Efficient exclusions: improving the efficiency of United States International Trade Commission exclusion order enforcement.

• Published date: 22 December 2012
• Author: Rasmussen, Nicholas H.
• Date: 22 December 2012

I. INTRODUCTION

Litigation, like diplomacy and war, (1) is economics by other means. But when the briefs are set aside and a decision is issued, every victorious litigator is faced with the inevitable question of how the client's victory can best be enforced fully, effectively, and efficiently. If the successful litigator argued a matter of unfair-importation patent infringement before the United States International Trade Commission ("U.S. ITC"), the short answer may be to presume that once a Final Determination and Exclusion Order has been issued, all that remains is to allow the Order to work its effect. In reality, the answer is more complex.

In today's global economy, there are at least two situations in which enforcing a U.S. ITC exclusion order may be exceedingly difficult. Enforcement is neither so straightforward as to expect infringers to comply, nor is it conducive to U.S. Customs and Border Protection Service ("CPB") identifying and excluding all infringing products. Today's global economy includes both difficult-to-identify manufacturers in states with weak intellectual property rights, (2) and complex technological products comprised of a multitude of discrete, but non-readily-identifiable, "build-up" components. (3) Either of these may be difficult to identify, and neither the client, nor the U.S. ITC or the CBP will necessarily have any particular store of knowledge regarding them. In these situations, enforcement may prove exceedingly difficult, even when a litigant has successfully obtained a U.S. ITC ruling and an exclusion order in its favor. Further complicating the issue, enforcement must comply with both domestic and international legal constraints as well as the economic pressures of the global economy.

Therefore, while the U.S. ITC's growing popularity as a forum for the litigation and enforcement of intellectual property rights speaks to its benefits as a forum, two significant questions remain. First, how can U.S. ITC exclusion orders best be efficiently and economically enforced? Second, are there reforms that would improve the efficiency of enforcing such orders, particularly those directed at non-readily identifiable infringing products or their producers?

This Note will examine post-litigation enforcement of U.S. ITC exclusion orders, as authorized under [section] 337 of Title 28 of the United States Code, (4) with the goal of suggesting mechanisms to improve the efficiency of enforcement. It will also consider methods that may improve the efficiency of exclusion orders in preventing the importation and sale of products produced by non-readily identifiable manufacturers in foreign states, or products comprised of non-readily identifiable "build-up" components that may be subject to U.S. ITC exclusion orders. Finally, this Note will suggest legislative, administrative, and legal mechanisms that might improve the efficacy of enforcing such orders in accordance with constraints imposed by domestic and international legal obligations.

Part I of this Note presents a brief introduction. Part II provides a general overview of relevant information regarding the global economy and intellectual property as well as an outline of the structure and relationship of institutions and legal agreements relevant to a discussion of U.S. ITC litigation and enforcement. Part III outlines the intricacies involved in enforcing U.S. ITC exclusion orders. In particular, Part III highlights the institutional relationships and the institutional differences and considerations involved in enforcing U.S. ITC exclusion orders. Part 1V discusses potential reforms, beginning with a brief discussion of prior commentators' suggestions, and followed by the author's own analysis and suggestions. Part V of this Note provides a brief conclusion.

II. BACKGROUND

In an increasingly internationalized and technology driven global economy, intellectual property--patents, trademarks, and service marks-are an increasingly important component in the growth and protection of businesses and national economies. The value of intellectual property to individual rights-holders cannot be overstated: intellectual property holdings--the value of patents, trademarks, and service-marks held by a company--may very well represent more than half of the market value for the average company listed internationally. (5) Moreover, failure to exploit the value of intellectual property assets may account for nearly $1 trillion U.S. dollars in foregone annual value by U.S. based companies alone. (6)

The importance to corporations of intellectual property at the national level highlights the strategic economic value of intellectual property in the global economy. But the value of intellectual property, as with any asset, depends on its legal protection. (7) While developed nations, such as the United States, have established an increasingly robust and interconnected intellectual property regime, (8) studies suggest that a significant percent of intellectual property is now developed in emerging markets, (9) generally regarded as intellectual property weak or uncertain regimes. (10) Such developments may be of particular concern to national economies; imports of industrial supplies (excluding crude oil), capital goods (computers, telecommunications, commercial parts), and consumer goods (including medicine) account for 86.9% of all U.S. imports. (11) Leading the list of U.S. trade partners is China, generally regarded as a relatively IP-weak state, (12) which accounts for 18.4% of all U.S. imports (13) but accounts for 80% of all goods seized by the CBP in the 2007 fiscal year as counterfeit or pirated. (14) As a final twist, while intellectual property protection regimes are increasingly interconnected at the global level, (15) functional enforcement continues to exist only at the national level, (16) This consists of territorial, national state-based regulation of specific registration, and import/export legal enforcement mechanisms. (17)

Two critical realizations of intellectual property protection spring from these facts: intellectual property protection is only as good as (1) the ability and willingness of states to police and prevent the unauthorized use of intellectual property at the design and manufacturing stage, and (2) the ability and willingness of states to police and prevent traffic of infringing goods at the point of importation and sale. Ultimately, where states are unable to rely on trading partners to sufficiently enforce intellectual property protection at the manufacturing level, or when domestic right-sholders do not possess foreign intellectual property rights, (18) states and domestic rights-holders must rely on import-focused controls.

A. Structural Basis of U.S. Intellectual Property Rights

In the United States, origination of most federally enforceable intellectual property rights (19) occurs through the administrative approval process for patents, trademarks, and service marks. Administrative power is vested in the United States Patent and Trademark Office ("U.S. PTO") (20) as authorized by, and in compliance with, applicable domestic statutes and international treaties. (21) Legal enforcement of patents outside of the administrative context of registration and cancellation is accomplished by the United States federal courts (22) and the U.S. ITC. (23) Finally, the Department of Homeland Security, through the CBP, is responsible for enforcing import/export regulations. (24) In this capacity, the CBP bears responsibility for detecting and detaining imports subject to U.S. ITC exclusion orders, cease and desist orders, and for physical enforcement of those orders at the point of importation into the United States. (25)

1. The United States International Trade Commission

The U.S. ITC plays an increasingly central role in trade-related patent litigation in the United States. Originated in 1916 as the United States Tariff Commission, (26) it was granted investigatory powers to enforce tariff and trade regulations under the 1930 Smoot-Hawley Tariff Act. (27) In the 1970s, the U.S. ITC began to develop into its current form, first as an advisory agency to the president, and eventually emerging as the executive-branch enforcement agency for unfair trade practices in the United States under the Trade Act of 1974. (28) That act amended [section] 337 of the Tariff Act of 1930 to grant the U.S. ITC investigatory, adjudicative, and enforcement power over individuals and companies engaged in unfair importation practices, such as patent infringement. (29) Most significantly, the 1974 revision grants the U.S. ITC a singularly powerful tool: the power to exclude from importation articles found to be the object of unfair trade practices after a finding of patent infringement. (30) Notably, the exclusionary power extends to the investigatory period prior to a finding on the matter, during which the U.S. ITC is authorized to issue an order excluding products under investigation from importation unless subject to a bonding provision. (31)

The U.S. ITC's exclusionary power is sweepingly broad in nature. The U.S. ITC may issue two types of exclusion orders. First, the U.S. ITC may issue a limited exclusion order prohibiting the importation of items by importers that the ITC has found to be infringing. (32) Second, and in more limited circumstances, it may issue a general exclusion order broadly prohibiting the importation of infringing goods regardless of whether the particular product or importer identified for exclusion was specifically named or identified in the U.S. ITC action. (33) Furthermore, [section] 337 instructs the U.S. ITC to "[consider] the effect of such exclusion," giving the U.S. ITC authority to adapt exclusion orders as it sees fit. (34)

2. U.S. ITC and the Federal Courts." Fundamental Differences

In modern patent litigation, several factors differentiate U.S. ITC...