Patent Litigation Before the International Trade Commission: Latest Developments

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Patent Litigation Before the International Trade Commission: Latest Developments Evaluating Whether to Litigate at the ITC, Navigating the Process, and Understanding Markman Hearings TUESDAY, SEPTEMBER 11, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Michael G. McManus, Partner, Duane Morris, Washington, D.C. Rodney R. Sweetland, III, Partner, Duane Morris, Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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4 Patent Litigation Before the International Trade Commission: Latest Developments September 11, 2012 Michael G. McManus Rodney R. Sweetland, III 2012 Duane Morris LLP. All Rights Reserved. Duane Morris is a registered service mark of Duane Morris LLP. Duane Morris Firm and Affiliate Offices New York London Singapore Los Angeles Chicago Houston Hanoi Philadelphia San Diego San Francisco Baltimore Boston Washington, D.C. Las Vegas Atlanta Miami Pittsburgh Newark Boca Raton Wilmington Cherry Hill Lake Tahoe Ho Chi Minh City Duane Morris LLP A Delaware limited liability partnership

5 The Commission The United States International Trade Commission (ITC) is an independent, quasijudicial Federal agency with broad investigative responsibilities on matters of trade. It is headed by six Commissioners who are nominated by the President and confirmed by the U.S. Senate. 5

6 Non-Partisan No more than three Commissioners may be of any one political party. Currently three Democrats and three Republicans serve as Commissioners. Chairmanship alternates between parties 6

7 The Commissioners According to statute, the Commissioners serve overlapping terms of nine years each, with a new term beginning every 18 months. In fact, some Commissioners serve longer terms as they remain seated until their replacement is confirmed by the Senate. 7

8 Office of Unfair Import Investigations (OUII) Traditionally, the OUII (sometimes referred to as the Staff ) assigned one attorney to participate in each investigation Functions as an independent party representing the public interest Since 2011, limited role in some cases for budgetary reasons 8

9 The Statute The Commission administers 19 U.S.C (often referred to simply as Section 337 ) which, among other things, prohibits importation of goods that infringe a U.S. patent. 9

10 Administrative Law Judges A 337 complaint will be referred to an Administrative Law Judge (ALJ) to oversee discovery and make an Initial Determination (ID) as to infringement. 10

11 There Are Presently Six ALJ s: Charles E. Bullock (2002) Theodore R. Essex (2007) Robert K. Rogers (2008) Edward J. Gildea (2008) Thomas Pender (2011) David Shaw (2011) 11

12 The Docket In recent years, the size of the ITC s Section 337 docket has ranged from 30 to 70 cases. This is in comparison to 2700 to 3000 federal district court patent cases. 1-2% of all patent cases are filed as Section 337 investigations. 12

13 Number of Section 337 Investigations Instituted By Fiscal Year 2005: : : : : : : 70 13

14 . 14

15 Can Name Multiple Respondents at the ITC Under the recently enacted Patent Reform Act, 35 U.S.C. 299, a district court plaintiff can t join claims against unrelated parties on the same patent. Thus, after transfer (28 U.S.C. 1404) motions, a district court patentee might end up in several different district courts. 15

16 Injunctive-Type Relief District courts apply the ebay test prior to awarding injunctions. The ITC does not. See Spansion Inc. v. International Trade Com n, 629 F.3d 1331, 1359 (Fed. Cir. 2010) ( Given the different statutory underpinnings for relief before the Commission in Section 337 actions and before the district courts in suits for patent infringement, this court holds that ebay does not apply to Commission remedy determinations under Section 337. ) (emphasis added) 16

17 The ebay Test for Injunctions (1) irreparable injury, (2) the inadequacy of remedies at law, such as money damages, (3) that the balance of hardships warrants an equitable remedy, and (4) that the public interest would not be disserved by a permanent injunction. ebay Inc. v. MercExchange, 547 U.S. 388, 391 (2006). (But injunctions are still granted in the majority of district court patent cases. See patstats.org). 17

18 Remedy Section 337 provides that infringing goods shall be excluded. 19 U.S.C. 1337(d). (But see Public Interest Factor discussion, below) Over a 12 year period, 100% (77 out of 77) cases with adjudication of violation resulted in exclusion order. Chien, Patently Protectionist? An Empirical Analysis of Patent Cases at the International Trade Commission 50 Wm. & Mary L. Rev. at

19 Speed Section 337 provides that investigations will be concluded at the earliest practicable time. 19 U.S.C. 1337(b)(1). 19

20 Speed Average time to adjudicated decision is 14 months at the ITC; 26 months in district court. See Chien at

21 Speed ITC investigations are not delayed while the complainant perfects service on respondents. Discovery begins upon publication of the Notice of Institution in the Federal Register. Discovery proceeds regardless of service of the complaint. 19 C.F.R (a). This is useful for foreign defendants. 21

22 Win Rate The long-term win rate for complainants in adjudicated cases is 58%. See Chien at

23 Special Circumstances Where Section 337 Is Useful: To counter widespread infringement (GEO); In response to Declaratory Judgment action; Early in product cycle; Process of manufacture patent. No 271(g) defenses. See Kinik Co. v. Int'l Trade Comm'n, 362 F.3d 1359, 1362 (Fed. Cir. 2004). Multiple defendants in different venues 23

24 BUT No money damages; No preclusion; and, Relief is limited to parties to the investigation under Kyocera case (unless GEO). 24

25 Sequence, Timing and Hazards of Section 337 Litigation

26 Target Date An ALJ can set up to a 16 month target by order (not reviewed). If longer than 16 months, it is considered an initial determination (ID) and is subject to review by the Commission. 19 C.F.R (a). 26

27 Initial Determination The ALJ must file his Initial Determination (ID) no later than 4 months prior to the Target Date. 19 C.F.R (a)(1)(i). Thus, for 16 month Target Date, the Final ID is due 12 months after institution. 27

28 Hearing Date ALJ s typically give themselves 2 to 3 months to draft the ID (due 4 months prior to Target Date) which is several hundred pages in length. The hearing takes 1-2 weeks. Thus, for a 16 month Target Date, expect to be in trial 9 months after institution. 28

29 Sample Timeline (15 Month Target Date)

30 Markman Hearings at the ITC

31 Traditional Markman Practice The traditional practice was for the ALJ s to construe the claims when drafting the ID. That is, they construed the claims after the hearing. This required one to put on an infringement and invalidity case without knowing what claim construction will be adopted. 31

32 Now Some ALJ s Hold Markman Hearings Bullock Yes Essex Generally does not hold Markman but has, e.g. Mobile Devices, Associated Software, and Components Thereof, ITC Inv. No. 337-TA-744 Gildea Depends on complexity of patent Pender Yes Rogers No, but requires exchange of claim terms and proposed construction among the parties Shaw Same as ALJ Rogers 32

33 Markman Rulings Are Issued as Orders Not IDs In 2010 the Commission issued a Notice that claim construction rulings should be issued as orders rather than Initial Determinations. Thus, they are reviewed by the Commission only after they underlie some substantive ruling. See Mobile Telephones and Wireless Communication Devices Featuring Digital Cameras, and Components Thereof, ITC Inv. No. 337-TA-703, Notice (October 20, 2010) 33

34 Timing of Markman Hearings Day 72 Day 86 Day 100 Day 117 Day 131 Day 139 Exchange claim terms Exchange Initial Expert Reports on Claim Construction Exchange Rebuttal Expret Reports on Claim Construction Opening Markman Briefs Rebuttal Markman Briefs Markman Hearing This is taken from Judge Bullock s Procedural Schedule in Certain Computer Forensic Devices and Products Containing Same, 337-TA-799, Order No. 10, but the timing is typical of other ALJ s. 34

35 The Domestic Industry Requirement

36 The Statute an industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned (A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in its exploitation, including engineering, research and development, or licensing. 19 U.S.C. 1337(a)(3) 36

37 Technical Prong and Economic Prong The two elements necessary to satisfy the domestic industry requirement are sometimes referred to as the technical prong and the economic prong The technical prong concerns whether the domestic industry activities relate to the patent. The economic prong concerns whether the domestic industry activities are sufficient to be considered significant or substantial under the statute 37

38 Domestic Industry: Three ways to Proceed: 1) Traditional brick and mortar; 2) Licensing activity; or 3) Licensee activity 38

39 Traditional Brick and Mortar The classic example is a U.S. factory that manufactures a product that practices the asserted patent. Could also mean quality assurance, customization or repair (but not sales & marketing) 39

40 Traditional Brick and Mortar To show significance a Complainant must put its D.I. activity in context. For example, in the context of international activity and related domestic activity. See Printing &. Imaging Devices & Components Thereof, Inv. No. 337-TA-690, Comm'n Op. (Feb. 17, 2011) Theoretically, activity that might be significant in one context may be found insignificant in another. 40

41 Licensing One can establish a domestic industry by showing a substantial investment in licensing. Monitoring the market Reverse engineering Negotiation 41

42 Licensing: Production-Driven vs. Revenue-Driven The Commission will give greater weight to licensing that precedes manufacture (production driven) as opposed to licensing efforts that seek a royalty from existing production (revenue driven) Certain Multimedia Display and Navigation Devices and Systems, Components Thereof, and Products Containing Same, Inv. No. 337-TA-694, Comm n Op., Slip Op. at 25 (Aug. 8, 2011) 42

43 Licensing: Litigation Expenses Count Toward the D.I. Only if They Relate to Licensing We agree with the Commission that expenditures on patent litigation do not automatically constitute evidence of the existence of an industry in the United States established by substantial investment in the exploitation of a patent. John Mezzalingua Associates, Inc. (d/b/a PPC, Inc.) v. Int l Trade Comm n, No , Slip Op. at 12 (appeal of Coaxial Connecters) 43

44 Licensing: Litigation Expenses Factors that suggest that litigation efforts relate to licensing include: 1) Pre-filing efforts to license 2) Post-filing offers to license 3) Whether patentee seeks an injunction (this suggests that purpose of lawsuit is exclusivity, not licensing) 44

45 Licensing: Litigation Expenses Practice tips for litigation expenses: 1. Don t seek injunctive relief. 2. Make sure that legal bills accurately reflect work related to licensing or settlement. Consider opening separate matter number for anything licensing related so that client can distinguish between pure litigation expenses and settlement related. 3. Precede litigation with clear record of attempts to license. 45

46 Licensee Activities The Patent Owner Can Rely on the Activity of Its Licensees to Satisfy the D.I. In re Certain Modified Vaccinia Ankara Viruses and Vaccines and Pharmaceutical Compositions Based Thereon, Inv. No. 337-TA-550, Order No. 28, 2006 ITC LEXIS 225, at * (U.S.I.T.C. Apr. 18,2006) ("the economic prong of the domestic industry requirement can be established where a complainant bases its claim exclusively on the activities of one licensed to practice the patents at issue. ) 46

47 Licensee Activities [t]he relevant inquiry is whether the [licensee] has made a substantial investment with respect to the articles protected by the patent, and not whether the investment relates to the specific features of the articles that contain the patented technology. Electronic Devices Including Handheld Wireless Communication Devices, ITC Inv. No. 337-TA-667, Order No. 49C (Public version dated Oct 15, 2009) 47

48 Timing of DI Activities Post-Complaint Activities Not Part of the DI - Maybe In 2010, the Commission stated "only activities that occurred before the filing of a complaint with the Commission are relevant to whether a domestic industry exists." Coaxial Cable Connectors, Inv. No. 337-TA-650, Comm'n Op. (Apr. 14, 2010), at 51 n

49 Timing of DI Activities Post-Complaint Activities CAN BE Part of the DI Maybe as a general matter, the only activities that are relevant to the determination of whether a domestic industry exists or is in the process of being established are those that occurred before the complaint was filed. [Cite] However, in appropriate situations based on the specific facts and circumstances of an investigation, the Commission may consider activities and investments beyond the filing of the complaint. [Cite] Having clarified this point, Video Game Systems, 337-TA-743 (Jan 20, 2012) at

50 Timing of DI Activities Activities That Pre-Date the Patent May be Part of the Domestic Industry In Video Game Systems, the Commission held that preissuance activities (e.g., R&D, prototype) are part of the D.I. as long as they relate to the later issued patent. Video Game Systems, ITC Inv. No. 337-TA-743, Comm'n Op. at 6 (April 13, 2011). 50

51 Public Interest Section 337 requires exclusion of infringing goods unless after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers, it finds that such articles should not be excluded from entry. 19 U.S.C. 1337(d)(1). 51

52 Public Interest The Commission has denied relief based on the public interest only three times in its history Denials of relief occurred in 1979, 1980, and No denials of relief based on public interest in the last 28 years 52

53 Public Interest Recent Developments New regulations became effective November 18, 2011 Now, a complainant must file a separate public interest statement not more than five pages in length which addresses the public interest factors. Respondent must reply within 8 calendar days Commission will use submissions to determine if ALJ may allow discovery and take evidence on public interest factors 53

54 Antitrust Claims At one time, antitrust claims were relatively common at the ITC One successful Complainant was denied remedy on Presidential Review citing the need to avoid duplication and conflicts in the administration of the unfair trade practice laws of the United States. Certain Welded Steel Pipe & Tube (April 26, 1978). This discouraged subsequent antitrust complaints Does this reflect current policy? Possibility for courageous litigant to prevail. 54

55 Trade Secrets In Certain Cast Steel Railway Wheels, Inv. No. 337-TA-655, a US company developed ABC Process to manufacture railway wheels. ABC Process was licensed to several companies in China. TianRui hired nine employees from a licensee, who disclosed secret to TianRui. TianRui manufactured according to ABC Process ITC held for US complainant although misappropriation occurred entirely overseas. Federal Circuit affirmed Commission. TianRui Group Co. v. International Trade Commission, 661 F.3d 1322 (Fed. Cir. 2011) 55

56 Counterclaims A respondent may assert a counterclaim in response to an ITC complaint. Respondent must immediately remove counterclaim to district court with proper venue Counterclaim shall relate back to the date of the original complaint Respondents seldom assert counterclaims in this manner but should to obtain desired venue 56

57 Recent Counterclaims Electronic Devices With Communication Capabilities, ITC Inv. No TA-808; Apple filed FRAND counterclaims and removed case to E.D. Va. Apple Inc. v. HTC Corporation, 12-cv-686 (ED Va). Mobile Devices, ITC Inv. No. 337-TA-744; Motorola filed FRAND counterclaims and removed to N.D. Cal. Microsoft obtained transfer to W.D. Wash. Followed by joint motion to stay. Motorola Mobility, Inc. v. Microsoft Corporation, Case No (ND Cal). 57

58 Recent Counterclaims (Cont.) Wireless Communication Devices, ITC Inv. No. 337-TA-745; Apple filed FRAND counterclaims and removed to W.D. Wis. Apple Inc. v. Motorola Mobility, Case No. 11-cv-178 (W.D. Wis.) Apple motion to enjoin ITC denied. Trial set for Nov. 5, Nitrile Gloves, ITC Inv. No ; several respondents filed counterclaims for unfair competition and tortious interference. Two dismissed as filed within 10 days of hearing. One transferred to Delaware to be joined with respondent s DJ. 58

59 Essential Patents There has been recent controversy as to whether patents declared essential to the practice of some technical standard (e.g. IEEE or 3G) may be asserted at the ITC. This arose in Certain Wireless Communication Devices, Portable Music and Data Processing Devices, Computers and Components Thereof (Inv. No. 337-TA-745) (Motorola v. Apple), but case resolved on other grounds In N.D. Ill. case involving same parties, Judge Posner has held that no injunctive relief available in district court for essential patents. 59

60 New Rules Proposed Pleading with particularity an allegation in the complaint that the complainant is relying on a domestic industry in the process of being established; Specifically pleading the relief (i.e., limited or general exclusion order and cease and desist order); Resetting the 30-day institution period where the complainant makes substantial pre-institution amendments to the complaint; New time calculations for service of documents; Limitations on the numbers of interrogatories and depositions. 77 Fed. Reg (July 12, 2012) 60

61 Thank You! Questions? Feel free to contact either of us at any time. Michael G. McManus Rodney R. Sweetland, III