International Trade Commission
The ITC has issued a series of new rules applying to all Section 337 investigations instituted after June 7, 2018. Although the overall impact of these new rules is not yet known, attorneys will find the following four changes of particular interest.
1. Rule 210(b)(1): The Notice of Investigation Will Identify Accused Products
Rule 210(b)(1) has been amended to require that the notice of investigation published in the Federal Register “will define the scope of the investigation in such plain language as to make explicit what accused products or category of accused products . . . will be the subject of the investigation . . . .” This change to Rule 210(b)(1) is an attempt to align with the prior requirement that the complaint contain “a clear statement in plain English of the category of the products accused.”
The ITC has made clear, however, that this rule change does not limit the investigation to any actual products that may be listed in the Federal Register, but still includes all products within the “category of accused products,” that are accused of infringing any asserted patent(s). In comments to the proposed rules, the ITC stated:
Requiring the notice of investigation to indicate accused products by specific names or model numbers does not comport with Commission practice. In particular, the Commission has long held that its remedies apply to any infringing product, not simply the products specifically adjudicated during an investigation. Identifying accused products with such specificity invites the risk of unduly restricting the scope, not only of an investigation, but also of any potential remedy the Commission may issue at the conclusion of that investigation.
Therefore, respondents should be aware that an investigation will not be limited to any specific products that may be recited in the Federal Register.
2. Rule 210.10(a)(6): The Commission Can Sever A Single Complaint into Multiple Investigations
Rule 210.10(a)(6) has been added to allow the ITC “to institute multiple investigations based on a single complaint where necessary to allow efficient adjudication.” The ITC did not adopt specific criteria for applying the rule, determining that such criteria “would be unduly restrictive and hamper the Commission’s flexibility with respect to managing investigations.” The ITC noted, however, “that instituting multiple investigations based on a single complaint would likely occur where the complaint alleges a significant number of unrelated technologies, diverse products, unrelated patents, and/or unfair methods of competition or unfair acts such that the resulting investigation, if implemented as one case, may be unduly unwieldy or lengthy.”
Allowing the ITC to divide a single complaint into multiple investigations could significantly increase litigation costs for parties and create potential inconsistencies among investigations. The ITC has indicated, however, that when the Office of Unfair Import Investigation (“OUII”) reviews draft complaints, the OUII will raise the possibility of multiple investigations with the complainants when such concerns are apparent from the draft. The OUII may also suggest modifications of filings to avoid the institution of multiple investigations. As a result, while the Commission will have the ability to institute multiple investigations from a single complaint, complainants who work closely with OUII prior to filing may be able to adjust their pleadings to avoid having multiple investigations instituted.
3. Rule 210.14(h): The ALJ Can Sever a Single Investigation into Multiple Investigations
New Rule 210.14(h) gives the ALJ the ability to sever an investigation into two or more investigations within 30 days of institution, based upon either a party’s motion, or upon the ALJ’s own judgment that severance “is necessary to allow efficient adjudication.” The ITC declined to specify any “rigid criteria for when an administrative law judge might determine that severing an investigation is appropriate,” but indicated that it may be appropriate where “the complainant alleges a significant number of unrelated technologies, diverse products, unrelated patents, and/or unfair methods of competition and unfair acts such that the resulting investigation, if it proceeds as a single case, would be unduly unwieldy or lengthy.”
Similar to new Rule 210(a)(6), the ability of the ALJ to divide a single investigation into multiple investigations could increase litigation costs for the parties and create potential inconsistencies between investigations. The rule may also lead to the filing of motions to sever by respondents in an attempt to increase litigation costs for complainants who may lack resources to litigate separately against multiple companies. The motivation for an ALJ to sever a case, however, is mitigated by the fact that the ALJ will still be responsible for handling the additional investigation(s).
4. Formalizing the Early Disposition Pilot Program
In 2013, the ITC implemented a pilot program “to test whether earlier rulings on certain dispositive issues in some section 337 investigations could limit unnecessary litigation, saving time and costs for all parties involved.” For example, determination of whether a domestic industry exists could be completed early in the investigation.
The new Rules expand on this program. Rule 210.10(b)(3) authorizes the Commission to direct the presiding ALJ to issue an initial determination pursuant to new subsection 210.42(a)(3) on potentially dispositive issues set forth in the notice of investigation. The initial determination is due with 100 days of institution of the investigation. As in the Pilot Program, the ALJ may hold expedited hearings on such issues and has discretion to stay discovery on all other issues during the 100-day proceeding.
Only the Commission may designate issues for a 100-day proceeding. Although the Commission’s original proposal would have allowed ALJ’s to identify potentially dispositive issues for inclusion, after consideration of public comments, the Commission decided to restrict the decision on the 100-day proceeding to the institution stage. Notably, this procedure does not affect summary determination practice, where an ALJ may dispose of one or more issues in the investigation when there is no genuine issue as to material facts.
The 100-day proceeding differs from summary determination because the ALJ’s ruling in a 100-day proceeding will be made after an evidentiary hearing on the issues identified in the notice of investigation. Even if there are disputes regarding material facts, such disputes will be resolved by the ALJ.
An increased use of 100-day proceedings has the potential of saving parties significant resources. If successful, such proceedings could lead to the early adjudication of case dispositive issues without expending resources on discovery related to other issues. Issues that might be decided in 100-day proceedings may include: (1) domestic industry issues; (2) patent validity issues that are primarily legal in nature (for example § 101); (3) infringement issues; and (4) standing.
The recent changes to the ITC rules of practice will likely lead to increased motion practice regarding severance of investigations and will also permit respondents to obtain early resolution of investigations if the 100-day proceeding program is used. Complainants should be prepared to work with OUII to try to avoid multiple proceedings.