2012 ofii general counsel conference washington, d.c. intellectual property protection & supply...

2012 OFII General Counsel Conference Washington, D.C.

Intellectual Property Protection & Supply Chain Risks


Intellectual Property Protection & Supply Chain Risks

• Sec. 337 (19 U.S.C. 1337) – “Unfair Practices in Import Trade”– International Trade Commission Practice – Trends,

Characteristics and Framework– International Trade Commission – The Investigation– U.S. Customs and Border Protection – Enforcement

and the Supply Chain

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International Trade Commission Practice - Trends, Characteristics and Framework

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Overview

• Growth in ITC Investigations• Distinguishing Characteristics• Statutory Framework

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Growth in ITC 337 Investigations

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Data obtained from www.usitc.gov, via S. Alex Lasher, The Evolution of the Domestic Industry Requirement in Section 337 Investigations Before the United States International Trade Commission,

18 U. Balt. Intell. Prop. L.J. 157, n130 (2010)


Growth in Foreign Complainants

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AIPLA 2012


Distinguishing Characteristics

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The Forum

• Independent, nonpartisan federal admin. agency

• Not a court• Headed by six

Commissioners• Investigations instituted

by majority or tie vote of the Commissioners

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Office of Unfair Import Investigations (“OUII”)

• a/k/a “Commission Investigative Staff” or “Staff Attorney”

• Section 337 actions are gov’t investigations; OUII acts as a neutral third party representing public interest

• Participate in all aspects of investigation

• In May 2011, the Commission announced it would reduce the role of OUII due to budget constraints

– OUII now participate in approx. 65% of investigations

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Filing the Complaint

• 30 day informal review by Commission, after which a formal investigation may be instituted

• Complainants must gather evidence before filing

– See Certain Zero-Mercury-Added Alkaline Batteries, Inv. No. 337-TA-493, Order No. 16 at 5 (Aug. 20, 2003)

– Denied motion to amend complaint where “[Complainant] provide[d] no explanation of why it did not wait until all testing was completed before filing the complaint . . . . [Complainant] was in complete control of the timing of filing the complaint[.]”)

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Length of Investigation

• Section 337(b)(1): Commission will “conclude any such investigation . . . at the earliest practicable time”

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Strict Adherence to Deadlines & Rules

• No good cause to file objections one day late where counsel attempted to file on the due date and encountered unexpected computer problems. Certain Inkjet Cartridges, Inv. 723 (Rogers) (Mar. 2011)

• Motion to file responses to objections “one minute late” was granted “only [] because it is unopposed.” Certain Computer Forensic Devices, Inv. No. 799 (Bullock) (Aug. 2012)

• Motion to compel denied for failure to comply with meet and confer requirements. Certain Hydraulic Excavators, Inv. No. 582 (Barton) (Dec. 2006)

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Statutory Framework: Elements of Proof

• An unfair act or unfair method of competition (for example, patent infringement)

• Relating to an imported product• Where the intellectual property in question is being

exploited by an existing domestic industry

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Domestic Industry Requirement: Two Prongs

• Technical Prong

– Complainant must practice one claim of asserted patent

– Practiced claim need not be the infringed claim

– Determined using infringement analysis

• Economic Prong

– Significant investment in equipment

– Significant employment of labor or capital

– Significant investment in exploitation, including licensing

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Economic Domestic Industry: Licensing

• Certain Semiconductor Chips, Inv. No. 432 (June 2002)• First case to find the existence of a domestic industry

based solely on licensing activities of NPE• Found clear intent by Congress to allow entities actively

licensing in the U.S. to meet the domestic industry requirement without showing the existence of an article covered by the asserted patents

• Complainant had extensive licensing activity in this case

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Economic Domestic Industry: Licensing

• Certain Electronic Devices Including Handheld Wireless Communication Devices, Inv. Nos. 667 & 673 (2009)

• NPE complainant licensed patents to Motorola, which produced articles covered by the patents in the U.S.

• When complaint was filed, complainant had not received any revenue from its licensing activities

• Still, complainant met the domestic industry requirement based on the investment in engineering activities of its U.S. licensee, Motorola

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Economic Domestic Industry: U.S. Subsidiaries

• Certain Integrated Circuits, Inv. No. 450 (2002)

• Taiwanese complainant satisfied domestic industry requirement based on activities of its U.S. sales subsidiary

• Domestic industry confirmed by:

– complainant’s leasing office space,

– providing engineering support to customers and third party vendors, and

– employing engineers to perform that assistance in the U.S.

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International Trade Commission –The Investigation

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Investigation Initiation – The Complaint• ITC process initiated by the filing of a complaint by Complainant(s) • Complaint must set forth all elements of a Section 337 action in detail

as set forth in Commission Rules– Must show a prima facie case of infringement of independent claims

by providing claim charts– Must show prima facie case of domestic industry with claim chart of

at least one claim and declaration showing economic investments• Advisable to provide Office of Unfair Import Investigations (“Staff”) with

confidential draft at least 2-3 weeks before filing– Staff will meet with complainant and provide advice as to potential

deficiencies to minimize need to supplement complaint

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Commission Review of Complaint• Commission will solicit public interest comments

– Respondents should consider providing comments as it is first opportunity to tell story, particularly in cases involving NPEs

• Commissioners vote whether to “institute” an investigation and must do so within 30 days from filing– ITC may ask for supplementation; could delay institution– If investigation instituted, Notice of Investigation is published in the

Federal Register and defines the scope of investigation, including whether ALJ will be permitted to consider public interest

• Investigations typically instituted• Respondents should use this time to consider counterstrike and to get

discovery in order

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Complaint Response

• Due approximately 3 weeks after Investigation instituted• Generally, respondent may assert all defenses that would be

available in a district court action – Additional defenses: no domestic industry and/or no importation– No 271(g) defenses at ITC

• Rules suggest that invalidity claim charts should be submitted with response, but not necessary

• Although rules provide for counterclaims, they are very rarely filed because must be removed to district court

• If respondent wants to “counterclaim” for infringement, then must file complaint for another investigation

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Early Investigation • Fact discovery starts within a few days of institution

– Very broad, few limits, and 10-day response time– Complainant has early advantage — if planned properly, Complainant collected

significant discovery before it filed complaint– Respondent must get its discovery house in order very quickly– Critical to get any redesigns “in the case” during discovery; the earlier, the better

• Protective Order – standard and issued by ALJ within days of institution– No source code provisions and prohibits disclosure to parties, including in-house

counsel– Can be modified through motion, but still unlikely to get a provision allowing sharing

of information with in-house counsel• Ground Rules – Each ALJ has own set of “local” rules• Target Date – ALJ sets date by which investigation must be completed

– A “line in the sand” for Respondents to plan their business operations

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Mid-Investigation• Notice of Prior Art

– Must disclose all prior art upon which respondent intends to rely– Can only be supplemented with showing of “good cause” so critical to complete prior

art investigation as early as possible• Expert Discovery

– Does not differ significantly from district court– If opinion not in report, then very likely excluded at hearing

• Motion practice– Types of motions do not differ significantly from those in district court – Only 10-day response time and shorter in some instances– Motions for summary determination must be filed no less than 60 days before hearing

begins, but the earlier, the better• Stipulations – consider stipulations to address issues not in controversy• Markman – less common than in district court

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Important Pre-Hearing Filings• Pre-hearing brief (about 4-6 weeks before hearing)

– Must include all of party’s contentions or will not be permitted to raise at hearing; if contention not in brief, then very likely excluded

– Typically lengthy; but, very important to streamline the case and focus on important issues and winnable theories

• Exhibits (about 4-6 weeks before hearing)– Exchange includes witness statements and demonstratives– Supplementation not likely so critical to include all potential exhibits– With 5 of the current 6 ALJs, entire direct case (aside from adverse and 3rd party

witnesses) goes in “on paper” in advance of hearing– Very important to plan key witnesses’ schedules around these dates

• Motions in limine– Reserve for most important evidentiary objections– Motions relating to “scope” (expert reports and prehearing brief) are most likely types to be

granted

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Hearing• Typically occurs 8-10 months after investigation is instituted• ALJ presides over hearing – no jury• Conducted pursuant to the Administrative Procedures Act

– Evidentiary rules are more liberal– Hearsay is generally admissible

• Testimony– With 5 of 6 ALJs, live direct examinations usually only from third parties

and adverse witness because directs submitted on paper– Scope of cross examination limited by direct and so on– Not uncommon for direct testimony of adverse party witnesses to be

combined with cross examination so that witness only appears once• Typically, hearing lasts 1-2 weeks

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Post-Hearing Submissions• Post-hearing briefs

– Simultaneous briefing that addresses each issue in investigation– Short turnaround – opening briefs typically filed within 2 weeks of close of evidentiary

hearing and response 1-2 weeks later– Brief length usually limited– Advisable to begin briefing during hearing

• Proposed findings of fact/conclusions of law– Simultaneous submission with post-hearing briefs and rebuttals/responses with

responsive post-hearing brief– Addresses each issue in investigation– Typically not limited in number and often in the hundreds of pages– Some ALJs no longer require parties to submit– Time consuming; if ALJ requires, it is critical that process start as soon as possible,

including before hearing

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ALL Initial Determination and Next Steps• ALJ issues Initial Determination (“ID”) no less than 4 months before Target Date

– ALJ’s ID addresses each issue in the investigation– ALJ must also issue Recommended Determination on remedy and bond within

14 days of ID, but ALJs often include as part of ID• Petitions for review

– Non-prevailing party (including Staff) must file a petition for review of the ID to the full Commission

– Must file a petition for review to preserve issues for appeal; if an issue is not in petition, it is waived

– Briefing period is short: petitions for review are due 12 days after service of ID and response is due 8 days later

– Prevailing party should also file petition (often called a “contingent” petition) addressing issues on which the ALJ ruled against it

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Commission Review/Remedy Briefing• Commission has 60 days from ID issuance date to grant or deny petition for review

– Standard: clearly erroneous finding of material fact; erroneous legal conclusion; or affects ITC policy

• If petition(s) granted– Commission will typically issue a briefing schedule and a list of issues being

reviewed– Often, commission sets forth a list of questions/issues that the briefing must

address• Remedy Briefs

– Commission will issue notice requesting briefing on remedy, bonding, and the public interest

– Parties and other interested persons can file briefs– In some instances, helpful to garner support from Congress

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Commission’s Final Determination

• If petition(s) was denied, the ALJ’s ID becomes the final determination• If petition granted,

– Commission can adopt, modify, or reverse the ALJ’s ID– In some instances, Commission may remand the investigation back

to the ALJ– If Commission only reviews part of an ID, the unreviewed portions

become part of the Final Determination• If Commission finds a violation, Commission issues exclusion order

(either LEO or GEO), often a cease and desist order, and sets a bond

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Post-Final Determination

• Presidential Review period

– 60-day period in which the Commission’s exclusion order is reviewed by a committee headed by the U.S. Trade Representative’s Office

– Opportunity for respondents to persuade committee that relief against public interest

– Respondents can still import during this period by posting a bond, which is subject to forfeiture

– Very rare for review to result in reversal of remedy; has only happened five times, the last one being over 20 years ago

– Although can lobby committee, such efforts have largely failed

• Commission’s Final Determination appealable to the U.S. Court of Appeals for the Federal Circuit

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Remedies• General Exclusion Order (“GEO”) — bars importation of accused products regardless of

source– Commission must find one of the statutory requirements is met– GEO allows complainant to avoid piecemeal and repeated litigation against

numerous infringers• Limited Exclusion Order (“LEO”) — bars entry of infringing products of the named

respondent(s)– May include downstream products (i.e., products containing an infringing

component)– Since Federal Circuit’s decision in Kyocera, which barred application of LEOs to

downstream products of non-respondents, cases involving respondent’s customers have increased as have requests for GEOs

• Cease and Desist Order — bars use and sale of imported infringing products already in U.S.

– Proving entitlement to cease and desist order important to obtaining complete relief

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Terminating Before Final Determination

• Settlement Agreements

– Like district court litigation, the private parties can enter into a settlement agreement

– In such a situation, parties jointly file a motion to terminate the investigation

– Parties must disclose all agreements to the ITC

– Must file redacted public version of all agreements

• Consent Orders

– Any party may file a motion to terminate the investigation based upon a consent order

– Can be via agreement between private parties or unilateral

– Typically will be granted if meets Commission’s requirements

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Enforcement of Exclusion Orders (EO)by U.S. Customs and Border Protection

(CBP) and the Supply Chain

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CBP EO Proceedings – General Characteristics

• IPR Enforcement is Priority Trade Issue (PTI)• CBP Proceedings are Somewhat Opaque• Not as Visible or Well Known as ITC Proceedings• Fewer Decision-Making Deadlines• Most Interactions are Ex Parte• Protected by Trade Secrets Act

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EO Issuance – ITC Handoff to CBP

• ITC Notifies CBP of Exclusion Order• CBP Prepares “Exclusion Order Notice” to Ports of Entry

– Information on How to Identify Excluded Products– Not Public

• CBP Officers Must Decide Whether Individual Shipments are Within Scope of Order

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Supply Chain Impact – First 60 Days

• During Presidential Review Period, Covered Products can be Imported Under Bond

• Bond Amount Set by ITC• Bond is Later Forfeited to Complainant or Released,

Depending on Presidential Review Outcome• After Presidential Review, Importations are Prohibited

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Supply Chain Impact – Complainant’s Steps

• Meeting with CBP Headquarters to Explain Your View of EO to Legal Staff

• Go to Port(s) of Entry

– Prepare and Present Training Materials

– Consciousness Raising

• Ex Parte and Informal

• Trade Secrets Act Impact – Import Details are Confidential

– Consider Private Investigator

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Supply Chain Impact – Importer’s Considerations

• Accelerate Imports Before EO Issuance?– But caveat if there is Cease and Desist Order

• Accelerate Imports During Presidential Review Period?– But Consider Bond Forfeiture

• Redesign?

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Supply Chain Impact - Importer and CBP

• Informal Advice on Scope from CBP Port Office– Quick– Non-Binding– Usually, Port will Exclude if Gray Area

• Formal Ruling Request under 19 CFR Part 177– Prospectively Binding on all CBP Personnel, unless/until

Modified or Revoked– Ex Parte, but Written Ruling is Published– But Could Take 90-180 Days or More– Most Common for Redesigns

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Supply Chain Impact – Importer and CBP (cont’d.)

• Exclusion of Goods can be Protested and then Litigated at U.S. Court of International Trade (CIT)

• Complainant Does Not Have Standing at CIT• CBP Policy is to Refrain from Issuing a Ruling under Part

177 if Importer Protests or Files for Advisory Opinion at ITC

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Supply Chain Impact – Product Identification

• Important for any Out-of-Scope Goods, Particularly Redesigns

• Clear and Consistent Invoice Descriptions and Markings• Certification Sometimes Utilized• CBP Labs Will Analyze• Heavy Penalties under 19 USC 1592 for Material False

Statements or Omissions – Seizure/Forfeiture Plus Fines up to U.S. Wholesale Value

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Supply Chain Impact – Other Considerations

• CBP Can Recall (“Redelivery Demand”) Goods it has Previously Released – Liquidated Damages if not Redelivered

• ITC Can Trump CBP Ruling or Determination on Whether Good is Within Scope

• ITC has Granted Mitigation, but not Exoneration, for Respondent “Incorrectly” Relying on CBP Ruling

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2012 ofii general counsel conference washington, d.c. intellectual property protection & supply...

Documents

commissioners investigations

govt investigations

formal investigation

aspects of investigation

role of ouii

file objections

staff attorney section

overview growth