The International Trade Commission (“ITC”) has become an increasingly popular forum for patent litigation involving imported products due to expedited scheduling,1 broader discovery tools,2 and a more lenient test for obtaining injunctive relief.3 As provided by several provisions of the Leahy-Smith America Invents Act (“AIA”),4 patent owners now have an additional reason to turn to the ITC for relief. In particular, the AIA places certain requirements on patent owners that make it more difficult to join multiple accused infringers in one civil action,5 while neither section 337 of the Tariff Act of 19306 nor the ITC’s rules7 impose any such restrictions.
More specifically, the AIA added new section 299 to Title 35 of the United States Code, which allows multiple accused infringers to be joined in a single civil action where the patent owner’s claim against those parties “aris[es] out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process.”8 As a result, the AIA resolved the split district court authority as to whether a patentee can join multiple accused infringers in a single infringement action under Rule 20 of the Federal Rules of Civil Procedure (FRCP)9 by effectively defining “the same transaction [or] occurrence” requirement of Rule 2010 as “the making, using, selling, or importing of the same accused product or process.”11 Focusing the transaction or occurrence on the same patented product or process in this manner helps to ensure that the questions of fact that may arise in an infringement action will be “common to all defendants or counterclaim defendants,” as required by new section 299.12
Just as the ITC is not bound by the FRCP,13 so too is it free from the restrictions of 35 U.S.C. § 299. Section 299 applies only to “civil actions,”14 which are heard by Article III, or judicial, tribunals.15 By contrast, the ITC is an Article I, or legislative, tribunal16 that hears only those actions enumerated by Congress in the Tariff Act.17 Moreover, under section 337 of the Tariff Act, the ITC exercises in rem jurisdiction over articles that are imported into the United States, rather than in personam jurisdiction over the accused infringer, as in Article III tribunals.18 Such in rem jurisdiction allows a patent owner to include multiple defendants from different districts in a single investigation, regardless of whether those defendants make, use, sell, or import the same accused product or process.19
Additionally, in Kyocera Wireless Corp. v. Int’l Trade Comm’n, the Federal Circuit “limited”20 application of exclusion orders under section 337 to respondents who are named in a complaint. The Federal Circuit tacitly encouraged patent owners to join diverse entities in an ITC investigation in order to encompass downstream products in such exclusion orders.21 Furthermore, it may be possible to join such entities in a section 337 action to show a pattern of infringement, which is one of the heightened requirements for obtaining a “general”22 exclusion order.23
Section 299 not only resolves Rule 20 in favor of accused infringers, it also provides that accused infringers “may waive the limitations set forth in this section.”24 This pro-defendant provision allows accused infringers the ability to benefit from economies of scale via joint defense agreements and other money-saving tactics as they see fit, while patent owners are blocked from such an option. Such economies of scale may be of particular importance to non-practicing entities (“NPEs”) and other parties whose economic justification for bringing an infringement action may depend on recovering small amounts from a large number of defendants. Indeed, some commentators posit that one of the purposes of new section 299 was to make it more difficult for NPEs to bring such actions in federal district court.25 By contrast, the ITC provides a ready venue for NPEs to bring multi-respondent complaints.
In 2010, the Federal Circuit made clear that the four-factor test for granting an injunction under eBay26 ― two (2) factors of which provide a significant hurdle for NPEs to overcome27 ― is not applicable to ITC investigations.28 Instead, the ITC is statutorily required to issue an exclusion order once the patent owner proves a violation of Section 337 (i.e., importation, infringement, and domestic industry) provided that the “public health and welfare” or certain economic conditions do not weigh against it.29
Also in 2010, the ITC further opened the door for NPEs by holding that its “domestic industry” requirement30 could be satisfied by licensing activity alone.31 Although this holding has been curtailed in recent investigations ― particularly with respect to patents that are licensed as part of a large patent portfolio32 ― the ITC remains an attractive and viable venue for NPEs to bring an infringement action against diverse defendants.33
The jurisdiction of the ITC under section 337, however, is not without limitation. In addition to its domestic industry requirement, which requires a “substantial” amount of economic activities in United States with a sufficient nexus to the asserted patent,34 jurisdiction under section 337 also requires the “importation” of accused products into the United States.35 In other words, section 337 generally does not apply to domestically produced goods.36 Moreover, unlike district court litigation, money damages are not available to plaintiffs at the ITC.
Nevertheless, a plaintiff may use the threat of an ITC exclusion order as leverage to force a favorable settlement. Recently-published ITC data illustrates that, on average, about 50% of all section 337 investigations are terminated by settlement and/or consent order prior to completion of the investigation and that certain NPEs ― in particular, NPE’s whose business model primarily focuses on purchasing and asserting patents (i.e., patent trolls) ― terminate investigations prior to completion of the investigation by settlement and/or consent order prior at an even higher rate: 61%.37 Thus, in cases where the ITC’s jurisdictional requirements are met, a patent owner’s ability to join diverse defendants in a single ITC action may lead to more infringement claims being brought before the ITC.