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Exclusion Orders: How an International Trade Commission Investigation Can Protect Patented Products from Infringing Imports 

by Jonathan J. Fagan

Published: September, 2020

Submission: September, 2020

 



The International Trade Commission (ITC) sits in a nondescript office building about a block farther south of the National Mall than tourists usually care to venture. Patent owners come from around the country to this tree-lined street in Washington, D.C., to seek a powerful remedy to protect their patented products: an exclusion order. An exclusion order directs U.S. Customs and Border Protection to block infringing imports at the United States border.


To obtain an exclusion order, a patent owner—known to the ITC as a complainant—must prove that (1) another party—a respondent—has imported a product into the United States (an accused product);[1] (2) the accused product infringes at least one claim of the complainant’s U.S. patent;[2] and (3) the importation of this product has harmed a U.S.-based industry (a domestic industry).[3]


Consider the following hypothetical example:


USA Hand Tools makes cordless power drills and owns an office building and assembly plant in Springfield, Illinois. USA Hand Tools employs a team of 12 design engineers who perform all design work on the cordless power drills in the Springfield office building. USA Hand Tools buys its batteries from Korea Battery Works in Seoul, South Korea and its housing and motors from Tijuana Motor, Inc., in Tijuana, Mexico. USA Hand Tools assembles the cordless power drills in its facility and distributes them throughout the United States.


USA Hand Tools’ new Model A drill contains an innovative clip that prevents the battery from becoming dislodged. USA Hand Tools received a U.S. patent on this innovative clip. Claims 1 and 2 of the patent read as follows:


1. An apparatus for securing a battery, comprising:


  • a metal clip; and
  • a spring.

2. The apparatus of claim 1, wherein the metal clip is made of brass.


Recently, USA Hand Tools purchased one of Beijing Hand Tools’ products—Model 1—from a big-box hardware store. To USA Hand Tools’ dismay, the Model 1 drill contains the patented clip—containing both a metal clip and a spring. However, Beijing’s clip is stainless steel. All manufacturing of the Model 1 drill occurs in Beijing, China. USA Hand Tools files a complaint in the ITC, naming Beijing Hand Tools as a proposed respondent to prevent further importation and sale of the Model A, which it claims infringes its patent.



Importation


The complainant must prove the respondent imports the accused product into the United States.[4] This makes sense, because the ITC protects U.S.-based industry—domestic industry—from foreign, infringing products.


A complainant can often show importation with relative ease—through stipulation of the parties or shipping records.[5]


But complications can arise. For example, the Court of Appeals for the Federal Circuit (the court that considers all appeals from the ITC) recently affirmed the ITC’s finding of importation in a case in which the accused product did not infringe when it crossed the border but did infringe when used as intended after crossing the border.[6] While each individual case presents its own challenges, the complainant must prove that the respondent imports the accused product into the United States.


In the hypothetical example, USA Hand Tools could point to its purchase of the Model 1 drill at the big-box store as evidence that Beijing Hand Tools imported the Model 1 into the United States. Beijing Hand Tools may also simply stipulate to importation. Put simply, Beijing Hand Tools could simply agree to not dispute importation.



Infringement


The complainant must also prove the accused product “infringe[s] a valid and enforceable United States patent[.]”[7] In other words, since the claims of a patent define the enforceable scope of the patent, a complainant must—just as in a federal district court—show the accused product contains or practices each element described in at least one claim of a U.S. patent.


In the hypothetical example, USA Hand Tools would need to demonstrate that the Model 1 drill contains the patented clip—just as described in USA Hand Tools’ patent. The claims of a patent define the scope of the invention. To show that the Model 1 clip infringes, USA Hand Tools will need to show it contains the elements of at least one claim of the patent. As explained above, the Model 1 clip contains both the metal clip and the spring. The Model 1, therefore, infringes claim 1 of the patent. The Model 1 clip is, however, stainless steel not brass. The Model 1 does not, therefore, infringe claim 2 of the patent.


To prove this, USA Hand Tools would likely examine physical specimens of the Model 1 drill, engage in discovery, and retain an expert witness to testify that Model 1 clip contains all of the limitations of at least one claim of USA Hand Tools’ patent.


Regarding patent validity, the ITC affords patent owners an advantage over federal district courts: The ITC does not stay—in other words, pause—investigations pending inter partes review (IPR). Patent-infringement defendants often file for IPR, asking the Patent Trial and Appeal Board (PTAB) to cancel at least one claim of the patent.[8] District courts often stay cases pending IPR. Because the PTAB has cancelled at least one claim in 80 percent of its decisions, IPR threatens the patent owner’s case.[9]


But the ITC does not stay investigations pending IPR.[10] Among other things, the ITC’s directive to a decision “at the earliest practicable time” weighs against such a stay.[11]


The substance of demonstrating infringement in the ITC differs little from in the federal district court. Using similar mechanisms of fact and expert discovery, the complainant must demonstrate the accused product infringes at least one claim of a valid U.S. patent.



Domestic Industry


Finally, the patent owner must satisfy the domestic-industry requirement. The patent owner must show “an industry in the United States, relating to the articles protected by the patent,… exists or is in the process of being established.”[12]


Remember the ITC protects U.S.-based industry from foreign, infringing products.[13] To demonstrate an industry exists, the complainant must satisfy both prongs of the domestic-industry requirement: the technical prong and the economic prong.


Technical Prong


To satisfy the technical prong, the complainant must demonstrate the existence of “articles protected by the patent.”[14] Put simply, this means the complainant must show a product—often its own product or a product produced under a licensing agreement—practices each and every limitation of at least one claim (not necessarily the same claim that the accused product infringes[15]) of the same U.S. patent it has accused the product of infringing.[16]


In the hypothetical example, USA Hand Tools would need to show the Model A drill’s clip contains each limitation of one of its patent’s claims. For example, it must show the Model A contains both limitations of claim 1—the metal clip and the spring. To accomplish this, USA Hand Tools would likely use the same expert it used to show infringement to testify that the Model A’s clip practices at least one claim of USA Hand Tools’ patent.


Economic Prong


To satisfy the economic prong, the complainant must show sufficient investment in a domestic industry related to the “articles protected by the patent.”[17] A complainant can show such an industry exists by showing “significant investment in plant and equipment,” “significant employment of labor or capital,” or “substantial investment in its exploitation, including engineering, research and development, or licensing.”[18]


Note that a patent owner may prove either an existing industry or one in the process of being established.[19] Early-state industries are in the process of being established when “a patent owner takes the necessary tangible steps to establish such an industry in the United States” and “there is a significant likelihood that the industry requirement will be satisfied in the future.”[20] For example, the commission found that a complainant satisfied the domestic-industry requirement when the party had invested significantly in facilities and equipment, labor and capital, and exploitation of the relevant patents but had not yet engaged in commercial production of goods.[21]


To satisfy the economic prong, in the hypothetical, USA Hand Tools would need to argue its investment in the office space and assembly plant, the employment of its engineering team, and its assembly of the Model A drill satisfy the economic prong. Beijing Hand Tools may argue the sourcing of products from outside the United States weighs against USA Hand Tools. Furthermore, Beijing Hand Tools might attempt to demonstrate USA Hand Tools can only apportion a small amount of its overall investment to the alleged domestic industry if the engineers spent only a small amount of time developing the patented clip.



The Exclusion Order


The ITC offers the exclusion order to those looking to protect patented products from infringing imports. The exclusion order offers one of the most uniquely powerful remedies available to patent owners: a directive to U.S. Customs and Border Protection to block infringing products at the border.


Patent owners who can demonstrate the three requirements discussed above—importation, infringement, and domestic industry—may obtain the benefit that an exclusion order offers to a patent-protected, U.S.-based industry.



[1] 19 C.F.R. § 1337(a)(1)(B).


[2] 19 C.F.R. § 1337(a)(1)(B)(i).


[3] 19 C.F.R. § 1337(a)(2)


[4] 19 C.F.R. § 1337(a)(1)(B).


[5] See, e.g., Certain LTE- and 3G-Compliant Cellular Commc’ns. Devices, USITC Inv. No. 337-TA-1138, Initial Determination at 14–15 (Feb. 18, 2020).


[6] Comcast Corp. v. ITC, 951 F.3d 1301 (Fed. Cir. 2020).


[7] 19 C.F.R. § 1337(a)(1)(B)(i).


[8] 35 U.S.C. § 311.


[9] United States Patent and Trademark Office, Trial Statistics: IPR, PGR, CBM (July 2020), https://www.uspto.gov/sites/default/files/documents/trial_statistics_20200731.pdf.


[10] Quinn Emanuel Urquhart & Sullivan, LLP, February 2019: ITC Treatment of IPR Decisions (Mar. 1, 2019), https://www.jdsupra.com/legalnews/february-2019-itc-treatment-of-ipr-65955/ (“[T]he ITC has never stayed a Section 337 investigation based on a pending IPR[.]”).


[11] 19 C.F.R. § 1337(b)(1); see, e.g., Certain Laser-Driven Light Sources, Subsystems Containing Laser-Driven Lgith Sources, and Products Containing Same, USITC Inv. No. 337-TA-983, Order Denying Motion to Stay (Mar. 3, 2016).


[12] 19 C.F.R. § 1337(a)(2).


[13] Note that a foreign-based company may satisfy the domestic-industry requirement, if it can satisfy both the technical and economic prongs.


[14] 19 C.F.R. § 1337(a)(2).


[15] Certain Ammonium Octamolybdate Isomers, USITC Inv. No. 337-TA-477, Comm’n Op. at 55 (Jan. 5, 2004) (“In order to satisfy the technical prong of the domestic-industry requirement, it is sufficient to show that the domestic industry practices any claim of that patent, not necessarily and asserted claim of that patent.”).


[16] See InterDigital Communs., LLC v. ITC, 707 F.3d 1295, 1298 (Fed. Cir. 2013).


[17] 19 C.F.R. § 1337(a)(3).


[18] 19 C.F.R. § 1337(a)(3)(A)–(C).


[19] 19 C.F.R. § 1337(a)(2).


[20] Certain Non-Volatile Memory Devices and Products Containing the Same, USITC Inv. No. 337-TA-1046, Comm’n Op. at 29 (Oct. 26, 2018).


[21] Id. at 43–44.


 



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