FAQ re § 337 Actions
1) Why did Congress create the § 337 claim?
Congress created the Section 337 action to be the primary option available to domestic companies to protect themselves from imports into the country of foreign goods that infringe U.S. intellectual property rights, such as patents, trademarks, and copyrights.
2) What are the requirements for § 337 actions?
Complainants must establish the traditional elements of an infringement case, and the rules and defenses for that aspect of the case are generally similar to a case filed in federal court. The complainant must also show “importation” of the accused product, and a “domestic industry” related to that product. But because proceedings are directed toward property, the complainant does not need to establish personal jurisdiction over any party.
Importation. The complainant can establish “importation” by proving either actual importation or a sale for the product to be imported. The scale of importation is not relevant; importing a single item, or even products samples, is sufficient.
Domestic industry. To satisfy the “domestic industry” requirement, the complainant must satisfy two prongs: the “technical prong,” requiring U.S. industry to actually be exploiting the protected intellectual property; and the “economic prong” requiring the exploitation to be sufficient to warrant ITC protection. The economic prong can be established by showing either:
- Significant investment in plant and equipment
- Significant employment of labor or capital, or
- Substantial investment in the intellectual property’s exploitation, including engineering, research and development, or licensing.
Investment or employment is “significant” if the value added to the product by the domestic activity is more than about forty percent of the product’s total value.
The third method of establishing the economic prong—requiring a “substantial investment” in engineering, research and development, or licensing—was added by Congress as an amendment to Section 337 in 1988. This method allows claims by entities such as universities or small businesses that have heavily invested in research and development, but license their intellectual property rather than exploiting it themselves. Importantly, a complainant using the substantial investment factor does not need to establish the technical prong of domestic industry. “Substantial” is a higher standard than “significant;” but it is unclear by how much because decisions of the Commissions rarely report the economic data they relied upon.
3) What are the differences between a § 337 action and a traditional patent infringement case?
Section 337 actions differ from traditional district court infringement cases in many ways. For example, because Section 337 actions are procedurally faster, Section 337 complaints must contain significantly more detail than complaints filed in federal district courts. Also, the party alleging infringement must establish additional elements to invoke the ITC’s special jurisdiction. While there are no monetary damage awards in Section 337 actions, the ITC can issue an “exclusion order,” which acts like an injunction but can be enforced directly against a product and thus cover all potential infringing parties.
4) I want to file a § 337 action, what do I need?
A Section 337 complaint must be accompanied with certain specified documents and include significantly more detail than a complaint in a federal district court. For example, a Section 337 complaint based on patent infringement must include certified copies of the patent, any patent assignments or license agreements, the patent’s file history, the prior art references cited during prosecution, and claim charts detailing the infringement allegations for each patent claim. The complaint must also plead the specific facts of the alleged unfair trade practice.
5) How long should I expect a § 337 action to take?
ITC rules require investigations to be conducted “expeditiously,” so they are usually completed within fifteen months. This quick turnaround can be beneficial to parties that are being injured by current infringing imports, but can create a burdensome discovery process.
6) What is the remedy in § 337 actions?
The ITC can order three forms of relief:
- Limited Exclusion Orders, that prohibit the respondent from importing the accused product;
- General Exclusion Orders, that prohibit any party from importing the accused product; or
- Cease and Desist Orders, that prohibit the respondent from both importing the accused product and selling products that have already been imported.
The most common form of relief is a limited exclusion order. Exclusion orders are similar to injunctions, except that they are enforced by the U.S. Bureau of Customs and Border Protection at the point of entry. A limited exclusion order will only apply to the named respondents of the Section 337 action, and is limited to the goods at issue.
General exclusion orders prevent any importation of the goods at issue, regardless of the party importing them. Because the effects of a general exclusion order are so broad, the ITC requires additional evidence to warrant this form of relief. A complainant must show either:
- There is a risk that a limited exclusion order will simply be circumvented, or
- There is a pattern of rampant infringement and it is difficult to determine the source of the infringing products.
A cease and desist order acts as a limited exclusion order, but also includes a bar on the respondent from selling any stock of imported goods that have been imported. This relief will be issued if a particular party has already accumulated a significant stock of imported infringing products. In order to issue this order, the ITC will need personal jurisdiction over the importing party.
Because a Section 337 case is technically a government investigation, any settlement by the parties must be approved by the Commission. Settlements can include a “Consent Order” prohibiting certain imports by the respondent, which will be enforced by the Commission.
7) What are the advantages of a § 337 action?
Speed. Because ITC rules require investigations to be conducted “expeditiously,” they are usually completed within fifteen months. This compares favorably with federal district court trials, which may take years. The intense speed of the investigations typically favors the complainant because they have had time in advance to prepare their case.
Broad jurisdiction. The ITC has nationwide jurisdiction. In addition, ITC investigations are in rem proceedings—that is, they are directed against the product rather than any party—and thus the complainant does not need to establish personal jurisdiction over any party. This is especially beneficial when the importing party is a foreign corporation that may have very few ties to the United States, or if many different parties are importing the accused good.
Judicial expertise. Unlike federal district court judges, who may not have much if any experience with intellectual property cases, the administrative law judges of the ITC primarily deal with these cases. Consequently, ALJs are much more experienced with intellectual property matters than typical federal district court judges. Because of this, ITC decisions are generally affirmed on appeal.
Efficient relief. While damages are not available in Section 337 actions, the Commission’s “exclusion orders” act as injunctions against the infringing good. These orders have the additional benefit of being enforced by the U.S. Bureau of Customs and Border Protection, and thus the infringing goods are prevented from even entering the country. Also, if the Commission issues a “general” exclusion order, the goods will be blocked from importation regardless of source, and thus one order can cover multiple, foreign parties at once.
8) What are the disadvantages of a § 337 action?
More preparation needed. Due to the expedited nature of Section 337 actions, a potential complainant is required to submit a much more comprehensive and detailed complaint in an ITC action than in a federal district court. For example, a Section 337 complaint based on patent infringement must include certified copies of the patent, any patent assignments or license agreements, the patent’s file history, the prior art references cited during prosecution, and claim charts detailing the infringement allegations for each patent claim. As a result, the complaint requires more preparation at the outset. In addition, the expedited nature generally makes the process more burdensome than a traditional intellectual property case.
Must establish additional elements. The ITC’s jurisdiction is based on its mission to enforce United States trade remedy laws in the context on international trade. Consequently, the complainant at the ITC must establish additional elements to invoke the ITC’s authority. These elements are “importation” of the good, and a “domestic industry” to protect. On the other hand, because the ITC focuses on the good regardless of the source, a complainant does not have to establish personal jurisdiction over any party.
9) Who decides the § 337 actions?
In response to a complaint, the Commissioners will vote on whether to institute an investigation, and will serve notice on the parties accused of importing the products, who have twenty days to respond to the claim. After the ITC votes to institute an investigation, the case will be assigned to an administrative law judge (ALJ), who will create a procedural schedule and issue a set of “Ground Rules” that will govern the proceeding. Unlike a district court case, the ITC’s staff attorneys participate as a third party arguing for the public interest. The decision by the ALJ will consist of an “Initial Determination” on the merits of the claim and a “Recommended Determination” of the proposed relief. Once the Commission adopts the ALJ’s determination, it becomes the ITC’s “Final Determination.”
10) How can I appeal an adverse § 337 action?
A decision by the ALJ will consist of an “Initial Determination” on the merits of the claim and a “Recommended Determination” of the proposed relief. The parties can petition for discretionary review of these determinations by the Commissioners. Although the determinations must be adopted by the Commissioners to become final, they will be adopted automatically if review is either not requested or not granted.
Unlike district court decisions, Section 337 decisions are subject to review by the President, who is empowered to disapprove of any decision on policy grounds. In addition, ITC decisions—but not Presidential disapprovals—can be appealed to the U.S. Court of Appeals for the Federal Circuit, the same appeals court for all district court patent infringement cases.
