T. Spence Chubb is a Special Counsel with the law firm of WilmerHale in Washington, D.C. Spence joined the firm in 2010 after leaving his long-time post at the U.S. International Trade Commission. From 1989 to 2010, Spence served as a Supervisory Attorney in the Office of Unfair Import Investigations (“OUII”) at the ITC, where he handled litigation involving patent, trademark, trade secret, and unfair competition claims under Section 337 of the Tariff Act of 1930 and supervised Commission investigative attorneys. Spence served as a Commission Investigative Attorney from 1986 to 1989. During his time with the ITC, Spence participated in more than 85 trials and 186 cases.
Spence spoke recently to ITC 337 Law Blog.
What are some of the most significant changes to Section 337 practice since you started as an ITC attorney in the 1980s?
Your question is a challenge because so many changes have taken place that it is almost easier to think about what’s still the same. Certainly some of the biggest changes from when I first appeared before the Commission while I was in private practice in 1984 and then started working at the Commission in 1986 stem from the elimination of the injury requirement for statutory intellectual property cases. (As everyone familiar with Section 337 practice knows, “statutory IP cases” means for the most part patent infringement cases.) What occurred subsequently was a sea change in the number and mix of cases being brought under Section 337. Ironically, despite the fact that the Omnibus Trade and Competitiveness Act changes of 1988 were primarily meant to make Section 337 an easier forum for the use of companies with patent-based complaints while keeping the statute basically the same for complainants with non-statutory-based complaints, the level of utilization of the statute by patent-based complainants remained basically unchanged while the number of non-patent-based cases dropped off significantly. Overall, this reduced the numbers of new complaints being brought every year from the 30s and 40s prior to the 1988 Act to the low to mid-teens for most years for the rest of the 1980s and throughout the 1990s. On the other hand, the caseload became more and more dominated by high tech, high stakes technologies. For example, I recall that around the time I started at the ITC, cases involving semiconductor chips would trickle in at about one a year. Before too long integrated circuit cases had become one of the most popular, if not the most popular, types of cases that were being brought.
In addition to the increasingly sophisticated technology at issue in the cases and their increasing stakes, Section 337 litigation like all complex litigation was undergoing the transition to the world of email and the internet, electronic discovery, the use of cell phones and remote computer access, and the use of more expensive and intricate graphics in trials.
So, basically, Section 337 practice has evolved from an area that tended to be concentrated on low-tech, inexpensive imports to a practice that focuses on sophisticated and complex technologies and cutting edge legal issues.
What is the purpose of the Office of Unfair Import Investigations (OUII)?
The Trade Act of 1974 made many fundamental changes to Section 337 and to the U.S. International Trade Commission in general (including changing the name from the U.S. Tariff Commission). Perhaps the most significant was requiring that Section 337 cases be conducted as full due process, adversarial proceedings under the formal adjudication provisions of the Administrative Procedure Act. As I understand it, in making the necessary rule changes to adjust to the new procedures, the Commission determined that assigning an attorney in its employ to represent the public interest would help to insure that public interest issues would not get lost sight of in the conduct of these newly adversarial inter partes proceedings. The original group of these public interest attorneys was a part of the ITC General Counsel’s office, but it was soon realized that such an arrangement was unworkable if the public interest attorney was to be a full party to the case with the same restrictions on ex parte contacts with decisionmakers (i.e., the Administrative Law Judges and the Commission and their legal advisors) as the private parties. Accordingly, the division that became OUII was spun off as a separate office under the ITC’s Director of Operations rather than under the General Counsel.
It is the practice of OUII to designate one (or occasionally two) of its attorneys to represent the public interest in every single Section 337 investigation. (OUII also has the power to file a Section 337 complaint on behalf of the public interest, but that power has only been utilized once for a regular Section 337 investigation, and only a few times for “enforcement proceedings” related to outstanding remedial orders.) The OUII attorney is a full party to the investigation with the same abilities as the attorneys for the private litigants (although almost invariably with far fewer resources!). This means that the “investigative attorney” (or IA) will conduct written discovery, seek the production of documents, participate in depositions, and engage in motions practice. Ultimately, the IA will take positions on the merits of all the technical and legal issues and argue those positions in his or her pre-trial brief and at trial before the Administrative Law Judge. Following the Judge’s decision on the merits, OUII will continue to participate as an independent party in the review proceedings before the Commission, again arguing the positions it has taken previously.
It should be kept in mind that OUII makes a decision on how to argue the merits based upon how it views the evidence and the law, not based upon any political considerations or any protectionist or pro-patent leanings. In reality, because OUII takes a position on all of the issues on an issue by issue basis (down to the level of the individual elements of a patent claim), OUII’s positions are usually not entirely on the side of one of the private parties or the other, but are instead a “mixed bag.”
Prospective complainants can meet with OUII before filing a Section 337 complaint. In practice, how does that work, and what are the benefits in doing so?
I can speak to this question as a former OUII supervisory attorney, and less so from my new perspective as a private practitioner. Attorneys for the prospective complainant will contact OUII a few weeks in advance of completing their draft complaint to let the OUII supervisory staff know that there is a potential new case in the works. When a draft is ready for review, a meeting or conference call can be set up with OUII. These days, with the very high caseload level, OUII generally prefers to set the meeting with counsel for prospective complainants to take place a full week to ten days after delivery of a copy of the final draft complaint. OUII rarely meets with counsel for the prospective complainant without first receiving the draft complaint, with the exceptions usually relating to potential cases that have unique jurisdictional or other fundamental first-impression issues that both the private attorneys and OUII feel should be discussed even before work on a draft is begun.
In a typical situation, OUII will have one or two supervisory level or senior staff attorneys review the draft complaint and meet with the prospective complainant’s attorneys (who sometimes are accompanied by an in-house company representative). Because Section 337 complaints require so much more detail than complaints in the U.S. District Courts, the main purpose and advantage of the review is for OUII to point out areas where the complaint needs more detail. Unless the complaint’s allegations are obviously and facially insufficient, it is not OUII’s function in these reviews to comment on or take any position on the merits. OUII’s attorneys do not form any sort of “bond” or “allegiance” with the complainant – they provide procedural information as they would to any member of the public seeking such information. More often than not, the OUII attorneys reviewing the draft complaint will not be the same OUII attorneys ultimately assigned to the investigation once it is instituted by the Commission.
It appears that Markman hearings are becoming more prevalent in Section 337 investigations. Do you think this trend will continue, and, if so, how will it affect Section 337 practice?
I think the jury is still out on the value and practicality of “Markman” (i.e., claim construction) hearings in Section 337 proceedings. Many in the 337 bar, including some Commission attorneys, see them as a way of promoting earlier settlement, since a party that receives an unfavorable claim construction ruling early in a case may be likely to perceive settlement as a more attractive prospect than going forward through the expensive trial and the review process with a bad construction on the outside hope of having that construction reversed by the Commission (and then having to go through another expensive trial and review process). In my view, it will likely take years for us to realistically assess whether an early Markman process will significantly impact settlement rates in Section 337 investigations. Proponents of Markman hearings also point to a reduction in the expense and complexity of trial because it eliminates the need for putting on a case addressing two or more alternative claim constructions.
For now, I suspect that the different ITC Judges will continue each with their own versions of the claim construction process. In other words, some will continue to hold early claim construction hearings (or at least receive written briefs on the subject) and make rulings early enough to impact not just the conduct of the trial but the summary determination phase; and others will take input on the parties’ claim constructions issues before trial so that they are aware of the key elements in dispute but will not decide them until submitting their “final initial determination” on the merits. This year, Chief Judge Paul Luckern held his first early Markman hearing and issued a ruling, but has often expressed reservations about how the process will work in view of the need for Commission review in time for meaningful consideration of the Commission’s final claim constructions for summary determination motions and trial purposes. In the case in question, the Commission has sought input from the parties on whether the Judge was correct to issue his claim construction ruling as an “initial determination” (ID) rather than as an ordinary order. An ID requires the Commission to consider whether to review right away rather than being able to wait until later in the case as happens with orders. No doubt the Commission’s decision on that issue will impact the future of claim construction procedures at the Commission. I should point out that Chief Judge Luckern does have at least one more Markman hearing scheduled in a more recently instituted case.
How long do ITC trials typically last? Also, how long is a typical trial day?
I have experienced trials that have lasted from one day to more than four weeks, and am aware of some having gone longer. However, the more common length of trial is one to two weeks. Most Judges start around 9:00 each morning, and end somewhere between 4:30 and 6:00 p.m. Some are willing to start earlier and go later if more trial time seems necessary, and some are willing to add a day or more to the length of the trial if needed.
To what do you attribute the steady increase in Section 337 filings at the ITC?
There are many causes that attorneys in the 337 bar will point to. I think that the remarkable surge in Section 337 complaints is a combination of factors, with perhaps the biggest truly being a “snowball” effect. In other words, knowledge of Section 337 as an attractive alternative to district court litigation grew gradually, but at some point reached a critical mass where the message began to spread even more rapidly, so that attorneys that had barely heard about the statute in the past and about the Commission’s ability to handle sophisticated IP cases in an expeditious manner were getting exposed and Section 337 was becoming a serious alternative, both for them and their clients. The rise of the district court rocket dockets helped emphasize and popularize the notion of obtaining a speedy resolution to IP disputes, which also helped push the ITC into consideration since the Commission had always been known for its speed. And, of course, there was the Supreme Court’s 2006 eBay decision dealing with the availability (or lack thereof) of district court injunctions in patent cases. Interestingly, it does not appear that the Federal Circuit’s 2008 Kyocera decision, making it more difficult to obtain “downstream” relief at the Commission, has had any dampening effect on the filing of cases before the Commission.
What is a Section 337 Enforcement Proceeding?
The Commission has two basic types of remedies – (1) exclusion orders that are enforced by Customs at the border and (2) cease and desist orders that are like injunctions in that an action to enforce a C&D order must be brought at the issuing tribunal, in this case the Commission. However, either type of order can serve as the basis for an ITC enforcement action. There are also two types of enforcement proceeding, formal and informal. I will limit my answer to the formal type, since the informal-type proceedings are very rare.
Generally, enforcement complaints are filed by the party that was the original complainant in the underlying investigation in which the remedial orders issued. Enforcement proceedings can be self-initiated by the Commission through a complaint filed by OUII, but this is very rare. The enforcement complaint will allege that the enforcement respondents have violated the Commission’s orders by importing and/or selling products, or engaging in some other related behavior, in violation of the orders. Not surprisingly, the most common acts alleged in enforcement complaints under Section 337 are continued patent infringements.
If the Commission finds the enforcement complaint to be sufficient, it will institute a formal enforcement proceeding that is usually delegated to an Administrative Law Judge for an “enforcement initial determination” (EID). An OUII staff attorney will be assigned as an independent party to represent the public interest and the Judge will set a target date as in a typical 337 investigation. The enforcement respondents are given an opportunity to answer the complaint, and typically the case will proceed through discovery and trial much like a regular 337 investigation, followed by the Judge issuing an EID. The Commission will then decide whether to review the EID or let it stand.
If a violation of an exclusion order is found, the Commission has the authority to modify or clarify the order if appropriate, and if the enforcement respondent is not already subject to a C&D order, the Commission can impose one. If a violation of a C&D order is found, the Commission can impose civil penalties of up to $100,000 per violation day or twice the total domestic value of the infringing goods that were imported and/or sold on each such day by each enforcement respondent. In addition, if an enforcement respondent’s goods are not already subject to an exclusion order, the Commission can issue one to insure that from that point on there will be border enforcement by Customs. If a civil penalty is assessed, the government can collect it in a civil action in an appropriate U.S. district court.
What are some of the ways that ITC complaints differ from district court complaints?
The Commission’s Rules of Practice and Procedure are in many ways patterned after the Federal Rules of Civil Procedure, but are quite different when it comes to what is required in terms of the complaint. Largely because Section 337 investigations result in considerable involvement by the Commission, a government agency, and can have wide-ranging public interest implications, the Commission through its complaint rule, 19 C.F.R. § 210.12, requires substantially more detail than a district court complaint. In other words, Section 337 complaints are not notice pleading but fact pleading.
In this regard, some of the additional information required from the complainant by the Commission before it will institute an investigation includes (and this is not an exhaustive list): Tariff Schedule numbers for the accused imported goods; information on related litigation; details regarding the “domestic industry” that the complainant seeks to protect; evidence of patent ownership, including certified copies of any assignments (i.e., certified by the U.S. Patent and Trademark Office); certified copies of the patents themselves and of their prosecution history files; if injury is alleged (as it must be in non-statutory-IP cases), details regarding the injury including information on matters such as complainant’s profits and losses, pricing information, and the level of respondents’ sales of the accused products; licensee information; information on foreign counterpart patents; and detailed claim charts setting forth complainant’s allegations regarding not only respondents’ infringement of all of the asserted independent claims, but also demonstrating the domestic industry’s utilization of the asserted patents.
Confidential treatment can be obtained for the complaint and many of the supporting exhibits, but for most such documents the Commission will expect the complainant to supply redacted “public versions.”
If there is one thing that you want our readers to know about the ITC and/or Section 337 practice, what is it?
Having spent over 23 years with the Office of Unfair Import Investigations and now just beginning with my new firm, WilmerHale, I think it is still most appropriate for me to emphasize the value that OUII brings to the quality and effectiveness of the Section 337 process and to highly recommend that private attorneys appearing in Section 337 investigations appreciate that value and try to take advantage of OUII as a resource and, if possible, an ally in the fray. Because OUII is an independent and impartial party, it necessarily maintains a certain distance from the private parties in terms of litigation strategy and tactics. However, OUII does have a public interest in facilitating the process by providing however much information it is practical and appropriate to provide to the “public,” the “public” in this case including the actual litigants appearing in an investigation. It should be kept in mind that OUII attorneys are experienced in all aspects of Section 337 proceedings (and for information that they don’t know off the top of their heads, they know where to look), as well as in complex patent and other IP litigation, so they can be a resource; again, to the extent practical and appropriate.
In terms of briefing and argument in motions practice and in connection with trial on the merits, it is important to keep in mind that while the Judges do not always agree with OUII’s positions, they are always very interested in hearing what OUII has to say and always take OUII’s positions into serious consideration. This is especially the case for matters that are unique to Section 337 practice at the ITC and for matters of Commission policy, but it is also true for matters such as patent infringement and validity. Thus, being able to convince the assigned OUII staff attorney of the reasonableness of the client’s positions on the issues is generally perceived as an advantage and worthy of some additional effort.
