10.12.1 United States International Trade Commission
The USITC provides a forum for domestic industries to seek exclusion of goods that violate U.S. intellectual property rights.300 The USITC now conducts more full patent adjudications on an annual basis than any individual district court. Figure 10.8 shows the number of new, completed, and active Section 337 investigations at the USITC from 2006 through 2022.301 Since 2010, the USITC has generally had over 100 active investigations per year, and it has completed approximately 60 patent investigations per year.302
The USITC’s Section 337 Administrative Law Judges (ALJs) focus almost exclusively on patent investigations, making the USITC the nation’s only specialized, trial-level patent-adjudication forum. The ALJs conduct an evidentiary hearing that resembles a bench trial. The ALJ’s determinations are reviewed by the USITC’s six Commissioners, and USITC decisions finding Section 337 violations are subject to review by the President.
Federal district court patent enforcement and USITC Section 337 patent investigations are closely interrelated, as approximately two-thirds of USITC patent cases have a district court counterpart. Over 90 percent of USITC intellectual property investigations initiated since the mid-1990s have involved allegations of patent infringement.
10.12.1.1 Section 337 authority
The USITC’s authority to prohibit importation of infringing goods traces to Section 337 of the Tariff Act of 1930 (codified at 19 U.S.C. § 1337). The Trade Act of 1974 established the USITC as an independent agency and gave it authority to protect domestic industries against unfair practices. The USITC was granted authority to issue exclusion orders, cease and desist orders and civil penalties within the formal adjudication provisions of the APA. The Act required the USITC to conclude its investigations “at the earliest practicable time, but not later than one year (18 months in more complicated cases)” after commencement of the investigation and modernized the agency, bringing it within the formal adjudication provisions of the APA. These changes provided a more hospitable environment for patent owners and ushered in the modern era of USITC unfair import investigations.
Congress amended Section 337 in 1988 to further facilitate the use of USITC investigations in combating unfair trade practices.303 Among other changes, the 1988 Act eliminated the injury requirement for statutory intellectual property rights, thereby lowering the threshold for pursuing USITC investigations. The 1988 Act also removed the requirement of prior law that the domestic industry be “efficiently and economically operated,” and expanded the scope of what constitutes a domestic industry. The 1988 Act provided that complainants could satisfy the domestic industry requirement either by showing that domestic industries exist in the United States or “[are] in the process of being established.”304 The statute also added investment in the exploitation of intellectual property rights, including through “engineering, research and development, or licensing,” as a possible basis for showing the existence of a domestic industry.305 The 1988 Act also expedited enforcement remedies by requiring the USITC to issue temporary exclusion orders within 90 days (or 150 days in more complex cases) of the publication of the USITC’s notice of investigation in the Federal Register. Prior practice allowed ALJs four months to prepare the initial determination (ID) of requests for temporary relief, with no statutory requirement regarding when the USITC must act on the ID.
Congress passed legislation in 1994 to bring Section 337 into compliance with the General Agreement on Tariffs and Trade, including the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) added during the Uruguay Round.306 The principal changes were to (1) substitute a directive to complete USITC investigations “at the earliest practicable time” for the fixed 12- to 18-month limit for completing investigations; (2) permit respondents to lodge counterclaims, subject to the requirement that such counterclaims be removed immediately to a US district court with proper venue; (3) require district courts to stay their proceedings at the request of a party who is also a respondent in a Section 337 proceeding with respect to any claim that involves the same issues; and (4) limit the issuance of general exclusion orders to situations where such general exclusion from entry is necessary to prevent circumvention of the order or where a pattern of violation exists and the source of infringing products is difficult to identify.
10.12.1.2 Section 337 substantive requirements
USITC patent investigations arise under Section 337(a)(1)(B) of the Tariff Act, which prohibits:
[t]he importation into the United States, the sale for importation, or the sale within the United States by the owner, importer, or consignee, of articles that –
- (i) infringe a valid and enforceable United States patent […]; or
- (ii) are made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable United States patent.
A complainant must establish three elements: (1) importation, (2) domestic industry, and (3) infringement of a valid U.S. patent (or other intellectual property).
The USITC interprets the importation requirement broadly to cover all commercial transactions that involve articles imported into the United States. The term “article” typically refers to an imported and allegedly infringing product that enters the United States through U.S. Customs and Border Protection. Section 337 also reaches software or data files that enter the country through physical media, but not if the importation of these items occurs through machine-readable form by electronic means.307 The USITC has stated that a “complainant need only prove importation of a single accused product to satisfy the importation element.”308 The purpose for which a respondent imports an infringing article is irrelevant with the exception of government use, which Section 337(l) exempts subject to the government compensating affected intellectual property owners the “reasonable and entire” value of the infringing articles in an action before the United States Court of Federal Claims. Consequently, the USITC has jurisdiction over foreign manufacturers, domestic companies that manufacture their products offshore and import them into the United States, and domestic companies that export products that are later re-imported.
In most USITC investigations, parties stipulate to importation, or the USITC decides the issue on summary determination. Thus, importation rarely presents a contested issue at the hearing. It is generally sufficient for the complainant to provide photographs of infringing products that are on sale within the United States or to include purchase orders that indicate prior importation.
10.12.1.2.2 Domestic industry
Complainants alleging violation of the infringing articles provisions must prove that a domestic industry “exists or is in the process of being established.”309 For purposes of this requirement, a domestic industry exists or is in the process of being established if:
there is in the United States, with respect to the articles protected by the patent [or other covered intellectual property right] –
- (A) significant investment in plant and equipment;
- (B) significant employment of labor or capital; or
- (C) substantial investment in its exploitation, including engineering, research and development, or licensing.310
This domestic industry requirement has historically been relatively easy to meet. It does arise, however, where the complainant is not engaged in significant domestic production based on the patents at issue. The 1988 amendments to Section 337 clarified that substantial investment in the exploitation of the intellectual property right in the United States, including engineering, research and development, or licensing, satisfies the domestic industry requirement.
The domestic industry requirement has two elements: the economic prong and the technical prong. “The complainant in a patent-based 337 investigation must show that an industry exists or is being established (economic prong) and that the industry practices at least one claim of the patent at issue (technical prong).”311 As the language of the technical prong refers to articles protected by “the patent” (not just to claims found to infringe), the technical prong is satisfied if the complainant’s article practices any claim of the patent.312 The complainant’s patent claim used to satisfy the technical prong does not need to be the same patent claim(s) as those allegedly infringed by the respondent.313
10.12.1.2.3 Infringement of a U.S. patent
The third element required to prove a Section 337 violation is infringement of a valid U.S. patent. This provision is based on the substantive federal patent law as interpreted by the federal courts. Section 337 patent investigations, however, do not permit defenses based on 35 U.S.C. § 271(g) or the award of monetary compensation.
10.12.1.3 Defenses to 35 U.S.C. § 271(g)
Section 271(g) extends patent liability to anyone who, without authority, “imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States.” Nonetheless, Congress excused “for purposes of this title,” products made by a patented process and that are “materially changed by subsequent processes” or “become a trivial and nonessential component of another product.”314 Because Section 337 investigations arise under Title 19 (and not Title 35) of the U.S. Code, the Federal Circuit held that, although Section 337(c) of the Tariff Act states that “[a]ll legal and equitable defenses may be presented in all cases,” the safe harbors set forth in 35 U.S.C. § 271(g) cannot be asserted under Section 337 because Congress limited these defenses to “purposes under this title.”315
Section 337 does not provide a patent owner the authority to pursue monetary damages. Instead, the only type of remedy available at the USITC is injunctive relief stemming from the USITC’s jurisdiction over infringing articles, as the eBay factors do not apply.