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Stefani Shanberg often counsels Silicon Valley companies about the perils of being hauled into court for patent infringement. But in the last couple of years she’s been warning her clients about another dangerous arena: the International Trade Commission.
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“One of our clients got sued at the ITC and didn’t even know what it was,” said Shanberg, a partner at Perkins Coie’s San Francisco office. “Another client sent an e-mail attaching the complaint and asked me to find out what it was all about. Neither client understood what they had just gotten involved in.” The ITC is a federal agency that stops foreign imports that infringe on U.S. products from entering the country. In recent years it has also been a venue for foreign firms to claim that U.S. companies are infringing their products or properties. Shanberg, who handled two ITC hearings in the last two years, knows just how grueling an experience it is, even for major companies, to be the subject of an investigation. “It’s an extremely intense and rigorous ordeal,” Shanberg said. “It’s like district court patent litigation, only harder. In one case we went from discovery to trial in three months.” And Shanberg, who said she enjoys the frantic pace of litigation at the ITC, expects a flood of work in the future. More and more businesses are taking their IP complaints against each other to the agency. “We now frequently counsel clients in this area, as the threat is definitely achieving a higher profile in recent years,” Shanberg said. “On the flip side, some emerging growth companies with strong focuses on IP protection are also beginning to recognize the value of the ITC and how they can use the forum as an offensive weapon.” The 1930 Tariff Act created the agency to stop knockoffs of U.S. merchandise from entering the country. Under the law, any company that holds a U.S. patent or trademark and does some manufacturing or research in the United States can file a complaint with the agency. But because of increasing globalization, many U.S. companies that manufacture products overseas are finding themselves targets of an ITC complaint. The commission does not keep statistics on the number of complaints it receives, only the number it acts on. That number has steadily increased in recent years, from 17 cases in 2000 to 29 cases in 2005. “There’s definitely more and more interest in the ITC among clients,” said Bas de Blank, an ITC expert and an associate at Orrick, Herrington & Sutcliffe in Palo Alto. “It offers a fast and powerful remedy that you can’t get in district courts.” The agency decides cases in 12 to 15 months, compared to three to five years for lawsuits in federal courts. Unlike federal courts, the commission issues exclusion orders that could ban an infringing product from the U.S. market. Many overseas companies learned the hard way what an effective tool the commission can be, de Blank said. “Many of those foreign companies that had to respond to ITC complaints in the past saw how powerful a forum it was,” he said. “So now they’re looking at it as a way to fight competitors, including U.S. competitors.” Major U.S. companies such as Gateway Computers, Qualcomm Inc., Nortel Networks, Real Communications Inc., Hewlett-Packard and Texas Instruments are now defending themselves at the ITC. Twenty-two of the 29 current investigations are against U.S. companies. De Blank noted that because more U.S. manufacturers incorporate overseas components, more claims of infringement are arising. “It only requires one infringing component or part for a product to be banned from the U.S. market.” THE NEW HOT THING The growing importance of the agency among clients is also pushing law firms to focus on the ITC practice. Previously, law firms farmed out ITC work to specialty boutiques, mostly based in Washington, D.C., where the ITC is located. But today, having ITC expertise within the firm is considered a selling point to clients. That’s why Orrick, Perkins and other big general practice firms are formalizing their ITC practices into subgroups within their patent litigation units. “I don’t think you can have a sophisticated patent litigation team without having a core group of ITC experts,” de Blank said. “It is similar to patent litigation, but it is significantly different in procedure, so you really need to have people that have extensive ITC experience.” Perkins’ San Francisco office has become the firm’s de facto ITC group because of the number of cases the attorneys have handled, said Managing Partner Kenneth Wilson. “We do have a D.C. office, but the other offices send us the work because we’ve done a lot of it in the past and our group here genuinely likes the intensity of the practice,” Wilson said. Local demand also drives the practice, Shanberg said. “At least a third of all ITC cases have had a West Coast complainant and half of the cases have had a West Coast respondent,” Shanberg noted. “Since January 2003, my practice has been on average half ITC and half district court patent litigation.” De Blank sees the trend to not only favor West Coast firms but also those with a significant Asia practice, like Orrick, which has offices in China, Japan and Taiwan. The firm has no D.C. office. “It used to be you almost had to have either an office in D.C. or a local counsel in order to practice before the ITC,” de Blank said. “I don’t think that’s the case anymore. The ITC does electronic filing now and any case can be handled by attorneys from around the country.” “The West Coast is kind of the perfect location for the practice because you’re in between D.C. and Asia,” he added. Still, ITC specialists such as Louis Mastriani, of D.C.’s Adduci, Mastriani & Schaumberg, are not likely to find themselves out of work. If anything, Mastriani said, the interest among general practice firms has been good for business. “Before, patent attorneys tended not to recommend the ITC to clients, but now more law firms are starting to recognize the importance of the ITC as the fastest and most predictable patent forum in the country,” Mastriani said. The 20-lawyer firm is handling six active ITC cases; for the amount of work an ITC case requires, the caseload is equivalent to a dozen patent litigation cases. “Not very many attorneys can handle the speed and complexity of many ITC cases,” Mastriani said. “It still requires specialized skills to be in this practice.”

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