Morris Manning & Martin, LLP

IP Newsflash August 2008: Importers Beware: An Overview of Section 337 Investigations


Owners of intellectual property assets do not have to rely solely on district court actions in order to protect their rights. The International Trade Commission (“ITC”) offers an attractive forum in which to bring an infringement action. The features of the ITC that are most appealing to intellectual property owners are the accelerated pace at which ITC actions proceed and the swift, effective remedies available. Compellingly, in certain cases, a successful ITC complainant (analogous to a district court plaintiff) can completely prohibit the importation of any infringing goods into the United States, regardless of whether the importer was named a respondent (analogous to a district court defendant) in the ITC action.

Picture this scenario. You are a company involved in the importation of goods into the United States and pride yourself on respecting the intellectual property rights of others and successfully avoiding litigation regarding the same. One day, however, you find that the United States Custom and Border Protection (“CBP”) has denied entry of your goods into the United States on the ground that your goods fall within the scope of a general exclusion order about which you had no knowledge. Although such extreme remedies are rare, they are realistic possibilities of which importers of goods into the United States need to be knowledgeable.

The Tariff Act of 1930, 19 U.S.C. §1330 et seq., protects domestic industries in the United States from unfair importation of goods made overseas. Section 337 of the Tariff Act provides protection against “unfair methods of competition and unfair acts in the importation of articles … into the United States. See 19 U.S.C. §1337. Unfair methods of competition and unfair acts include infringement of patents, registered trademarks, and copyrights. Consequently, § 337 investigations, which are administered by the International Trade Commission (“ITC” or “Commission”), provide an alternative strategy for protecting intellectual property rights with respect to infringing imports.

While the ITC grants only equitable relief, the ITC offers intellectual property owners remedies against infringers not available in district court actions. The first, and most powerful, weapon available in the ITC arsenal is a permanent exclusion order, which can take the form of a general exclusion order or a limited exclusion order. A general exclusion order will prevent the importation of infringing goods by any person, whether that person was named as a party in the § 337 investigation. A limited exclusion order, on the other hand, prevents importation of the infringing goods by the respondents identified by the complainant and subsequently named in the § 337 proceeding. An exclusion order may also reach products that incorporate the infringing product, which are known as “downstream” products. Exclusion orders are enforced by CBP, which has the authority to inspect and deny entry of goods within the scope of any exclusion order, which is a significant difference between exclusion orders and the analogous permanent injunctions available in district court actions. The ITC can also issue and serve on named respondents a cease and desist order prohibiting the respondents from “engaging in the unfair methods or acts involved.” See 19 U.S.C. §1337.

The accelerated pace at which § 337 investigations proceed as well as the powerful remedies available make the ITC an attractive forum for protecting intellectual property rights. Whether you are contemplating filing a § 337 complaint or you are faced with defending against a § 337 complaint, there are differences between § 337 investigations and district court actions of which you should be aware. This article presents an overview of the procedure of § 337 investigations, the advantages and disadvantages as compared to district court actions, and practical considerations to keep in mind when faced with a § 337 investigation.

General Procedure of § 337 Investigations

The ITC, located in Washington, D.C., follows the general procedures, but does not mirror, district court actions when presiding over a § 337 investigation. A § 337 investigation is initiated by the filing of a complaint with the ITC. The ITC has 30 days to review the complaint and determine whether to institute an investigation as requested by the complainant. If the ITC decides to take the case, the Commission publishes a Notice of Investigation in the Federal Register identifying the scope of the investigation, including the assigned Administrative Law Judge (“ALJ”) who will preside over the proceeding, the complainant(s) and respondent(s), and the patent(s) at issue. An attorney from the Office of Unfair Import Investigation of the ITC, or Staff Attorney, is also named as a party to a § 337 investigation and participates as an independent party appearing on behalf of the public interest.

As in a district court case, a § 337 investigation proceeds through traditional fact and expert discovery, including requests for documents and things, interrogatories, requests for admission, and depositions. At the close of discovery, the parties submit prehearing briefs and statements setting forth each party’s contentions on the issues asserted in the investigation. Thereafter, a hearing is held before the ALJ wherein each party can examine and cross-examine witnesses and submit exhibits in support of their positions. Jury trials are not available for § 337 actions. Contrary to district court cases in which claim construction typically occurs prior to any trial on the merits, claim construction in a § 337 investigation is part of the hearing. After the hearing, which traditionally lasts only 1-2 weeks, the parties submit opening and rebuttal post-hearing briefs and proposed findings of fact setting forth their respective contentions on the issues involved.

After the parties’ post-hearing submissions, the ALJ issues an initial determination as to whether a § 337 violation has occurred. The Commission may review and adopt, modify, or reverse the initial determination, adopt the initial determination without review, adopt part of or substitute a new decision, or remand the initial determination. The Commission ultimately issues a final determination on whether there has been a violation of § 337 and the appropriate remedy if a violation is found. The final determination is subject to Presidential review on policy grounds and is appealable to the United States Court of Appeals for the Federal Circuit.

ITC v. District Court

Although § 337 investigations provide an alternative strategy for protecting intellectual property rights, there are distinct differences as compared to filing a lawsuit in a district court. Importantly, § 337 investigations move at a very fast pace with a final determination within 15-18 months from the institution of the investigation. The ITC is required, by statute, to conduct § 337 investigations expeditiously. Conversely, district court actions can continue for years. For example, discovery in § 337 investigations typically occurs during the 7 months after institution of the investigation, whereas in district court actions discovery traditionally takes place over 12-24 months after the filing of the complaint. Similarly, a § 337 hearing will commence 8 to 9 months after institution of an investigation and a district court trial may not be until 24-48 months after the filing of the complaint. Unlike district court actions where the parties can often extend deadlines by agreement, § 337 action deadlines are usually not subject to extension. The fast paced schedule of a § 337 investigation also does not leave much time to explore settlement opportunities with the opposing side, although the ALJ often requires the parties to participate in settlement negotiations. Complainants do not have the option of “filing but not serving” an ITC complaint in order to initiate settlement discussions.

Moreover, because ITC investigations have the potential to tremendously affect commerce, § 337 actions require fact pleading rather than mere notice pleading as in district court cases. Accordingly, a § 337 complaint must include detailed and specific facts showing the following: (1) importation of potentially infringing goods into the United States, sale for importation, or sale after importation within the United States of the accused goods, (2) infringement of a United States patent (through the use of claim charts), copyright, or trademark or other unfair act, and (3) existence of an industry in the United States relating in some manner to the products at issue. Because of the heightened requirement of fact pleading, § 337 actions force complainants to prepare and strategize their cases prior to filing the complaint. This will typically give complainants in § 337 investigations an edge when it comes to managing a fast paced ITC investigation.

Another important difference between § 337 investigations and district court actions is the broad jurisdictional reach afforded to complainants in ITC actions. Personal jurisdiction is not required in § 337 actions. Rather, § 337 requires that the ITC have in rem jurisdiction over the accused product. Consequently, the accused infringing product must only be imported into the United States in order to satisfy the jurisdictional requirements of § 337. There is, however, no remedy available against infringing products made in the United States. The broad jurisdictional reach of the ITC allows intellectual property owners to bring a single action against all known infringers involved in the importation of infringing products rather than having to file multiple lawsuits in different jurisdictions in order to satisfy the jurisdiction and venue requirements in district court actions.

Although respondents are permitted to assert legal and equitable defenses in response to a § 337 complaint, counterclaims are not determined in a § 337 hearing. Rather, Respondents are permitted to file counterclaims, but such claims are transferred to a district court of appropriate venue.

Furthermore, complainants are not entitled to recover damages in § 337 investigations. To obtain damages, complainants are compelled to file a parallel action in a United States district court. If requested by a named respondent in a § 337 investigation involving the same claim, there is a mandatory stay of the parallel district court action. The record of a § 337 investigation can be used in a parallel district court proceeding, but it is not binding on the district court. Although it might be viewed as highly persuasive, there is the possibility of having to litigate the same issues twice, once in the § 337 investigation and again in the district court action.

Practical Considerations

The fast paced nature and unique remedies available have made the ITC an appealing forum for seeking protection of intellectual property rights. Because of the rise in popularity of this forum, it is imperative that companies involved in the importation of goods into the United States regularly monitor the ITC docket to determine whether they have been named a respondent in a § 337 investigation or whether the goods in which they deal are the subject of a § 337 investigation. As explained above, a party does not necessarily need to be named as a respondent in a § 337 action in order for their goods to be denied entry at the border. A general exclusion order will prevent the importation of infringing goods by any person, whether or not that person was named as a party in the § 337 investigation.

As discussed above, a hearing in a § 337 action will commence 8-9 months after institution of an investigation. This hectic schedule often can put a strain on a respondent’s business. Respondents are, therefore, advised to explore entering into a joint defense agreement or explore other cost sharing options with other respondents in order to curb the high costs and demands of § 337 investigations.

The procedures, time frame, and requirements involved with instituting or defending a § 337 action are very complex and demanding. Because of this, if you are faced with a § 337 action, whether as a complainant or respondent, it is important to hire counsel who is familiar with the ITC rules, procedures, and practice, as well as counsel who has expertise in patent cases. If you have any questions about filing a complaint with the ITC, defending against a § 337 complaint, or monitoring the ITC docket, please contact any of the following attorneys:

John Fry at [email protected]
Bryan Harrison at [email protected]
Heather Champion Brady at [email protected]