August 12, 2013
Law360
Authored by Michael E. Kudravetz and P. Andrew Riley
All public commenters agree that the process for enforcing U.S. International Trade Commission exclusion orders needs a major overhaul.1 These public comments were submitted in response to the Office of the U.S. Intellectual Property Enforcement Coordinator's request for public comments2 in advance of an interagency review of the exclusion order enforcement process called for in the Obama administration's 2013 Joint Strategic Plan on Intellectual Property Enforcement, issued in June.
The ITC, under Section 337 of the Tariff Act of 1930, investigates allegations of unfair practices in import trade, including allegations related to intellectual property infringement. When the ITC finds a violation of Section 337, it issues an exclusion order barring the importation of the infringing goods. Although the ITC issues exclusion orders, U.S. Customs and Border Protection oversees enforcement of those orders.
IPEC requested that commentators respond to seven questions, generally regarding the adequacy of current CBP procedures for enforcing exclusion orders; the ease of access to information and understanding of CBP procedures by interested parties; the timeliness and effectiveness of notice that interested parties receive from CBP; the drafting of ITC exclusion orders to assist CBP in enforcement; and any collaboration between the ITC and CBP.3
The 10 public comments—divided roughly evenly between legal groups, such as the American Bar Association's Intellectual Property Section and the ITC Trial Lawyers Association (ITCTLA), and frequent corporate litigants at the ITC and their lobbying arms, such as Microsoft Corp., Samsung Electronics Co. Ltd., and the Intellectual Property Owners Association (IPO)—indicate that the current procedures are significantly lacking in each of these areas. Specifically, the public commentators' responses call for increased transparency, efficiency, and effectiveness in the processes and standards for enforcing ITC exclusion orders. The commentators offer a variety of suggestions for improving those procedures and this article examines some of common themes raised.
A first recurring theme in the responses is that the exclusion order enforcement process needs greater transparency. Many of the commentators complained that CBP exclusion order proceedings are shrouded in secrecy, without any formal process or record of the proceedings. After the ITC issues an exclusion order, both the successful ITC complainant and prospective importers may meet ex parte with CBP to discuss the scope of the exclusion order, including what products should or should not be encompassed by the exclusion order.
These meetings with CBP are informal and off-the-record and, as the American Intellectual Property Lawyers Association notes, "affected parties generally are not even aware of the meetings and are deprived of the information provided to CBP that may influence its decision." The Imaging Supplies Coalition (a nonprofit trade association whose members include Brother, Canon Inc., Seiko Epson Corp., Hewlett-Packard Co., Lexmark International Inc., Oki Data Americas Inc., Samsung, Toshiba Corp. and Xerox Corp.), complains that "the inability of CBP to request assistance from rights holders in making decisions regarding imported products serves little or no purpose to support effective enforcement or facilitate fair competition." Microsoft simply states that "CBP's enforcement process lacks transparency at all stages."
Commenters largely agree that a more formal inter partes process should be established for determining the precise scope of an ITC exclusion order, providing notice to interested parties along with an opportunity to review and respond to adverse parties' statements. Such a process would, ideally, balance the interests of a successful ITC complainant who has gained an exclusion order against those of potential importers of noninfringing or designed-around products seeking access to the U.S. market. Commentators also stress, however, that such a process should be both expedient and limited, without allowing the interested parties to relitigate the issues already decided during the investigation phase of the ITC proceedings.
PPC Broadband Inc. (formerly known as John Mezzalingua Associates Inc.) also contends that, with respect to general exclusion orders (GEOs), which prohibit entry of categories of products presumed to infringe, "effective enforcement of a patent-based GEO should always require the participation of the rights holder in the process of educating CBP about the patent claims and the nature of infringing articles." Several commentators include proposed timelines and procedures for such inter partes proceedings.
Another area of concern for several commentators is the internal process at CBP for determining the scope and application of exclusion orders. For example, as the IPO noted:
In the past, CBP would issue written rulings under 19 C.F.R. Parts 174 and 177 to explain its determinations of whether imported articles fell within the scope of ITC exclusion orders. Today, CBP appears to rely on unwritten informal determinations and self-certification by importers that the importers are in compliance with ITC exclusion orders . . . None of these changes is reflected in CBP regulations, leading to confusion and uncertainty for ITC litigants in determining how exclusion orders will be enforced.
Several commentators—including the ITCTLA, Microsoft, the IPO and Tessera, Inc., among others—argue that the ITC itself, possessing superior knowledge of the technology as well as the procedural background and precedential understanding, may be the more appropriate forum for conducting a post-issuance inter partes proceeding regarding whether a new or redesigned product falls within the scope of an exclusion order, rather than leaving that determination to CBP.
Some commentators also complained of a lack of clarity in the respective roles of CBP's Intellectual Property Rights Branch versus CBP's Centers of Excellence and Expertise (which focus on specific industries) in enforcing ITC exclusion orders.4 As the ABA IP Section noted, "it is possible to meet with both IPR Branch officials and the relevant industry CEE regarding exclusion order enforcement issues, but it is not clear how the two entities are dividing or sharing responsibility for decision making and implementation." Further, the ITCTLA observed that "it is not clear whether the IPR Branch or the CEEs in the future will be responsible for adjudicating and issuing ruling letters on redesigns pursuant to 19 C.F.R. § 177."
Lack of efficiency and consistency in the exclusion order enforcement process is also a recurring theme in the comments submitted to IPEC. For example, ITCTLA enumerates a host of shortcomings, including inaccurate field instructions issued by CBP to ports of entry; failure by CBP to timely issue field instructions, precluding the appropriate collection of bond for imports allowed during the 60-day presidential review period; and varying levels of exclusion order enforcement between different ports. Several commentators, such as ISC, also noted a "lack of enforcement statistics and reports available to rights holders or others regarding the number and nature of enforcements CBP conducts regarding specific exclusion orders."
Most commentators also call for greater cooperation and communication between the ITC and CBP regarding the scope of exclusion orders. For example, ITCTLA argues that "Customs [should] seek guidance from the ITC in all cases, and in particular the Office of General Counsel and/or the Office of Unfair Import Investigations (OUII), on the scope of the exclusion order. The ITC often spends a year to eighteen months developing a detailed record . . . Customs, which only becomes involved after an exclusion order issues, should rely more on the ITC's expertise and the record developed at the ITC." Microsoft, while arguing that the standard language of ITC exclusion orders is sufficient, concedes that "ITC involvement, at some level, would aid the process as the ITC is best positioned to determine the scope of exclusion."
By contrast, however, the ABA IP Section puts the onus on the ITC to provide CBP with an exclusion order accompanying "practical considerations" regarding enforcement. The ABA also calls on the ITC to "revise the traditional language of exclusion orders to include more targeted descriptions of covered products, which may allow for greater efficiency, consistency and predictability in enforcement." Similarly, Samsung argues that "the difficult burden shouldered by CBP to interpret and administer exclusion orders is caused largely by the lack of clear instructions and guidance from the ITC."
Samsung included with its submission a declaration by George J. Weise, a former U.S. Commissioner of Customs (heading what was then known as the U.S. Customs Service, a predecessor of today's CBP). Weise states that "[w]ithout clearly articulated, objective standards and guidance from the ITC, CBP officers in more than 300 ports of entry throughout the U.S. will not be capable of administering exclusion orders in the manner that was intended."
Law firm Adduci Mastriani & Schaumberg LLP, also attached to its submission a "white paper" it submitted to the ITC in May 2013, on the issue of exclusion order enforcement. Arguing that "[t]he plain language of Section 337 makes clear that Congress did not intend to authorize the [ITC] to deputize CBP to make ex parte Section 337 patent determinations," the Adduci firm recommends procedures for shifting the burden for making a final determination on whether an imported article falls within the scope of an exclusion order away from CBP to the ITC. Several other commentators recommended a similar transfer of practical authority, albeit with varying procedural recommendations.
Several commentators also complained of difficulty in obtaining review of CBP rulings on whether specific products fall within the scope of an exclusion order. One particular concern raised by Microsoft, Samsung, and PPC Broadband concerns a patent holder's lack of standing to either challenge or support a CBP ruling at the U.S. Court of International Trade. Microsoft notes that "[w]here CBP prohibits import [of a product falling within the scope of an exclusion order], the patentee may not be permitted to participate as a party in the CIT appeal. Similarly, where CBP permits import, the patentee lacks standing to bring suit before the CIT, and thus has limited recourse."
Armed with these public comments, IPEC will convene and chair an interagency working group charged with creating recommendations to improve enforcement of ITC exclusion orders. The working group will include representatives from the ITC; the U.S. Departments of the Treasury, Justice, Commerce and Homeland Security (where CBP resides); and offices within the Executive Office of the President, including the U.S. Trade Representative, the Office of Science and Technology Policy, and the National Economic Council. The interagency working group is expected to release recommendations later this year.
Endnotes
1 All public comments submitted in response to IPEC's request are available at http://www.regulations.gov/#!docketBrowser;rpp=25;po=0;D=OMB-2013-0003 (last accessed July 26, 2013).
2 78 Fed. Reg. 37242-43 (June 20, 2013).
3 78 Fed. Reg. 37242-43 (June 20, 2013).
4 More information about CBP's Centers for Excellence and Expertise is available at http://www.cbp.gov/xp/cgov/trade/trade_transformation/industry_int/ (last accessed July 26, 2013). Originally printed in Law360 (www.law360.com). Reprinted with permission. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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