U.S. intellectual property owners are increasingly turning to the little-known U.S. International Trade Commission (ITC) to protect their most important IP rights. In 2008, nearly 15% of all patent trials conducted in the U.S. took place at the ITC.
Biotech and pharmaceutical companies are no exception. Amgen filed a successful complaint at the ITC in 1988 against Chugai involving imported recombinant erythropoietin (EPO). In 2006, it again filed a complaint involving imported EPO, this time against Hoffman-La Roche. In the mid-1990’s Genentech filed a complaint against Biotechnology General and Novo Nordisk, accusing them of infringing patents relating to recombinant production of human growth hormone.
More recently the ITC investigated a complaint filed by Bavarian Nordic involving modified vaccinia Ankara (MVA) viruses and vaccines. That case ended with a consent order settlement.
The ITC has also issued orders excluding imports of Viagra and Cialis following investigation of complaints from Pfizer and Eli Lilly. In both cases the ITC issued a general exclusion order, barring all further imports into the U.S. of all infringing products. Of the 34 new investigations instituted by the ITC in 2006, seven involved medical, pharmaceutical, or biotech products.
EPO was Amgen’s first commercial success and in many ways its most important product. Human growth hormone was Genentech’s flagship product. Viagra and Cialis are hugely important to Pfizer and Lilly, respectively. GEN is running a two-part series on Section 337 of the U.S. trade laws to elucidate why these companies would go to the ITC with such important intellectual property issues rather than to the courts. This first part will give background on Section 337 and detail the various advantages of going to the ITC compared to the U.S. courts. The second part, which will run on Wednesday, December 23, will provide tips for complainants and respondents.
Section 337 and the U.S. ITC
Section 337 of the U.S. trade laws provides private parties with remedies for unfair import practices other than practices related to pricing or import volume. Section 337 investigations are generally directed at infringement of U.S. patents, trademarks, trade dress, and copyrights, although many other unfair acts can be addressed, including misappropriation of trade secrets and antitrust violations.
A Section 337 complaint is investigated by the ITC, an independent federal agency comprising six commissioners, an extensive supporting staff, and independent administrative law judges (ALJs), who are responsible for handling the case and issuing an initial determination on the merits, which the ITC can then review.
Also unlike the courts, the ITC’s Office of Unfair Import Investigations (OUII) participates as a formal party in all investigations, charged by law with representing the public interest in Section 337 cases. With just a few exceptions, the ITC applies the same procedural rules and substantive intellectual property law as the U.S. courts.
The remedies under Section 337 are severe. If the ITC finds a violation, it normally issues an exclusion order, directing U.S. Customs and Border Protection to prohibit importation of all products that violate the order. The ITC can also issue a cease and desist order, barring continued sale of existing inventories in the U.S., with severe fines for any violation. The ITC decision may be appealed to the U.S. Court of Appeals for the Federal Circuit, which also hears all other patent appeals.
Why Should a Complainant Go to the ITC?
In the appropriate case, the ITC can offer a number of advantages over a district court, such as:
Expedited resolution of cases: Section 337 investigations are expedited, with a hearing generally within eight to nine months of initiation. A final ITC decision can generally be expected within 13 to 15 months of initiation. One alternative for speedy resolution of patent-infringement cases is to go to a district court “rocket docket.” Many rocket dockets, however, are slowing down, and several recent Federal Circuit decisions such as TS Tech and In re Hoffman-La Roche have directed the rocket dockets to transfer cases to jurisdictions with a stronger connection to the case. This makes it harder to keep cases in a rocket docket, while cases are not transferred out of the ITC.
Draconian remedy: If a complainant establishes that a respondent violated Section 337, the ITC will normally automatically issue an exclusion order to be enforced by customs and perhaps a cease and desist order as well. In district courts, injunctions are often difficult to get, and district court judgments are not self-enforcing. Moreover, an ITC exclusion order can apply to products that incorporate the infringing component in a combination or different form. This may be particularly important for drugs that are made in a variety of formulations or in compound form.
In rem jurisdiction: Unlike in many district court patent cases, there are very few if any jurisdictional issues in a Section 337 case, since the ITC’s authority to issue an exclusion order is in rem, i.e., based on the product importation. The ITC does not need to have jurisdiction over the foreign accused parties. Personal jurisdiction is required for a cease and desist order. However, the ITC exercises nationwide jurisdiction over U.S. entities, and any foreign party that chooses to defend itself and appears at the ITC thereby concedes personal jurisdiction.
Experienced judges: The ITC ALJs are generally very knowledgeable in patent and intellectual property law, unlike many U.S. district court judges.
No counterclaims: While the ITC will receive counterclaims (such as antitrust claims), the complainant can immediately remove any counterclaim to a U.S. district court, where it is often stayed until the ITC issues its final determination.
Parallel proceedings: At the same time it files the complaint with the ITC, the complainant may also file suit in a district court, commonly referred to as a parallel proceeding. The ITC cannot award monetary damages against an infringer, but the district court may award such damages following the ITC determination. While the ITC determination is not binding on the district court in patent cases, the district court often defers to the ITC determination.
General exclusion orders: The ITC can also issue a general exclusion order, which bars the import of goods from all sources including companies and exporters that were not specifically named as a respondent. This remedy can be particularly useful in cases where the complainant faces a widespread pattern of foreign infringers and it may be difficult to identify all such foreign sources, or where sources could change frequently over time.
Proceeding at the ITC may have strategic as well as substantive benefits for a complainant asserting IP infringement for a biotech or pharmaceutical product. Companies on both sides of the divide should know about and understand the ramifications of Section 337. The second part of this two-part series will focus on considerations for biotech and pharmaceutical firms thinking of using Section 337, as well as how best respondents can proceed.