Both for US companies and, increasingly, for foreign-based companies, the US International Trade Commission (ITC or Commission) has become the forum of choice for speedy and effective relief against imports infringing on intellectual property rights. Under Section 337 of the Tariff Act of 1930 (19 USC § 1337), the ITC has the power to bar the importation of articles that infringe on US patents and other intellectual property rights.1

Based on recent developments, one issue in particular will be of renewed interest in Section 337 practice in 2011: whether the issuance of an exclusion order (general or limited) barring an infringing article from entering the United States is in the public interest. The “public interest” prong is not a new legal test per se. The statute provides that if the Commission finds a violation of Section 337, it shall exclude the articles concerned from the United States -

unless, after considering the effect of such exclusion upon the public health and welfare, competition conditions in the United States economy, the production of like or directly competitive articles in the United States, it finds that such articles should not be excluded from entry.

19 USC §1337(d)(1).

However, the Commission’s renewed interest in this prong is a new and significant development that will likely lead to a change in practice in 2011. On October 1, 2010 the ITC published a notice of proposed rulemaking amending its rules of practice to allow the gathering of more information on public interest issues arising from complaints alleging a violation of Section 337. See 19 CFR Part 201: Rules of Adjudication and Enforcement, 75 Fed. Reg. 60671 (Int’l Trade Comm. Oct. 1, 2010) (notice of proposed rulemaking). The ITC’s notice of proposed rulemaking, if implemented, would require complainants to include additional allegations regarding the effect of an exclusion order on the public interest; similarly, respondents would be have to address these allegations, as well, in their initial answer to the complaint.

The proposed amendments are designed to help the ITC in identifying investigations that require further development of public interest issues in the record, and to develop information regarding the public interest at each stage of the investigation. 75 Fed. Reg. at 60671. The ITC proposes to do so by requiring that complainants and respondents address the following new four factors in their initial pleadings:

  1. .Explain how the articles potentially subject to the orders are used in the United States;
  2. Identify any public health, safety, or welfare concerns in the United States relating to the potential orders;
  3. Indicate the extent to which like or directly competitive articles are produced in the United States or are otherwise available in the United States, with respect to the articles potentially subject to the orders; and
  4. Indicate whether complainant, complainant’s licensees, and/or third party suppliers have the capacity to replace the volume of articles potentially subject to an exclusion order and a cease and desist order within a commercially reasonable time.

Additionally, the administrative law judges (ALJ) presiding over Section 337 investigations will be able to order discovery and take evidence on matters of public interest. Section 210.50(b)(1) of the ITC’s rules provides that the ALJ shall take evidence with respect to the issues of remedy and bonding, but not with respect to the public interest unless the Commission orders otherwise. There have been only a handful of cases (Adjustable-Height Beds and Components Thereof, Reduced Ignition Proclivity Cigarette Paper Wrappers and Products, Components for Installation of Marine Autopilots with GPS or IMU, Variable Speed Wind Turbines and Components Thereof) where the Commission directed the ALJ to take evidence on the issue of public interest and issue findings of fact. In the notice of proposed rulemaking, the ITC proposes to amend Section 210.50(b)(1) to also provide that if the Commission orders the ALJ to take evidence on the public interest, the ALJ should also address the public interest in its initial determination. Further, under the proposed rules, the extent of the taking of discovery by the parties on public interest matters shall be at the discretion of the presiding ALJ.

While the ITC decides whether to proceed with this rulemaking and institutionalize the new public interest factors, the ITC’s practice has been to request comments concerning the public interest before instituting an investigation. We expect this practice to continue in 2011 until the proposed changes to the Commission’s rules of practice come into effect.

At a meeting of Section 337 practitioners on January 19, 2011 in Washington, DC, members of the US International Trade Commission, and attorneys with the ITC’s Office of Unfair Import Investigations, the Commissioners confirmed the growing trend of Section 337 investigations: in fiscal year 2010 there were 51 new investigations and 103 active investigations on the ITC’s docket. The Commissioners also encouraged 337 practitioners to consider mediation under the ITC’s new mediation program. Modeled after the mediation rules of the US Court of Appeals for the Federal Circuit, the ITC’s mediation program, introduced in late 2008, took off just last year. From 2010 to date, there were a total of seven mediations in Section 337 cases conducted pursuant to the ITC new mediation rules. While none of these resulted in all claims being resolved, the Commissioners indicated that the mediation was believed to be an effective process for narrowing the claims that continued to trial.