringement matters, those dockets are slowing down as case filings increase. This has not (yet) happened to the ITC.

As a matter of strategy, you should proceed before the ITC if you are willing to commit resources for a 14 to 16-month period, with almost no let up in intensity. The plus side of this approach is that you will know where you stand infringement-wise in fairly short order (at least as measured by the judicial clock) and, if you’re successful, the pay-off is big.

Q. Do you feel that the ITC is under utilised by IP owners?

A. Both United States and foreign owners of US IP rights definitely know about the ITC and they make full use of this forum. In fact, 14 notices of investigation were instituted by the commission in June 2011 alone (and as of July 21, 2011, an astounding 53 investigations have thus far been instituted for the calendar year.) Insofar as patent-related investigations are concerned, these numbers show that the ITC is quite busy and is only getting busier.

Aside from patents, insofar as trademark and trade secret matters are concerned, it’s a different story. Despite the fact that the ITC may order the exclusion of products that infringe a trademark, or are produced as a result of misappropriated trade secrets, the ITC rarely sees a complaint falling under either category.

Given that the ITC is well prepared to hear trademark and trade secrets cases and to provide an effective remedy, if appropriate, it is quite puzzling why more trademark and trade secrets complaints are not being filed with the agency.

The public interest as a factor in ITC cases

Q. With recent attention on the public interest factor, what information should the parties bring to the commission’s attention and what recommendations do you have on the timing of that information?

A. The public interest factors are listed in the Tariff Act. When an ALJ is assigned an investigation, the judge will look at the number of patents and claims asserted, as well as the number of parties (particularly respondents) involved.

"DESPITE THE FACT THAT THE ITC MAY ORDER THE EXCLUSION OF PRODUCTS THAT INFRINGE A TRADEMARK, OR ARE PRODUCED AS A RESULT OF MISAPPROPRIATED TRADE SECRETS, THE ITC RARELY SEES A COMPLAINT FALLING UNDER EITHER CATEGORY."

Unless the commission specifically instructs the ALJ to consider a specific aspect of public interest (rarely the case), or unless the parties make public interest an issue during the course of the investigation (not usually the case), public interest does not come into play until the remedy portion of the parties’ post-hearing briefs and the remedy portion of the ALJ’s initial determination. (Granted, on occasion, the parties have identified significant public interest issues in ITC investigations).

That doesn’t mean that public interest evidence doesn’t make its way into the typical investigation where public interest issues are not highlighted by the parties. It does, but quietly, arousing little attention, as one would expect of an issue that the parties typically treat during trial as minor.

If, however, there is a public interest issue that is important to either the complainant or the respondent, then it is up to the interested party to inject it into the investigation. They can easily do this at the very start of the investigation by making it an issue and by providing supporting evidence. If it’s a ‘big deal’ to one (or both) of the parties, then that party should make it a ‘big deal’ to the ALJ and to the commission.

Finally, the issue of public interest is most prominent when an investigation is before the commission on appeal. At that time, the commission will again afford the opportunity for the submission of comments addressing the public interest aspect of the case. A good example of the prominence of public interest as an issue at this appellate stage is the Wind Turbines case (TA-337-641).

There, the commission received numerous comments from various non-party entities and associations, including members of Congress, on the significance of the issues presented in the Wind Turbines investigation.

The availability of general exclusion orders

Q. What recommendations would you provide to patentees seeking a general exclusion order?

A. First, read the Federal Circuit’s Kyocera decision. It provides a clear explanation as to how limited exclusion orders (LEOs) differ from general exclusion orders (GEOs).

In order to obtain the benefit of a GEO (i.e. to exclude the downstream products of non-parties), the patentees must be prepared to present evidence showing that a general exclusion order is necessary to prevent circumvention of a limited exclusion order, or that there is a pattern of violation and it is difficult to identify the source of the infringing products. With the Federal Circuit looking over the commission’s shoulder, the ITC is going to require strict proof before it issues a GEO. After all, it’s all about the evidence.

Q. What recommendations do you have for respondents seeking to defeat a request for a general exclusion order?

A. It’s all about proof or, in the case of respondents, the complainant’s lack of proof. For example, to defeat a GEO, respondents must be prepared to show that there will be no circumvention of an exclusion order limited to products of named persons (i.e. an LEO) or that in rebutting complainant’s proof to the contrary, there is no pattern of violation and it is not difficult to identify the source of allegedly infringing products.

As to this last consideration, respondents could prove that a GEO is not supported by the evidence because the complainant did not exercise due diligence in identifying all potential respondents, i.e. entities are known to exist that manufacture products identical or substantially similar to the accused products, but these entities were not named in the complaint.

Carl C. Charneski is a counsel at Brinks Hofer Gilson & Lione. He can be contacted at: ccharneski@brinkshofer.com

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