Pedal to the Metal: U.S. ITC Announces New Procedure To Further Streamline §337 Investigations

Law.com
June.14.2021

The fastest IP court in the country just got faster. The U.S. International Trade Commission (ITC) recently announced a new pilot program that empowers its Administrative Law Judges (ALJs) to issue an “interim initial determination” that resolves a case-dispositive or otherwise significant issue early in an investigation. Now, instead of being in trial nine to 10 months after the filing of a complaint, parties could be in trial in half that time on a discrete issue that ends the investigation entirely or dramatically tips the scale in one direction. This pilot program—assuming ALJs embrace it—provides §337 litigants with another tool to efficiently win these high stakes cases.

Overview of §337 and the New Pilot Program

Section 337 (19 U.S.C. §1337) empowers the ITC to investigate claims of unfair foreign competition relating to imported products. The most common claim is for patent infringement, but the ITC also adjudicates other acts of unfair competition, including trademark and copyright infringement, trade secret misappropriation, and violations of the Lanham Act and antitrust laws. Section 337 offers complainants several advantages over comparable actions in federal court, most notably speed—the ITC endeavors to render a final decision in 16 months or less—and a near-automatic exclusionary remedy that bars infringing products from entering the United States.

The new pilot program is the latest in a series of steps the Commission has taken to attempt to further streamline §337 investigations. The program authorizes the presiding ALJ to receive briefing on and to hold an evidentiary hearing to develop the factual record necessary to resolve a discrete issue prior to the main evidentiary hearing. According to the ITC’s announcement, ALJs may exercise their “discretion to allow parties to file motions to put particular issues within the program that they believe will resolve the investigation expeditiously or facilitate settlement.” Such issues include infringement, patent invalidity, patent eligibility, standing, and satisfaction of the domestic industry requirement. Interim IDs are subject to review by the full commission.

An ALJ must issue an interim ID no later than 45 days before the start of the main trial. The Commission will attempt to decide whether to review an interim ID within 45 days of issuance and to then resolve any review within another 45 days. An interim ID schedule may look like this:

The above schedule is hypothetical but is based on a typical schedule for a full §337 investigation and for a truncated 100-day §337 proceeding. The dates aboveare about as late in the schedule as a party could initiate the interim ID process. A party that is particularly bullish on an issue could request an interim ID on that issue earlier in the investigation and move all of the above dates earlier in time.

An ALJ may stay discovery on other issues during the interim ID process and may stay the remaining procedural schedule while an interim ID is on review by the Commission. This pilot program applies to all investigations instituted on or after May 12, 2021, and to any earlier investigation at the discretion of the ALJ.

The Interim ID Program Fills a Void in Existing ITC Procedure

Section 337 litigants can use the new pilot program to fill in gaps in existing ITC procedures, including the 100-day and summary determination procedures. The new interim ID procedure resembles the 100-day program in which the Commission orders the ALJ to accept briefing, conduct a hearing, and issue an ID on a case-dispositive issue within the first 100 days of the investigation. The major drawback of the 100-day program is that it may only be instituted by the Commission when the case begins and before any discovery has taken place. Consequently, the Commission utilizes the 100-day program infrequently—just twice in the last three years—often because it deems the issue too “unwieldy” or “complex” to be decided in 100 days. The interim ID pilot program empowers ALJs to institute a 100-day-like procedure after the benefit of some discovery and the service of contentions, which should offer some insight into whether the issue may be resolved on an interim basis and whether it is dispositive or at least “significant.”

The interim ID program also offers some benefits over the existing summary determination process, which is analogous to summary judgment procedure under the federal rules of civil procedure. In the ITC, summary determination may be granted if “there is no genuine issue as to any material fact.” Unfortunately, most contested motions for summary determination are denied—sometimes in less than a page—due to the presence of an apparent disputed issue of fact. The interim ID program could increase the rate of early termination, because it provides ALJs with an opportunity to develop the complete factual record necessary to resolve these disputed issues of fact prior to the main trial.

The program appears likely to benefit respondents more than complainants for two reasons. First, because §337 remedies are prospective, any stay or suspension of the investigation benefits respondents, often to the tune of millions of dollars per day for high volume importers. Second, because the complainant bears the ultimate burden of proof, respondents have many more opportunities to use the pilot program to pare back the complainant’s claims.

Strategic Use of the New Pilot Program

Savvy §337 litigants will use the interim ID program to strike a blow that ends or at least cripples their opponent’s case or streamlines their own claims. In patent cases, a complaint could use the pilot program to resolve the economic prong of domestic industry when that issue would otherwise have been subject to a contested motion for summary determination.

Respondents frequently seek institution of a 100-day proceeding regarding the economic prong, but, as noted above, such requests are mostly denied due to the complexity of the issue. A complainant that seeks an interim ID on the economic prong would either win (and cross that issue off its elements of proof) or lose (and save itself months of litigation expenses prosecuting costly patent claims). A respondent in a patent case could use the interim ID program to attack myriad issues, including standing, patent ineligibility under 35 U.S.C. §101, indefiniteness (which some ALJs presently address early during claim construction anyway), and anticipation under 35 U.S.C. §102.

Parties to trademark infringement claims could also use the interim ID program to streamline issues for trial, for example, to address secondary meaning, functionality, or likelihood of confusion.

Complainants who make a non-statutory IP claim—for example, infringement of unregistered trade dress, trade secret misappropriation, or violations of antitrust laws—must prove an additional element: that the alleged unfair act has injured or will injure a domestic industry or retrain trade. This element may be ripe for adjudication in an interim ID, because it is dispositive of the claim and, although it is often heavily factual, it may be discrete enough to resolve in a brief early hearing.

Next Steps and Words of Caution

The ITC’s notice states that ALJs may “put issues within the program as they deem appropriate,” so expect ALJs to either issue new rules implementing the interim ID process or to simply accept motions seeking the institution of the process. A party seeking to initiate an interim ID procedure will have to justify its request, likely through some showing of a likelihood of success. The possibility of resolving a strong claim or defense early in the investigation and pushing the parties toward resolution will undoubtedly appeal to some ALJs; however, the already accelerated pace of 337 investigations, heavy caseload, and the fact that one ALJ recently retired may make it challenging for ALJs to squeeze an additional hearing into their schedules.

The program threatens collateral consequences apart from a potentially devastating decision on a claim or defense. A stay could nullify one of the primary advantages complainants seek in the ITC: speed to resolution. Also, as shown above, a party seeking to initiate an interim ID process may have to show all of its cards earlier than it otherwise would, enabling the other side to adjust its strategy to compensate for potential weaknesses in its case.