Despite the challenging economic climate known as 2009, the United States International Trade Commission retains its well deserved reputation as a venue for one of the most powerful remedies available to United States patent holders seeking to enjoin importation of infringing products into the US.
Since 1999, the number of Section 337 patent infringement investigations instituted at the ITC has increased dramatically. In 2009, the number of investigations instituted dropped off slightly from the record-setting 2008, but the last three years (2007 – 2009) still represent the three busiest years for patent litigation at the ITC. In the first third of fiscal year 2010, 15 complaints were filed, indicating 2010 could be a record year at the ITC.
2009 statistics on patent treatment at the ITC
The winning percentage for complainants in ITC patent cases is traditionally higher than that for patent plaintiffs in federal district courts. Between 1975 and 1988, complainants secured an infringement finding and avoided a finding of invalidity and/or unenforceability in 75 percent of patent cases brought before the ITC, compared with a sub-45 percent in federal district courts.1 From 1995 to 2000, ITC complainants prevailed at a 67 percent rate, while the rate in federal district court cases was under 45 percent.2
But what happened in 2009? To understand the jurisprudence of this bench, we have evaluated its approach to patent litigation on a patent-by-patent basis, reviewing and analyzing any patent completely adjudicated3 by a member of the current bench of Administrate Law Judges (ALJs) in 2009. In 2009, the current group of ALJs issued 15 Initial Determinations and, as defined in footnote 3, “adjudicated” 41 patents. In the investigations that went to hearing in 2009 and where an Initial Determination issued:
6 of 15 investigations resulted in a violation (40 percent)
16 of 41 relevant patents were infringed (39 percent)
6 of 41 relevant patents were invalid (slightly less than 15 percent), and
0 of 41 patents were declared unenforceable (0 percent)
The 2009 rulings slightly favored the patentee on invalidity and unenforceability defenses when compared to prior statistics for the currently appointed ALJs, who historically have invalidated approximately 20 percent of adjudicated patents (compared to less than 15 percent in 2009) and found a patent unenforceable less than 4 percent of the time when patents were fully adjudicated (compared to 0 percent in 2009). The current group of ALJs found infringement in 2009 at a far lower rate than existed in the 1970s and 1980s at the ITC, but, overall, the ITC is still a patent-friendly jurisdiction, as reflected in the favorable validity and enforceability statistics and the ability of a prevailing patentee to obtain injunctive relief.
The Commission seeks guidance on parameters for licensing–based domestic industries
Currently, the hottest issue at the ITC is non-practicing entities (“trolls”) – specifically, those entities trying to establish the domestic industry requirement based on licensing activities. These complainants continue to test the outer limits of Section 337.
In Certain Coaxial Cable Connectors and Components Thereof and Products Containing Same, Inv. No. 337-TA-650, the ITC has requested public comment on the issue of using licensing expenditures to satisfy the domestic industry requirement. In the Initial Determination, the ALJ found that the complainant satisfied the domestic industry requirement, largely based on expenditures the complainant made on measures to enforce the relevant patent.
In December 2009, the ITC issued a notice of its determination to review portions of the Initial Determination, including the finding that the complainant satisfied the domestic industry requirement. The ITC also requested the parties and members of the public comment on the interpretation of section 337(a)(3) (C) as it pertains to licensing.
In its notice, the ITC was particularly interested in receiving comment on three questions: (1) whether all types of spending made in licensing efforts are properly considered an investment under section 337(a)(3)(C), and whether some types of spending may be entitled to more weight than others; (2) whether the term “exploitation” in section 337(a)(3)(C) indicates that greater weight should be given to licensing efforts aiming to bring a covered article into the marketplace, as opposed to efforts to get an existing producer to take a license for an already marketed product; and (3) to what extent legal fees paid in litigation against targeted licensees and/or infringers represent investments under section 337(a)(3)(C).
Four non-party submissions were made in response. One group of submissions argues that licensing may be relied on to satisfy the domestic industry requirement only to the extent that it is directly tied to exploitation of patents – that is, licensing is not an investment under section 337(a)(3)(C) when it is a mere exercise of a patent owner’s right to exclude others from using patented technology, but must constitute a substantial investment in propagating the relevant technology. Otherwise, such expenditures do not move innovation forward.
The second group generally concurs and argues that legal, litigation and post-litigation expenses do not satisfy the domestic industry requirement because they do not contribute to US economic activity (i.e., technology and related jobs).
A third submission is completely different. It argues that the ITC should consider all forms of licensing investment, including legal fees paid in litigation. Relying on ITC precedent finding domestic industry based on licensing activity, this group holds that licensing revenues are a source of funding for entities that do not engage directly in manufacturing.
Whatever the ITC determines, the Coaxial Cable case is likely to have a substantial impact on the types of cases that can be initiated in the ITC. Stay tuned.
1 Hahn, Robert W., Assessing Bias in Patent Infringement Cases: A Review of International Trade Commission Decisions, p. 3 (February 2007), AEI-Brookings Joint Center Working Paper No. RP07-03 (citing Aoki, Reiko and Thomas J. Prussa, International Standards for Intellectual Property Protection and R&D Incentives, 35 Journal of International Economics 251, 273 (1993)).
3 Cases adjudicated to completion are those that resulted in either “no violation found” or “violation found.”