Patent Litigation at thePatent Litigation at thePatent Litigation at thePatent Litigation at theInternational Trade CommissionInternational Trade Commission

Deanna Tanner OkunAdduci Mastriani & Schaumberg LLPAdduci, Mastriani & Schaumberg, LLP

May 16, 2013

PATENT LAW INSTITUTECenter for Judicial Studies

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Center for Judicial StudiesDuke University School of Law

The ITC The U.S. International Trade Commission (ITC)

is an independent, nonpartisan, quasi-judicial d i i i i hi Cadministrative agency in Washington, D.C.

Established by Congress in 1916y g

Broad investigative powers on matters of tradeo Administer U S trade remedy laws in a fair and objective mannero Administer U.S. trade remedy laws in a fair and objective mannero Provide the President, the U.S. Trade Representative, and

Congress with independent, quality analysis, information, and support on matters relating to tariffs and international trade andsupport on matters relating to tariffs and international trade and competitiveness

o Maintain the Harmonized Tariff Schedule of the United States

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The ITC (cont.)( )

Six Commissionerso Serve overlapping terms of nine years eacho Serve overlapping terms of nine years eacho New term beginning every 18 monthso Not political – equal party split

Six Administrative Law Judges

Offi f U f i I t I ti ti Office of Unfair Import Investigations

General Counsel

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What is Section 337? Section 337

o Trade remedy to address unfair competition through y p gimportation

o Section 337 of the Tariff Act of 1930, as amended (19 U.S.C.o Section 337 of the Tariff Act of 1930, as amended (19 U.S.C. § 1337) authorizes the ITC to investigate unfair methods of competition and unfair acts, including IP infringement, in the importation of articles into the United Statesp

o Section 337 makes it unlawful for any person to import such goods into the United States, to sell them for importation, orgoods into the United States, to sell them for importation, or to sell them within the United States after they are imported

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Section 337 Violation Elements of Violation (involving statutory intellectual property)

o Importation into the United States, the sale for importation, or the sale within the U.S. after importation by the owner, importer or consignee of articlesarticles

o Infringement by articles of one or more claims of a valid and enforceable U.S. patent (unfair act or method of competition)

o Domestic Industry related to the articles protected by the patent exists, or is in the process of being established

Remedies Availableo General Exclusion Order excludes all infringing products, regardless of

manufacturer (in rem)manufacturer (in rem)o Limited Exclusion Order excludes the infringing products of specific

person(s) found to be violating the statute (in rem)o Cease and Desist Order directed to individuals/corporations found to

maintain commercially significant inventory of infringing goods imported in the U.S. prior to a determination of a Section 337 violation (in personam)

o Remedy must not be contrary to the public interest as determined by four statutory factors

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y

Executive Branch Review Appeal to CAFC

Increasing Use of Section 337g

70

50

60

30

40

10

20

‘90 ‘00 ‘12

0

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Accused Products in CY 2011 and 2012

Automotive/Manufacturing/Transportation

4%Chemical

compositionsPrinting

Small consumeritems9%

4% compositions2%

Pharmaceuticalsand medical devices

6%

Printingproducts

1%

Computer & telecommunications

products27%Memory

products2%

Other9%

Consumerelectronics products

16%Integrated

circuits

LCD/TV11%

Lightingproducts

8%products

5%

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Usage by Non-U.S. Based Complainantsg y p

70

Non-U.S. Based ComplainantsU.S. Complainants

50

60

33%40%

20122011

Non-U.S. Based Complainants

40

40%30%35%20%

2011201020092008

20

30 28%27%33%15%

2007200620052004

10

15%5%

12%17%

2004200320022001

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02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

0%2000

Non-U.S. Based Complainants 2011 - 2012p

Bermuda Motorola Mobility British Virgin Islands Index SystemsBritish Virgin Islands Index Systems

Canada MOSAID, Standard Innovation Finland Nokia France Louis VuittonFrance Louis Vuitton

Germany OSRAM, MT. DermIsrael Human Eyes TechnologiesJapan Elpida, Furuno, Kaneka, Renesas, Sharp, Sony, p p , , , , p, y,

Canon, Hitachi MetalsKorea LG, Samsung

Switzerland Beacon Navigation, Merck & CieTaiwan AU Optronics, HTC, ITRI, Nanya, VIA, Realtek

SemiconductorUnited Kingdom Compound Photonics, Litepanels, Mondis Technology

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Patent Litigation at the ITC vs. District Court

ITC District Court

Length ≤18 months average of 3 years

Jurisdiction in rem (articles) in personam (people)Jurisdiction in rem (articles) in personam (people)

Discovery broad Federal Rules apply

J d 6 ALJs with predominantly 677 j d ith di l dJudges 6 ALJs with predominantly patent caseload

677 judges with diverse caseload

Confidentiality automatic administrative protective order public by defaultp

Remedy exclusion orders/cease and desist orders

monetary damages only, unless eBay factors also allow injunction

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Section 337 Terminologygy

ITC District CourtComplainant Plaintiff

Respondent Defendant

Administrative Law Judge Magistrate JudgeAdministrative Law Judge Magistrate Judge

Administrative Protective Order Negotiated Protective Order

Summary Determination Summary Judgment

Hearing Trial

Initial Determination Magistrate’s Decision

Recommended DeterminationRecommended Determination

Petition for Review

Commission Opinion District Judge’s Opinion

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Advantages of Section 337 for ComplainantsComplainants

Resolution “Earliest Practicable Time” (Target Date) In Rem Jurisdiction over the Imported Article In Rem Jurisdiction over the Imported Article Broad Discovery

o Foreign party discovery – No Hague Convention concernso Nationwide subpoena power

Experienced ALJs Automatic Protective Order Automatic Protective Order Effective Remedies No eBay considerationsNo eBay considerations Mediation program The 35 U.S.C. 271(g) process patent exception for goods

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(g) p p p gmaterially changed or a nonessential component is inapplicable

Parallel ITC and District Court Actions

28 U.S.C § 1659(a)o District court stay mandatory as to claims involving the sameo District court stay mandatory as to claims involving the same

issues as those in ITC action o District court has discretion over whether to stay non-parallel

portion of the caseportion of the case

Record in ITC Section 337 investigation may be used in district court

D i i f th ITC t t i d t h l i ff t Decisions of the ITC on patent issues do not have preclusive effect in district court

Decisions of district courts on patent issues do have preclusive effectDecisions of district courts on patent issues do have preclusive effect at the ITC

All legal and equitable defenses may be presented in a Section 337

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investigation, but counterclaims must be removed to district court

Section 337 Timeline

Complaint Commission Opinion andFiled

ALJ’s Initial Determination/Recommended

pRemedial Order(s) Issued

Entry Only Under Bond

InvestigationInstituted Executive

BranchReview/

Determination

Review/ExclusionHearingPublic

InterestDiscovery & Prehearing Posthearing

FilingsFilings Filings

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Months -1 0 7 to 9 10 to 12 14 to 16 16 to 18

Enforcement of ITC Exclusion Orders ITC orders are enforced by the U.S. Customs and Border

Protection (CBP), a component of the Department of Homeland SecuritySecurity

ITC sends a copy of the exclusion order to the IP Rights Branch t CBP H d t i W hi t D Cat CBP Headquarters in Washington, D.C.

After consulting with the ITC about the language of the order and any technical issues, the order is forwarded to CBP Office of Field Operations, where it is entered into an electronic database and becomes available to CBP officers at all U.S.

t f tports of entry

U.S. ports are primarily concerned with trade facilitation, so a

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customs strategy may help a complainant obtain full exclusion of infringing products

Hot Topics at the ITCp

Non-Practicing Entities (NPEs)o Applying the Domestic Industry Requirement to

NPEs

SSOs, F/RAND and SEPso Should an exclusion order be issued if there is a

valid, infringed F/RAND-encumbered SEP?

ITC Proposed Rules Changes ITC Proposed Rules Changeso Cost of litigation/E-discovery concerns

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Brief History of Section 337

Amendment applies APA;

Distinguishes infringement of patents, registered trademarks copyrights and

Section 316 of Tariff Act of 1922: “Unfair methods of applies APA;

changes name to Int’l Trade Comm’n;

trademarks, copyrights and registered semiconductor mask works from other unfair acts; expands DI test; eliminates injury requirement f

competition and unfair acts in the importation of articles . . . into the United States”

Eliminates statutory time limits and establishes

d l l

gives ITC authority to issue remedy; sets time limit of

for statutory IPSection 316 replaced by Section 337 of Tariff Act of 1930; CCPA (predecessor of CAFC)

target dates; largely procedural; result of GATT decision

time limit of 12 months for most investigations

(p )allows use of §337 for patent casesU.S. Tariff

Commission created

1916 1922 1930 1974 1988 1994

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Domestic Industry Standard for IP-Based InvestigationsBased Investigations19 U.S.C. §1337(a)(3)

An industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work or design concerned –

(A) Significant investment in plant and equipment;(B) Significant employment of labor or capital; or(C) Substantial investment in its exploitation including(C) Substantial investment in its exploitation, including

engineering, research & development, or licensing

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Domestic Industry Testy

Economic ProngSignificant investment in plant and equipmento Significant investment in plant and equipment

o Significant employment of labor or capital; oro Substantial investment in its exploitation, including

i i h d d l t li iengineering, research and development, or licensing• Not available for non-IP based investigations

Technical Prongo Infringement analysis

At least one claim of each asserted patent must beo At least one claim of each asserted patent must be practiced

o Only applies where complainant manufacturers and sells a commercial product

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sells a commercial product

Non Practicing EntitiesNon-Practicing Entities

The 1988 amendments to Section 337 referred to what we now call “Non-Practicing Entities”

o Congress gave examples of what could constitute a licensing industryg y

o “Universities and other intellectual property h i t i li i fowners who engage in extensive licensing of

their rights to manufacturers”

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Defining Non-Practicing Entities is Difficultg gITC Definitions: Category 1 NPEg y

o Universities, intellectual property owners who engage in extensive licensing of their rights to manufacturers, including individual inventorsg

Category 2 NPE o Business model that focuses on purchasing and asserting

patentspatents o Sometimes referred to as “patent trolls”

Caveat:M i fit th d fi iti GEo Many companies can fit the definition: e.g., GE

o Chief Judge Rader, among other scholars of patent law, has cautioned that legal decisions should not be based on th “ h t i ti ” f th ti

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the “characteristics” of the parties

Key Factors in Licensing AnalysisKey Factors in Licensing Analysis

Investment in licensing activitiesM t tit t l it ti f th i di id l t d t to Must constitute an exploitation of the individual asserted patent

o Claimed activities must relate to licensingo Investments must be domestic, i.e., occur in the United States

Investment must be substantialo Number of licenseeso Amount of revenue generated from license agreementso Number of U.S. employees involved in the relevant licensing effortso Litigation expenses, alone, not sufficientg p , ,

Court of Appeals for the Federal Circuit has affirmed the Commission's approach

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the Commission's approach

Proving DI Through Licensingg g g

“Because the statute requires that investmentrequires that investment activities satisfy all three

of these requirements, the absence of athe absence of a

connection to any one of them will defeat

complainant’s attempt tocomplainant s attempt to rely on those activities to

satisfy the domestic industry requirement.”

Inv. No. 337-TA-694

Substantial?

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Substantial?

Is the Number of ITC Investigations Involving NPEs High?Involving NPEs High?

Suggestion that NPE filings account for the increased caseload at the ITC

This suggestion does not appear to be supported by data as reported in a published ITC factsheet

The number of complaints filed by NON-NPEs has increased significantly since the eBay decision in 2006, peaking in 2011

The number of complaints filed by NPEs has not increased dramaticallyo Only 27 investigations (9%) involved complaints that were filed by

NPEs whose business model focused on purchasing and asserting patents

o Only 33 investigations (11%) involved complaints that were filed by other types of NPEs, such as research institutions, start-ups and individual inventors

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individual inventors

Commission Investigations Instituted 5/16/2006 Q1 20135/16/2006 - Q1 2013

80

60

70

40

50 Total Number of Investigations per Calendar Year

30

Non-NPE Inv.

Cat 1 NPE

10

20Cat. 1 NPE

Cat. 2 NPE

25

02006 2007 2008 2009 2010 2011 2012 Q 1 2013

SSOs, SEPs and F/RAND,

Standard-setting organizations (“SSOs”) allow industry participants to decide on technologyindustry participants to decide on technology standards for devices in a given field

Technology standards are often the subject of patents essential to adhering to a particular technology i e they are Standard Essentialtechnology, i.e., they are Standard Essential Patents (“SEPs”)

SSOs typically require that owners of SEPs license those patents according to Fair, Reasonable AndNon-Discriminatory (“F/RAND”) terms

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Non-Discriminatory ( F/RAND ) terms

If the ITC finds a SEP valid and infringed, is an exclusion order appropriate?is an exclusion order appropriate?

The ITC has authority and discretion to consider alternative approaches

o Tailor a remedy to fit with individual circumstances present in each investigation involving F/RAND encumbered SEPseach investigation involving F/RAND-encumbered SEPs

o Suggest or compel arbitration or mediation under the threat of enforcement or vacation of an exclusion order to giveof enforcement or vacation of an exclusion order to give parties the opportunity and/or incentive to agree on F/RAND license terms

o Section 337 permits the ITC to issue an exclusion order and leave it to the U. S. Trade Representative ("USTR") (under authority delegated by the President) to deny relief based on

li

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policy concerns

ITC Rule Changesg

Limits Imposed on Written Discovery – Effective May 20, 2013F t D itio Fact Depositions• By Complainants: maximum of 5 per respondent/20 for all respondents• By all respondents: maximum 20

B C i i I ti ti Att i 10• By Commission Investigative Attorney: maximum 10o Interrogatories limited to 175 per party including all discrete subparts

El i Di P d R l I d O b 5 2012 Electronic Discovery – Proposed Rules Issued October 5, 2012o A person/party need not provide discovery of electronically stored

information that the person/party identifies as not reasonably accessible because of undue burden or costbecause of undue burden or cost

o Conforms Commission rules regarding discovery of electronically stored information to certain Federal Rules of Civil Procedure

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Dispositions 2004 - 2012

Complaint

No Violation21%

pWithdrawn

12% No Violation

Violation

Violation Settled

Terminated due to Arbitration

Settled22%Settled 45%

Settled

ComplaintWithdrawn

Terminated due to Arbitration

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1%

When to Consider ITC as Complainantp

Is there an importation? Is jurisdiction over multiple parties available

in district court? Is nationwide and/or worldwide discovery

necessary? I t b i ti d Is access to a process being practiced overseas necessary?I ti f th ? Is time of the essence?

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Contact Information

DeannaDeanna TannerTanner OkunOkunDeanna Deanna Tanner Tanner OkunOkun1133 Conn. Ave., N.W.Washington, DC 20036gT: 202.467.6300 okun@adduci.com

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