NPEs AT THE ITC
While non-practising entities still enforce their patents in US district courts, recent years have seen an increase in those using the International Trade Commission as a preferred forum. James Coughlan and John Schnurer explain why.
Non-practising entities (NPEs) have traditionally enforced their patent rights in US district courts and not at the US International Trade Commission (ITC). Te ITC cannot award monetary damages, and it imposes an additional jurisdictional hurdle not required by the district courts. However, in recent years, the ITC has become a more popular forum for NPEs. In the last three years, at least 31 entities have been sued at the ITC by patent owners who do not manufacture a product covered by their asserted patents. ITC complaints filed by NPEs present unique legal challenges, and respondents must consider their options and potential strategies when defending themselves at the ITC.
Te ITC is an independent, quasi-judicial federal agency that investigates alleged unfair acts of importation, including imports of products that allegedly infringe US patents. By rule, ITC actions must be completed expeditiously, and a final decision must be rendered in a timely manner, usually within 14 to 18 months. At the ITC, the plaintiff is referred to as the ‘complainant’, defendants are ‘respondents’ and the action is an ‘investigation’. Te ITC can issue an exclusion order directing the US Department of Customs and Border Protection to bar infringing articles from entering the United States. It can also issue cease and desist orders requiring the removal or destruction of infringing articles already held in inventory in the US.
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To establish jurisdiction at the ITC, a patent owner must prove that a domestic industry exists, or is being established, in connection with the asserted patent. A domestic industry is typically found where the patent owner has
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made substantial domestic investments in connection with the manufacture of a product covered by a claim of the asserted patent. In 1988, Congress amended the statute to provide that a domestic industry can exist where the complainant has made substantial investments in the asserted patent’s exploitation, including its licensing. Despite this change, NPEs continued to pursue injunctive relief primarily in the district courts to gain leverage in licence or settlement negotiations.
In 2006, however, the Supreme Court’s decision in eBay Inc. v. MercExchange made it more difficult for NPEs to obtain injunctive relief from the district courts. Te Supreme Court held that such relief was no longer ‘automatic’ upon a finding of infringement, and may not be available to parties that do not manufacture products and can therefore be made whole by monetary relief. In addition, the increased popularity of forums traditionally favoured by NPEs, such as the courts of the Eastern Districts of Virginia and Texas, has resulted in more crowded and slower dockets. Moreover, defendants in those forums have had success transferring patent actions to other venues.
At the same time, the rapid pace of ITC proceedings remained substantially the same, and the standard for obtaining relief at the ITC remained unchanged by the eBay decision. A remedy from the ITC continued to be virtually automatic if a violation of the statute was found to have occurred. Te ITC has recently confirmed that in view of the change in the statute dating back to 1988, NPEs can establish a domestic industry and pursue their rights at the commission. Perhaps due to these factors, NPEs began to file more complaints at the ITC.
World Intellectual Property Review September/October 2010 49
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