On June 10, 2014, the International Trade Commission (“ITC” or the “Commission”) issued an article regarding statistical facts and trends relating to certain aspects of Section 337 investigations.

According to the article, the number of new Section 337 investigations has remained at elevated levels over the past several years.  While the number of new investigations peaked in calendar year 2011 and has decreased somewhat in the years since, new investigations are still being instituted at historically high levels.  The Commission notes in particular that the number of ancillary proceedings has been increasing in recent years.

High tech products dominate Section 337 investigations.  Computer and telecommunications products were the basis of 30% and 38% of the investigations in 2012 and 2013, respectively.  Other consumer electronic products were at issue in 23% and 7% of the investigations in 2012 and 2013, respectively.  However, the article also notes that Section 337 investigations have involved a wide range of other types of products in recent years, including pharmaceuticals, medical devices, and small consumer items.

In 1988, Section 337 was amended to allow IP rights-holders that do not manufacture products (i.e., non-practicing entities or NPEs) to obtain remedies at the ITC.  In order to analyze the prevalence of NPE activity at the ITC, the Commission classified NPEs into two distinct categories — Category 1 and Category 2 NPEs.  Category 1 NPEs include entities that do not manufacture products that practice the asserted patents, including “inventors who may have done R&D or built prototypes but do not make a product covered by the asserted patents and therefore rely on licensing to meet the domestic industry requirement; research institutions, such as universities and laboratories, that do not make products covered by the patents, and therefore rely on licensing to meet the domestic industry requirement; start-ups that possess IP rights but do not yet manufacture a product that practices the patent; and manufacturers whose own products do not practice the asserted patents.”  Category 2 NPEs included entities that “do not manufacture products that practice the asserted patents and whose business model primarily focuses on purchasing and asserting patents.”

According to the article, some commentators have argued that the Supreme Court’s eBay v. MercExchange decision in 2006, making it more difficult to obtain injunctions in district court, may be driving NPEs to use the ITC.  However, the Commission’s data does not support this conclusion.   Since the eBay decision, the ITC has instituted 337 Section 337 investigations (through the first quarter of 2014).  Of these, Category 1 NPEs accounted for 10%, and Category 2 NPEs accounted for an additional 10%.  Yet, only four NPEs were successful in obtaining exclusion orders, two Category 1 NPEs and two Category 2 NPEs.  The ITC also notes that each of these NPEs (or a subsidiary) developed the technology at issue in the investigation.

As to the suggestion that NPEs are using the ITC to obtain settlements with respondents, the report finds that the data is inconclusive due to the relatively small number of NPE investigations.  However, despite the small sample size, the data shows that 30.3% of all Section 337 investigations involving Category 1 NPEs resulted in a settlement, while 50.0% of all investigations involving Category 2 NPEs resulted in a settlement.  By way of comparison, the settlement rate for all other investigations is 48.2%.

Lastly, the Commission reported that its data regarding the number of respondents named in Section 337 investigations varies substantially from year to year across all complainant categories.  For example, in 2013, the number of respondents in investigations based on complaints from Category 1 NPEs ranged from 3 to 15, and the number of respondents in investigations based on complaints from Category 2 NPEs ranged from 2 to 21.  The number of respondents in all other investigations ranged from 1 to 24.

According to the article, commentators have previously suggested that large numbers of respondents may stem from the Federal Circuit’s decision in Kyocera v. Int’l Trade Comm’n, which prohibits the scope of remedial orders issued by the ITC from reaching non-party downstream products containing accused components.