ITC Proves Useful Resource for Life Science Firms

The U.S. International Trade Commission (ITC)'s power to seal the country's borders against importation of products covered by U.S. patents makes this federal agency a powerful resource for patent holders. Still, many life sciences companies doing business in this country fail to utilize this quasi-judicial body to protect their pharmaceuticals, medical devices and other patented products.

The ITC's authority to protect companies active in the United States from unfair competition from abroad comes from '337 of the Tariff Act of 1930. To proceed under '337, there must be a 'domestic industry,' importation and an unfair method of competition or unfair act, such as patent infringement. Relief is even possible when imported products are not protected by patents, if they are made abroad through the use of patented processes.

Most ITC cases are completed in about a year, two to three times faster than cases tried in court. Moreover, the ITC's jurisdiction is based on imported articles, rather than personal jurisdiction over the infringer. As a result, the ITC and the U.S. Customs Service can prevent the continued importation of an infringing product even if its foreign manufacturer or distributor cannot be identified or subjected to the jurisdiction of the U.S. courts. By itself, '337 can yield as much relief as many companies need and can also be used in conjunction with court litigation.

The speed of a '337 case may create special opportunities. Complainants receive relief more quickly than they probably could from a court. In a business context, the rapidity and timing of the relief may be as important as the relief itself. Sophisticated companies typically prepare their discovery requests and anticipate the requests of respondents before they file their complaint. In this way, they are better able to maintain control over the momentum of the case during its brief duration.

In some ways, however, the speed of a '337 case can be a deterrent to companies pursuing patent claims. These cases are often complex and can involve parties that do not conduct business in English. Expedited cases can also mean that costs are incurred more quickly than in a court case, and the ITC cannot award monetary damages, so there is no prospect of recouping litigation expenses.

The Jurisdictional Reach

The ITC offers an advantage over courts in cases in which the patent holder does not know the identity of a foreign company. Its jurisdiction is based on the presence of the imported products in the United States, and its exclusion orders are directed to the Customs Service and relate to products being brought into the United States. Indeed, the ITC has the power to issue industry-wide exclusion orders when confronted with evidence that a more limited exclusion order would be ineffective.

The ITC attempts to assert personal jurisdiction over as many companies as possible involved with the product. It does this so as to permit companies that will be affected by an adverse decision to present defenses with respect to the claim of unfair competition.

The unique aspect of the ITC is its ability to provide immediate, nationwide relief by keeping an infringing product out of the United States. If the ITC finds a '337 violation, it almost invariably issues an exclusion order to the Customs Service. Without any further action by any private party, the Customs Service prevents products 'tainted' by the unfair trade practice from entering the United States.
Although there is a statutory presumption in favor of exclusion orders directed to specific companies, the ITC may issue a 'general' exclusion order if doing so is necessary to provide effective relief. A general exclusion excludes all products of the type found to infringe, regardless of the source.

Once an exclusion order is entered, the U.S. government, acting through the Customs Service, assures that infringing products can no longer enter into the United States and can even seize and destroy infringing products. The ITC can also issue a cease-and-desist order to prevent parties and their agents from taking further actions, such as the sale or use of infringing products already in the United States.

Courts have the power to issue injunctions against infringing companies, but those orders are limited to the court's own jurisdiction. A court can award monetary damages only against companies over which it has properly asserted judicial power. A money judgment, moreover, has value only if the plaintiff can find assets that can be used to satisfy the judgment.

Hence, the availability of monetary relief may be illusory if, as is often the situation, foreign infringers cannot be identified or brought within the court's jurisdiction, or do not have assets that can be reached to satisfy the court's monetary judgment.

 
Often, the best form of relief is to file claims in both the court and the ITC. A company that is a respondent in a '337 case and a defendant in court risks having products prospectively excluded from the United States and having to pay compensation for past acts.

Special Aspects Of The ITC

There are other notable features of '337 actions, including the following:

 
' Experienced administrative law judges. Section 337 cases are decided by administrative law judges who work solely in this area. Their work focuses on '337 cases, and they develop familiarity with the relevant substantive law and, often, with relevant technologies.

 
' Developing a record for the district court. If a '337 case is filed in conjunction with a district court case based on the same claims, the ITC respondent/court defendant may stay the court case pending the outcome of the '337 case. Then the record developed during the '337 case is used by the district court. The opportunity for additional discovery exists.

 
' The complaining company's 'nationality' is irrelevant. Many non-U.S. companies have used '337 because cases only require domestic activities related to the infringed patents and not domestic citizenship.

' No issue preclusion. Decisions in '337 patent-based cases are not binding on district courts. This factor can help a complainant or a respondent that lost at the ITC possibly to obtain a more favorable outcome in the district court. The party that won before the ITC will have to prove its case again.

' Automatic confidentiality order. Judges automatically issue confidentiality orders to assure that time is not lost while the parties negotiate the terms of a mutually acceptable confidentiality order. As a result, the parties are spared the expense and delay that generally accompanies the negotiation of a protective order in court. Confidentiality orders, however, can create obstacles because the parties' employees cannot see briefs and rulings containing confidential information until they are public. Thus, parties are assured of the confidentiality of their business information; however, their knowledge of the case can be limited.

' The settlement option. The private parties in a '337 case almost always have the option of settling their case. Parties settle at any time during the proceeding, from the period immediately following the filing of the complaint through the pendency of an appeal to the U.S. Court of Appeals for the Federal Circuit. Settlements of '337 cases are subject to more scrutiny than court settlements because the ITC has to review the terms of the settlement, solicit comments from the public about the settlement and find that it is not contrary to the public interest or welfare.

Recent Life Sciences Cases

Life sciences companies that have filed complaints at the ITC recently have generally obtained satisfactory results. Most of these companies have either settled with the accused infringers under terms that presumably benefited the complainant or received an exclusion order directed to the respondent's infringing product.

In one case, the parties resolved the specific dispute that was before the ITC. Protek Inc. and Enzyme Systems Products Inc. filed a complaint alleging the importation of patented products ' enzymes used to cleave proteins at specific sites in the body ' against Bachem A.G. and two affiliated companies. Certain Amino Fluoro Ketone Compounds, USITC Inv. No. 337-TA-425. The ITC instituted an investigation in November 1999, and, in April 2000, the parties moved to terminate the investigation based on their agreement, which included a license and entry of a consent order. The ITC eventually terminated the case on that basis.

In another case, the filing of a '337 complaint at the ITC appears to have contributed to a resolution of many disputes between the parties. Chiron Corp. filed a complaint alleging that SmithKline Beecham PLC violated '337 by manufacturing and importing some recombinantly produced Hepatitis B vaccines and products containing those vaccines. Chiron and the SmithKline Beecham respondents thereafter jointly requested termination of the investigation based on a global settlement agreement that resolved the specific issue that was the subject of the ITC case and other litigation between the parties in the United States and Europe. Certain Recombinantly Produced Hepatitis B Vaccines and Products Containing Same, USITC Inv. No. 337-TA-408 (1998).

No settlement was needed in another case, when the respondent failed to
participate in the case and was found to be in default. This happened in the ITC's recent decision involving 4-androstenediol, a nutritional supplement used by body builders and a testosterone-enhancing drug. Respondent Changzhou Huabang Pharmaceutical Group Ltd. (PRC) made this product and imported it into
the United States. LPJ Inc. accused Changzhou of infringing its patent.
The ITC served the complaint and notice of investigation on Changzhou and, later, an order to show cause as to why it should not be in default. Changzhou never responded. The ITC then issued an exclusion order directed to Changzhou's 4-androstenediol. Certain 4-Androstenediol, USITC Inv. No. 337-TA-440, Commission Decision, Publication No. 3496 (March 2002). Thus, LPJ received the relief that it sought even though Changzhou was never brought under the ITC's jurisdiction and probably could not be brought under the jurisdiction of a U.S. court.

 
Things have not gone quite so easily or so well for some complainants in cases that went to trial, although special circumstances generally were present that contributed to the outcome. One such case involved human growth hormone: Genentech Inc. sued two groups of respondents for infringing its patents and requested interim relief pending a final decision. Some respondents settled by agreeing to entry of a consent order, but others did not.

Following a hearing, the judge denied Genentech's request for a temporary exclusion against these respondents, and the ITC accepted this decision. Certain Recombinantly Produced Human Growth Hormones, USITC Inv. No. 337-TA-358, Pub. No. 2764 (March 1994).

The parties then proceeded with discovery and trial. The judge ultimately issued a decision in which he found that Genentech had established a '337 violation on the merits. The judge nonetheless denied relief because he determined that Genentech had acted improperly during discovery by withholding documents and information from the respondents. As a sanction, the judge dismissed Genentech's complaint with prejudice. Certain Recombinantly Produced Human Growth Hormones, USITC Inv. No. 337-TA-358, Pub. No. 2869 (March 1995).

The U.S. International Trade Commission (ITC)'s power to seal the country's borders against importation of products covered by U.S. patents makes this federal agency a powerful resource for patent holders. Still, many life sciences companies doing business in this country fail to utilize this quasi-judicial body to protect their pharmaceuticals, medical devices and other patented products.

The ITC's authority to protect companies active in the United States from unfair competition from abroad comes from '337 of the Tariff Act of 1930. To proceed under '337, there must be a 'domestic industry,' importation and an unfair method of competition or unfair act, such as patent infringement. Relief is even possible when imported products are not protected by patents, if they are made abroad through the use of patented processes.

Most ITC cases are completed in about a year, two to three times faster than cases tried in court. Moreover, the ITC's jurisdiction is based on imported articles, rather than personal jurisdiction over the infringer. As a result, the ITC and the U.S. Customs Service can prevent the continued importation of an infringing product even if its foreign manufacturer or distributor cannot be identified or subjected to the jurisdiction of the U.S. courts. By itself, '337 can yield as much relief as many companies need and can also be used in conjunction with court litigation.

The speed of a '337 case may create special opportunities. Complainants receive relief more quickly than they probably could from a court. In a business context, the rapidity and timing of the relief may be as important as the relief itself. Sophisticated companies typically prepare their discovery requests and anticipate the requests of respondents before they file their complaint. In this way, they are better able to maintain control over the momentum of the case during its brief duration.

In some ways, however, the speed of a '337 case can be a deterrent to companies pursuing patent claims. These cases are often complex and can involve parties that do not conduct business in English. Expedited cases can also mean that costs are incurred more quickly than in a court case, and the ITC cannot award monetary damages, so there is no prospect of recouping litigation expenses.

The Jurisdictional Reach

The ITC offers an advantage over courts in cases in which the patent holder does not know the identity of a foreign company. Its jurisdiction is based on the presence of the imported products in the United States, and its exclusion orders are directed to the Customs Service and relate to products being brought into the United States. Indeed, the ITC has the power to issue industry-wide exclusion orders when confronted with evidence that a more limited exclusion order would be ineffective.

The ITC attempts to assert personal jurisdiction over as many companies as possible involved with the product. It does this so as to permit companies that will be affected by an adverse decision to present defenses with respect to the claim of unfair competition.

The unique aspect of the ITC is its ability to provide immediate, nationwide relief by keeping an infringing product out of the United States. If the ITC finds a '337 violation, it almost invariably issues an exclusion order to the Customs Service. Without any further action by any private party, the Customs Service prevents products 'tainted' by the unfair trade practice from entering the United States.
Although there is a statutory presumption in favor of exclusion orders directed to specific companies, the ITC may issue a 'general' exclusion order if doing so is necessary to provide effective relief. A general exclusion excludes all products of the type found to infringe, regardless of the source.

Once an exclusion order is entered, the U.S. government, acting through the Customs Service, assures that infringing products can no longer enter into the United States and can even seize and destroy infringing products. The ITC can also issue a cease-and-desist order to prevent parties and their agents from taking further actions, such as the sale or use of infringing products already in the United States.

Courts have the power to issue injunctions against infringing companies, but those orders are limited to the court's own jurisdiction. A court can award monetary damages only against companies over which it has properly asserted judicial power. A money judgment, moreover, has value only if the plaintiff can find assets that can be used to satisfy the judgment.

Hence, the availability of monetary relief may be illusory if, as is often the situation, foreign infringers cannot be identified or brought within the court's jurisdiction, or do not have assets that can be reached to satisfy the court's monetary judgment.

 
Often, the best form of relief is to file claims in both the court and the ITC. A company that is a respondent in a '337 case and a defendant in court risks having products prospectively excluded from the United States and having to pay compensation for past acts.

Special Aspects Of The ITC

There are other notable features of '337 actions, including the following:

 
' Experienced administrative law judges. Section 337 cases are decided by administrative law judges who work solely in this area. Their work focuses on '337 cases, and they develop familiarity with the relevant substantive law and, often, with relevant technologies.

 
' Developing a record for the district court. If a '337 case is filed in conjunction with a district court case based on the same claims, the ITC respondent/court defendant may stay the court case pending the outcome of the '337 case. Then the record developed during the '337 case is used by the district court. The opportunity for additional discovery exists.

 
' The complaining company's 'nationality' is irrelevant. Many non-U.S. companies have used '337 because cases only require domestic activities related to the infringed patents and not domestic citizenship.

' No issue preclusion. Decisions in '337 patent-based cases are not binding on district courts. This factor can help a complainant or a respondent that lost at the ITC possibly to obtain a more favorable outcome in the district court. The party that won before the ITC will have to prove its case again.

' Automatic confidentiality order. Judges automatically issue confidentiality orders to assure that time is not lost while the parties negotiate the terms of a mutually acceptable confidentiality order. As a result, the parties are spared the expense and delay that generally accompanies the negotiation of a protective order in court. Confidentiality orders, however, can create obstacles because the parties' employees cannot see briefs and rulings containing confidential information until they are public. Thus, parties are assured of the confidentiality of their business information; however, their knowledge of the case can be limited.

' The settlement option. The private parties in a '337 case almost always have the option of settling their case. Parties settle at any time during the proceeding, from the period immediately following the filing of the complaint through the pendency of an appeal to the U.S. Court of Appeals for the Federal Circuit. Settlements of '337 cases are subject to more scrutiny than court settlements because the ITC has to review the terms of the settlement, solicit comments from the public about the settlement and find that it is not contrary to the public interest or welfare.

Recent Life Sciences Cases

Life sciences companies that have filed complaints at the ITC recently have generally obtained satisfactory results. Most of these companies have either settled with the accused infringers under terms that presumably benefited the complainant or received an exclusion order directed to the respondent's infringing product.

In one case, the parties resolved the specific dispute that was before the ITC. Protek Inc. and Enzyme Systems Products Inc. filed a complaint alleging the importation of patented products ' enzymes used to cleave proteins at specific sites in the body ' against Bachem A.G. and two affiliated companies. Certain Amino Fluoro Ketone Compounds, USITC Inv. No. 337-TA-425. The ITC instituted an investigation in November 1999, and, in April 2000, the parties moved to terminate the investigation based on their agreement, which included a license and entry of a consent order. The ITC eventually terminated the case on that basis.

In another case, the filing of a '337 complaint at the ITC appears to have contributed to a resolution of many disputes between the parties. Chiron Corp. filed a complaint alleging that SmithKline Beecham PLC violated '337 by manufacturing and importing some recombinantly produced Hepatitis B vaccines and products containing those vaccines. Chiron and the SmithKline Beecham respondents thereafter jointly requested termination of the investigation based on a global settlement agreement that resolved the specific issue that was the subject of the ITC case and other litigation between the parties in the United States and Europe. Certain Recombinantly Produced Hepatitis B Vaccines and Products Containing Same, USITC Inv. No. 337-TA-408 (1998).

No settlement was needed in another case, when the respondent failed to
participate in the case and was found to be in default. This happened in the ITC's recent decision involving 4-androstenediol, a nutritional supplement used by body builders and a testosterone-enhancing drug. Respondent Changzhou Huabang Pharmaceutical Group Ltd. (PRC) made this product and imported it into
the United States. LPJ Inc. accused Changzhou of infringing its patent.
The ITC served the complaint and notice of investigation on Changzhou and, later, an order to show cause as to why it should not be in default. Changzhou never responded. The ITC then issued an exclusion order directed to Changzhou's 4-androstenediol. Certain 4-Androstenediol, USITC Inv. No. 337-TA-440, Commission Decision, Publication No. 3496 (March 2002). Thus, LPJ received the relief that it sought even though Changzhou was never brought under the ITC's jurisdiction and probably could not be brought under the jurisdiction of a U.S. court.

 
Things have not gone quite so easily or so well for some complainants in cases that went to trial, although special circumstances generally were present that contributed to the outcome. One such case involved human growth hormone: Genentech Inc. sued two groups of respondents for infringing its patents and requested interim relief pending a final decision. Some respondents settled by agreeing to entry of a consent order, but others did not.

Following a hearing, the judge denied Genentech's request for a temporary exclusion against these respondents, and the ITC accepted this decision. Certain Recombinantly Produced Human Growth Hormones, USITC Inv. No. 337-TA-358, Pub. No. 2764 (March 1994).

The parties then proceeded with discovery and trial. The judge ultimately issued a decision in which he found that Genentech had established a '337 violation on the merits. The judge nonetheless denied relief because he determined that Genentech had acted improperly during discovery by withholding documents and information from the respondents. As a sanction, the judge dismissed Genentech's complaint with prejudice. Certain Recombinantly Produced Human Growth Hormones, USITC Inv. No. 337-TA-358, Pub. No. 2869 (March 1995).