ITC Filings Surge in 2004

Attorneys have rushed to the border in 2004 to enforce patent rights. In the first 6 months of 2004, the International Trade Commission (“ITC” or “Commission”) has received more complaints to uphold patent rights than in any previous year except for 2001. It is anticipated that by the end of the year, the ITC will have experienced its most active year for patent litigation ever. Two key factors are helping to fuel an expansion of patent litigation at the ITC: the ability to pursue parallel actions before both the ITC and Federal District Court, and the fast track investigation of the ITC with final decisions typically issuing within 12 to 18 months. Moreover, the in rem nature of the remedies available at the ITC, particularly the general exclusion order, allows domestic patent holders to obtain substantial prospective relief without filing a series of actions against numerous foreign infringers. Consequently, as technology increasingly becomes a global enterprise, the pace of patent infringement complaints filed with the ITC will only continue to surge.

Section 337 of the Tariff Act of 1930 (19 U.S.C. '1337) gives the ITC authority to redress unfair trade practices caused by imports into the United States. The statute also requires proof of a “domestic industry” that either exists or is in the process of being established. One unfair trade practice the ITC can redress is importation of goods that infringe a valid U.S. patent. Owners of copyright and trademark rights can also seek relief before the ITC to prevent importation of infringing goods.

Filing a complaint that alleges an unfair trade practice under Section 337 causes the ITC to undertake an informal review to determine whether the complaint was properly filed (it is customary practice for complainants to confer with the Commission Investigative Attorney prior to filing to determine whether the complaint meets the Commission's rules). Assuming the complaint is sufficient, within 30 days the ITC is statutorily required to institute an “investigation.” The United States participates as a party in the investigation through the ITC's Office of Unfair Import Investigations (“OUII”), which represents the public interest. As investigations decided by the ITC are appealable to the Federal Circuit, the ITC follows Federal Circuit (or its predecessor court the C.C.P.A.) precedent. Due to the fact that the ITC's jurisdiction is limited to investigating issues of unfair importation, the ITC cannot investigate an issue of patent infringement unless the allegedly infringing goods are or were imported into the United States.

Pleading before the ITC is significantly different from pleading before the federal courts. In contrast to the notice pleading of federal courts, procedural rules at the ITC require that both the complaint and the response contain significant detail regarding the alleged unfair trade practices. In the complaint, the complainant must set forth, inter alia, evidence of a domestic industry, specific instances of unfair importation or sale, and a claim chart setting forth an exemplary claim of the patent applied to the allegedly infringing article. In its response, the respondent must also provide specific information such as details regarding the importation of the allegedly infringing articles, including statistical data on quantity and value of imports, along with affirmative defenses.

As noted above, once initiated, Section 337 proceedings before the ITC proceed on a fast track. The statute requires that the ITC conduct and conclude its investigation “at the earliest practical time.” To fulfill this requirement, the ITC generally concludes its investigation and issues an order within 12 to 15 months. To maintain such rapid schedules, the rules require that the Commission establish a target date for conclusion of the investigation within 45 days of institution.

Successfully enforcing patent rights before the ITC earns the complainant an exclusion order against continued importation of the accused articles and/or a cease and desist order barring the sale of the subject articles held in inventory by the respondents in the United States. Exclusion orders are enforced by the U.S. Customs Service while the Commission enforces cease and desist orders. ITC Section 337 investigations are in rem, and are consequently directed toward the products found to infringe, not the importing parties. Accordingly, the ITC has opined that its power to issue remedial relief, namely exclusion orders, does not require “minimum contacts” with the forum jurisdiction (ie, personal jurisdiction). However, due process notice to proposed respondents, either in the form of personal service or publication in the Federal Register, is typically required. (Notwithstanding, infringers that may be affected by a subsequent general exclusion order need not be specifically put on notice.) Consequently, the remedies afforded by the ITC do not include monetary damages. In order to obtain monetary damages, the owners of patent rights must seek that remedy in a parallel action in Federal District Court.

For much of the 20th century, patent owners relied little upon the ITC for relief of patent infringement. Rather, they have looked almost exclusively to the Federal District Courts to enforce patent rights. During much of the 1990s, patent-related 337 ITC complaints hovered relatively constant between a mere six to 11 complaints filed each year.

Patent-related 337 complaints increased significantly in 2000, when 17 such complaints were filed. A modest increase in Section 337 patent complaints was also seen in 2001, when 24 such complaints were filed. Following the occurrence of the economic and tech recession, 337 patent complaints fell sharply in 2002, when 13 such complaints were filed, with the level remaining relatively steady in 2003. With the beginnings of a recovery in the tech sector and economy in 2004, patent-related 337 filings have yet again exploded. In the first half of 2004, the ITC received a record 18 complaints. Following the filing trends of the past two quarters, it is expected that the ITC will receive in excess of 30 complaints in 2004.

Seeking to enforce patent rights through a 337 action before the ITC represents a powerful companion to conventional patent litigation in Federal District Court. While seeking damages in federal court, patent owners can simultaneously pursue a parallel in rem action before the ITC to prevent the importation of infringing articles. While the action seeking monetary damages in federal court may take time, the ITC generally concludes its investigation in a fraction of the time necessary to conclude a conventional Federal District Court patent action. Moreover, the unique nature of the exclusion order remedy at the ITC and the benefits to a domestic patent holder of only having to file one suit before the ITC to avail itself of substantial prospective relief against numerous foreign infringers, favorably complements a parallel federal district court action. Accordingly, the speed of the Section 337 investigation and the unique and powerful remedies available before the ITC provide a striking tactic for patent right holders, giving those who wield the proceeding great leverage in negotiations.

With the increasingly international nature of business and technology today, more and more patent owners can expect that infringing goods will come from outside the United States. When those infringing goods cross the American border, do not forget the ITC when filing that district court action. The ITC can provide patent owners with fast and decisive relief against infringement.

Attorneys have rushed to the border in 2004 to enforce patent rights. In the first 6 months of 2004, the International Trade Commission (“ITC” or “Commission”) has received more complaints to uphold patent rights than in any previous year except for 2001. It is anticipated that by the end of the year, the ITC will have experienced its most active year for patent litigation ever. Two key factors are helping to fuel an expansion of patent litigation at the ITC: the ability to pursue parallel actions before both the ITC and Federal District Court, and the fast track investigation of the ITC with final decisions typically issuing within 12 to 18 months. Moreover, the in rem nature of the remedies available at the ITC, particularly the general exclusion order, allows domestic patent holders to obtain substantial prospective relief without filing a series of actions against numerous foreign infringers. Consequently, as technology increasingly becomes a global enterprise, the pace of patent infringement complaints filed with the ITC will only continue to surge.

Section 337 of the Tariff Act of 1930 (19 U.S.C. '1337) gives the ITC authority to redress unfair trade practices caused by imports into the United States. The statute also requires proof of a “domestic industry” that either exists or is in the process of being established. One unfair trade practice the ITC can redress is importation of goods that infringe a valid U.S. patent. Owners of copyright and trademark rights can also seek relief before the ITC to prevent importation of infringing goods.

Filing a complaint that alleges an unfair trade practice under Section 337 causes the ITC to undertake an informal review to determine whether the complaint was properly filed (it is customary practice for complainants to confer with the Commission Investigative Attorney prior to filing to determine whether the complaint meets the Commission's rules). Assuming the complaint is sufficient, within 30 days the ITC is statutorily required to institute an “investigation.” The United States participates as a party in the investigation through the ITC's Office of Unfair Import Investigations (“OUII”), which represents the public interest. As investigations decided by the ITC are appealable to the Federal Circuit, the ITC follows Federal Circuit (or its predecessor court the C.C.P.A.) precedent. Due to the fact that the ITC's jurisdiction is limited to investigating issues of unfair importation, the ITC cannot investigate an issue of patent infringement unless the allegedly infringing goods are or were imported into the United States.

Pleading before the ITC is significantly different from pleading before the federal courts. In contrast to the notice pleading of federal courts, procedural rules at the ITC require that both the complaint and the response contain significant detail regarding the alleged unfair trade practices. In the complaint, the complainant must set forth, inter alia, evidence of a domestic industry, specific instances of unfair importation or sale, and a claim chart setting forth an exemplary claim of the patent applied to the allegedly infringing article. In its response, the respondent must also provide specific information such as details regarding the importation of the allegedly infringing articles, including statistical data on quantity and value of imports, along with affirmative defenses.

As noted above, once initiated, Section 337 proceedings before the ITC proceed on a fast track. The statute requires that the ITC conduct and conclude its investigation “at the earliest practical time.” To fulfill this requirement, the ITC generally concludes its investigation and issues an order within 12 to 15 months. To maintain such rapid schedules, the rules require that the Commission establish a target date for conclusion of the investigation within 45 days of institution.

Successfully enforcing patent rights before the ITC earns the complainant an exclusion order against continued importation of the accused articles and/or a cease and desist order barring the sale of the subject articles held in inventory by the respondents in the United States. Exclusion orders are enforced by the U.S. Customs Service while the Commission enforces cease and desist orders. ITC Section 337 investigations are in rem, and are consequently directed toward the products found to infringe, not the importing parties. Accordingly, the ITC has opined that its power to issue remedial relief, namely exclusion orders, does not require “minimum contacts” with the forum jurisdiction (ie, personal jurisdiction). However, due process notice to proposed respondents, either in the form of personal service or publication in the Federal Register, is typically required. (Notwithstanding, infringers that may be affected by a subsequent general exclusion order need not be specifically put on notice.) Consequently, the remedies afforded by the ITC do not include monetary damages. In order to obtain monetary damages, the owners of patent rights must seek that remedy in a parallel action in Federal District Court.

For much of the 20th century, patent owners relied little upon the ITC for relief of patent infringement. Rather, they have looked almost exclusively to the Federal District Courts to enforce patent rights. During much of the 1990s, patent-related 337 ITC complaints hovered relatively constant between a mere six to 11 complaints filed each year.

Patent-related 337 complaints increased significantly in 2000, when 17 such complaints were filed. A modest increase in Section 337 patent complaints was also seen in 2001, when 24 such complaints were filed. Following the occurrence of the economic and tech recession, 337 patent complaints fell sharply in 2002, when 13 such complaints were filed, with the level remaining relatively steady in 2003. With the beginnings of a recovery in the tech sector and economy in 2004, patent-related 337 filings have yet again exploded. In the first half of 2004, the ITC received a record 18 complaints. Following the filing trends of the past two quarters, it is expected that the ITC will receive in excess of 30 complaints in 2004.

Seeking to enforce patent rights through a 337 action before the ITC represents a powerful companion to conventional patent litigation in Federal District Court. While seeking damages in federal court, patent owners can simultaneously pursue a parallel in rem action before the ITC to prevent the importation of infringing articles. While the action seeking monetary damages in federal court may take time, the ITC generally concludes its investigation in a fraction of the time necessary to conclude a conventional Federal District Court patent action. Moreover, the unique nature of the exclusion order remedy at the ITC and the benefits to a domestic patent holder of only having to file one suit before the ITC to avail itself of substantial prospective relief against numerous foreign infringers, favorably complements a parallel federal district court action. Accordingly, the speed of the Section 337 investigation and the unique and powerful remedies available before the ITC provide a striking tactic for patent right holders, giving those who wield the proceeding great leverage in negotiations.

With the increasingly international nature of business and technology today, more and more patent owners can expect that infringing goods will come from outside the United States. When those infringing goods cross the American border, do not forget the ITC when filing that district court action. The ITC can provide patent owners with fast and decisive relief against infringement.