Patent Litigation in the U.S. International Trade Commission

August 1, 2007

Litigation Counsel Series

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• Approximately 30 new cases are filed each year by companies alleging import of infringing products into the U.S.

• With the accelerated globalization of business, the ITC is an increasingly popular forum for litigation of intellectual property disputes, for both U.S. and foreign companies with a U.S. presence

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Using the ITC as a Strategic Weapon

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• It is fast– Trial-like hearing before an ALJ held within 6-9

months of filing, and Final Determination issued within 12-18 months

• There are no counterclaims– Respondents cannot file counterclaims or

countersuits; a separate Investigation would have to be initiated

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Using the ITC as a Strategic Weapon

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• It offers a powerful remedy– Exclusion orders stopping infringing products at

the border– Cease and desist orders stopping the sale of

infringing products already in the U.S.– No monetary damages in the ITC

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Using the ITC as a Strategic Weapon

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• It is an extremely aggressive approach– Puts a strain on Respondent businesses– Is a more immediate and significant threat than

District Court litigation– Frequently combined with District Court litigation

seeking monetary relief

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Using the ITC as a Strategic Weapon

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• Jurisdiction– In Rem Action (i.e., action pertains to the accused

product not the accused party)– Importation (i.e., infringing product or component

must be imported into the U.S.)

What is Required to File a Complaint with the ITC?

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• Unfair Practice– The law of patent infringement is essentially the

same as in a District Court case– Cases may also be filed alleging violations of

copyrights, trademarks, trade dress, or unfair competition

What is Required to File a Complaint with the ITC?

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• Complainant must show significant activity based in the U.S. that is related to the asserted patent(s)– Activities may include production or manufacture,

research and development, or licensing– There must be a significant nexus between the

U.S.-based activity and the patented element– Activities can be related to any claim of asserted

patent(s), not just the claim(s) asserted for infringement

Domestic Industry

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1. Complaint filed2. Investigation instituted and case assigned to ALJ3. Respondent answers Complaint4. Discovery and expert analysis completed5. Trial-like hearing before ALJ6. ALJ issues Initial Determination

What is the Process for a Section 337 Investigation?

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7. Initial Determination may be reviewed by the ITC8. If exclusion orders are issued, presidential review

period runs, after which Final Determination can be appealed to the Federal Circuit

9. If exclusion orders are not issued, Final Determination can be immediately appealed to the Federal Circuit

What is the Process for a Section 337 Investigation?

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ITC v. District Court LitigationLitigation Element ITC District Court

Remedy Exclusion Order enforced by US Customs Service and/or Cease and Desist Order enforced by ITC; No monetary damages

Monetary damages and/or injunctive relief

Decision-Maker Administrative Law Judge with significant patent litigation experience makes Initial Determination; Commissioners appointed by President make Final Determination

Jury and/or District Court Judge appointed by the President

Commencement of Action

Detailed Complaint filed with ITC; Investigation instituted 30 days later by Commission

Complaint filed with Court commences infringement action

Parties Complainant(s) must have domestic industry; Respondent(s) must import accused products; Staff attorney participates on behalf of the public interest;Pro-Complainant forum.

Private Plaintiff(s) and Defendant(s)

Procedure Discovery (10 days to respond; extensive); Trial-like hearing before ALJ

Discovery (30 days to respond; extensiveness depends on Court); Trial before Judge and possibly jury

Counterclaims Not available Available

Decision 15 month maximum (absent exception from statutory deadline granted by Commission)

Depends on Court

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Action ITC District Court

Active Investigation / Active Litigation

30 days after Complaint is filed Investigation is instituted by ITC

Upon service of Complaint

Answer by Respondent (ITC) / Answer by Defendant and Parties Exchange Initial Documents (DC )

20 days after Institution of Investigation 1-3 months after filing of Complaint

Preliminary Conference 1-2 months after Institution of Investigation 1-3 months after filing of Complaint

Exchange Initial Documents 1-2 months after Institution of Investi gation 3-12 months after filing of Complaint

Claim Construction Initial Determination contains claim construction

Markman Hearing and Markman Ruling 12 -14 months after filing of Complaint (extensive Markman briefing)

Formal Discovery, including fact witness depositions

2-5 months after Institution of Investigation 12-18 months after filing of Complaint

Expert Reports and Discovery 4-6 months after Institution of Investigation 14-18 months after filing of Complaint

Pre-Trial 7-8 months after Institution of Investigation 18-22 months after filing of Complaint

Trial 8-9 months after Institution of Investigation (unlikely to slip beyond 9 months)

24-36 months after filing of Complaint depending on Court and Judge

Initial Determination (ITC) 12 months afte r Institution of Investigation n/a

Final Determination (ITC) / Final Judgment (DC)

15 months after Institution of Investigation 28-40 months after filing of Complaint depending on whether trial is bench or jury trial and depending on Court and Judge

ITC v. District Court Schedule

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Concurrent ITC and District Court Cases

• Effect of ITC Section 337 Investigation on District Court proceedings:– Counterclaims filed in ITC may be removed to

District Court– There is a mandatory stay of District Court litigation

if requested by Respondent in an ITC Section 337 Investigation involving the same claim

– Discovery taken in one proceeding can be used in both

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• Parties are allowed extensive discovery of each other

• Broad third party discovery is also permitted• Discovery is expedited (e.g. 10 days to respond)• Discovery often runs on multiple simultaneous

tracks• Discovery is affected by ALJ to whom the case is

assigned

Discovery in the ITC

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• ITC hearing is similar to a District Court trial, except:– There is no jury– Federal Rules of Evidence are more liberally

applied– Time limits are more extreme (e.g. for some

judges, it is not unusual for hearings to run more than 10 hours per day and on weekends)

– There is enormous pressure to limit issues taken to trial, and for each issue tried, much detail must be presented in a very short period of time

ITC Hearing

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• ALJ must file ID no later than: – 3 months prior to the target date if the target date

is less than 15 monthsOR

– 4 months prior to the target date if the target date is greater than 15 months

• ALJ is required to make detailed findings of law and fact on all contested issues and elements of a violation of Section 337

Post-Hearing Process - Initial Determination

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• A petition for review must be filed within 10 days of the issuance of the ID

• Any issue not raised in the petition for review that was decided adversely to a party will be deemed to have been abandoned

Post-Hearing Process -Full Commission Review of Initial Determination

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• Commissioners have the following options on review:– Do nothing in which case the ID becomes the Final

Determination– Review the ID, in which case they may either

adopt the ID (in whole or in part) or reverse the ID

• Presidential review period must run prior to remedy taking effect

Full Commission Review of Initial Determination

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• Parties have the opportunity to make written submissions on exact form of remedy if violation is found, including the terms of the customs exclusion order and the terms of any cease and desist order

• Remedy strategy must be carefully crafted at very early stages of discovery

• ITC has no authority to award monetary damages

Remedy

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• Customs exclusion order can either be limited to specific named Respondents, or general as to all infringing products– Limited exclusion order (LEO) is the typical

remedy– In order to obtain a general exclusion order

(GEO), Complainant must show a widespread pattern of unauthorized imports from many sources

Exclusion Order

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• Typical LEO is drafted in very broad terms (e.g. Customs is directed to exclude all products of a company that infringe a named claim of a patent)

• Customs then has broad discretion to interpret the order to determine how it should be enforced

Section 337 Enforcement

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• Instructions are considered law enforcement, so actual terms of the instructions are not provided to Respondents or importers

• There is no formal process for interested party input, and the instructions to customs can be modified at any time

Customs Instructions to Ports

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• Most LEOs that cover product categories in which the ITC knows that there are non-infringing imports allow customs to accept a certification that goods to be imported do not infringe

• Importer must provide certification and assume liability

• Customs has the right to inspect, verify, and demand additional information even if certification is provided

• Customs exclusion order can be extremely disruptive to the importation process

Certification

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• Once the instructions go out, key activity occurs at the ports

• Complainants identify the ports with most significant import volume and educate the port officials

• If there is any indication of problems, Respondents can also seek to educate port officials to avoid or resolve problems

In the Field/At the Ports

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• Clients should establish a dedicated in-house team to coordinate and assist in responding to discovery requests because serious sanctions (including the dismissal of the Investigation) are possible if a party improperly withholds discovery

• Law firm resource planning and staffing needs to account for multi-tracking and peak demand

Suggestions for Case Preparations