WHEN AND HOW TO FILE AN ITC ACTION IN PATENT CASES 26TH ANNUAL NATIONAL CLE CONFERENCE JANUARY 3-7, 2009 – VAIL, COLORADO Why Consider the ITC? Patent Savvy Judges OUII Staff Historically quick time to resolution Remedy Why Consider the ITC: Patent Savvy Judges • Hon. Paul J. Luckern (appointed 1984) - M.S. Organic Chemistry from Cornell, Chemist at Kodak and elsewhere, taught chemistry at USC, patent examiner, junior partner at Fish & Neave, trial attorney U.S. DOJ. Previously ALJ at Social Security Administration. • Hon. Charles E. Bullock (appointed 2002) - Trial attorney at Federal Energy Commission (“FERC”). Previously ALJ at Environmental Protection Agency and FERC (has been ALJ since 1984). • Hon. Carl C. Charnesky (appointed April 2007) - Previously ALJ at the Environmental Protection Agency (1996-2007) and Social Security Administration (1994-1995). Before that, trial attorney for governmental agencies (1977-1994) • Hon. Theodore R. Essex (appointed October 2007) - Previously ALJ at the Office of Medicare Hearings (2006-2007). Retired U.S. Air Force; served in the Judge Advocates General corps (1985-2005). Why Consider the ITC: OUII Staff Lynn I. Levine, Director Spence Chubb, Thomas S. Fusco, Anne M. Goalwin, Supervisory Attorney Supervisory Attorney Supervisory Attorney Staff Attorneys Kevin G. Baer Vu Q. Bui Juan S. Cockburn Mareesa Frederick David H. Hollander Jeffrey Hsu Erin D.E. Joffre Benjamin Levi David O. Lloyd Bryan Moore Chris Paulraj Kecia Reynolds Rett V. Snotherly Heidi Strain Why Consider the ITC: Judicial Statistics Court Total No. of No. of Cases Median Time IP Cases Patent Cases Cases Tried Interval Commenced Commenced D.Del. 609 29 (4.7%) 30.3 176 157 N.D.Cal. 4,205 55 (1.3%) 23.3 529 159 E.D.Tex. 1,630 42 (2.5%) 19.2 408 359 C.D.Cal. 8,560 177 (2.1%) 18.4 1,564 334 ITC – 337 32 13 (40%) 17.7 32 32 W.D.Wisc. 507 14 (2.7%) 8.3 73 42 Sources: Judicial Business of the United States Courts, 2007 Annual Report; United States International Trade Commission, Electronic Document Information System (EDIS) Section 337 Investigational History (October 2008). Why Consider the ITC: Complaints Filed *projected Source: United States International Trade Commission, Electronic Document Information System (EDIS) Section 337 Investigational History (October 2008). What Are Your Objectives? Limited Exclusion Order (“LEO”) General Exclusion Order (“GEO”) Cease and Desist Order Damages (not available from ITC) Market Entry / Market Protection Licensing All of the above LEOs vs. GEOs 19 U.S.C. § 1337(d) - Exclusion of articles from entry (1) If the Commission determines, as a result of an investigation under this section, that there is a violation of this section, it shall direct that the articles concerned, imported by any person violating the provision of this section, be excluded from entry into the United States…. (2) The authority of the Commission to order an exclusion from entry of articles shall be limited to persons determined by the Commission to be violating this section unless the Commission determines that – (A) A general exclusion from entry of articles is necessary to prevent circumvention of an exclusion order limited to products of named persons; or (B) There is a pattern of violation of this section and it is difficult to identify the source of infringing products. LEOs Before Kyocera Certain Erasable Programmable Read-Only Memories (“EPROMs”), Inv. No. 337-TA-276 (March 16, 1989) Held that the Commission had authority to issue an exclusion order covering downstream products when the exclusion is necessary to give the complaint complete and effective relief. Announced nine factor balancing test for determining when an LEO should reach downstream products (“EPROMs” factors). (1) value of article relative to value of downstream product; (2) identity of downstream manufacturer; (3) incremental value of downstream exclusion to complainant; (4) incremental harm to respondent; (5) burden to third parties from exclusion; (6) availability of noninfringing alternatives; (7) likelihood downstream products contain infringing articles; (8) opportunity for evasion absent downstream order; (9) enforceability by Customs. LEOs Before Kyocera Federal Circuit affirmed LEOs granted using EPROMs test: Hyundai Electronics Indust. Co. v. ITC, 899 F.2d 1204 (Fed. Cir. 1990) – appeal from original EPROMs decision. Commission’s LEO: prohibits “the unlicensed entry into the United States of certain EPROMs manufactured abroad by Hyundai Electronics Industries Co., Ltd. ..., whether in the form of single-unit packages, incorporated into a carrier of any form, mounted on a circuit board of any configuration, or contained in certain products….” Commission Determination. Federal Circuit’s holding: “The Commission’s remedy determination … represents a careful and common-sense balancing of the parties’ conflicting interests as well as other relevant factors and is solidly based on the evidence of record.” Hyundai, 899 F.2d at 1209. LEOs Before Kyocera Federal Circuit affirmed LEOs granted using EPROMs test: Certain Display Controllers and Products Containing Same, Inv. Nos. 337-TA-491, 481 (Feb. 4, 2005). “[W]e determine that the limited exclusion order should cover display controllers with upscaleing functionality that are encompassed by the ‘867 patent, and circuit boards and LCD monitors containing the same ….” “[I]n the absence of such an exclusion order, Genesis will effectively be given no relief because there is virtually no importation of the accused products alone into the United States outside of downstream products.” Affirmed without criticism of LEO in MStar Semiconductor, Inc. v. ITC, 2006 WL 1476137 (Fed. Cir. 2006). Kyocera Limits LEOs to Named Respondents Kyocera Wireless Corp. et al. v. ITC, 545 F.3d 1340 (Fed. Cir. 2008). “[O]n its face, the statutory context [of § 1337(d)] limits LEOs to named respondents that the Commission finds in violation of Section § 337.” “[T]he Act plainly constrains the Commission’s authority to exclude articles to those of ‘persons determined by the Commission to be violating this section’ without a GEO.” “If a complainant wishes to obtain an exclusion order operative against articles of non-respondents, it must seek a GEO by satisfying the heightened burdens of § 1337(d)(2)(A) and (B).” Does Kyocera’s Holding Go Too Far? Holding is premised on the idea that only named respondents can be “persons determined by the Commission to be violating” § 337. “Section 337(d)(1) provides that the Commission ‘shall direct that the articles concerned, imported by any person violating the provision of this section, be excluded from entry into the United States. …” (emphasis in original). If “an infringing article is excludable under an LEO, regardless of the importer, the language in these sections requiring the importer to be in violation of the statute would be redundant.” (emphasis added). Does Kyocera’s Holding Go Too Far? Section 337 distinguishes between “persons” and “parties”: “The Commission shall determine … whether or not there is a violation of this section, except that the Commission may, by issuing a consent order on the basis of an agreement between the private parties to the investigation … terminate any such investigation … without making such a determination.” “A respondent may raise any counterclaim in a manner prescribed by the Commission.” “Any person adversely affected by a final determination of the Commission … may appeal such determination….” Kyocera does not distinguish between these statutory categories. ALJs Enforce Kyocera’s Narrowed LEO Authority Certain Probe Card Assemblies, Components Thereof and Certain Tested DRAM and NAND Flash Memory Devices and Products Containing Same, Inv. No. 337-TA-621, Order No. 34 (Nov. 25, 2008) (Bullock, J.) “In the Kyocera decision, the Federal Circuit held that, under 35 U.S.C. § 1337(d), the Commission can only issue a limited exclusion order against a named respondent that is found in violation of Section 337, and that if a complainant wishes to obtain an exclusion order against a non-named respondent, the complainant must seek a general exclusion order….” Accordingly, “a limited exclusion order against any non-named respondents for direct infringement of the ‘485 patent … is no longer available under Federal Circuit precedent….” Post-Kyocera, Complaints Must Make Some Early Decisions Do you seek a GEO? Must make an express request for a GEO in complaint or, under Certain Probe Cards, it may be waived. Face heightened proof requirements of 337(d)(2)(A) and (B). Combine LEO with GEO under (d)(2)(A). If not, how many respondents do you name? No practical limits on ITC discovery. Balance need for complete relief against multiplication of burdens. New rules favor large company complainants? Post-Kyocera, Complaints Must Make Some Early Decisions Is a Cease and Desist Order sufficient relief? “In addition to, or in lieu of [an exclusion order], the Commission may issue and cause to be served on any person violating this section, or believed to be violating this section, as the case may be, an order directing such person to cease and desist from engaging in the unfair methods or acts involved.” 19 U.S.C. § 1337(f)(1). Penalty for violation: “for each day on which an importation of articles, or their sale, occurs in violation of the order … not more than the greater of $100,000 or twice the domestic value of the articles entered or sold on such day in violation of the order.” 19 U.S.C. § 1337(f)(2). Additional Early Decisions: What Type Of Claim Should You Assert? Preference for “device” or “apparatus” claims. Easier to prove direct infringement of a device; easier enforcement by Customs. “Network” and “method” claims are less useful. Divided infringement problems; issues of foreign steps can arise. You really don’t want to assert a “product by process” claim… Proving up the process used to manufacture an article abroad. Or do you? Kinik Co. v. ITC, 362 F.3d 1359 (Fed. Cir. 2004) held 271(g) exceptions do not apply in ITC actions. You really, really don’t want an indirect infringement case. Still waiting on those third-party documents…. Additional Early Decisions: Should You File a Companion Case for Damages? As noted, damages are not available from the ITC. A companion District Court action seeking damages may be filed. 28 U.S.C. § 1659(a) gives the District Court defendant the ability to stay that action “until the determination of the Commission becomes final....” Does not “become final” until “all appeals are exhausted.” Once the stay is lifted, the ITC record is admissible “to the extent permitted under the Federal Rules of Evidence and Federal Rules of Civil Procedure.” Depositions, documents, etc. are easy. Query: how best to use favorable ITC determination? So You’ve Decided to File an ITC Complaint… 19 C.F.R. § 210.12 imposes heightened pleading requirements: Complaint must establish prima facie case of violation and be signed under oath. Include certified copies of patents and file histories, all license agreements, photographs or drawings of accused articles and domestic industry articles, copies of all art “mentioned” in prosecution history, and more. Identify claims being asserted. Provide a “non-technical” description of patented invention(s). Should provide claim charts for infringement. Copies of the domestic article and accused article, if practicable. Must allege (in addition to infringement) Domestic industry, remedy, bonding. Domestic Industry: Two Components Technical Prong: Requires technical exploitation of the patent in the United States. If Complainant does not manufacture products that practice the patent, may rely on domestic licensing activity specific to the patent. Economic Prong: Significant investment in plant and equipment; or Significant employment of labor or capital; or Substantial investment in the patent’s exploitation, including engineering, research and development, or licensing. Commission Institution “The Commission shall investigate any alleged violation of this section on complaint under oath or upon its own initiative.” 19 U.S.C. § 1337(b)(1) (emphasis added). Generally, 30 days from filing to institution. 19 C.F.R. § 210.10. Institution by publishing notice of investigation in the Federal Register. Can begin discovery the day after institution. See, e.g., 19 C.F.R. § 210.29 Main Differences From District Court Unlimited Discovery Can serve the day after institution; responses due in 10 days. No limit on the number of discovery requests. No limit on the number of deposition hours. All corporate representative depositions are trial examinations. But… ALJs are moving to “Discovery Committee” practice; and It is possible to negotiate limits and/or request them in the initial scheduling conference with the ALJ. Main Differences From District Court Confidential Business Information Order No. 1 – Protective Order Issues automatically. Covers all party and third party CBI. Does not provide for access by client representatives. Heavy penalties for violation (self-reporting). Tends to chill settlement opportunities. Under-informed clients. Makes regular (weekly) client conference calls a best practice. Can negotiate modification. Main Differences From District Court Generally, no Markman hearing: Three different claim construction proposals at trial. Becomes a large part of expert direct and cross examination Need to brief alternative scenarios. Should you ask for a Markman hearing? ALJs have conducted them on request. How well do you know the accused articles? How well do you know the prior art? Main Differences From District Court Mandatory Settlement Conferences: ALJ scheduling orders increasingly require mandatory settlement conferences. Effort at formally addressing the fact that these investigations move too fast to settle. Require reporting post-conference. As useful as you make them. Main Differences From District Court Effects of High Speed: Every theory known to patent law gets asserted. Hard to figure out the good from the bad before deadlines. No jury, so more technical arguments made and longer shots taken. Expert reports due before close of fact discovery. Theories not preserved are waived. Paramount importance of deciding on themes early. Every act in dogged pursuit of themes. Main Differences From District Court Pre-Hearing Briefs All parties brief every issue. Waiver rule taken very seriously. If an issue is not well briefed (e.g., motivation to combine), it is likely waived. Makes for long briefs (500+ pages is common). OUII Staff takes a position on ultimate issues (violation / no violation). Staff brief is usually due about a week after the private parties. Staff will actively try and prove its positions at trial.