Practice Tips

A Closer Look At Google Inc.’s Public Interest Submission In Certain Communication Equipment (337-TA-817)

By Eric Schweibenz
|
Jun
18
Certain changes enacted in 2011 to the ITC’s rules governing Section 337 investigations require the International Trade Commission (the “Commission”) to invite comments from the public and proposed respondents regarding public interest issues implicated by each newly filed complaint.  As shown by Google Inc.’s (“Google”) submission in Inv. No. 337-TA-817, this early public interest briefing can be used to advance various policy based arguments with the ITC that may ultimately influence the appropriate remedy in the investigation.  In Certain Communication Equipment, Google suggested that granting an exclusion order to the benefit of a non-practicing entity (“NPE”) may harm consumers and not be in the public’s best interest. By way of background, on October 19, 2011, the Commission published a Notice of Final Rulemaking amending its rules and creating, inter alia, new rule 210.8(c)(1), which provides that upon the complaint’s filing, the Commission will publish a notice in the Federal Register inviting comments from the public and proposed respondents on any public interest issues raised by the complaint and potential exclusion and/or cease and desist orders.  See our October 21, 2011 post for more details.  In accordance with this new rule, on November 7, 2011, the Commission published a notice requesting comments on whether the issuance of an exclusion order and/or cease and desist order in Inv. No. 337-TA-817 would “negatively affect the public health and welfare in the United States, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, or United States Consumers.”  In response to the Commission’s request, Google filed a five page submission arguing that nothing in the complaint, or in other publicly available information, suggested that Complainant ChriMar Systems, Inc. d/b/a CMS Technologies’ (“ChriMar”) or its licensee can meet the demand for the wireless communication products it seeks to exclude and, as a result, issuing an exclusion order against the accused products “could severely harm the wireless communications industries, to the detriment of consumers, competitive conditions in the United States, and the public interest.”  As a corollary to this argument, Google also asserted that denying an exclusion order as against the public interest when a complainant or its licensees cannot meet the market demand for an accused product will harmonize the remedies available to litigants at the Commission and district courts.  In particular, the Commission may issue an injunction without having to consider the equitable guidelines set forth in the Supreme Court’s decision in eBay Inc. v. MercExchange LLC, 547 U.S. 388 (2006). Under eBay, a patentee is unlikely to obtain a permanent injunction if it, or its licensees, do not manufacture, sell, practice or otherwise bring a product to market that competes with the accused device/method.  Because many NPEs lack production-driven licensees that bring competitive products to market, they are less likely to receive a permanent injunction in district court.  Thus, Google notes that an increasing number of NPEs are filing Section 337 complaints, where an injunction may issue absent consideration of eBay’s equitable factors, to increase the NPE’s bargaining position during settlement negotiations in concurrent district court proceedings.  To prevent this end-run around eBay, and to “protect American industry and consumers,” Google argues that in most cases, when a Complainant (NPE or otherwise) and it licensees cannot meet the market demand for an accused product, an exclusion order should not issue.  Google assumes that the Complainant in this scenario is more concerned with increasing its revenue, rather than excluding the Respondents from market and, therefore, concludes that the appropriate venue for the Complainant’s dispute is a district court where it may seek damages for past infringement and a running royalty for future infringement. Following Google’s submission of its public interest statement, ChriMar served extensive discovery on Google, arguing that such discovery was warranted because Google had interjected itself into the investigation by filing a public interest statement.  ChriMar also moved to strike Google’s submission after Google did not comply with ChriMar’s discovery requests.  See our June 1, 2012 post for more details.  In an Order dated May 29, 2012, ALJ Theodore R. Essex rejected each of ChriMar’s arguments.  Specifically, the ALJ noted that Google did not “interject” itself into the investigation, as ChriMar contended, but simply responded to an invitation by the Commission to provide commentary on the investigation and its impact on the public interest.  Additionally, because Google’s public interest statement was based entirely on public facts and raised what ALJ Essex determined to be “relatively straight forward arguments regarding eBay and the availability of alternative suppliers,” the ALJ found that Google’s submission raised no issues warranting discovery.     Whether the arguments made by Google gain significant traction with the Commission remains to be seen; however, Google’s submission directed towards NPE’s through the newly created public interest briefing is interesting and underscores the concerns shared by many about the increasing use of Section 337 by NPE’s.  Moreover, ALJ Essex’s rejection of ChriMar’s discovery requests and motion to strike should provide parties contemplating submitting a public interest statement with a degree of certainty that such submissions should not typically subject the non-party to unwarranted and overly broad discovery.
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Did You Know … Importing Articles Manufactured Using Trade Secrets Misappropriated Abroad Can Be A Violation Of Section 337?

By Eric Schweibenz
|
Jun
22
Any regular reader of this blog will recognize that the vast majority of Section 337 actions involve the importation, sale for importation, and/or sale within the U.S. after importation of articles that allegedly infringe U.S. patents.  See 19 U.S.C. § 1337(a)(1)(B).  However, patents are not the only form of intellectual property that can form the basis for a Section 337 action.  The statute also prohibits, inter alia, “[u]nfair methods of competition and unfair acts in the importation of articles … into the United States, … the threat or effect of which is … to destroy or substantially injure an industry in the United States.”  19 U.S.C. § 1337(a)(1)(A).  The ITC has long interpreted this provision of Section 337 to apply to trade secret misappropriation.  See TianRui Group Co. v. ITC, 661 F.3d 1322, 1326 (Fed. Cir. 2011).  But until the TianRui decision, it was not entirely clear whether Section 337 could prohibit the importation of articles manufactured using misappropriated trade secrets where the acts of misappropriation occurred entirely outside the U.S. By way of background, TianRui was an appeal from the ITC’s finding of a violation of Section 337 in Certain Cast Steel Railway Wheels, Certain Processes For Manufacturing Or Relating To Same And Certain Products Containing Same (Inv. No. 337-TA-655).  See our October 19, 2009 and December 4, 2009 posts for more details.  Complainant Amsted Industries Inc. (“Amsted”) was an American-based company that developed two secret processes to make cast steel railway wheels.  Amsted used one of the processes and licensed the other to companies overseas, including companies in China.  The basis of the ITC’s investigation was Amsted’s complaint, filed August 14, 2008, alleging a violation of Section 337 in the importation into the U.S., sale for importation, and sale within the U.S. after importation of certain cast steel railway wheels and products containing the same by reason of misappropriation of Amsted’s trade secrets (the “ABC trade secrets”).  The complaint named TianRui Group Company Limited; TianRui Group Foundry Company Limited; Standard Car Truck Company, Inc. and Barber TianRui Railway Supply, LLC (collectively “TianRui”) as Respondents.  The ITC instituted an investigation and held a ten day evidentiary hearing, finding that TianRui had misappropriated Amsted’s ABC trade secrets under Illinois trade secret law.  Specifically, after TianRui was unsuccessful in obtaining a license, it hired away nine employees of another Chinese Amsted licensee to manufacture wheels using the confidential ABC process.  On October 16, 2009, ALJ Charneski issued the Initial Determination (“ID”) finding a violation of Section 337 by TianRui with respect to the ABC trade secrets.   The Commission issued a notice determining not to review the ID, and soon after issued a notice of Issuance Of A Limited Exclusion Order and Cease and Desist Order; Termination of the Investigation.  See our December 18, 2009 and February 19, 2010 posts for more details.  TianRui appealed the decision to the Federal Circuit. One of the main arguments that TianRui raised on appeal was that the ITC had exceeded its authority by applying Illinois trade secret law to find a violation of Section 337 based on acts of misappropriation that occurred entirely in China.  Specifically, TianRui argued that Section 337 is only appropriately applied extraterritorially with respect to patents, as there is no express language authorizing the ITC to do the same with trade secrets.  The ITC’s primary counter-argument emphasized that it had not applied trade secret law extraterritorially because a key aspect of a Section 337 violation is the domestic element of importation. In the opinion, the Federal Circuit affirmed the ITC’s application of domestic trade secret law (albeit not Illinois law specifically) to conduct occurring in a foreign country.  The Court determined that the Congressional presumption against extraterritorial application of legislation does not apply for three reasons.  First, Section 337 is specifically directed to importation of articles into the United States, an inherently international transaction, and thus “it is reasonable to assume that Congress was aware, and intended, that the statute would apply to conduct … that may have occurred abroad.”  Second, the Court pointed out that the ITC “does not purport to regulate purely foreign conduct.”  Rather, the “unfair” activity is only prohibited to the extent that it results in importing goods into the United States and causing domestic injury.  Third, the Court determined that the legislative history of Section 337 supports interpreting the statute as permitting the ITC to evaluate conduct that occurs extraterritorially since “Congress intended a … broad and flexible meaning.”  The Court also held that the domestic industry injured as a result of the importation need not actually practice the misappropriated trade secrets.  See our November 7, 2011 post for more details on the TianRui opinion. In the wake of TianRui, there appear to have been two new Section 337 complaints involving the importation of articles manufactured using misappropriated trade secrets where the acts of misappropriation occurred outside the U.S.  The first was filed by Twin-Star International, Inc. of Delray Beach, Florida and TS Investment Holding Corp. of Miami, Florida (collectively, “Twin-Star”) on December 13, 2011.  Twin-Star’s complaint alleged that Shenzhen Reliap Industrial Co., Ltd. of China (“Reliap”), Yue Qiu Sheng, a.k.a. Jason Yue of China (“Yue”), and Whalen Furniture Manufacturing Inc. of San Diego, California (“Whalen”) (collectively, the “Electric Fireplaces Respondents”) unlawfully engage in unfair methods of competition and unfair acts in connection with the importation into the U.S., sale for importation, and/or sale within the U.S. after importation of certain electric fireplaces, components thereof, manuals for same, and products containing same and in relation to certain processes for manufacturing or relating to same.  According to the complaint, the unfair methods of competition and unfair acts at issue include, inter alia, the Electric Fireplaces Respondents’ misappropriation of Twin-Star’s trade secrets.  According to the complaint, Yue was formerly employed by Twin-Star in China and, since the termination of his employment, Yue has misappropriated Twin-Star’s trade secrets in China in connection with the formation of his own new company Reliap.  See our December 15, 2011 post for more details.  The ITC instituted an investigation based on Twin-Star’s complaint—Certain Electric Fireplaces, Components Thereof, Manuals for Same, and Products Containing Same, Certain Processes for Manufacturing or Relating to Same, and Certain Products Containing Same (Inv. No. 337-TA-826)—on January 13, 2012.    See our January 17, 2012 post for more details.  The 826 investigation has been consolidated with Inv. No. 337-TA-791. The second post-TianRui Section 337 complaint in this area was filed by SI Group, Inc. of Schenectady, New York (“SI Group”) on May 21, 2012.  In its complaint, SI Group alleges that a number of entities are involved in the unlawful importation into the U.S., sale for importation, and/or sale within the U.S. after importation of certain rubber resins made using misappropriated SI Group trade secrets.  According to the complaint, a Mr. Xu Jie, a.k.a. Jack Xu (“Xu”), was employed by SI Group (Shanghai) beginning on April 14, 2004, and SI Group started manufacturing SP-1068 tackifier in Shanghai shortly thereafter.  The complaint states on information and belief that, by virtue of his employment and position, Xu was the only employee at the SI Group (Shanghai) plant who had access to the entire trade secret processes for making SP-1068 and other resins.  On April 30, 2007, Xu resigned from SI Group (Shanghai).  While Xu apparently denied that he was leaving to join a competitor, SI Group alleges in the complaint that Xu in fact joined Sino Legend (Zhangjiagang) Chemical Co., Ltd., Sino Legend Holding Group, Inc., Sino Legend Holding Group Ltd., HongKong Sino Legend Group Ltd., Ning Zhang, and Quanhai Yang (collectively, “Sino Legend”).  According to the complaint, shortly after Xu joined Sino Legend, Sino Legend started to market its SL-1801 resin, which has specifications substantially the same as those for SI Group’s SP-1068 tackifier.  The complaint therefore alleges that Sino Legend misappropriated SI Group’s trade secrets through hiring Xu (or otherwise) to develop SL-1801 and other rubber resins corresponding to SI Group rubber resins.  See our May 22, 2012 post for more details.  The ITC instituted an investigation based on SI Group’s complaint—Certain Rubber Resins and Processes for Manufacturing Same (Inv. No. 337-TA-849)—on June 20, 2012.    See our June 22, 2012 post for more details.  In view of the above, it appears that Section 337 actions based on the alleged misappropriation of trade secrets abroad may be becoming more common in the wake of the Federal Circuit’s decision in TianRui.  As in TianRui, both Twin-Star’s and SI Group’s recent complaints involve situations where a U.S. company’s trade secrets were allegedly misappropriated in China and used in connection with the importation of articles into the U.S. to the detriment of a domestic industry.  Since it is now clear that violations of Section 337 can potentially arise from acts of trade secret misappropriation that occur entirely outside the U.S., companies may be encouraged to bring new Section 337 actions where they believe that their domestic industry is being harmed through the importation of articles manufactured abroad using misappropriated trade secrets.  While it is unlikely that the number of new Section 337 actions based on trade secret misappropriation will eclipse the number based on patent infringement, this newly-invigorated basis for seeking relief from the ITC should not be overlooked.
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Commissioner Williamson Named Chairman Of ITC

By Eric Schweibenz
|
Jun
29
On June 25, 2012, the ITC issued a press release announcing that Irving A. Williamson has been designated by President Obama as Chairman of the U.S. International Trade Commission. According to the press release:
President Barack Obama has designated Irving A. Williamson, a Democrat of New York, as Chairman of the U.S. International Trade Commission (USITC) for the term June 17, 2012, through June 16, 2014.  Chairman Williamson was nominated to the USITC by President George W. Bush on September 7, 2006; renominated on January 9, 2007; and confirmed by the U.S. Senate on February 1, 2007. He was sworn in as a member of the Commission on February 7, 2007, for a term expiring on June 16, 2014.  President Barack Obama designated him Vice Chairman for the term ending June 16, 2012.   Chairman Williamson has more than 40 years of experience in the international and trade policy fields. Prior to his appointment, he was for seven years President of Williamson International Trade Strategies, Inc., a New York-based consulting firm that advised clients on legal, policy, and regulatory issues affecting international trade and business. As a consultant, he worked with over 20 U.S. Agency for International Development (USAID) and other donor- funded projects, advising countries on World Trade Organization (WTO) accession, compliance, and participation; he has also conducted WTO and other trade-related training programs all over the world. Much of his work focused on trade with Africa and the Middle East. From 1993 to 1998, Chairman Williamson was Deputy General Counsel in the Office of the U.S. Trade Representative (USTR), where he helped manage a 14-attorney office that was engaged in more than 30 dispute settlement proceedings.  The office was named best government international law office in May 1997.  In this position, he also served as chairman of the interagency Section 301 Committee, which investigated foreign trade barriers, and worked on implementing legislation for the WTO and the North American Free Trade Agreement. He served as acting general counsel for seven months.  Chairman Williamson played a role in developing President Bill Clinton's Partnership for Economic Growth and Opportunity in Africa initiative and represented USTR in negotiations with the Congress on the African Growth and Opportunity Act legislation. Following his USTR service, Chairman Williamson was Vice President for Trade, Investment, and Economic Development Programs at the Africa-America Institute in New York. From 1985 to 1993, he was the manager of trade policy for the Port Authority of New York and New Jersey. Prior to that, he served for 18 years as a Foreign Service Officer with the U.S. Department of State. Chairman Williamson holds a Bachelor of Arts degree in history from Brown University, a Master of Arts degree in international relations with an emphasis on African studies and international economics from the Johns Hopkins School of Advanced International Studies, and a Juris Doctor degree from the George Washington University Law School. He is married to Cheryl A. Parham, has two children, Patrick and Elizabeth, and resides in New York City.
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Did You Know … The America Invents Act (AIA) May Lead To Stays Of Section 337 Investigations Pending The Completion Of New Post Grant Proceedings?

By Eric Schweibenz
|
Jun
29
Historically, stays of Section 337 actions pending the resolution of patent reexaminations at the U.S. Patent and Trademark Office (“PTO”) have rarely been granted.  But on September 16, 2012, new post-grant proceedings—Post Grant Review (PGR), Transitional Program for Covered Business Method Patents (TPCBMP), and Inter PartesReview (IPR)—will become available to the public pursuant to the America Invents Act (AIA).  Unlike traditional reexamination, these new post-grant proceedings are designed to proceed relatively rapidly to final resolution.  Also unlike traditional reexamination, the estoppel provisions of the new proceedings will extend to the ITC.  As discussed on the Patents Post-Grant Blog, in view of these significant differences, it is possible that the ITC will eventually start to grant motions to stay Section 337 actions pending resolution of the new post-grant proceedings much more readily than it has in the past with traditional reexaminations. By way of background, patents asserted in Section 337 actions have often been the subject of concurrent reexamination proceedings at the PTO.  When this occurs, Respondents sometimes seek to stay the Section 337 investigation pending the outcome of the reexamination.  However, because of the unique nature of the ITC as a forum, stays pending reexamination have rarely been granted at the ITC.  See our November 6, 2009 post for more details on the factors used in evaluating motions to stay at the ITC.  For example, in Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same (Inv. No. 337-TA-605), the Commission reversed an ALJ’s Initial Determination granting a motion to stay the investigation pending the completion of reexamination proceedings.  The Commission made note of “Congress’s mandate that section 337 investigations be expeditiously adjudicated … and the Commission policy that, to the extent practicable and consistent with requirements of law, investigations be conducted expeditiously to avoid delay.”  Comm’n Op. at 6.  The Federal Circuit later denied a request for a writ of mandamus to vacate the Commission’s opinion.  In re Freescale Semiconductor, Inc., 2008 U.S. App. LEXIS 15739, at *4 (Fed. Cir. Jun. 25, 2008).  More recently, ALJ E. James Gildea denied a motion to stay an investigation pending reexamination in Certain Blu-Ray Disc Players, Components Thereof and Products Containing the Same (Inv. No. 337-TA-824).  See our April 18, 2012 post for more details. A primary reason that stays pending reexamination are rarely granted at the ITC is that the ITC has a statutory mandate to expeditiously process its docket.  See Certain Semiconductor Chips(Inv. No. 337-TA-605), Comm’n Op at 6.  Since patent reexamination proceedings can often take 4-5 years to come to an ultimate resolution, the ITC has been reluctant to stay its relatively fast investigations while the PTO resolves a drawn-out reexamination. However, the new post-grant proceedings allowed under the AIA are designed to conclude within 12-18 months of initiation.  The speed of these proceedings as compared to traditional reexamination could significantly alter the calculus used to determine whether a stay is appropriate at the ITC.  Since a stay pending a post-grant proceeding under the AIA would likely not last nearly as long as a stay pending reexamination, the justification for denying a stay based on the relative slowness of PTO proceedings may be significantly weakened in the future.   Moreover, since the estoppel provisions under the AIA will extend to the ITC, the ITC may have more of an incentive to allow the PTO to come to a determination as to an asserted patent’s validity in the first instance. The ITC will likely take a wait-and-see approach in the short term based on its historical practice of rarely granting motions to stay pending traditional reexamination.  However, if it becomes clear that the PTO is actually concluding trials within the mandated 12-18 month time frame, motions to stay ITC actions pending post-grant proceedings at the PTO stand a chance of gaining traction.  We will continue to monitor developments in this area.  For more information on the AIA and the new post-grant proceedings, please visit the Patents Post-Grant Blog.
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ITC Issues Article Regarding Increased Use Of Section 337 Investigations By Non-Practicing Entities

By Eric Schweibenz
|
Jul
24
The International Trade Commission (“ITC” or the “Commission”) recently issued an article (dated June 18, 2012) highlighting the dramatic increase in the agency’s Section 337 caseload from FY 2000 to 2011, and providing detailed statistics regarding the use of Section 337 investigations by non-practicing entities (“NPEs”). According to the article, the number of new Section 337 investigations has increased by over 530% from FY 2000 to FY 2011.  Current statistics for FY 2012 indicate that the agency’s caseload will remain stable or increase going forward, with proceedings involving high-tech products, such as smartphones and tablets, accounting for much of the workload.  For instance, “[s]martphone companies involved in Section 337 investigations during the first half of FY 2012 include: Apple (14), HTC (8), Motorola (4), Samsung (3), RIM (3), Nokia (3), and LG (1).”   In 1988, Section 337 was amended to allow IP rights-holders that do not manufacture products, i.e., NPEs, to obtain remedies at the ITC.  There is currently much debate as to whether NPEs should be permitted to obtain relief by instituting a Section 337 investigation.  In order to analyze the prevalence of NPE activity at the ITC, the Commission classified NPEs into two distinct categories -- Category 1 and Category 2 NPEs.  “Category 1 NPEs include manufacturers whose products do not practice the asserted patents; inventors who may have done R&D or built prototypes, but do not make a product covered by the asserted patents and are therefore relying on licensing to meet the domestic industry requirement; research institutions, such as universities and laboratories, that do not make products covered by the patents, and therefore are relying on licensing to meet the domestic industry requirement; and start-ups that possess IP rights but do not yet manufacture a product that practices the patent.”  Category 2 NPEs included entities that “do not manufacture products that practice the asserted patents, and whose business model primarily focuses on purchasing and asserting patents.”  Since the Supreme Court’s decision in 2006 in eBay v. MercExchange, the Commission reports that 258 investigations have been instituted trough the first quarter of 2012.  Of these 258 investigations, 26 (or 10%) were filed by Category 1 NPEs and 21 (or 8%) were filed by Category 2 NPEs.  Only one Category 2 NPE complainant (Rambus in Inv. No. 337-TA-661), and two Category 1 NPE complainants (Tessera in Inv. No. 337-TA-605 and UNeMed Corporation in Inv. No. 337-TA-679), were successful in obtaining an exclusion order.  Based upon this data, the Commission concludes that the agency’s increased caseload may not be directly driven by NPEs desire to litigate in the ITC following eBay. As to the suggestion that NPEs are using the ITC to obtain settlements with respondents (whom are likely involved in parallel district court proceedings against the NPE-complainant) the report finds that the data is inconclusive due to the relatively small number of NPE investigations.  However, despite the small sample size, the data shows that 38% of all Section 337 investigations involving Category 1 NPEs resulted in a settlement, while 62% of all investigations involving Category 2 NPEs resulted in a settlement. Lastly, the Commission reported that its data regarding the number of respondents named in Section 337 investigations varies substantially from year to year, thereby preventing the agency from accurately commenting on whether the total number of respondents in NPE investigations has increased significantly in recent years.  The article seems to suggest that any general increase in the number of Section 337 respondents may stem from the Federal Circuit’s decision in Kyocera v. Int’l Trade Comm’n, which prohibits the scope of remedial orders issued by the ITC from reaching third party downstream products containing accused components, rather than being directly correlated to increased NPE activity at the ITC.
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ITC Publishes New Proposed Rules Of Practice And Procedure

By Eric Schweibenz
|
Jul
30
On July 2, 2012, the International Trade Commission (“Commission”) published a Notice of proposed rulemaking, announcing amendments to its Rules of Practice and Procedure.  According to the Notice, the amendments are necessary to make certain technical corrections, to clarify certain provisions, to harmonize different parts of the Commission’s rules, and to address concerns that have arisen in Commission practice. The notice states that the amendments are part of a Plan for Retrospective Analysis of Existing Rules published by the Commission on February 13, 2012, at 77 Fed. Reg., 8114, which in turn was in response to Executive Order 13579 of July 11, 2011, and established a process under which the Commission will periodically review, and if necessary, modify, streamline, expand, or repeal its regulations so as to make “them more effective or less burdensome in achieving regulatory objectives.”  The Notice groups the proposed amendments by topic.  We do not address each of proposed amendments, but instead summarize the more significant proposals as follows: Proposed Rules Of General Applicability Section 210.5 is amended to standardize the time for an administrative law judge (ALJ) or the Commission to issue a public version of a confidential order, initial determination, opinion, or other document.  Presently, the time to do so varies, and the Commission proposes to amend section 210.5 such that the ALJ or Commission issues a public version of the confidential document within 30 days after issuing a confidential document.  The deadline can be extended for good cause by order. Section 210.8 provides for the filing of the complaint and for filings by the complainant, respondents, and members of the public on public interest issues raised by the complaint. The Commission proposes amending this rule to require a complainant, proposed respondent, or member of the public to file a public version of a submission at the same time that it files a confidential submission. Proposed Rules Regarding Pleadings The Commission proposes to amend section 210.12, regarding the content of a complaint.  Specifically, it proposes amending 210.12(a)(6)(i)-(ii) to require the complainant to plead with particularity whether it alleges a domestic industry that exists or a domestic industry that is in the process of being established.  In addition, the Commission proposes to amend 210.12(a)(11) to require the complainant to specify if it is requesting a general exclusion order, a limited exclusion order, and/or cease and desist orders under 19 U.S.C. § 1337(d), (f) or (g).  The Commission further proposes adding a paragraph 210.12(a)(12) requiring the complainant to identify the accused products with a clear statement in plain English in order to put the public on notice of the type of products involved. As an example, the notice states that the caption of an investigation might refer to "certain electronic devices," but the complaint would provide a further statement to identify the type of products involved as “mobile devices, tablets, or computers.” The Commission also proposes amending Section 210.14, which generally provides for amendments to pleadings and the notice of investigation. More specifically, the Commission proposes to standardize its process for consolidating related investigations.  The proposed rule would add a new paragraph (f) to provide that (i) the Commission may consolidate investigations, (ii) the presiding ALJ may consolidate the investigations if the affected investigations are before the same ALJ, and (iii) the chief ALJ may consolidate investigations if the investigations are before different ALJs and the ALJs agree that consolidation is appropriate. The Commission further proposes amending 210.14 to address the increasingly common practice of complainants filing substantial amendments to complaints during the pre-institution review period.  The notice states that substantial amendments to complaints (such as naming additional proposed respondents, additional patents or patent claims) during the pre-institution review period are problematic because they (i) complicate the Commission’s ability to solicit and obtain comments concerning the public interest implications of the complaint in a timely manner, (ii) place additional demands on Commission resources to assess the amendments and/or processing extensions before the conclusion of the original institution period, and (iii) effectively reduce the 30-day period proposed respondents normally have to review the allegations against them. The proposed rule adds a new sentence at the end of rule 210.14(a).  It provides that if a complainant significantly amends a complaint prior to institution, the amendment will restart the normal 30-day process for determining whether to institute the investigation. Proposed Rules Regarding Motions With regarding to motions for default, complainants have failed in certain investigations to follow the two step approach in section 210.16(b)(1) to first move for an order to show cause why the respondent should not be held in default.  Then, only if the respondent fails to make this showing, would the ALJ issue an order finding the respondent in default.  Accordingly, the Commission proposes to split section 210.16(b)(1) into two parts, Section 210.16(b)(1)(A) and Section 210.16(b)(1)(B), to emphasize these two separate steps. With respect to parties failing to act other than by failing to appear and answer the complaint and notice of investigation, the Commission proposes amending Section 210.17 to provide that a respondent who initially appears but who later wishes to default may file a notice of its intention to default. This noticed default will be treated the same as other failures to act in this section, such that the ALJ or Commission may draw the same adverse inferences that can be traditionally drawn per this section of the statute. Section 210.21(b) regards motions to terminate and investigation due to settlement, and the Commission proposes to amend this section to clarify that the parties must provide a copy of any documents referenced in the settlement agreements because these documents are considered part of the settlement agreement.  With regard to terminations by consent orders, the Commission proposes revising section 210.21(c) to clarify the terms to be included in the consent order, and that although consent order stipulations can contain additional terms, the consent order itself cannot add terms beyond those provided for in this section, and that the Commission will not enforce any such additional terms.  The Commission also proposes that parties filing motions to terminate by consent order must submit copies of any agreements with other parties, for example, any settlement or licensing agreements. Proposed Rules Regarding Discovery Section 210.28, regarding depositions contains two important proposed amendments.  With respect to deposition notices directed to parties (i.e., corporations), the present rule does not provide a deadline for the party to respond.  The Commission proposes applying the same ten-day deadline that presently applies to interrogatories and documents, such that a party will have ten days to respond and object to a corporate deposition notice.  The Commission further proposes to limit the number of depositions taken as follows:
  • Complainants as a group can take the greater of five fact depositions per respondent, or no more than 20 fact depositions;
  • The respondents, as a group, can take no more than 20 fact depositions;
  • The Commission investigative attorney can take a maximum of 10 fact depositions, and can participate in all depositions noticed by the parties.
The ALJ, upon motion, may increase these deposition numbers for good cause. With respect to interrogatories, the Commission proposes amending section 210.29 to follow the ground rules of several ALJs, and limit the number of interrogatories that can be served on any other party to 175, including subparts, absent stipulation or an order upon motion to the ALJ for good cause. Proposed Rules Regarding Determinations And Actions Taken Section 210.43 pertains to petitions for review of an initial determination of an ALJ to the Commission.  The Commission proposes to make more explicit that attempts to evade page limits though reference to previously filed pleadings will not be tolerated by reiterating that all arguments not contained within the petition or its response are waived.  Section 210.43(a) is also amended to correct a technical error, and state that the deadline for filing petitions to review an initial determination that terminates an investigation in its entirety on summary determination is ten calendar days, rather than ten business days.  The Commission further proposes to amend section 210.43(a) to provide that petitions for review of enforcement initial determinations in formal enforcement proceedings are due 10 days after the service of the enforcement initial determination, and responses thereto are due 5 business days after the service of the petitions for review. * * * * * Practitioners should carefully review the entirety of these proposed rules.  To be assured of consideration, written comments to the proposed rules must be received by 5:15 p.m. within 60 days after publication of the notice of proposed rulemaking.
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Meredith Broadbent Sworn In As ITC Commissioner

By Eric Schweibenz
|
Sep
28
On September 11, 2012, the ITC issued a press release announcing that Meredith Broadbent has been sworn in as a commissioner of the U.S. International Trade Commission. According to the press release:
Meredith Broadbent, a Republican of Virginia, has been sworn in as a Commissioner of the U.S. International Trade Commission (USITC). Nominated to the USITC by President Barack Obama on November 8, 2011, she was confirmed by the U.S. Senate in August 2, 2012. She will fill the Commission term expiring on June 16, 2017. Commissioner Broadbent held the William M. Scholl Chair in International Business at the Center for Strategic and International Studies from October 2010 until her appointment. From 2003 to 2008, she served as Assistant U.S. Trade Representative for Industry, Market Access, and Telecommunications. In that position, she was responsible for developing U.S. policy that affected trade in industrial goods, telecommunications, and e-commerce. She led the U.S. negotiating team for the Doha Round negotiations to reduce tariff and nontariff barriers on industrial goods and successfully concluded an innovative plurilateral trade agreement with the European Union, Japan, Korea, and Taiwan. She also directed an administration initiative to reform the Generalized System of Preferences program for developing countries. From 2009 to 2010, she was a Trade Advisor at the Global Business Dialogue, a multinational business association focused on international trade and investment issues. Earlier in her career, Commissioner Broadbent served as a senior professional staff member on the Republican staff of the Committee on Ways and Means of the U.S. House of Representatives. In that position, she drafted and managed major portions of the Trade and Development Act of 2000, legislation to authorize normal trade relations with China, and the Trade Act of 2002, which included trade promotion authority and the Andean Trade Promotion and Drug Eradication Act. Prior to that, she served as professional staff for the House Ways and Means Trade Subcommittee, where she was instrumental in the development and House passage of the implementing bills for the North American Free Trade Agreement and Uruguay Round Agreements. Commissioner Broadbent holds a Bachelor of Arts degree in history from Middlebury College and a Master of Business Administration degree from the George Washington University School of Business and Public Management. Originally from Cleveland, Ohio, she is married to Charles Riedel, has two sons, Charles and William, and resides in McLean, Virginia.
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ITC Publishes New Proposed Rules Regarding Scope of Discovery

By Eric Schweibenz
|
Oct
06
On October 5, 2012, the International Trade Commission (“Commission”) published a Notice of proposed rulemaking, announcing amendments to its Rules of Practice and Procedure.  In particular, the Commission proposes to amend Section 210.27 by adding new subsections (c), (d), and (e) that include specific limitations on electronically stored information, new general limitations on discovery, and specific procedures to address withholding otherwise discoverable information on the grounds of attorney-client privilege and work product protection, and procedures to address the potential waiver of such privileged information if produced during the discovery process. According to the notice, the intended effect of the proposed amendments is to, “reduce expensive, inefficient, unjustified, or unnecessary discovery practices in agency proceedings while preserving the opportunity for fair and efficient discovery for all parties.”  Each of the three new proposed subsections of Section 210.27 will be separately addressed below. Proposed Limitations on Electronically Stored Information The commentary accompanying the proposed rules states that new subsection 210.27(c) is similar to Federal Rule of Civil Procedure 26(b)(2)(B), and the new subsection would provide that, “a person need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost.”  The proposed subsection further provides that a party seeking such information could nonetheless file a motion to compel its production.  If, in response to the motion to compel, the person from whom discovery is sought makes a showing that the information is not reasonably accessible because of undue burden or cost, then the administrative law judge (“ALJ”) would be allowed to order discovery from such sources if the requesting party showed good cause, taking into account proposed considerations contained in new subsection (d).  Proposed subsection (c) would also allow the ALJ to specify conditions for discovery of electronically stored information, for example by requiring the requesting party to pay part or all reasonable costs of obtaining information from sources that are not reasonably accessible.  The comments specifically state that the case law developed under Federal Rule of Civil Procedure 26(b)(2)(B) “would provide guidance for application of proposed subsection (c).” General Limitations on Discovery The commentary to the proposed rules states that proposed new subsection (d) is similar to Federal Rule of Civil Procedure 26(b)(2)(C), and that new subsection (d) requires limitations on discovery if the ALJ determines that the discovery sought is duplicative or can be obtained from a less burdensome source; the party seeking discovery has had ample opportunity to obtain the information; or the burden of the proposed discovery outweighs its likely benefit.  However, the comments provide that proposed new subsection (d) differs from its Federal Civil Rule counterpart by (1) requiring the ALJ to limit discovery if the person from whom discovery is sought has waived the legal position that justified the discovery or has stipulated to the facts pertaining to the issue to which the discovery is directed, and (2) the proposed subsection (d) requires the ALJ to consider the importance of the discovery in resolving the issues to be decided by the Commission rather than, in the case of the Federal Civil Rule counterpart, analyzing the importance of the issues at stake in the action. Procedures to Claim and Mitigate Waiver of Privileged Information The commentary states that proposed subsection (e) addresses uncertainly surrounding any alleged waiver of privileged information that is produced during discovery, and the absence of any Commission rules requiring the production of a privilege log when withholding information on the basis of privilege or work product protection.  The comments state that proposed subsection (e) provides uniform procedures requiring the production of privilege logs similar to Federal Rule of Civil Procedure 26(b)(5).  However, proposed subsection (e) provides more detail than its Federal Rule counterpart by (1) describing in greater detail the specific categories required to be contained within the privilege log, and (2) adding that the privilege log must be produced within ten days after expressly making the claim when responding to a relevant question or request.  The proposed subsection (e) allows parties to agree to waive compliance with the privilege log requirement for certain time frames. The comments also state that proposed subsection (e) is similar to Federal Rule of Civil Procedure 26(b)(5)(B)’s procedure for addressing the recall or mitigation of potentially privileged information that has been produced during discovery.  The proposed subsection (e) goes further than its Federal Rule counterpart by providing strict timelines for persons receiving alleged privileged information to return, sequester, or destroy the specified information; not use or disclose the information until the dispute is resolved; retrieve the information from anyone to whom the information was disclosed prior to the notification of privilege; meet and confer to resolve the privilege question; and then file any motion to compel the production of the privileged information, using only the description of the potentially privileged information  provided on a privilege log.  The comments state that subsection (e) is not intended to alter any state or federal law regarding waiver of privileged or work-product information, and that the Commission would expect ALJs “to apply federal and common law when determining the consequences of any allegedly inadvertent disclosure,” including, “whether the holder of the privilege or protection took reasonable steps to prevent disclosure of the information and other considerations found in Federal Rule of Evidence 502.” In order to be considered, the notice states that written comments regarding the proposed rules must be received by 5:15 p.m. on December 4, 2012.
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U.S. Department Of Justice And U.S. Patent & Trademark Office Issue Joint Policy Statement On Remedies Involving Standards-Essential Patents

By Eric Schweibenz
|
Jan
18
On January 8, 2013, the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the U.S. Patent & Trademark Office (“USPTO”) issued a joint policy statement on providing injunctive relief in judicial proceedings or Section 337 investigations when the patentee has agreed to license the patent-in-suit on reasonable and nondiscriminatory (“RAND”) or fair, reasonable and nondiscriminatory (“FRAND”) (collectively, “F/RAND”) terms while participating in standards-setting activities at a standards-developing organization (“SDO”). By way of background, Section 337(d)(1) provides that the International Trade Commission (“Commission”) may deny entry of an exclusion order if it finds that issuing the exclusion order would have a greater adverse impact on the (1) public health and welfare; (2) competitive conditions in the U.S. economy; (3) production of like or directly competitive articles in the U.S.; or (4) U.S. consumer, than would be gained by protecting the patent holder.  SEPs can pose special problems when considering the proper remedy for infringement.  For example, as explained in the joint policy statement, when an industry standard incorporates patented technology owned by a participant in the standards-setting process, and the standard becomes established in the industry, it may be prohibitively difficult and expensive to switch to a different technology within the established standard or to a different standard entirely.  As a result, the patentee could potentially take advantage of increased market power by asserting the SEPs to exclude competitors from the market or obtain a higher price for its use than would have otherwise been possible before the standard was set, when alternative technologies could have been chosen.  These actions may induce prospective implementers to postpone or avoid making commitments to a standardized technology or to make inefficient investments in developing and implementing a standard in an effort to protect themselves.  Moreover, the unwarranted higher royalties could be passed on to consumers in the form of higher prices. As further explained in the joint policy statement, to reduce opportunistic conduct in the adoption of voluntary consensus standards, some SDOs have relied on voluntary licensing commitments by their participants, including the commitment to license SEPs on F/RAND terms.  Such commitments facilitate the bilateral licensing negotiations necessary for successful widespread adoption of an industry standard and provide assurances to implementers of that standard that the patented technologies will be available to parties seeking to license them, while also benefitting owners of SEPs in the form of expanded marketing opportunities and sources of revenue.  In light of these and other potential benefits, the U.S. supports voluntary F/RAND licensing domestically and abroad. A patentee’s F/RAND commitments can impact the remedy for infringement of a valid and enforceable SEP.  For instance, an injunction or exclusion order based on a F/RAND-encumbered patent may be inconsistent with the public interest, especially in cases where the exclusion order appears to be incompatible with the terms of the patentee’s F/RAND licensing commitment to an SDO.  It is possible in such cases that the patentee is attempting to use the exclusion order to pressure an implementer to accept more onerous licensing terms than those provided for by the patentee’s F/RAND commitment and the SDO’s policy.  Such an order may harm competition and consumers by degrading one of the SDO’s tools for mitigating the threat of opportunistic actions by owners of SEPs.  On the other hand, if a putative licensee is unable or refuses to take a F/RAND license and is acting outside the scope of the patentee’s F/RAND commitment (e.g., by refusing to negotiate on F/RAND terms or to pay the F/RAND royalty), then an exclusion order could be appropriate. Thus, the DOJ and USPTO are concerned about the potential impact of exclusion orders on competitive conditions in the U.S. and domestic consumers in cases involving F/RAND-encumbered patents that are essential to a standard.  More specifically, the DOJ and USPTO “believe that, depending on the facts of individual cases, the public interest may preclude the issuance of an exclusion order in cases where the infringer is acting within the scope of the patent holder’s F/RAND commitment and is able, and has not refused, to license on F/RAND terms.”  The DOJ and USPTO “urge the [Commission] to consider whether a patent holder has acknowledged voluntarily through a commitment to license its patents on F/RAND terms that money damages, rather than injunctive or exclusionary relief, is the appropriate remedy for infringement.”  The joint policy statement also reminded the Commission that the public interest factors in Section 337(d)(1) “‘are not meant to be given mere lip service,’ but rather ‘public health and welfare and the assurance of competitive conditions in the United States economy must be the overriding considerations in the administration of this statute’” (quoting Certain Inclined Field Accelartion Tubes & Components Thereof, Inv. No. 337-TA-67, Comm’n Op. at 22 (emphasis in original)). As suggested in the joint policy statement, one approach the Commission may take in crafting a remedy with respect to an SEP is to delay entry of an exclusion order until a F/RAND royalty rate has been determined (e.g., by a court or arbitrator).  Once the F/RAND rate is determined, the respondent could be given the option of either paying the F/RAND rate or having the exclusion order go into affect.
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ITC Issues Article Regarding Statistics On Section 337 Investigations With Emphasis On NPE Activity

By Eric Schweibenz
|
Apr
22
On April 15, 2013, the International Trade Commission (“ITC” or the “Commission”) issued an article highlighting the sustained increase in the agency’s Section 337 caseload over the last five years and providing detailed statistics regarding the use of Section 337 investigations by non-practicing entities (“NPEs”). According to the article, the number of new Section 337 investigations has increased significantly over the last five years and is expected to remain at elevated levels.  This increase drove the Commission to construct a new courtroom specially equipped to handle complex cases to maintain expeditious target dates for investigation completion. High tech products dominate Section 337 investigations.  Computer and telecommunications products were the basis of 25% and 30% of the investigations in 2011 and 2012, respectively.  Liquid crystal displays and TVs accounted for 15% and 5% of the investigations in 2011 and 2012, respectively, and other consumer electronic products were at issue in 15% and 20% of the investigations in 2011 and 2012, respectively. In 1988, Section 337 was amended to allow IP rights-holders that do not manufacture products, i.e., NPEs, to obtain remedies at the ITC.  In order to analyze the prevalence of NPE activity at the ITC, the Commission classified NPEs into two distinct categories — Category 1 and Category 2 NPEs.  Category 1 NPEs include entities that do not manufacture products that practice the asserted patents, including “inventors who may have done R&D or built prototypes, but do not make a product covered by the asserted patents and are therefore relying on licensing to meet the domestic industry requirement; research institutions, such as universities and laboratories, that do not make products covered by the patents, and therefore are relying on licensing to meet the domestic industry requirement; and start-ups that possess IP rights but do not yet manufacture a product that practices the patent, and manufacturers whose product does not practice the asserted patent.”  Category 2 NPEs included entities that “do not manufacture products that practice the asserted patents, and whose business model primarily focuses on purchasing and asserting patents.” Some commentators have argued that the Supreme Court’s eBay v. MercExchange decision in 2006, making it more difficult to obtain injunctions in district court, may be driving NPEs to use the ITC.  However, the Commission’s data does not support this conclusion.   Since the eBay decision, the ITC instituted 301 investigations (through the first quarter of 2013).  Of these, 11% were based on Category 1 NPEs and 9% were based on Category 2 NPEs.  Yet, only four NPEs were successful in obtaining exclusion orders, two Category 1 NPEs and two Category 2 NPEs.  The ITC also notes that each of these NPEs (or a subsidiary) developed the technology at issue in the investigation. As to the suggestion that NPEs are using the ITC to obtain settlements with respondents (whom are likely involved in parallel district court proceedings against the NPE-complainant) the report finds that the data is inconclusive due to the relatively small number of NPE investigations.  However, despite the small sample size, the data shows that 35.7% of all Section 337 investigations involving Category 1 NPEs resulted in a settlement, while 54.6% of all investigations involving Category 2 NPEs resulted in a settlement.  By way of comparison, the settlement rate for all other investigations is 49.5%. Lastly, the Commission reported that its data regarding the number of respondents named in Section 337 investigations varies substantially from year to year across all complainant categories, preventing the agency from accurately commenting on whether the total number of respondents in NPE investigations has increased significantly in recent years.  For example, in 2012 investigations based on complaints from Category 1 NPEs ranged from 2 to 35 respondents.  Complaints from Category 2 NPEs ranged from 2 to 45 respondents, and all other investigations ranged from 1 to 35 respondents.  The ITC has previously suggested that large numbers of respondents may stem from the Federal Circuit’s decision in Kyocera v. Int’l Trade Comm’n, which prohibits the scope of remedial orders issued by the ITC from reaching non-party downstream products containing accused components.
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ITC Adopts Final Rules Regarding Scope Of Discovery

By Eric Schweibenz
|
May
28
On May 21, 2013, the International Trade Commission (“Commission”) published its Final Rules, amending its Rules of Practice and Procedure. The purpose behind the Commission’s new rules is “to reduce expensive, inefficient, unjustified, or unnecessary discovery practices in agency proceedings while preserving the opportunity for fair and efficient discovery for all parties.”  See recent ITC article discussing rule changes.   The Commission’s final rules are a follow-up to the proposed rules published in the Federal Register on October 5, 2012.  See our October 6, 2012 post for a detailed discussion of the proposed rules.  All eight changes made between the proposed rules and the final rules are laid out in the “Overview of the Amendments to the Commission’s Rules” section of the Federal Register publication. The Commission received eight sets of comments during the public comment period, but only made technical, non-substantive changes based on the received comments.  One of the suggestions made during the comment period was to explicitly define what types of materials are “not reasonably accessible.”  The Commission rejected this suggestion, stating that such a change is unnecessary. Further, the Commission stated that it would be difficult to create a comprehensive list of things that are “not reasonably accessible.” The final rules are effective as of June 20, 2013.
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ITC Launches Pilot Program Using Early Disposition Of Key Issues To Lessen Litigation Costs

By Eric Schweibenz
|
Jun
27
On June 24, 2013, the International Trade Commission (“ITC” or the “Commission”) issued a press release stating that the Commission has launched a pilot program “to test whether early rulings on certain dispositive issues in some section 337 investigations could limit unnecessary litigation.” According to the release, when determining whether or not to institute an investigation, the Commission will identify investigations likely to present a dispositive issue and will direct the presiding Administrative Law Judge (“ALJ”) to expedite discovery, factfinding (including an evidentiary hearing), and determination of the potentially dispositive issue.  The Commission’s goal is for these expedited issues to be determined within 100 days of the institution of the investigation.  The ITC will proceed to the additional merits of the case only if the complainant survives determination of the early dispositive issue. Examples of potentially dispositive issues include the existence of a domestic industry, importation, or standing. In an article providing additional details about the pilot program, the Commission explained that specific timeframes for expedited activities will be established, and noted that the 100 day deadline may be subject to a limited extension for good cause.  Once an early Initial Determination (“ID”) is issued, the parties would have five calendar days to file petitions for review, with replies due three business days after any petition has been served.  The effect of an early ID terminating an investigation (such as a finding of no domestic industry) would be to stay the investigation pending Commission action.  Based on any petitions and replies received, the Commission will determine whether to review the early ID within 30 days after issue, and will “normally” complete review within 30 days.  If the early ID is not reviewed, it will become the Commission’s final determination.  The Commission “recognizes that resolving issues in pilot program investigations will be challenging for the ALJs and the parties.”  However, the Commission also notes that the complainant controls the timing of filing the complaint, and in most instances any necessary information should have been acquired prior to filing the complaint.  In other words, the complainant “should be prepared to prove its case, including such elements as domestic industry, importation, and standing, without extensive discovery on these issues.” The pilot program is being used in the institution of Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof (Inv. No. 337-TA-874), where the Commission directed the ALJ in the notice of institution to “collect facts and issue an early ruling on the domestic industry issue within 100 days of the investigation’s institution.”  See our March 25 and March 29, 2013 post for additional details about this investigation.
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President Obama Vetoes ITC Final Determination Of Violation In Certain Electronic Devices Including Wireless Communication Devices, Portable Music And Data Processing Devices, And Tablet Computers (337-TA-794)

By Eric Schweibenz
|
Aug
05
On August 3, 2013, U.S. Trade Representative, Ambassador Michael B.G. Froman, issued a letter to Chairman Williamson of the U.S. International Trade Commission (the “Commission”) announcing that President Barack Obama disapproves of the Commission’s determination to issue an exclusion order and a cease and desist order in Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers (Inv. No. 337-TA-794).    By way of background, the Complainants in this investigation are Samsung Electronics Co., Ltd. and Samsung Telecommunications America, LLC (collectively, “Samsung”).  On September 14, 2012, ALJ E. James Gildea issued an Initial Determination (“ID”) finding no violation of Section 337 with respect to U.S Patent Nos. 7,706,348 (the ‘348 patent); 7,486,644 (the ‘644 patent); 7,450,114 (the ‘114 patent); and 6,771,980 (the ‘980 patent) by Respondent Apple Inc. (“Apple”).  Specifically, ALJ Gildea found that the ‘348, ‘644, and ‘980 patents were valid but not infringed and that the ‘114 patent was both invalid and not infringed.   The ALJ also found that the economic prong of the domestic industry requirement was satisfied with respect to each of the patents, but that the technical prong was not satisfied for any of the patents. On November 19, 2012, the Commission determined to review the ID in its entirety and issued a notice requesting written submissions from the parties and the public on certain issues, including the assertion of FRAND-related patents at the Commission, and on the issues of remedy, public interest and bond.  See our November 20, 2012 post for more details.  On March 13, 2013, the Commission issued another notice requesting written submissions from the parties and the public on various additional topics, including some FRAND-related topics.  See our March 21, 2013 post for more details.  As set forth in its notice reporting the opinion, the Commission determined that Apple had violated Section 337 in connection with the importation and sale of wireless communication devices, portable music and data processing devices, and tablet computers that infringe certain claims of the ‘348 patent, but not with regard to the other patents.  The Commission issued a limited exclusion order and a cease and desist order directed at Apple, and terminated the investigation.  See our June 6, 2013 post for more details on the notice and submissions received and our July 17, 2013 post for more details on the Commission’s opinion in this investigation. Ambassador Froman’s August 3, 2013 letter provides, in pertinent part:
The Administration is committed to promoting innovation and economic progress, including through providing adequate and effective protection and enforcement of intellectual property rights.  Relief available to the owners of intellectual property rights through section 337 is an important facet of achieving that objective.  At the same time, standards, and particularly voluntary consensus-based standards set by SDOs, have come to play an increasingly important role in the U.S. economy.  Important policy considerations arise in the enforcement of those patents incorporated into technical standards without which such standards cannot be implemented as designed, when the patent holder has made a voluntary commitment to offer to license these SEPs on FRAND terms.  Licensing SEPs on FRAND terms is an important element of the Administration’s policy of promoting innovation and economic progress and reflects the positive linkages between patent rights and standards setting. I have reviewed the various policy considerations set out above based on the information provided in this case, including information developed in connection with the Commission’s determination.  Although the parties dispute the facts vigorously, it is beyond the scope of this policy review to revisit the Commission’s legal analysis or its findings based on its record. After extensive consultations with the agencies of the Trade Policy Staff Committee and the Trade Policy Review Group, as well as other interested agencies and persons, I have decided to disapprove the USITC’s determination to issue an exclusion order and cease and desist order in this investigation.  This decision is based on my review of the various policy considerations discussed above as they relate to the effect on competitive conditions in the U.S. economy and the effect on U.S. consumers. I would like to underscore that in any future cases involving SEPs that are subject to voluntary FRAND commitments, the Commission should be certain to (1) to examine thoroughly and carefully on its own initiative the public interest issues presented both at the outset of its proceeding and when determining whether a particular remedy is in the public interest and (2) seek proactively to have the parties develop a comprehensive factual record related to these issues in the proceedings before the Administrative Law Judge and during the formal remedy phase of the investigation before the Commission, including information on the standards-essential nature of the patent at issue if contested by the patent holder and the presence or absence of patent hold-up or reverse hold-up.  In addition, the Commission should make explicit findings on these issues to the maximum extent possible.  I will look for these elements in any future decisions involving FRAND-encumbered SEPs that are presented for policy review.  The Commission is well-positioned to consider these issues in its public interest determinations.  This policy decision is not an endorsement or a criticism of the Commission’s decision or analysis.  My decision to disapprove this determination does not mean that the patent owner in this case is not entitled to a remedy.  On the contrary, the patent owner may continue to pursue its rights through the courts. 
For more information about the public interest factors and the history of Presidential disapproval of ITC remedies under Section 337, please see our June 17, 2009 post.
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ITC Names New Administrative Law Judge

By Eric Schweibenz
|
Sep
24
On September 23, 2013, the International Trade Commission issued a press release announcing that Judge Sandra (Dee) Lord will become an administrative law judge at the ITC. The press release relating to ALJ Lord states:
Irving A. Williamson, Chairman of the United States International Trade Commission (USITC), announced today that Judge Sandra (Dee) Lord has joined the USITC as an Administrative Law Judge (ALJ).  Lord will manage litigation, preside over evidentiary hearings, and make initial determinations in the agency's investigations involving unfair practices in import trade.  These investigations most often involve allegations of patent and trademark infringement. Prior to joining the USITC, Lord served as an ALJ with the Social Security Administration's Office of Disability Adjudication and Review (National Hearing Center) in Falls Church, VA.  Previously, she was an ALJ in the Social Security Administration's Raleigh Hearing Office in Raleigh, NC. Lord served as a Special Master in the U.S. Court of Federal Claims' Office of Special Masters from 2009-2012. From 1997 to 2008, Lord was a trial attorney in the Commercial Litigation Branch/Frauds section in the Department of Justice's Civil Division. Prior to that, she was Of Counsel at the Washington, DC, law firm of Ross, Dixon & Masback (now Troutman Sanders, LLC); served as Associate General Counsel at the Howard Hughes Medical Institute in Bethesda, MD; and was an Assistant Counsel for Appellate Litigation in the U.S. Department of Labor's Office of the Solicitor. Lord holds a juris doctor degree from the Georgetown University Law Center and a bachelor of arts degree, summa cum laude, from Yale University.  She is a member of the bars of the District of Columbia and the State of Maryland.
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President Obama Fails To Veto ITC Final Determination Of Violation In Certain Electronic Digital Media Devices (337-TA-796)

By Eric Schweibenz
|
Oct
16
On October 8, 2013, the U.S. Trade Representative, Ambassador Michael B.G. Froman, issued a statement confirming that President Barack Obama would not disapprove of the International Trade Commission’s (the “Commission”) final determination to issue an exclusion order and cease and desist order in Certain Electronic Digital Media Devices and Components Thereof (Inv. No. 337-TA-796). By way of background, the Complainant in this investigation is Apple Inc. (“Apple”).  On October 24, 2012, ALJ Thomas B. Pender issued an Initial Determination (“ID”) which found that Respondents Samsung Electronics Co., Ltd. and Samsung Telecommunications America, LLC (collectively, “Samsung”) violated Section 337 by infringement of certain valid claims of U.S. Patent Nos. D618,678; 7,479,949 (the ‘949 patent); RE 41,922 (the ‘922 patent); and 7,912,501 (the ‘501 patent).  See our January 22, 2013 post for more details on the public version of the ID.  On January 23, 2013, the Commission issued a notice determining to review the ID in its entirety, and also remanded the investigation to ALJ Pender to consider certain issues related to the ‘922 patent and the ‘501 patent.  See our January 24, 2013 post for more details. On March 26, 2013, ALJ Pender issued the subject Remand ID finding that claims 34 and 35 of the ‘922 patent are infringed by the text-selection feature of Samsung’s accused products, and that claim 3 of the ‘501 patent is not infringed.  See our April 8, 2013 post for more details.  Both Apple and Samsung petitioned for review of the Remand ID.  On May 28, 2013, the Commission issued a notice determining to review the Remand ID in its entirety.  See our May 31, 2013 post for more details. On August 9, 2013, the Commission issued a notice finding a violation of Section 337 and issuing a limited exclusion order and cease and desist order against Samsung.  Specifically, the Commission found that certain Samsung smartphones and tablet computers infringe claims 1, 4-6, 10 and 17-20 of the ‘949 patent and claims 1-4 and 8 of the ‘501 patent, that the asserted claims of the ‘949 and ‘501 patents have not been proven to be invalid, and that a domestic industry exists relating to articles protected by the ‘949 and ‘501 patents.  See our August 12, 2013 post for more details. Ambassador Froman’s October 8, 2013 notice provides, in pertinent part:
This Administration remains committed to advancing innovation and economic progress in the United States and globally.  Consistent with that policy, ensuring adequate and effective protection of intellectual property rights, including enforcement of such rights at the U.S. border through exclusion orders under section 337, is an important national interest.  At the same time, an exclusion order’s impact on competitive conditions in the Unites States and U.S. consumers are considerations relevant to my policy review of USITC determinations under section 337. ***** After carefully weighing policy considerations, including the impact on consumers and competition, advice from agencies, and information from interested parties, I have decided to allow the Commission’s determination in Certain Electronic Digital Media Devices and Components Thereof, Investigation No. 337-TA-796, to become final.  In so doing, I am continuing the practice of successive Administrations of exercising section 337 policy review authority with restraint. During the course of the USITC’s investigation and during the policy review, Samsung raised concerns about the scope of the USITC’s determination and possible issues that could arise in connection with U.S. Customs and Border Protection (CBP) interpretation and enforcement of the resulting exclusion order.  More generally, Samsung and other members of the patent community have expressed concerns regarding the clarity of the USITC’s exclusion orders and, in particular, regarding CBP procedures for interpretation and enforcement of those orders. The Office of the Intellectual Property Enforcement Coordinator (IPEC) is conducting an interagency review aimed at strengthening the procedures and practices used during the enforcement of USITC exclusion orders.  USTR, the Department of Justice, the Department of Homeland Security, and several other agencies are working with IPEC in this review.  I look forward to receiving recommendations to address these issues on a systemic basis. With regard to the exclusion order issued in this investigation, I note that the order includes a list of devices that the USITC determined did not infringe the two patents at issue.  The order expressly states that these devices and any other Samsung electronic media devices incorporating the approved design-around technologies are not covered.  Thus, I do not believe that concerns with regard to enforcement related to the scope of the order, in this case, provide a policy basis for disapproving it.  If questions should arise about the scope of the exclusion order, I would urge close coordination between CBP and the USITC in addressing such enforcement issues.
As we noted in our August 5, 2013 post, President Obama recently vetoed the Commission’s determination to issue an exclusion order and cease and desist order directed at Apple for violating Section 337 in connection with the importation and sale of accused products that infringe certain claims of Samsung’s U.S. Patent No. 7,706,348 in Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers (Inv. No. 337-TA-794).
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ITC Issues Article Regarding Section 337 Investigation Statistics

By Eric Schweibenz
|
Jun
13
On June 10, 2014, the International Trade Commission (“ITC” or the “Commission”) issued an article regarding statistical facts and trends relating to certain aspects of Section 337 investigations. According to the article, the number of new Section 337 investigations has remained at elevated levels over the past several years.  While the number of new investigations peaked in calendar year 2011 and has decreased somewhat in the years since, new investigations are still being instituted at historically high levels.  The Commission notes in particular that the number of ancillary proceedings has been increasing in recent years. High tech products dominate Section 337 investigations.  Computer and telecommunications products were the basis of 30% and 38% of the investigations in 2012 and 2013, respectively.  Other consumer electronic products were at issue in 23% and 7% of the investigations in 2012 and 2013, respectively.  However, the article also notes that Section 337 investigations have involved a wide range of other types of products in recent years, including pharmaceuticals, medical devices, and small consumer items. In 1988, Section 337 was amended to allow IP rights-holders that do not manufacture products (i.e., non-practicing entities or NPEs) to obtain remedies at the ITC.  In order to analyze the prevalence of NPE activity at the ITC, the Commission classified NPEs into two distinct categories — Category 1 and Category 2 NPEs.  Category 1 NPEs include entities that do not manufacture products that practice the asserted patents, including “inventors who may have done R&D or built prototypes but do not make a product covered by the asserted patents and therefore rely on licensing to meet the domestic industry requirement; research institutions, such as universities and laboratories, that do not make products covered by the patents, and therefore rely on licensing to meet the domestic industry requirement; start-ups that possess IP rights but do not yet manufacture a product that practices the patent; and manufacturers whose own products do not practice the asserted patents.”  Category 2 NPEs included entities that “do not manufacture products that practice the asserted patents and whose business model primarily focuses on purchasing and asserting patents.” According to the article, some commentators have argued that the Supreme Court’s eBay v. MercExchange decision in 2006, making it more difficult to obtain injunctions in district court, may be driving NPEs to use the ITC.  However, the Commission’s data does not support this conclusion.   Since the eBay decision, the ITC has instituted 337 Section 337 investigations (through the first quarter of 2014).  Of these, Category 1 NPEs accounted for 10%, and Category 2 NPEs accounted for an additional 10%.  Yet, only four NPEs were successful in obtaining exclusion orders, two Category 1 NPEs and two Category 2 NPEs.  The ITC also notes that each of these NPEs (or a subsidiary) developed the technology at issue in the investigation. As to the suggestion that NPEs are using the ITC to obtain settlements with respondents, the report finds that the data is inconclusive due to the relatively small number of NPE investigations.  However, despite the small sample size, the data shows that 30.3% of all Section 337 investigations involving Category 1 NPEs resulted in a settlement, while 50.0% of all investigations involving Category 2 NPEs resulted in a settlement.  By way of comparison, the settlement rate for all other investigations is 48.2%. Lastly, the Commission reported that its data regarding the number of respondents named in Section 337 investigations varies substantially from year to year across all complainant categories.  For example, in 2013, the number of respondents in investigations based on complaints from Category 1 NPEs ranged from 3 to 15, and the number of respondents in investigations based on complaints from Category 2 NPEs ranged from 2 to 21.  The number of respondents in all other investigations ranged from 1 to 24. According to the article, commentators have previously suggested that large numbers of respondents may stem from the Federal Circuit’s decision in Kyocera v. Int’l Trade Comm’n, which prohibits the scope of remedial orders issued by the ITC from reaching non-party downstream products containing accused components.
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ITC Introduces New Section 337 Research Tool

By Eric Schweibenz
|
Oct
06
On September 30, 2014, the U.S. International Trade Commission issued a press release announcing the introduction of 337Info.  According to the press release, 337Info is a new web-based tool that will help users find information about and track Section 337 investigations.

In particular, 337Info is an information retrieval system that contains data about Section 337 investigations, including:
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ITC Names New Administrative Law Judge MaryJoan McNamara

By Eric Schweibenz
|
Aug
17
On August 17, 2015, the International Trade Commission issued a press release announcing that Judge MaryJoan McNamara has become an administrative law judge at the ITC.

The press release relating to ALJ McNamara states:
Meredith M. Broadbent, Chairman of the United States International Trade Commission (USITC), announced today that Judge MaryJoan McNamara has joined the USITC as an Administrative Law Judge (ALJ). McNamara will manage litigation, preside over evidentiary hearings, and make initial determinations in the agency's investigations involving unfair practices in import trade. These investigations most often involve allegations of patent and trademark infringement.Prior to joining the USITC, McNamara served as an ALJ with the Social Security Administration's Office of Disability Adjudication and Review (National Hearing Center) in Baltimore, MD. Previously, she was a civil litigation attorney in private practice; a consultant to the U.S. Department of State on certain provisions of the Hague Convention; and an EEO specialist in the U.S. Department of Agriculture's Office of Adjudication and Compliance, where she drafted final agency decisions.Earlier in her career, McNamara was an attorney in private practice in Baltimore, MD, and in Boston, MA, where she engaged in complex litigation that included first chair trials and appellate work. Among other positions, McNamara held a position as a Special Assistant Attorney General for Massachusetts and as a Court Conciliator in Lowell Superior Court, Massachusetts. McNamara began her career at the Illinois Bureau of the Budget (now Office of Management and Budget) in Springfield, IL.McNamara holds a juris doctor degree from Northeastern University in Boston, MA; a master's degree from the University of Chicago; and a bachelor's degree from Cornell University. She also completed coursework at the University of Vienna's Institute of European Studies in Austria.
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Did You Know The Commission Investigative Staff’s Participation Rate During The Last Three Years In Newly-Instituted Section 337 Investigations?

By Eric Schweibenz
|
Dec
16
For purposes of assessing the ongoing impact of the Commission’s 2011 plan to reduce the role of the Office of Unfair Import Investigations (“OUII”) in Section 337 investigations, we reviewed OUII’s participation rate in newly-instituted Section 337 actions over approximately the last three years.

By way of background, OUII serves, inter alia, as an independent third party representing the public interest in Section 337 actions. One of OUII’s tasks is to help create a complete record on all contested issues so that the Commission can properly enforce the provisions of Section 337. This is important because, unlike with district court litigation, a Section 337 action “is not purely private litigation ‘between the parties’ but rather is an ‘investigation’ by the Government into unfair methods of competition or unfair acts in the importation of articles into the United States.” Young Eng’rs, Inc. v. U.S. Int’l Trade Comm’n, 721 F.2d 1305, 1315 (Fed. Cir. 1983).
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ALJ Bullock Issues Notice Regarding Evidentiary Issues In Certain Mobile and Portable Electronic Devices (337-TA-1004/990)

By Eric Schweibenz
|
Apr
19
On April 17, 2017, Chief ALJ Charles E. Bullock issued a notice regarding certain evidentiary issues in Certain Mobile and Portable Electronic Devices Incorporating Haptics (Including Smartphones and Laptops) and Components Thereof (337-TA-1004/990).

By way of background, the 337-TA-990 Investigation was instituted based on a complaint filed by Immersion Corp. (“Immersion”) alleging violation of Section 337 by Apple Inc. (“Apple”), AT&T Inc. (“AT&T”), and AT&T Mobility LLC (“AT&T Mobility”) in the importation into the U.S. and sale of certain mobile electronic devices incorporating haptics (including smartphones and smartwatches) and components thereof that infringe one or more claims of U.S. Patent Nos. 8,773,356; 8,619,051; and 8,659,571. See our February 11, 2016 and March 25, 2016 posts for more details on the complaint and Notice of Investigation, respectively.
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