The End is Just the Beginning: Enforcement of ITC Exclusion Orders

Managing Intellectual Property | November.14.2013

After a difficult and expensive ITC investigation results in an order excluding certain goods from importation into the U.S., both the patent owner and accused patent infringer may think that the matter is finally over. But in fact, the parties’ dispute may just move to a new forum: the U.S. Bureau of Customs and Border Patrol (“Customs”). Customs, not the ITC, actually enforces the ITC’s exclusion orders. Once an exclusion order issues, Customs develops guidelines for identifying infringing goods. Customs then seeks to prevent infringing goods from entering the U.S.

A crucial difference between Customs and the ITC is that parties may meet separately with Customs, without their adversary even knowing that such meeting occurs. Customs may meet separately with both the patent owner and accused infringer to discuss how Customs should implement the exclusion order. Even more significantly, an importer may challenge the scope of an exclusion order in a Customs administrative proceeding. This challenge can be prospective, for example, an importer can seek a ruling from Customs that a redesigned product does not infringe the patent at issue and so does not violate the exclusion order. The challenge also can be retrospective, where an importer challenges Customs’ exclusion or detention of a particular shipment. Both types of proceedings happen between the importer and Customs only; the patent owner has no right to participate or appeal Customs’ ruling.

Customs’ procedures can be a great advantage for an importer dealing with an exclusion order. Potentially, the importer can work around the exclusion order and obtain the right to import new redesigned products, without facing the patent owner again in court.

Recently, the Customs has been criticized for allegedly failing to adequately enforce exclusion orders. In June, the Obama Administration announced a review of Customs’ enforcement procedures, citing concerns about Customs’ ability to handle the “complexity” of determining whether or not a given product violates an exclusion order. Members of Congress have written letters to Customs and the Department of Homeland security that criticize Customs’ enforcement and demand more information. In July, Microsoft took the unprecedented step of filing a lawsuit against Customs in a U.S. court when Customs refused to exclude certain Motorola imports that Microsoft believes are covered by an ITC exclusion order. Microsoft is particularly upset that Customs’ rulings resulted from “secret” meetings between Motorola and Customs.

Chinese companies who become involved in ITC investigations must understand the critical role played by Customs in enforcing the ITC’s orders. In particular, Chinese respondents should develop a strategy for engaging Customs to mitigate the harm of any exclusion order. Chinese companies also should stay informed of possible changes to Customs’ procedures due to court rulings or political action.

By Bas de Blank and Vann Pearce

This article was originally published in Managing Intellectual Property in November 2013.