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IP: Determining if your business can handle an ITC investigation

ITC investigations can be effective, but costly

Part One of this series discussed why the International Trade Commission (ITC) has become an increasingly popular forum for patent litigation and addressed two basic technical requirements that must be met to institute an action there: the infringing product must be imported into the U.S and your company must have a domestic industry with respect to the patented technology. Part Two will help you consider whether your business can tolerate the demanding schedule of an ITC investigation and will discuss the challenge of enforcing an order if you prevail.

Can your business tolerate an ITC investigation?

After receiving a complaint, the ITC makes a determination as to whether it will institute an investigation. Within 45 days of the decision to institute an investigation, the ITC must establish a target date for the investigation’s completion and issuance of a final determination. The target date is typically less than 15 months from institution of the investigation.

Four months before the target date, the administrative law judge (ALJ) must issue an initial determination, which is the ALJ’s decision on the merits of the case. Therefore, in the months between institution of the investigation and the ALJ’s initial determination (typically a period of seven to 11 months), the parties will:

  • Determine and exchange their claim construction positions
  • Notice prior art
  • Serve and respond to interrogatories
  • Produce and review documents
  • Take depositions
  • Provide technology tutorials to the ITC
  • File and respond to motions to compel
  • Exchange expert reports
  • File summary determination motions
  • Exchange exhibit lists and witness statements
  • File objections to exhibits and witness statements
  • Prepare and file pre-trial briefs
  • Prepare and file motions in limine
  • Conduct a full hearing on the merits
  • Prepare and file post-trial briefs

The burden on the parties’ employees—those who will serve as fact witnesses and those supporting the litigation—is significant. There is little opportunity to accommodate schedules. Those who will help assess the merits of the case will need to be available on short notice and for extended periods of time. In short, an ITC investigation can be incredibly disruptive to the organizations involved. Therefore, before deciding to commit to the ITC, you must be confident your business can commit to the process.

Can you enforce your order?

While a company with a significant U.S. presence may be more likely to abide by an exclusion or cease-and-desist order, a prevailing complainant must always be diligent in ensuring compliance. When deciding whether to pursue claims of infringement in the ITC, the time and cost associated with enforcing the order must be taken into account.

Once an order issues, U.S. Customs and Border Protection is responsible for implementing it. Customs prepares field instructions and computerized targeting instructions that are used by officers at ports of entry to identify excluded products. These instructions are developed with input from the ITC and the parties to the investigation.

Customs’ ability to identify excluded products and prevent their importation is only as good as the quality of the information it receives from the ITC and the parties. For an ITC complainant that has prevailed on the merits, the time and expense associated with monitoring the market for violations and providing the information necessary to enforce the order can be significant.

If an order is violated and brought to the ITC’s attention, the violation can be addressed through informal or formal enforcement proceedings. Penalties for violation include seizure and forfeiture of the infringing products and, for violation of cease-and-desist orders, civil penalties, payable to the U.S., of up to $100,000 a day or twice the value of the infringing products. The ITC can file a civil action in district court to obtain judicial enforcement of an exclusion or cease-and-desist order. While only the ITC can file the civil action, the complainant can encourage the ITC to do so by initiating informal or formal enforcement proceedings.

Every five years, the ITC conducts a survey to gather feedback from prevailing complainants about the effectiveness of the exclusion orders issued by the ITC. The feedback indicates that, while exclusion orders are effective in limiting the importation of infringing products, the orders are not always effective in stopping such importation altogether:

  • 48 percent of complainants believed that, since the order issued, the value of the infringing products covered by the order had “effectively stopped,” “decreased substantially,” “decreased moderately” or “decreased slightly,” while only 9 percent believed the value had “remained the same” or “increased” (30 percent were not able to answer because they had “no basis to judge”).
  • 51 percent of complainants who responded to the survey believed infringing products covered by the exclusion order were imported after the order issued, while only 35 percent of complainants believed infringing products had not been imported.

These survey results also tell us that monitoring the market and providing information to Customs is likely to help keep infringing products out of the country:

  • 57 percent of complainants undertook investigation to identify products intended for sale in the U.S. and 54 percent provided information to Customs to assist in enforcement of the exclusion order.
  • 55 percent of those who provided information to Customs reported that the information led to stopping importation of products covered by the exclusion order, while only 10 percent reported that the information did not help stop importation (35 percent did not know).

The full survey results can be found on the ITC website.

ITC proceedings can be a relatively quick and effective means to keep products that infringe your company’s patent from being imported into the U.S. For many reasons (e.g., speed, unrelated parties can be joined in one action), it may be preferable over a district court action. Before committing to the ITC, however, be prepared for the intensity of the process and the work and expense necessary to enforce the order if you prevail.

Contributing Author

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Marla Butler

Marla Butler is a trial lawyer and partner with the firm Robins, Kaplan, Miller & Ciresi L.L.P. She helps clients in the medical, semiconductor, LCD,...

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