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American Intellectual Property Law Association

ITC Pilot ProgramDomestic Industry Review

Yuichi WatanabeIP Practice in Japan Committee

October 22, 2013

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US International Trade Commission (ITC)

• An administrative agency in Washington, DC

• One of its duties to protect U.S. domestic industries.– Six commissioners (3 Republicans + 3 Democrats)

– Six administrative law judges (ALJ)

– Office of Unfair Import Investigation (OUII)

– General counsel

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ITC Section 337 Proceedings

• 19 USC § 1337(a)(1) Subject to paragraph (2), the following are unlawful . . .

(B)The 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 a valid and enforceable United States copyright registered under title 17; 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.

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Domestic Industry (DI) Requirement

• 19 USC § 1337 (a)(2) Subparagraphs (B) . . . of paragraph (1) apply only if an industry in the United States, relating to the articles protected by the patent, copyright, trademark, mask work, or design concerned, exists or is in the process of being established.

• “Technical” prong of DI

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Domestic Industry Requirement

• 19 USC § 1337 (a)(3) For purposes of paragraph (2), an industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned

(A) significant investment in plant and equipment;

(B) significant employment of labor or capital; or

(C) substantial investment in its exploitation, including engineering, research and development, or licensing.

• “Economic” prong of DI

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ITC Pilot Program

• June 24, 2013, ITC News Release 13-059– “FASTER INVESTIGATION RESOLUTION, LOWER

LITIGATION COSTS ARE GOALS OF USITC SECTION 337 PILOT PROGRAM”

– Purpose: “to test whether earlier rulings on certain dispositive issues in some section 337 investigations could limit unnecessary litigation, saving time and costs for all parties involved.”

http://www.usitc.gov/press_room/documents/featured_news/337pilot_article.htm

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ITC Pilot Program

• How it works:– The Commission will designate investigations to participate if

they are “likely to present a potentially dispositive issue.”

• “One such issue could be the existence of a domestic industry”

– If the Commission designates an investigation to participate, the Commission will direct the presiding Administrative Law Judge (ALJ) to expedite factfinding on the DI requirement and issue an early Initial Determination (ID) within 100 days of institution.

http://www.usitc.gov/press_room/documents/featured_news/337pilot_article.htm

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ITC Pilot Program

• How it works (cont’d):– If ALJ issues an early ID finding no domestic industry, the

investigation would be stayed pending Commission action. 

– After petitions and replies for review of issued ID have been filed, the Commission will decide whether to review the ID.

• If the Commission decides not to review the ID, the ID will become the Commission’s final determination.

http://www.usitc.gov/press_room/documents/featured_news/337pilot_article.htm

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First Pilot Program Investigation

• Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof– Inv. No. 337-TA-874

• Complainant:– Lamina Packaging Innovations LLC

• Respondents:– Remy Cointreu

– L’Oreal USA

– Cognac Ferrand USA

– 11 others

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First Pilot Program Investigation

• Commission’s Notice of Institution of Investigation:– “Notwithstanding any Commission Rules that would otherwise

apply, the presiding Administrative Law Judge shall hold an early evidentiary hearing, find facts, and issue an early decision, as to whether the complainant has satisfied the economic prong of the domestic industry requirement.”

– “The Commission expects the issuance of an early ID relating to the economic prong of the domestic industry requirement within 100 days of institution.”

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First Pilot Program Investigation

• Parties’ reaction to the Commission’s order– Complainant:

• Pilot program is unlawful

• “arbitrary and capricious”

– Respondents:• No violation of law

• ALJ Theodore Essex:– “[T]he Commission’s decision to depart from its own

rules and regulations without any justification is of questionable legality.” Order No. 3 at 1, fn. 1.

– Will follow the Commission’s instructions “at this time.”

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First Pilot Program Investigation

• ID issued by ALJ Essex on July 5, 2013– “In the case before the ITC, the Commission has sought

to deviate from its rules,” and “[t]his deviation is without a justification that the cause of justice requires it . . . . .”

• Violation of Constitution

• Violation of Administrative Procedure Act

• Violation of Commission’s own rules.

• No explanation or rules published through the Federal Register.

• No criteria for selection of the parties to participate.

• And so forth for 17 pages.

– In the alternative, “[i]f the Commission should disagree . . . the ALJ finds no domestic industry . . . .”

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First Pilot Program Investigation

• Notice of Commission Decision to Review ID, August 7, 2013

• Opinion by Commission issued September 3, 2013– Rejected ALJ’s arguments.

– The pilot program for early fact finding on a dispositive issue is procedural in nature, not substantive.

– The pilot program did not substantially prejudice Complainant because Complainant had ample opportunity to prove its case on DI.

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First Pilot Program Investigation

• Opinion by Commission issued September 3, 2013 (Cont’d)– “Moreover, there can be no genuine confusion about the

basis for the Commission’s action in this investigation, as the face of [Complainant’s] complaint raised obvious questions as to the sufficiency of [Complainant’s] claims to a domestic industry.”

• FN: Complainant “is an entity formed in 2010 for the purpose of asserting certain patents.”

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Implications of the Pilot Program

• Early disposal of cases that fail to meet the threshold requirement will save parties time and money.– Otherwise, parties must litigate every issue (invalidity,

infringement, etc.) only to find out later that it was entirely unnecessary because there was no domestic industry to begin with.

• Discourages certain NPEs from filing an ITC complaint

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Implications of the Pilot Program

• Issues other than DI under the pilot program?– ITC News Release provides, “the pilot program is not

limited to the issue of domestic industry (for example, other possible issues might include importation and standing) . . . .”

– Complainants and Respondents should both be prepared to present a strong case for DI, importation, and standing immediately after institution of investigation.

– Respondents should present

• Federal Circuit review?

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