Preparing to Defend a Section 337 Action: What District Court Litigators Need to Know

• Publication year: 2014
• Author: Philip Graves

Preparing to Defend a Section 337 Action: What District Court Litigators Need to Know

Philip Graves

Snell & Wilmer

Marjorie A. Witter

Snell & Wilmer

The U.S. International Trade Commission ("ITC" or "the Commission") is an important venue for patentees. Cases are guaranteed a decision within sixteen months of the institution of the investigation and success provides injunctive relief without the need to satisfy the traditional equitable standard applicable in patent cases under EBay Inc. v. MercExchange, L.L.C.¹ Moreover, the venue allows for multiple, unrelated defendants to be pursued in a single proceeding. For these reasons and others, the number of investigations in the ITC under Section 337 of the Tariff Act of 1930 ("Section 337")² has trended upward over most of the past ten years.³

Section 337 proscribes a variety of acts associated with the importation of articles into the United States, including "[t]he importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that (i) infringe a valid and enforceable United States patent...; or (ii) are made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable United States patent."⁴ The statute authorizes the Commission to investigate alleged violations in a quasi-judicial proceeding, which is conducted by an administrative law judge ("ALJ") on the record after notice and opportunity for a hearing.⁵ Most of the issues and procedures with which counsel are familiar in a typical patent case, such as claim construction, infringement, and invalidity play their accustomed role in a proceeding for patent infringement in the ITC.

The remedies available to a successful patent holder in the ITC are, however, quite different and may, in some circumstances, be potentially more compelling than those available in federal court. Damages are not available. Instead, if the Commission determines that a violation has occurred, it "shall direct that the articles concerned, imported by any person violating the provision of this section, be excluded from entry into the United States" unless public interest concerns dictate a contrary outcome (an exception only rarely invoked).⁶ Notably, an exclusion order may in certain circumstances reach beyond the particular respondents named in the complaint to exclude a class of products regardless of the source, an in rem remedy that can be quite effective (and subject to potential abuse).⁷ Moreover, Customs and Border Protection enforces an exclusion order, typically with input from the successful patent holder, with the effect that goods found to infringe may be seized and forfeited at the port of entry.⁸ In addition, the Commission may issue a cease and desist order that precludes the sale within the U.S. as well as the importation into the U.S. of infringing articles, which subject the named respondents to possible penalties of up to $100,000 per day of violation.⁹

[Page 31]

Given the potentially significant impact of these remedies, defense counsel new to the venue should have a thorough appreciation of the important differences between litigating a patent case in the ITC and in U.S. district court. Probably the most important is this: the development of the major evidence, theories, and themes of the case must be front-loaded to an extent rarely seen outside the most aggressive of district court rocket dockets. Deadlines to respond to pleadings and discovery are expedited and defendants (referred to as "respondents" in the ITC) are required to make substantive showings much earlier than in usual district court practice. It is imperative that counsel effectively prepare their clients for the pace of the proceedings and the required disclosures, as well as the significant disruption that may result from the need to gather electronic discovery on an expedited basis.¹⁰

THE INVESTIGATION MOVES AT WARP SPEED

The first step in an ITC investigation is, as in district court, the filing of a complaint.¹¹ However, because the ITC is an administrative agency rather than a court, the filing of the complaint is not sufficient to invoke the tribunal's adjudicative authority. The Commission must determine whether to institute an investigation within thirty days of the filing of the complaint.¹² If the complaint is procedurally sufficient, the Commission will typically go forward with an investigation, and will serve non-confidential copies of the complaint, exhibits, and notice of investigation upon each respondent.¹³

When an investigation is instituted, an ALJ will be assigned to the proceeding and a protective order will be entered. Respondents' counsel should make their appearances and agree to be bound to the protective order as soon as possible following service so that they can request a copy of the confidential complaint and exhibits and prepare their responses. Respondents have twenty days from the date of service of the complaint and notice of investigation to file a written response.¹⁴ While professional courtesy and the local rules of many district courts often permit a more leisurely approach to the filing of a responsive pleading, in the ITC respondents should assume that any extension will be short.¹⁵ A respondent that fails to respond will find itself in default, with potentially severe consequences (including a finding of waiver of respondent's right to appear, to be served with documents, and to contest the allegations at issue in the complaint).

Within forty-five days following institution of the investigation, the ALJ must issue an order setting a target date for completion of the investigation, including the completion of the Commission's review of the ALJ's determinations and recommendations regarding the existence of a violation of Section 337 and the appropriate remedy.¹⁶ Any target date that exceeds sixteen months from the date of institution will be reviewed by the Commission.¹⁷ In practice, ALJs rarely set a target date that exceeds sixteen months from the date of institution.¹⁸

Due to the sixteen-month timeframe, the procedural schedule in an ITC investigation is correspondingly short. Parties typically are given approximately five months for discovery, with the deadline to file summary determinations within the following two months.¹⁹ The evidentiary hearing, the ITC's equivalent of a trial, is approximately eight to nine months from the date the notice of institution was published.²⁰

Given the short timelines, upon receiving notice of the filing of the complaint, respondents should proactively identify which of their products is accused and perform a comparison of that product to the independent claims of the patent. Respondents should also run invalidity searches against the patents in suit, and review those search results (and the identified prior art references) well in advance of the deadline to respond.

Discovery Responses

The short schedule of an ITC investigation is reflected in discovery practice. The Commission rules provide that interrogatories, requests for production of documents, deposition notices, and requests for admission may be served immediately following the publication of the notice of institution in the Federal Register.²¹ Any response thereto is due within ten days after service.²²

In addition, if a party withholds information due to privilege, that party must make the claim at the time of the response, and must serve a privilege log within ten days of making the claim.²³

Such short timelines emphasize the importance of early communication with clients about expectations for document collection and production, and the related costs. Given the short time to respond and to produce a privilege log, document collection should begin from notice of the complaint. Further, the client should be prepared to gather relevant information within a few weeks of receipt of discovery.

Subpoena Practice

Third party discovery, such as discovery seeking materials and testimony to support an invalidity defense based on the existence of prior art or an on-sale bar, may be obtained through the service of a subpoena just as in district court litigation. Unlike in district court, counsel for the parties may not issue subpoenas. Instead, the party must make an application to the administrative law judge for issuance of a subpoena requiring a person to appear at deposition or to produce documents.²⁴ Many ALJs provide detailed guidance as to the required content of the application and the substance of the subpoena in their Ground Rules, which typically require a showing of the relevance of the information sought and the reasonableness of the scope of inquiry.²⁵ Requests for issuance of a subpoena are ruled on quickly, often within two or three days.

The speed with which subpoenas are issued contrasts with the multi-layered process for enforcement against a recalcitrant third party. First, the frustrated litigant must move before the ALJ for an order certifying a request for enforcement to the Commission.²⁶ In the event that the ALJ agrees that legitimate discovery has been thwarted, he must submit a written report concerning the purpose, relevance, and reasonableness of the subpoena.²⁷ The Commission will then review the papers and, if it agrees that the subpoena should be enforced, issue a notice stating that it has granted the request and authorizes the Office of the General Counsel ("OGC") to seek enforcement.²⁸ The OGC will then file a motion (typically, in the U.S. District Court for the District of Columbia) to enforce the subpoena.

[Page 32]

On a motion to enforce an ITC subpoena, the Commission (and, in the background, the interested litigant) has some advantages over traditional district court practice, such as the availability of nationwide process.²⁹ In addition, the Supreme Court has confined the role of a court before which such a motion is pending to determining...