It was June 2005 and Intermec Technologies Corp. was in trouble. The Everett, Washington-based company was mired in three different patent infringement suits with New York-based Symbol Technologies Inc., an S&P 500 company with annual earnings of $1.75 billion and a reputation as a fierce courtroom opponent.
The lawsuits over mobile computing technology already had dragged on for more than a year, and it looked like Intermec would be stuck in court for many years to come.
Then Intermec opened a new front in the legal war on June 30. It filed a complaint with the International Trade Commission, alleging Symbol was importing mobile computing devices that infringed Intermec’s patents. Approximately two months later, Symbol settled the patent disputes, agreeing to pay millions of dollars to license Intermec’s patents.
Such dramatic results frequently occur when companies bring their patent disputes to the ITC.
“ITC proceedings have a way of galvanizing patent owners and infringers [to reach settlements] ?? 1/2 in a way that district court cases, which might go on for years, don’t do,” says Brian Busey, an attorney at Morrison & Foerster, which represented Intermec before the ITC.
This is a major reason why U.S. businesses are increasingly turning to the ITC to resolve their infringement complaints. “The number of [ITC] cases has been sharply on the rise in the past few years,” says Larry Shatzer, head of Foley & Lardner’s IP litigation practice. “Today, there are three times the number of cases there were 10 to 12 years ago.”
The number of infringement cases brought to the ITC is still dwarfed by the number of infringement suits filed in court. The ITC conducted only 57 IP-related investigations and ancillary proceedings in 2005, compared to 12,184 civil suits filed in U.S. federal district courts relating to copyright, trademark and patent infringement that same year. Those numbers may soon change.
“In-house counsel are now starting to realize this is a powerful option in certain circumstances,” Shatzer says.
The ITC offers a simple but potent remedy to IP owners. Pursuant to Section 337 of the Tariff Act of 1930, this independent federal agency can bar all imports that infringe a U.S. company’s IP rights. The ITC also can issue a cease-and-desist order that prohibits companies from selling infringing items that already have been imported.
Although Section 337 empowers the ITC to handle all types of infringement cases, the vast majority of Section 337 cases concern patent infringement. That’s because owners of federally registered trademarks or copyrights can exclude infringing imports by simply registering online with the customs service. That agency will then bar the infringing items. Owners of other IP rights, such as patents, must first get an exclusion order from the ITC, which the customs service then enforces.
To get an exclusion order, a patent owner basically needs to prove three things: it has a valid U.S. patent, this patent is infringed by an imported good and the patent holder is using the patent in the U.S. The ITC defines “using” broadly; it encompasses R&D efforts involving the patent as well as attempts to license the patent.
Another factor driving patent owners to the ITC is the fact that it may now be easier to obtain an exclusion order than to get a court injunction against a patent infringer. The Supreme Court’s 2006 decision in eBay v. MercExchange toughed the requirements for issuing such injunctions.
“Companies are increasingly coming to the ITC, and that is likely to accelerate as a result of the eBay decision,” says Thomas Jarvis, a Washington, D.C., attorney who is president-elect of the ITC Trial Lawyers Association.
The main attraction of the ITC is its speed. “The ITC has an expedited procedural schedule that virtually guarantees a decision in 12 to 15 months,” Jarvis says. “Most district courts will not get to trial in less than 22 months.”
Even the rocket dockets in East Texas and Northern Virginia may be slower than the ITC.
Thus, the ITC is a particularly attractive forum for companies whose products–such as semiconductors and electronic goods–have short commercial life spans. The ITC can stop infringing goods before these products’ life cycles are over, while the vast majority of courts can’t act in time.
However, a disadvantage to the ITC’s speed is that it forces patent owners and alleged infringers to expend large amounts of time, money and effort to prepare for an administrative trial that takes place just nine months after the ITC begins investigating a complaint. “If you compress several years of litigation into nine months ?? 1/2 you front-load the costs,” Busey says.
These costs may be too great for smaller companies to swallow. That’s why it’s usually large companies that initiate Section 337 proceedings.
The ITC’s speedy proceedings also may pose a problem if a patent owner needs to engage in lots of discovery. The problem is not obvious, since the ITC allows parties to engage in unlimited discovery and there’s no fixed limit on the number of depositions or interrogatories. However, discovery deadlines are much shorter in the ITC than in court, so parties before the ITC need to perform their discovery quickly. This need for speed makes it difficult to obtain and examine large amounts of information.
Moreover, patent owners do not receive any favoritism from the ITC. “The ITC has tended to be more patent-neutral than district courts overall,” says Richard Kelly, a litigation partner in the Washington, D.C. office of Oblon, Spivak, McClelland, Maier & Neustadt. “In district court jury cases, patentees win 68 percent of time. In the ITC, it’s about 50 percent.”
The reason for the discrepancy is that administrative law judges (ALJs)–not juries–hear ITC cases.
“Juries tend to favor patentees,” Kelly says. “The jury is going to sympathize with the person who’s been wronged. So if jury thinks you [the patentee] have been wronged, the jury will favor you.”
The ALJs at the ITC have no such bias. And because these judges have extensive experience with adjudicating patent infringement cases, they are more likely to understand complex patent issues. This, however, is a two-edged sword.
“The stronger or more technical your case is, the more you want a judge savvy in patent law,” Shatzer says. “But if you have some tough arguments to make on the patent side, you may want to be in front of a jury.”
The biggest disadvantage of the ITC, from a patentee’s point of view, is that the agency cannot award damages. Damages can only be obtained from a court.
Thus, a growing number of companies are launching two-pronged attacks on infringers–simultaneously filing infringement complaints with both the ITC and the federal courts. This strategy creates the prospect of a swift exclusion order and a longer-term damages award. It also ratchets up the pressure on alleged infringers to settle.
“The ITC is often used as a club to get potential licensees to get a license,” Kelly says. “The ITC has a pretty big in terrorem effect.”