Your intellectual property and trade secrets are the lifeblood of your business. As the world gets smaller, keeping them “yours” becomes more difficult, but is more vital to your competitive advantage than ever.
Smart Business spoke to Joel Covelman of Jackson DeMarco Tidus Peckenpaugh about how to best protect yourself if an infringement does occur.
What is the ITC, and how are its investigations different from a lawsuit?
Most businesses have valuable intellectual property in the form of patents, trademarks, copyrights, or trade secrets. When someone infringes one of these, the standard approach is to file a court case to stop the infringement. But when infringements come from imported counterfeits and knockoffs, a lawsuit against local importers and retailers will not reach the foreign source. In such cases the U.S. International Trade Commission (ITC) and the Bureau of Customs and Border Protection (Customs) may be able to stop the infringements, and do so quicker than a court. But ITC investigations differ from court lawsuits in a number of important respects.
Investigations of infringing imported goods are conducted by the ITC under Section 337 of the Tariff Act of 1930 (Section 337). The ITC can issue exclusion orders (similar to court injunctions) that bar importation, which Customs carries out. An exclusion order can be easier to obtain than an injunction due to a recent Supreme Court ruling affecting the availability of injunctions. The ITC can issue orders directly against imported products and so the infringer need not be in the U.S. for the ITC to grant relief. But when importers, resellers, or foreign infringers are present anywhere in the U.S., they all can be brought before the ITC in a single investigation, thus avoiding the need to file several suits against infringers in different places.
The majority of ITC investigations deal with patent infringements, although the Commission’s authority extends to trademark, trade secret and copyright infringements. Section 337 is concerned with imports and with domestic businesses that are the victims of infringing imports. There must be a domestic industry in existence, or being created, which is being unfairly harmed. Thus, entities that merely acquire and license patented inventions cannot initiate an ITC investigation. But businesses that conduct research or design products here, even if they license others to make and sell them, can meet ITC jurisdictional requirements. Even foreign-based businesses that have U.S. intellectual property rights and a substantial U.S. operation can seek to initiate ITC investigations.
Can the ITC award damages?
Unlike a court, the ITC cannot award money damages for infringement. As a result, complainants typically file a federal court suit in parallel with their ITC complaint. This court suit is usually stayed until the ITC proceeding is concluded. The evidence submitted to the ITC can be transferred to the district court, so that the parties need not duplicate their evidence gathering. This saves a considerable amount of money.
How does the ITC proceeding work?
An administrative law judge conducts a trial-like hearing to take evidence, and makes the factual findings and initial determinations that are subject to review by the full Commission. The Commission then makes the official determination. To ensure that the public is not deprived of goods legally entitled to be sold in the U.S., and that U.S. businesses are not victimized by foreign competitors, a government attorney from the Office of Unfair Import Investigations represents the public interest. The government attorney can be a powerful friend or foe to either side, since he or she is more dispassionate than the competitors who are asserting and denying infringement accusations.
Customs enforces ITC exclusionary orders. Customs headquarters informs field offices at which entry ports barred goods might appear, and how to identify them. Complainants who have won ITC exclusion orders should meet with Customs representatives quickly after an exclusion order is issued to be sure it is put into effect.
What are the advantages of going through the ITC?
In many courts, lawsuits can take years to reach a verdict. In contrast, ITC investigations are scheduled to last between 12 to 18 months. An ITC complaint contains far more details than a federal district court complaint, so that the respondent is informed of the specific allegations from the outset. It is to counterbalance the speed and streamlined procedures of an ITC investigation that highly detailed complaints are required.
Remedies against respondents who fail to participate are easier to get from the ITC than a court. In a court case the complainant must put on evidence against a defaulting defendant in order to get a judgment. In ITC proceedings, the Commission will presume the allegations in the complaint to be true, and no other evidence need be presented in order for the complainant to get relief. This Commission practice results from the requirement that factual allegations in an ITC complaint must be highly detailed.
How can businesses know if this approach is right for them?
The speed, nationwide scope, and injunction-like exclusion orders of the ITC can be very effective for complainants. For respondents, while the unique aspects of ITC investigations can provide defenses not available in court cases, the faster pace can be a burden. Holders of U.S. intellectual property rights and respondents in ITC investigations are encouraged to seek out knowledgeable counsel for a fuller explanation.
Joel Covelman is Of Counsel to Jackson DeMarco Tidus Peckenpaugh, where he practices in the field of intellectual property and litigation. Reach him at [email protected] or (949) 752-8585.
