Alert February 10, 2010

Options for Enforcement of ITC Exclusion Orders

If the U.S. International Trade Commission (“ITC”) finds a violation of Section 337, it typically issues an exclusion order against importation of the offending articles into the United States and, if there are domestic respondents with significant inventories, cease-and-desist orders precluding them from trafficking in the offending articles.  While this marks the end of the ITC investigation, it is not the end of the process of excluding the articles from commerce in the United States.  This article explains the steps that should be taken, and options available, after an ITC remedy has issued, whether your client is the complainant that has won the remedy or the respondent against whom the remedy has been imposed. 

Taking Action upon Issuance of an ITC Exclusion Order

Upon issuance of an exclusion order, the ITC serves the order on the U.S. Bureau of Customs and Border Protection (“Customs”), which is responsible for enforcement.  Customs now lies within the Department of Homeland Security, which has the primary duty of keeping terrorists and their weapons out of the United States.  Customs does not receive assistance from the ITC in determining how to enforce an exclusion order, and the order itself will typically state only that articles infringing certain claims of particular patents are to be excluded.  Given the lack of particularity provided by the exclusion order and limited resources available for enforcement, Customs receives input from the private parties regarding how to enforce the order.

Customs allows the parties in the ITC investigation affected by the exclusion order to present their views on how the order should be enforced in individual, ex parte meetings.  The parties usually meet for a few hours with Customs officials responsible for drafting an advisory to customs agents, who will enforce the order at the border.  These meetings are very important because they typically are the only opportunity for each party to explain its viewpoint to Customs as to how the exclusion order should be enforced.

The complainant should contact Customs shortly after issuance of the exclusion order to schedule a meeting promptly, since there will be no enforcement until the advisory issues.  The complainant should provide Customs with as much information as possible to facilitate enforcement, including descriptions of the articles subject to the order (and how to distinguish them from articles not subject to the order), their harmonized tariff codes, their ports of entry, methods of shipment, and the identities of the manufacturers, importers and U.S. customers.  Accordingly, it is important for the complainant to have obtained sufficient information during discovery in the ITC investigation to provide useful information to Customs.

Similarly, the respondent should contact Customs to schedule a meeting, and should be prepared to explain how enforcement should be limited.  The respondent should differentiate between its products potentially subject to the order and those falling outside the order to try to avoid overbroad enforcement.  To the extent the respondent has re-designed products to avoid the order, the respondent should be prepared to explain this to Customs and inform Customs how to identify the re-designed products.  The respondent should bear in mind that claims of non-infringing re-designs are common, and that the complainant also will be meeting with Customs to present its view of the order, so the respondent will need to make a highly persuasive argument that the re-design avoids the order.  In appropriate cases, the respondent may choose to provide a technical protocol that Customs can use to determine whether or not articles fall within the order, since Customs has technical facilities available.  Even if such information does not result in a favorable advisory, this may make Customs more receptive to accepting subsequent certifications that certain articles do not fall within the exclusion order, assuming the order includes a provision permitting certification.

After the meetings, Customs will issue its advisory (which is not provided to the private parties) and enforcement will begin.  A complainant can continue to assist Customs by monitoring the marketplace and providing information to Customs that will assist with enforcement.  A complainant can also monitor an import database to try to identify on its own shipments potentially subject to exclusion, and convey this information back to Customs. 

Options for Challenging Exclusion Orders and Pursuing Their Enforcement

To the extent that complainants or respondents are dissatisfied with Customs’ enforcement, they have a few options through which to raise their arguments.  However, only parties whose products may be excluded from entry by Customs have formal options for addressing enforcement directly at Customs.  Prior to importation of articles potentially subject to exclusion, a party may request an advisory ruling by submitting a letter to Customs explaining why certain articles should not be excluded.  See 19 C.F.R. § 177. If a party believes that its articles have been improperly excluded from entry, it can protest Customs’ decision.  A party dissatisfied with either Customs’ advisory ruling or decision in a protest can file suit against Customs in the Court of International Trade.  However, that court recently confirmed that complainants generally lack standing to challenge Customs’ decisions.  See Funai Elec. Co. v. United States, Slip Op. 09 – 109 (Ct. Int’l Trade Oct. 6, 2009).

A complainant dissatisfied with Customs’ enforcement can pursue enforcement proceedings in the ITC.  Enforcement proceedings can be either informal or formal.  See 19 C.F.R. § 210.75.  To start informal enforcement proceedings, a complainant can request that the ITC, through the Office of Unfair Import Investigations, investigate possible violations.  Alternatively, or if informal enforcement proceedings do not resolve the matter, a complainant can file a formal enforcement proceeding.  The formal enforcement proceeding will be assigned to an Administrative Law Judge and will follow the normal course of an ITC investigation, except that the schedule is typically somewhat condensed, particularly if emergency relief is sought.  The ITC can rule that products were improperly imported even if Customs decided that they fell outside the exclusion order, since the ITC is the final arbiter of the scope of its order.  In addition, the ITC can impose substantial civil penalties for violations of the order.  Enforcement proceedings can also be used to address possible violations of cease-and-desist orders and consent orders.  The ITC recently assessed over $20 million in civil penalties against violators of cease-and-desist orders and a consent order.  See In the Matter of Certain Ink Cartridges and Components Thereof, Inv. No. 337-TA-565 (U.S.I.T.C. Sept. 24, 2009).

In addition, either a complainant or a respondent may seek modification of the exclusion order due to changes in conditions subsequent to issuance of the order.  See 19 C.F.R. § 210.76.  A party may also seek rescission of the order, e.g., due to settlement. 

Other Considerations for Complainants and Respondents

In addition to pursuing enforcement of an ITC exclusion order, a complainant can maximize the benefit of the order by “marketing” it to known purchasers and potential purchasers of the articles subject to exclusion.  For example, a complainant should consider sending letters to such purchasers to inform them of the order and the possibility of being found a willful infringer in subsequent district court litigation.  In many cases, the recipients of the letter may decide that attempting to purchase the articles subject to exclusion is not worth the risk of interruption of their supply and potential liability.  Complainants may also want to provide their sales force with scripts addressing the exclusion order, so that they may educate the marketplace while trying to ensure that sales persons do not inaccurately characterize the order.  Advertisements in trade journals and at trade shows may also be appropriate in some circumstances.

Conversely, a respondent should anticipate the complainant’s marketing campaign and have a strategy in place for preserving its business before the ITC renders a final determination.  To the extent the exclusion order only affects some of a respondent’s products, the respondent will want to make sure that customers and potential customers know which products are unaffected by the order.  If warranted, a respondent should also consider seeking a stay of enforcement pending appeal and/or an expedited briefing schedule on appeal.

Conclusion

The ability to obtain an exclusion order against infringing products at the ITC remains an important remedy for intellectual property owners.  However, obtaining an exclusion order is not the end of the enforcement process.  For a complainant, it is essential to work with Customs to help locate and identify the articles subject to exclusion, and to educate the marketplace about the order.  For respondents subject to exclusion orders, it is likewise important to explain how enforcement of an exclusion order should be limited, and to distinguish re-designed products that respondents believe should not be subject to exclusion.

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For further information on this topic, please attend ACI’s 2nd Annual Expert Forum on ITC Litigation & Enforcement at The Omni Berkshire Place, New York on February 24-26, 2010. Information can be found here.