Welcome to the latest issue of the Section 337 Update. This newsletter is designed to provide you with practical updates and developments on Section 337 proceedings before the US International Trade Commission.
The increasing size and complexity of Section 337 investigations before the United States International Trade Commission (“Commission”) have challenged the ability of the Office of Unfair Import Investigations (“OUII”) to participate fully and make contributions to the adjudicatory process. To adapt the mission of the OUII and its staffing model to these changing circumstances, on May 2, 2011, the Commission issued a notice of its adoption of a rule which reduces the role of the OUII in Section 337 investigations. See 19 C.F.R. § 210.3.
In Section 337 investigations before the Commission, the OUII serves as an independent third party representing the public interest. OUII’s main task is to assist in creating a complete record on all contested issues so that the Commission can properly enforce the provisions of Section 337. In contrast with district court litigation, a Section 337 investigation is not a purely private dispute between the parties; it is a government investigation into unfair acts involving the importation of articles into the United States.
The Commission’s new rule adopts a proposal from the supplement to the Commission’s January 2011 Report on the Commission’s Strategic Human Capital Plan 2009-2013 (the “Report”), which asserts that the continued addition of substantially more resources to the OUII is no longer sustainable or warranted. (Click here to view the Commission Report). Under this new staffing approach, the OUII will generally only participate in Section 337 investigations which require its specific expertise, rather than playing a role in nearly all cases. In cases with significant issues unique to Section 337 investigations, including the domestic industry requirement, the public interest and bonding, or cases with only limited respondent participation, the participation of the OUII is likely to aid the decision-making process. This refocus of the OUII’s priorities and functions is an effort by the Commission to take a balanced approach to adequately fulfilling the Commission’s statutory missions and to meeting government-wide obligations in a prudent and fiscally responsible manner.
The OUII was originally established in the Trade Act of 1974 (the “Trade Act”), which instituted significant changes in the procedures for Section 337 investigations. Prior to the passage of the Trade Act, the Commission investigated Section 337 complaints directly, and private parties had a limited role in the investigations after their institution. However, after the enactment of the Trade Act, private parties acquired substantial new rights to participate directly in Section 337 investigations. This led to problems, though, because the Commission, serving as an administrative fact-finder, could not directly communicate with the private parties ex parte. To resolve this problem, the OUII, then known as the Unfair Import Investigations Division or “UIID,” was established to represent the public interest and aid the Commission in making a reasoned and fair determination. The OUII has effectively served as an independent third party in Section 337 investigations because the OUII attorneys investigate and consider all issues and evidence relevant to resolution of the investigation, whereas the positions taken by the private parties may be biased and shaped by their business interests at stake.
The OUII has played a number of critical roles in Section 337 investigations. Prior to the filing of a complaint, complainants typically consult with the OUII and have the OUII review draft complaints before their filing in order to ensure the technical compliance of the draft complaint with the Commission’s regulations and to improve the likelihood that the Commission will institute an investigation. During the 30-day period following the filing of the complaint, the OUII reviews the complaint for sufficiency and compliance with the Commission’s rules and may consult with the complainant and the proposed respondents, and ultimately advises the Commission on whether to institute a Section 337 investigation.
After the Commission institutes an investigation, the role of the OUII shifts from being a confidential one to an advisory one. OUII attorneys become parties to the investigation and represent the public interest. The OUII’s primary role is to help assemble a full and complete record to support the public’s interest in a reasoned and fair determination by the Commission. Similar to private parties, the OUII can propound written discovery and participate in depositions, motions practice, and trial. The OUII also has independently briefed issues that are relevant to the public interest and advocates for a recommended outcome on the merits of the significant legal issues presented in an investigation. The private parties deal with the OUII attorney in the same way as they deal with each other – contacts with the OUII attorney are fully permitted. After an Administrative Law Judge (“ALJ”) issues an Initial Determination, the OUII participates in briefing during review of the ID by the Commission. Furthermore, the OUII participates in any formal enforcement proceedings of Section 337 investigations after the Commission’s Final Determination.
Under the above-mentioned new rule, the OUII will enter a transitional period, during which, on a trial basis, it will implement a number of alternative staffing approaches, and the effectiveness of these will be evaluated by the Commission periodically. Contrary to past practice, the OUII will now give highest priority to certain functions that draw upon its particular expertise, while eliminating or reducing efforts devoted to other functions. The OUII will continue to review draft complaints prior to filing and advise the Commission on whether to institute investigations.
However, once an investigation is instituted, OUII’s role will be reduced. The OUII will continue its efforts to ensure that the investigation record is fully developed, to resolve procedural disputes without the need to resort to the presiding ALJ, and to facilitate settlement. An OUII attorney will only participate in all or nearly all of the matters/issues arising in an assigned case for a share of its cases. In certain investigations, OUII will participate in a selective manner on those issues on which it is able to provide the greatest added value and expertise. In another subset of investigations, which are less likely to draw on its expertise, the OUII will cease to be a party altogether. In terms of selecting investigations in which it will not participate, the OUII will report to the Commission the criteria it uses to perform that identification.
The new rule took effect as of May 2, 2011, the date of the notice. According to the notice, “[t]he new rule will have no substantive effect on Commission practice in conducting Section 337 investigations” but “will allow OUII the flexibility to reassign attorneys to cases as necessary without having to publish notices announcing the change in the Federal Register.” The Commission will evaluate the effectiveness of these new staffing models on a periodic basis and will provide additional guidance to the OUII. The ITC is now widely recognized as an important forum for patent-based disputes involving imported goods, as evidenced by the recent growth in the number of cases and their complexity. Accordingly, the OUII’s mission and staffing model must be adapted to these changing circumstances, as the number of cases and complexity of these cases is likely to continue to increase.