The United States International Trade Commission (“ITC”) is a Federal agency that deals with matters involving trade. Among its many responsibilities, the ITC investigates a variety of issues related to trade including investigating and adjudicating cases involving imported products that allegedly infringe intellectual property rights. These infringement investigations, called Section 337 investigations, may include allegations that imported goods infringe patents or trademarks. For example, the ITC may investigate allegations by a complainant (plaintiff) that certain imported goods infringe utility or design patents or infringe registered or common law trademarks. “Other forms of unfair competition involving imported products, such as infringement of registered copyrights, mask works or boat hull designs, misappropriation of trade secrets or trade dress, passing off, and false advertising, may also be asserted.” See https://www.usitc.gov/intellectual_property.htm for more details.
The ITC offers certain advantages over Federal district courts for patent owners seeking to enforce their patents against alleged infringers. For example, some would say the ITC is the ultimate rocket docket. Most investigations are completed within 12 to 15 months of institution whereas district courts may take several years. Scheduled to take effect for investigations instituted after June 7, 2018, new rules announced by the ITC are intended to further “increase the efficiency of its section 337 investigations and reduce the burdens and costs on the parties and the agency.” These new rules are part of a process that began in 2015 with the proposal of amendments to the Commission’s Rules of Practice and Procedure.
The new rules will allow the ITC to institute multiple investigations based on one complaint and will allow Administrative Law Judges (“ALJs”) to use their discretion to sever an investigation into two or more investigations within 30 days of institution. Severing large investigations will ensure they proceed to completion according the Section 337 timelines and help ALJs better manage their dockets. ALJs may be more likely to sever cases with multiple parties and/or multiple patents. For example, where one party is only involved in a subset of the issues, the ALJ may server the investigation for efficiency.
The new ITC rules also formalize procedures of a previous, rarely-used pilot program for resolution of potentially dispositive issues within the first 100 days of an investigation. The following rules apply to such 100-day proceedings:
• an ALJ may hold expedited hearings on designated issues;
• an ALJ may stay discovery on the remaining issues pending resolution of the 100-day proceeding;
• within 100 days of institution of the investigation, an ALJ’s initial determination in a 100-day proceeding is due;
• absent review, the initial determination on these issues becomes final within 30 days; and
• a petition to review an initial determination in a 100-day proceeding is due within five business days after service of the initial determination, and the time for filing a response to a
petition for review is five business days.
Additional rule changes will impact other aspect of Section 337 investigations. Specifically, a party may now serve objections to a subpoena or move to quash, which is more consistent with the Federal Rules of Civil Procedure. Drafts of expert reports will be privileged. More documents will be able to be filed online and electronically served. Further, the ITC’s notice of investigation “will define the scope of the investigation in plain language so as to make explicit” the products that are at issue. In general, these new rules are likely to ensure the ITC continues to provide a forum for quickly resolving patent infringement disputes involving imported goods.
In addition to the advantages already discussed, the ITC offers patent owners several other benefits over district courts when enforcing patent rights. For example, the ITC does not stay proceedings pending inter partes review (“IPR”) of the validity of an asserted patent at the United States Patent and Trademark Office whereas district courts often stay cases while IPRs are pending. Stays further lengthen district court cases relative to ITC investigations. In addition, the Supreme Court in TC Heartland v. Kraft Foods greatly limited the proper venues for patent cases, but there are no venue restrictions in Section 337 investigations. Further, the remedy in a Section 337 investigation is an exclusion order that prevents the importation of infringing products into the United States. In contrast, the Supreme Court’s decision in eBay v. MercExchange has made it difficult to get an injunction, which some would consider a similar remedy to an ITC exclusion order. If these advantages were not enough, patent owners should also know that ITC success rates for patent owners have been steadily increasing over the last few years for cases decided on the merits. In fact, some have reported the success rate for patent owners was just short of 90% in 2017.
Given the advantages of adjudicating patent infringement matters at the ITC, why not always use that forum instead of district courts? The answer, in part, is that for an investigation to be launched at the ITC, the complainant must be able to allege more than just patent infringement. The complainant must be able to allege a domestic industry exists or is being established and be able to allege infringement by the importation, sale for importation, or sale after importation of the accused products. In district court, a plaintiff need not make these additional allegations. Further, due to the speed at which ITC investigations proceed, the cost of litigation must be absorbed over a shorter time period and can be higher.
In sum, patent owners should consider whether the ITC is the appropriate forum for litigating their patent infringement claims given that 1) the new ITC rules for patent cases are likely to further boost the speed and efficiency of this rocket docket; 2) the remedy of prohibiting importation of infringing products can lead to early, favorable settlements; and 3) patent owners have an enviable record of success in cases decided on the merits at the ITC.