Friday, October 3, 2008

Inside IP Law

Tech companies turn to ITC to resolve patent disputes

The U.S. International Trade Commission (ITC) is quickly becoming the forum of choice for tech companies seeking to protect their patents from infringement by imported products. In fiscal year 2008, which ended on September 30, the ITC commenced 43 new Section 337 investigations — a record for new complaints at the ITC. Why is the ITC the fastest and most powerful vehicle to stop  infringing imports?

• Speedy resolution — Patent cases brought in federal district courts can take several years before they go to trial. Patent cases at the ITC are usually tried within nine months.  Final decisions are generally rendered in 13 to 15 months. 

• Injunctive relief — Tech companies that are successful at the ITC can obtain injunctive relief barring the importation of infringing products. Fast injunctive relief is essential to tech companies because their technology may become outdated by the time a court hears the case.

• Multiple respondents — The ITC allows patent owners to name multiple respondents (foreign manufacturers and exporters, U.S. importers or distributors) in one case.

• Customs enforcement — Exclusion orders are enforced at the borders by U.S. Customs and Border Protection rather than through self-enforcement and contempt proceedings in district court. A respondent with a U.S. inventory of infringing products may also be subject to a cease-and-desist order.

• Dual-path litigation — Companies can initiate an ITC case while pursuing a district court complaint, and litigate in district court to obtain damages.

Inside the ITC
The ITC enforces Section 337 of the Tariff Act of 1930, which is directed at unfair methods of competition and unfair acts in the importation of infringing goods. After a complaint is filed, the ITC votes on whether to institute a case (almost every complaint is instituted). The case is then assigned to one of five administrative law judges who try only 337 investigations and are conversant with the technology, ITC procedures and patent law. An attorney from the ITC’s independent Office of Unfair Import Investigations (OUII)  represents the public interest. Discovery is fast moving, subpoena jurisdiction is nationwide, and sanctions for discovery failures can be imposed. 

After discovery, the judge presides over an evidentiary hearing, in which each party has the opportunity to present and cross-examine witnesses. After post-trial briefing, the judge renders a decision on the merits and a recommendation on remedy.  

If the complainant is successful, the statute provides for a 60-day “presidential review period” on policy grounds only, during which a losing respondent can import under bond. ITC decisions are appealed directly to the U.S. Court of Appeals for the Federal Circuit. 

Not all patent disputes may be brought at the ITC. For example, if an accused infringing article is entirely domestic, the ITC has no jurisdiction.

The ITC has other unique requirements. The patent owner must show  a “domestic industry” related to its products by presenting evidence that its products covered by each patent are manufactured, repaired, serviced, etc., in the U.S. The product can be manufactured overseas, as long as there are related U.S. economic activities. The domestic industry may also be satisfied by showing that your company has conducted other activities related to the patent, such as research and development. 

The Future
The ITC investigation brought by Broadcom against Qualcomm, and now before the Court of Appeals for the Federal Circuit, has substantially heightened the ITC’s visibility given the critical issue to be decided: the extent to which the ITC can exclude from the U.S. market third-party “downstream” cellphones and PDAs containing infringing products.

Clearly, the ITC offers advantages to high tech companies seeking to enforce their patent rights. High tech companies should always consider the ITC as part of a strategy to protect U.S. markets from infringing imports.  

Jeffrey R. Whieldon is Of Counsel with Fish & Richardson PC. He can be reached at whieldon@fr.com.