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When a competitor gains ground in the U.S. market and infringes intellectual property in the process — what should a company do? For more and more companies, the choice is to file a complaint with the U.S. International Trade Commission under �337 of the Tariff Act of 1930, 19 U.S.C. 1337. These investigations offer redress against infringing imports that the federal courts cannot match due to the ITC’s technical capabilities, the almost limitless discovery available, the favorable nationwide relief often obtained and the fast-pace schedule at which the agency works. Even among foreign companies, �337 investigations have gone from being arcane matters at an obscure independent U.S. government agency to the forum of choice to adjudicate IP infringement allegations among major global competitors. As a result, the ITC is on track to institute more �337 cases this year than ever before, with 28 investigations filed or instituted in the first 10 months of 2004 alone — well above previous years’ annual average of roughly 19 investigations. Though originally designed primarily as a protectionist tool for small U.S. companies to compete against foreign companies and restrict imports into the U.S. market based on allegations of unfair practices in import trade, lately large, sophisticated companies with deep pockets also are increasingly filing �337 complaints, including numerous Fortune 500 companies. Section 337 is a unique tool that owners of U.S. intellectual property rights can use to bar infringing imported products from entry into the United States and prohibit the products’ sale in the United States. Section 337 complaints are being filed both in lieu of and in conjunction with parallel federal court litigation, and the unique statutory rules that permit the staying of the parallel federal court litigation and the use of the ITC’s record in that litigation make �337 investigations so much more appealing. 28 U.S.C. 1659(a). Section 337 investigations have traditionally been used by U.S. companies with limited resources to take advantage of the lower litigation costs and limitless discovery afforded by ITC proceedings that typically would bog down federal district court litigation. However, modifications to �337 enacted in the Omnibus Trade and Competitiveness Act of 1988 made it possible for foreign companies also to use this tool to obtain redress against IP infringement in the U.S. market. 19 U.S.C. 2191; H.R. Rep. No. 100-40, 100th Cong., 1st Sess. Pt. 1, at 157 (April 6, 1987). In many instances, the foreign complainants that now use �337 were once the recipients of such actions filed against them. Well-recognized foreign companies from the United Kingdom, Japan, Germany and many others have been complainants in �337 proceedings. Favorable holdings in �337 proceedings are especially important to foreign companies because rulings place them in a strong position over their competitors when it comes to licensing and royalty issues — not to mention the complete elimination of competitors that infringe a U.S. patent in the U.S. market. The result is a big upswing in the number of ITC cases. BENEFITS OF ITC PROCEEDINGS ITC proceedings are much more streamlined than federal court litigation, even litigation in the Northern District of California or the “rocket docket” of the Eastern District of Virginia. For example, at the ITC, responses to discovery requests and motions are generally due within 10 days of service whereas district courts often afford 30 days to respond. With its well-defined procedures and tight deadlines, the parties, the administrative law judges (ALJs) and the commissioners often complete the process of discovery, hearing, initial ALJ determination and the final ITC determination in 15 months. Some parties see the ITC proceedings as having reduced legal fees and costs as a result of the natural benefits of an expedited proceeding as compared to federal court litigation. The ITC has in rem jurisdiction over imported products accused of infringing U.S. IP rights, so the ITC’s jurisdiction is established throughout the nation once it is demonstrated that allegedly infringing products or parts and components thereof have been imported from anywhere into the United States. Moreover, respondents failing to respond to a complaint or to participate in a �337 investigation risk being held in default. A defaulting party waives its right to participate in the investigation but is subject to any remedy issued by the ITC. 19 C.F.R. 210.16. The ITC also is preferred because it is a tested decision-making body with expertise in IP law. Section 337 cases offer a set of checks and balances and a ruling by a very experienced body, which is not necessarily available in federal courts. A federal court judge might handle one IP case every five years. In contrast, four administrative law judges (ALJs) currently preside over �337 investigations at the ITC. Because the ALJs and their legal advisors focus exclusively on IP law, they quickly become specialized jurists in this area, making them among the most experienced trial judges of IP claims in the United States. The ITC investigations also benefit from the input and participation of the Office of Unfair Import Investigations, whose staff attorneys represent the public interest, in a role similar to amicus parties, in each �337 investigation. These staff attorneys’ views often provide helpful guidance from a neutral source for the ALJs’ and commissioners’ consideration. Determinations made by the ALJs are subject to review by the commissioners, and the investigations benefit greatly from review and advice given to the commissioners from the Office of General Counsel Attorney Advisors. These specialists in IP law advise the commissioners on whether to adopt, modify, reject or remand the ALJ’s initial determination on infringement, validity and enforceability and the recommended determination on the appropriate remedy. The commissioners also benefit from their own personal staff, including attorneys who advise the commissioners in their �337 decisions. The investigations also are subject to presidential review, as the U.S. president has authority to disallow any remedy issued by the ITC within 60 days of issuance. 19 U.S.C. 1337(j). Notably, the president has authority to disapprove remedies imposed but has no authority to impose a remedy when the ITC has determined not to issue one as a result of finding no �337 violation. Therefore, the input and oversight by the president is more accurately recognized in this instance as an advantage to a respondent. None of this oversight and input exists in federal court litigation. Therefore, �337 actions are increasingly preferred over federal court litigation when IP owners cannot risk the possibility of an incorrect legal interpretation or ruling. ITC actions also are well known for the boundless discovery available. Whereas federal court rules limit parties to 25 interrogatories, impose requirements to obtain foreign discovery and are more tolerant of protections against discovery, the ITC imposes few, if any, limitations. The ITC’s nationwide jurisdiction permits the ALJs to issue subpoenas throughout the United States, and the ITC jurisdiction on imports allows it effectively to compel discovery throughout the world against any named party, greatly facilitating discovery for the complainants that use �337. 19 C.F.R. 210.27-210.34. The remedies provided by the ITC also yield significant benefits, as they are enforceable by U.S. Customs and the ITC with little need for input by the complaining party. Unlike district courts, the ITC does not provide for monetary remedies. 19 U.S.C. 1337(d), (e), (f), (g) and (i). Nevertheless, a positive result in a �337 investigation for a complainant can have devastating consequences for respondents that import infringing goods into the United States. The ITC may issue either a “limited” exclusion order or a “general” exclusion order upon determining that there is a violation of �337. 19 U.S.C. 1337(d), (e); 19 C.F.R. 210. A limited exclusion order prevents importation into the United States of infringing goods manufactured by enumerated respondent foreign producers. A general exclusion order prevents the importation of all infringing goods irrespective of the foreign source. Moreover, downstream products containing a component or part found to violate �337 can be covered by a limited exclusion order, effectively extending relief against a third party that exports the downstream product to the United States. See Inv. No. 337-TA-481 & 491, Limited Exclusion Order, Aug. 20, 2004. Because �337 jurisdiction exists even when any part or component is imported for a final product that allegedly infringes a U.S. patent, the jurisdiction of the ITC is very broad. Indeed, it would be difficult to find a product in the United States that does not have at least one imported part or component. Historically, U.S. trade imbalances have resulted in increased import-restraint investigations, and the recent increase in �337 investigations is a natural result of the growing trade deficit in the United States. CHINESE COMPANIES TARGETED No country has seen this effect more directly than China. Imports from China are increasing the fastest of all the U.S. trading partners and comprise the largest source of imports in the United States; thus, it is no surprise that imports from China are the subject of most �337 investigations under way today. In addition, a large percentage of these imports have been high-tech products, which tend to be the subject of most IP disputes. Similar trends were seen against other countries with which the United States suffered serious trade imbalances in the past — for example Japan and Taiwan in the 1970s and 1980s. During this period, 51 percent of all �337 investigations were aimed at imports from Japan and Taiwan, with which the United States had large trade deficits at the time. Many of the foreign company respondents involved in past �337 investigations were emerging onto the international market at the time and just becoming familiar with the need to respect IP rules and develop their own IP. These companies now are more aware of U.S. IP rules and have become some of the most strident guardians of their own IP rights in the United States. In the process, they have begun filing their own �337 cases in the United States to foreclose unfair competition from their competitors — whether located in the United States or in other foreign countries. Therefore, �337 cases may have helped to inform foreign companies hoping to expand onto the international market on the importance and value of strict IP enforcement. Given the institutional strengths of the ITC, its jurisdiction, procedures and remedies and global economic trends, �337 litigation should continue its upward trend in the near future, particularly against imports from China. As China increases its capacity to manufacture high-tech, high value-added products and continues to increase the export of those products to the United States, its companies will find themselves the recipient of an increasing number of �337 complaints. The ITC is likely therefore to continue to grow in importance as a forum to resolve IP trade disputes. Lyle Vander Schaaf is a senior associate and an international trade lawyer in the Washington office of White & Case, where he focuses on investigations before the International Trade Commission. He served in the Office of General Counsel for the ITC from 1991 to 1996. He can be reached via e-mail at [email protected]. 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