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Douglas Panzer
January 19, 2012

Is the International Trade Commission the Next Big Arrow in the Quiver for Patent Enforcement? (Part 2)

Posted By Douglas Panzer @ 10:00 am
Filed under: ITC 337 Actions,Litigation,Unfair Competition

In Part 1 of this two-part article we looked at an overview of International Trade Commission Section 337 Investigations as a weapon in preventing the importation of goods that allegedly infringe a US patent. This strategy is currently being played out by tech giants Apple and Motorola Mobility.

Apple v. Motorola Mobility
The strategy of coupling an ITC proceeding with an analogous patent infringement suit is precisely the tack taken by Apple, Inc. in trying to maintain its hefty US market share for the iPhone by precluding the importation of competing goods. Apple’s proceedings before the ITC are part of a much larger battle between the parties, including patent infringement suits that Motorola brought against Apple in Germany and the Southern District of Florida, as well as another infringement filing by Apple against Motorola in the Northern District of Illinois.

On Friday, January 13, the ITC issued an initial determination finding that Motorola’s Droid phones do not infringe three asserted patents and therefore refusing to block importation of the Droid phones.

Will the decision stand?
The decision of the administrative law judge in each ITC case is subject to review by the full six-member panel. The ruling given by the ALJ – called an initial determination – is reviewed and either approved or modified by the panel to become a final determination. The full panel will only overturn the initial determination if there was a clearly erroneous application of law, clearly erroneous finding of fact or if it conflicts with an existing policy of the ITC. That’s not a very good standard if you’re laying bets on a reversal from the ID to the FD. Assuming the ID stands, the only recourse left is to appeal the FD to the Court of Appeals for the Federal Circuit. In this particular case, assuming the decision stands with the full panel, I can’t imagine Apple will appeal it. I suspect they’ll proceed with the district court case and focus their energies there. An appeal to the CAFC would be far more likely by a losing respondent who had their imports shut down by the ITC. That is, if Motorola had lost, they’d be more likely to appeal to the CAFC.

How big a blow is this to Apple?
The ramifications of this loss for Apple with respect to the Northern District of Illinois case are yet to be seen. Suffice it to say, however, it certainly doesn’t help. It won’t give Motorola any incentive to settle the district court case and will only strengthen their belief that they are operating not only within the law, but in a way that won’t lead to a finding of infringement or damages against them in the district court case. Is that a sure thing? No. But it’s definitely some momentum in their direction. On the other hand, I don’t see this as a critical blow to Apple’s case by any stretch. Bottom line is, the goods are going to keep coming into the country. Now Apple will have to argue that Motorola has to pay them for that privilege.

From a market perspective, Apple’s ITC play was an aggressive attempt to keep Motorola’s team from even stepping onto the playing field to compete. The ITC said Motorola can play. Now Apple will have to compete to win, both in terms of market share and in terms of a final determination on the infringement issue.

In the grand scheme of this epic battle between two tech titans, this was a small battle, with the victory going to Motorola. The battle will wage on with both sides still standing strong.

January 18, 2012

Is the International Trade Commission the Next Big Arrow in the Quiver for Patent Enforcement? (Part 1)

Posted By Douglas Panzer @ 12:28 pm
Filed under: ITC 337 Actions,Litigation,Unfair Competition

Looking for a method, backed by the US government, to completely block your competition from entering the US market? A Section 337 Investigation before the US International Trade Commission might just be your silver bullet. At least that’s the thinking of a growing number of US businesses that own potentially blocking patents.

What is this Section 337 of which You Speak?
19 U.S.C. §1337 – aka ITC Section 337 – permits the ITC to investigate alleged unfair competition resulting from the importation of goods into the United States where those goods would, among other possible harms – infringe a valid and enforceable US patent. (See 19 USC 1337(a)(1)(B)) Complaints before the ITC are adjudicated by an administrative law judge who issues an initial determination (“ID”) on the merits. The full six-member committee of the ITC then reviews the ID and accepts or modifies it in order to issue a final determination (“FD”). The outcome of the FD is then enforceable through US Customs and Border Patrol.

Why Choose The ITC Forum?
Companies that are faced with immediate competition from the importation of allegedly infringing products certainly will view proceedings before the ITC as a much faster and cheaper way to stop those products from coming into the country.

First, the typical time to a hearing is about a year and time to a decision is about 18 months, whereas getting to a decision in a federal district court patent infringement suit will take closer to three years. The times to respond to discovery and to motions in the 337 proceeding is shorter as well. If you’re in a multi-billion dollar market where every sale counts and maintaining market share is key, time is of the essence. Provided the complainant (the patent owner) prevails before the ITC, an exclusion order (preventing importation) or a cease and desist order (preventing the further sale or marketing of already imported goods) from the ITC may be had in approximately half the time it takes to get an injunction from a district court.

Next, it’s likely to be far less expensive to proceed before the ITC rather than fully litigating the matter. Claim construction hearings – where a judge interprets what the language of a patent means – are almost always held in district court cases, but often are not held in ITC cases. While the parties will have to pay experts to figure out damages and technical issues in a typical lawsuit, the remedy before the ITC is limited to an exclusion order or a cease and desist order, so there’s a large dollar savings there by not including economic experts and their fees. Showing proper jurisdiction is easier and therefore less expensive because the goods themselves confer in rem jurisdiction. There are numerous other ways (such as a vastly streamlined discovery process) that the costs are reduced versus a typical district court patent case. And we shouldn’t forget that the parties will likely use the ITC ruling as a bargaining chip in settlement negotiations related to the district court patent infringement case that is likely operating in parallel with the 337 proceedings.

The ITC 337 investigation is an aggressive “offensive defense” to a market position. It puts the respondent (the alleged infringer) in an immediate position of having to quickly justify its position and fight for its right to even proceed with importing these goods into the country let alone focusing on marketing and selling them to grab any market share.

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