Primer on § 337 Actions
To carry out its duty to investigate intellectual property-based import investigations, the International Trade Commission (ITC) adjudicates infringement claims where the allegedly infringing good is a product imported into the United States. The ITC’s authority for these cases derives from section 337 of the Tariff Act of 1930 (Section 337). While about 90 percent of Section 337 actions are patent infringement claims, Section 337 also covers infringement of trademarks, copyrights, semiconductor mask works, and boat hull designs.
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—referred to as the “complainant”—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.
Filing a Complaint. Section 337 actions begin when a party files a complaint with the ITC identifying the type of unfair trade practice alleged (e.g., patent infringement), the accused imported product, and the parties who import it. To facilitate the expedited pace of the cases, the initial complaint must be more comprehensive than a typical claim filed in federal district court. 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—referred to as the “respondents”—who have twenty days to respond to the claim. Any parallel lawsuit in federal court can be stayed pending an investigation by the ITC.
Elements of a Complaint. 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.
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.
Fast-Paced Investigations. 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. A hearing is held that typically lasts one or two weeks and is similar to a trial in a federal district court. But, unlike a district court case, the ITC’s staff attorneys participate as a third party arguing for the public interest. 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.
Relief Available. 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.
Appellate Review. 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. Once adopted, the determination becomes the ITC’s “Final Determination.”
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.
