The United States International Trade Commission (ITC) has recently amended its rules governing section 337 unfair trade practice investigations. The amendments formally add the 100-day program, permit the Commission to split investigations prior to institution, allow Administrative Law Judges (ALJs) to sever investigations post-institution, and make other procedural changes. These changes are effective June 7, 2018.

Background

The ITC’s investigations under 19 U.S.C. § 1337 offer patent owners an attractive alternative to district court litigation. Well-known advantages to ITC proceedings include consolidated proceedings against multiple accused infringers, a quick time to resolution, and the potential issuance of exclusion orders that prevent infringing imports from entering the United States. The speediness of ITC proceedings incurs costs rapidly, however, and the previous rules did not readily provide a mechanism for putting on the brakes in the face of a potentially case-dispositive issue.

The New Rules Formalize the 100-Day Provision for Early Disposition

In 2013, the ITC launched a pilot program for 100-day early disposition to allow earlier rulings on certain dispositive issues, limit unnecessary litigation and conserve resources. This program permits an ALJ to conduct expedited fact-finding and an abbreviated hearing limited to a specific issue, such as the presence or lack of a domestic industry, and to then rule on that issue. Since its inception, only six cases have used the program, and those cases invoked the provision to establish that the complainant did not meet the requirements for filing an ITC complaint.

The new rules formally adopt the 100-day provision. (§ 210.10(b)(3); § 210.42(a)(3)).

Commentators have had mixed reactions to the adoption of the 100-day procedure. Some have raised concerns that it might result in increased frivolous 100-day proceedings instituted by parties wishing to delay proceedings, whether to have more time to prepare for trial, or to delay the issuance of an exclusion order. Others have expressed concerns that over-use of the provision might result in substantial delays. Some commentators, however, are optimistic that the threat of this procedure will increase efficiency by encouraging complainants to prepare their complaints more carefully before filing or have their case dismissed following a 100-day proceeding.

The New Rules Allow for Severing Cases

The ITC has another big change in the works. New ITC rules permit the institution of multiple investigations from a single complaint based on the single consideration of efficient adjudication. (§ 210.10(a)(6)). The rationale behind this rule is to limit the number of technologies and/or unrelated patents asserted in a single investigation. Judges may now also opt to sever an investigation into multiple investigations at any time prior to or upon thirty days from the institution of the investigation, based on either party’s motion. (§ 210.14(h)).

Although there is a potential benefit to severing cases where, for example, there is a substantial difference between the products at issue or theories of infringement presented across the initial group of respondents, there are concerns that this procedure might also include substantial pitfalls. Comments on the proposed rule include concerns about increased costs and use of ITC resources and worries that inconsistent results and timing between investigations might result. Much of the negative feedback focused on potential gamesmanship and disparities resulting if severance could lead to different ALJs adjudicating related investigations, including the improper use of motions for severance for the purpose of ALJ-shopping. Concern also was expressed regarding the impact on multiple investigations if the complainant withdrew or modified its complaint.

Other New Rules Require Specificity of the Accused Products and Otherwise Align the ITC Rules with District Court Litigation

Another new rule requires the notice printed in the Federal Register at the institution of the investigation to give more effective notice to the public by defining in plain language the scope of the investigation and to make explicit what accused products or category of accused products will be the subject of the investigation. (§ 210.10(b)(1)). Thus, complainants must carefully establish their case before institution and may not rely on discovery to do so, encouraging efficiency in proceedings and reducing discovery costs.

Finally, other remaining significant rule changes align the ITC rules more closely to the Federal Rules of Civil Procedure. One new rule allows judges to order acceptable means of electronic service to ensure secure transmission. (§ 201.16(f)). Another new rule allows parties to file objections to a subpoena; in the past parties only could file a motion to quash. (§ 201.32(d)). Yet another new rule protects draft expert reports and expert communications with counsel from discovery. (§ 210.27(e)(5) and (g)(3)).

Following implementation of the new rules, only time will tell if they will have their desired effect of further streamlining ITC section 337 proceedings, or if the increased options provided to parties will slow proceedings, as some observers believe they might. Overall, however, these changes are seen as improvements. The 100-day program did not appear to be abused during the pilot program; investigations are only to be severed if it is believed that doing so will provide efficiencies; and the procedural changes appear to be the sort that will increase efficiencies with very little down side.