History will remember U.S. Sen. Reed Smoot and U.S. Rep. Willis Hawley for a 1930 law that raised tariffs and is blamed for helping to accelerate the Great Depression. The tariffs are long gone, but Section 337 of the Smoot-Hawley Tariff Act has emerged as a giant hammer for technology companies in the patent wars over mobile devices.
It’s also been a bonanza for Washington-based Adduci, Mastriani & Schaumberg, a firm long established in what has become the preferred forum for these battles: the once sleepy International Trade Commission (ITC).
“The last four to five years, things have taken off like a skyrocket,” said V. James Adduci II, a co-founder of the firm. “The ITC has become the hottest forum for litigating IP rights of U.S. and foreign companies.”
Adduci Mastriani has mirrored that growth; the 26-lawyer firm boasts the most trade lawyers under one roof in the United States, elbowing out general-practice giants such as Atlanta-based Alston & Bird and intellectual property heavyweights like Fish & Richardson and Washington’s Finnegan, Henderson, Farabow, Garrett & Dunner to become the biggest player before the ITC. Adduci Mastriani led in ITC filings from 2008 through 2010, according to IP Law & Business and Corporate Counsel, affiliates of The National Law Journal. By its own count, during the 23 months ending in November, its lawyers worked on one-third of the cases before the commission.
The ITC’s commissioners regularly decide cases affecting billions of dollars in trade for mobile phone companies, GPS manufacturers and other electronics firms. The body handles a quarter of all patent trials in the United States, and the number of investigations it has begun increased by 37 percent during 2011, to 70.
Adduci Mastriani had humble beginnings. Adduci and partner Louis Mastriani had worked together at the ITC during the late 1970s before deciding to go out on their own in 1981. “I was 28, with a baby about to happen, no money, no business,” Adduci said. “We started the firm and we starved for a while and we decided our niche is going to be what it remains: international trade.”
Luck played a role in the firm’s success. One major reason the ITC has risen to prominence is its ability to issue automatic injunctions in the form of exclusion orders, immediately barring a foreign company from shipping goods into the United States. District courts around the country were barred from issuing such injunctions by a 2006 U.S. Supreme Court ruling — which instantly made the ITC the venue of choice.
“You can shut down your foreign competition for the life of the patent, which means tens of billions of trade can be shut down overnight,” Adduci said.
The ITC’s speed in deciding patent cases — usually about 15 months, compared with years for federal district courts — has added to its allure for technology companies, whose products often have short shelf lives.
In 2011, Adduci Mastriani helped Garmin Ltd., a Swiss maker of GPS-based navigation devices, fend off a case brought by Japanese electronics company Pioneer Corp. Pioneer claimed that Garmin had infringed its patents for car-navigation systems and damaged its U.S. licensing division, which it argued constituted a “domestic industry” under trade law. The ITC begged to differ, in a ruling likely to restrict patent holders that only extract royalty payments by licensing patents from bringing ITC cases.
Adduci Mastriani helped Kentucky-based printer manufacturer Lexmark International Inc. win a general exclusion order barring after-market printer-cartridge makers from importing toner cartridges that infringe its patents. In a second printer dispute, the firm helped Japan-based Oki Data Corp. beat a patent infringement case brought by a Japanese rival, Ricoh Co. Ltd., which claimed that Oki Data infringed five of its patents.
Additionally, the firm represented Massachusetts-based chip maker Analog Devices Inc. in a successful patent dispute with Dover Corp.’s Knowles Electronics over protective packaging for chips used in microphones, winning a limited order excluding Knowles’ infringing products from the United States.
Not all matters were wins. The firm represented China-based Tianrui Group Foundry Co. Ltd., a maker of railroad and car parts that was accused of stealing trade secrets from Chicago-based Amsted Industries Inc. by hiring away employees from Amsted’s Chinese licensee. Even though the alleged theft occurred overseas, the ITC barred imports of Tianrui’s rail parts, a decision upheld in a 2-1 ruling by the U.S. Court of Appeals for the Federal Circuit. Adduci Mastriani lawyers are seeking a rehearing.
The firm had a hand in one of the biggest battles in the smartphone wars between mobile handset makers. Along with Chicago-based Kirkland & Ellis and Palo Alto, Calif., patent boutique Bridges & Mavrakakis, Adduci represented Apple Inc. in its case against Taiwan’s HTC Corp., maker of a number of popular handsets that use Google’s Android operating system. The commission found that HTC infringed on just one out of 10 patent complaints filed by Apple, which is appealing the ruling.
Being a boutique firm with a large presence in a fast-growing section of the legal market means pressure from bigger firms. Adduci Mastriani starts first-year associates at $115,000 per year, compared with $145,000 to $160,000 at the big Washington and New York firms. In October, partner Jamie Underwood left to join the Washington office of Alston & Bird. “Many big firms have wanted to gobble us up and make us their trade department,” Adduci said. “They all say, ‘More revenue.’ I don’t see that. I think that the best argument is: You get access to a larger client base. But we’ve been very happy with the people that have come to us.”
Another cloud over the firm is close to lifting. A malpractice suit brought in 2002 by a Swedish inventor Hakan Lans, who hired Adduci Mastriani during the 1990s to pursue companies believed to be infringing on his color-graphics technology patents, is nearing settlement.
International firms including Bingham McCutchen have discussed acquiring Adduci Mastriani. Still, Adduci said, success hasn’t made the boutique’s lawyers any more interested in being acquired. “Clients come to us because we’re regarded as pretty good at what we do,” he said. “So I think we’re going to continue to resist being merged into a larger organization.”
Jason McLure is a freelance reporter in New Hampshire.