The United States International Trade Commission (“ITC”) is a quasi-judicial federal agency with broad investigative responsibilities on matters of international trade. An increasingly popular function of the ITC is serving as an alternate forum to litigate intellectual property disputes arising under Section 337 of the Tariff Act of 1930, as amended (19 U.S.C. § 1337), commonly referred to as a “Section 337 investigation.” Section 337 vests the ITC with authority to investigate and issue decisions involving importation of articles that constitute unfair competition, which includes the importation of articles infringing on a valid patent, trademark, or copyright. While the ITC can institute a Section 337 investigation on its own initiative, the ITC is quickly becoming a popular forum for U.S. companies asserting claims of patent infringement.
It is easy to see why companies are turning to the ITC over a traditional district court litigation. Section 337 investigations are assigned to an Administrative Law Judge (“ALJ”) that oversees the entirety of the proceeding, beginning once the ITC’s investigation begins. Compared to district court litigation, which can (and often does) drag on for years, a trial-like hearing in ITC proceedings generally occurs within one year from the IP owner’s complaint of unfair competition. In addition to an expedited result, ITC proceedings have a broader reach on infringers as the jurisdiction is in rem, which means jurisdiction is tied to the article, opposed to where the entity conducts business. Therefore, a patent holder does not need to argue personal jurisdiction or be concerned over venue issues. However, the ITC only has the power to grant injunctive relief, generally in the form of an Exclusion Order as discussed below, and the ITC cannot award damages.
The ITC shares several common characteristics of district court litigation. For example, discovery and motion practice is still subject to the Federal Rules of Civil Procedure. After the parties conduct discovery, evidentiary hearings, and post-hearing briefing, the ALJ issues an Initial Determination, which details all the contested issues and elements of the Section 337 violation. The Initial Determination issued by the ALJ can then be reviewed by the ITC, allowing the ITC to adopt or reject the ALJ’s findings. The ITC’s review is most often prompted by a party petitioning for the Initial Determination to be reviewed, although the ITC can also conduct a review of any Initial Determination as it sees fit. If a party petitions the ITC to review the ALJ’s Initial Determination but the ITC declines to conduct such review, the ALJ’s Initial Determination becomes a Final Determination. During the pendency of the ITC proceeding, the allegedly infringing goods may still be imported into the United States upon the posting of a bond determined by the ITC.
If the Final Determination includes a finding of infringement, the ITC has the power to issue an Exclusion Order, either Limited (“LEO”) or General (“GEO”). The issuance of an exclusion order can be compared to injunctive relief in district court litigation, although the ITC’s Exclusion Orders are often more powerful and prevent the infringing articles from entering the United States. A LEO excludes the importation of infringing goods by the infringing party named in the Section 337 investigation. A GEO, however, provides for the widespread exclusion of the importation of infringing goods regardless of the importing party’s identity or involvement in the Section 337 investigation. The orders are provided to U.S. Customs and Border Protection (i.e., “Customs”), which is tasked with the enforcement of these Exclusion Orders and preventing the importation of infringing goods into the U.S. Exclusion Orders are prospective in nature, however, and do not impact the use or sale of goods that are already in the United States.
Due to the ITC’s ability to more swiftly stop infringers than district courts and its ability to proceed in rem, it is no surprise that Section 337 investigations have become increasingly popular over the years among IP owners seeking international relief. For those involved in the international trade business, the increasing popularity of Section 337 may seem daunting and unduly burdensome. But they are less onerous than resorting to the District Courts. Moreover, through strategic planning and proactive measures, the burdens faced by international or foreign traders can be lessened or avoided altogether. Our next article will discuss proactive measures that can be taken with Customs to block the importation of infringing items with and without first obtaining an order from the ITC.