The first installment of this series examined strategic considerations in filing an intellectual property action in the United States district courts, the most traditional forum for such actions. In this installment we discuss the United States International Trade Commission (“ITC”), an agency that over the past decade became one of the preeminent forums for patent litigation. The ITC can be a tremendous tool for those whose rights are infringed, especially for parties dealing with knockoffs, infringement by many unrelated parties, or those in industries where market realities require speedy judgments. However, navigating ITC rules and practices can be tricky for the inexperienced or unprepared.
The ITC is an independent federal agency which performs a number of functions, such as investigating the effects of subsidized imports on domestic industries, but also performs “Intellectual Property-Based Import Investigations.” The ITC has the unique ability to direct U.S. Customs to block infringing products from entering the United States. If a party is found to have violated intellectual property rights, the ITC has three main forms of relief it can provide: a “Limited Exclusion Order” directing Customs to block the importation of all products of the named parties found to be infringing; a “General Exclusion Order,” where Customs stops all infringing products, regardless of their origin; and a “cease and desist order” barring infringers located inside of the United States from selling infringing products.
The ITC has become an extremely popular forum for a number of reasons: 1) after the eBay decision injunctions became more difficult to obtain in the district courts but the ITC’s main remedy is injunctive; 2) speed—while district court cases generally take 2-3 years to issue a final decision, the ITC generally issues an initial decision in under 12 months and a final decision in just 16 months; 3) knowledgeable judges—district court judges are generalists but the ITC’s six administrative law judges exclusively hear intellectual property matters and thus are well versed in the relevant law, and often the relevant technology; 4) the ITC has fewer discover restrictions than the district courts; 5) wide range of subject matter—the ITC’s jurisdiction includes the infringement of utility and design patents, registered copyrights, registered and common law trademarks, misappropriation of trade secrets and trade dress, passing off, and “other unfair acts”; 6) 2012’s America Invents Act limited the ability to file one suit against multiple, unrelated infringers in the district courts, but the ITC has no such limits; and 7) the General Exclusion Order is a powerful weapon, particularly for companies trying to attack “knock-offs,” as one ITC action can result in a general exclusion order which stops all counterfeit goods, regardless of the producer, and which is automatically enforced by Customs.
However, there are some limitations to the ITC. Only certain rights holders may institute ITC proceedings as those seeking ITC relief must demonstrate that they, or their licensees, have a “domestic industry” and perform some manufacturing, research, technical support, repair, or licensing work inside the United States. Second, because the ITC’s main remedies are exclusion orders enforced by U.S. Customs at the border and ports, the ITC does not effectively address infringement by products manufactured inside the United States. Also, though the ITC has the ability to block digital imports, exclusion orders are better suited to the exclusion of physical products than of electronic transmissions. In addition, the ITC cannot provide monetary damages and all relief is prospective and bars future behavior.
ITC litigation can be difficult for those whose counsel is not experienced in ITC practice. The ITC’s unique and stringent procedural rules, with many opportunities for the inadvertent waiver of arguments often trap those who are new to the forum.
The short discovery period also can be problematic for those unprepared for it. Because the judges’ decisions issue 12 months after an investigation starts, with an evidentiary hearing in less than 9 months, the period for fact discovery is often only four to five months long. This short discovery period has a number of effects—parties must immediately request and review any discovery they need, as the opportunities for follow up are limited; the expedited pace often leads to broader discovery requests, and magnifies any discovery missteps. The limited discovery period and slower mechanism for enforcing discovery means that the ability to compel third parties, particularly those who need to be served via the Hague Convention, is limited.
The limited time frame also contributes to the relatively high trial rate at the ITC—as compared to the district courts where only about 5 percent of cases go to trial, at the ITC almost half do. Finally, the expedited pace and short time frame mean that while expenses start mounting immediately, and are incurred over a compressed time frame.
Unlike the district courts, the ITC is mainly for offensive action, for parties wishing to enforce their intellectual property. However, there is one method of defensive use of the ITC—often parties subject to an ITC exclusion order redesign their products in a way that they believe is no longer infringing and would like their redesigned products to be able to enter the United States without being stopped by Customs. In these cases, the party may seek an Advisory Opinion from the ITC, where the ITC examines the redesigned product and issues an opinion on whether or not it infringes.
ITC actions can be difficult for those unused to the forum or its speed, and the ITC offers little relief for those who seeking damages or whose rights are infringed by products produced in the United States. However, the ITC’s speed, knowledgeable judges, and joinder rules offer distinct advantages to those in high tech areas, where markets and products change rapidly, and the technology may be hard to grasp. The ITC is also particularly useful to those whose rights are infringed by multiple unrelated parties, and its general exclusion order remedy is an extremely efficient way to fight counterfeits and knockoffs.