April 9th, 2010
Patent infringement concerns regarding issued United States patents can sometimes arise in instances where goods are produced in foreign countries and imported into the United States. While sale or use in the United States of an infringing product made outside of the United States still constitutes patent infringement, it may prove difficult to sue the manufacturer of the goods for infringement. This leaves the U.S. distributers or users of the infringing product. However, the users of the infringing product can in many cases also be a customer, or potential customer, of the patentee. Suing such a party in the U.S. Federal Courts for patent infringement can prove to be very bad for business. However, there is another option; an action for patent infringement can be initiated with the International Trade Commission (ITC).
Section 337 of the Tariff Act of 1930 (19 U.S.C. §1337) states that unfair methods of competition and unfair acts of importation of articles into the U.S. are unlawful. In particular, the importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that infringe a valid and enforceable United States Patent is illegal. Accordingly, in an action for patent infringement before the ITC, the infringing article or product is essentially the other party in the case.
In general, a proceeding before the ITC under section 337 begins when a patent owner files a complaint alleging an act that has taken place in another country that would constitute patent infringement if performed in the United States. The complaint must include allegations that give the ITC jurisdiction. Unlike the "notice pleading" requirements of a complaint filed in U.S. Federal Court, a complaint to the ITC for patent infringement requires detailed fact specific information including substantive exhibits. Once a complaint is received, the ITC Commissioner, and potentially ITC staff attorneys, will review the complaint for proper form. If the complaint is accepted by the ITC, then an investigation will begin. Under section 337 an investigation by the ITC will take one year. The investigation could take 18 months if the case is considered complicated. More than one manufacturer or supplier can be named in an ITC complaint.
Once the ITC investigation is initiated, service of the notice of such investigation is handled by the ITC. Therefore, the often lengthy and complicated foreign service of process that is undergone in a court proceeding is avoided. The foreign entities named in the complaint are given the opportunity to participate in the proceedings. Within one year, all discovery in an ITC investigation must be completed and a decision rendered by an Administrative Law Judge. As such, proceedings before the ITC move very rapidly. For example, a plaintiff can propound interrogatories to a named manufacturer in a foreign country and answers to those interrogatories are due within 10 days. Preparation of such answers sometimes involves significant investigation. This is further complicated by the possibility of language barriers where the manufacturer is not fluent in English.
The initial costs in an ITC action can be similar to those in an infringement action before the Federal Courts. This is due in large part to the fact that pre-litigation preparation is more time consuming because the request for investigation (the complaint) must be very detailed. In addition, due to the accelerated nature of the proceeding, preparation of discovery requests, as well as choosing experts and getting their reports, should be done in advance. The ITC complaint requires that all known eligible infringers be named; therefore it may be necessary to prepare discovery and witnesses regarding several different parties. Affirmative defenses can be asserted at the ITC, but these are often transferred to U.S. District Court so as not to slow down the ITC investigation. However, the patent owner should be prepared to address any attacks on patent validity during the course of an ITC investigation. Moreover, in proceedings before the ITC, ITC staff attorneys may be active participants.
Once the ITC issues a final determination, the President of the United States reviews it. If the Plaintiff prevails in an ITC action, no penalty is asserted directly against the non-prevailing party and no damages are assessed. Instead, the ITC will enter an order excluding the offending articles from entry into the United States. The ITC can also issue a cease and desist order that requires the importer to stop importing infringing goods. Failure to comply with a cease and desist order can subject the importer to significant fines that accrue for each day that the cease and desist order is violated.
To date, ITC rulings have been more Plaintiff friendly. In addition, the Administrative Law Judges at the ITC preside solely over section 337 actions. As such, they are familiar with patent infringement cases and the issues involved, and are likely to understand technologies more readily than Federal District Court judges who hear patent infringement cases rather infrequently.
For further information on this and intellectual property in general, please visit our website and archives at www.mkgip.com.
