June 2014
Intellectual Property Today
By Christine E. Lehman; Mareesa A. Frederick; Elizabeth D. Ferrill
Authored by Elizabeth D. Ferrill, Mareesa A. Frederick, and Christine E. Lehman
Whether you walk into Harrods in London or Saks Fifth Avenue in New York City, you can easily purchase the same handbag or shoes from your favorite fashion designer in either country. This is the reality of today's globalized economy—business is no longer confined within national borders. The market for goods, especially those with innovative designs, like handbags and shoes, has become globalized.
Moreover, protection of goods with such innovative designs has come to the forefront of many businesses. Once the forgotten stepchild in some companies' patent portfolios, the global "Smart Phone Wars," involving Apple and Samsung, have elevated design patents to a new level of prominence and importance. Although the laws of design patent have not changed, the fact that Apple chose to enforce its design rights against Samsung (in addition to its utility patents) suggests that design patents are a useful and vital part of a company's patent arsenal.
While the products protected by industrial design rights easily cross borders, those borders still play a critical role in enforcement of design rights. Today, no single design patent system provides a patentee with a single design right that can be enforced throughout the world. Patent holders can obtain a design patent (in some places called a design registration) in multiple jurisdictions, but then must independently enforce those rights in each jurisdiction. When facing global counterfeiters or competitors, a rights holder is faced with an important question—where should I sue?
This article endeavors to help you answer this question for two jurisdictions that play leading roles in today's globalized economy—the United States and the European Union. While the protection afforded for design rights in the United States and the European Union are comparable, the enforcement of these rights at the border are quite different. And, enforcing design patents at the U.S. border presents some unique challenges. Finally, recent changes in EU customs laws should make enforcement a bit easier on the eastern side of the Atlantic.
One interesting aspect of the Apple v. Samsung global patent battle is the fact that Apple chose to enforce its design patents in the U.S. International Trade Commission (USITC).1 Indeed, the USITC has become a desirable venue for patent owners who are seeking to stop infringing imported products from being imported into the United States. The USITC's speed, coupled with its powerful exclusion remedy, makes it attractive for enforcing protected designs against infringers under certain circumstances.
The USITC investigates claims regarding various types of intellectual property rights violations involving imported goods. Section 337 of the Tariff Act of 1930 ("Section 337"), a trade statute, governs USITC proceedings. Section 337(a)(1)(B) makes unlawful "[t]he importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee of articles that (i) infringe a valid and enforceable patent." The USITC is thus tasked with protecting the U.S. border from imported products that infringe both U.S. utility and design patents (as well as certain other intellectual property rights).
Like a U.S. federal district court, the genesis of a USITC investigation is the complaint. The USITC will review the complaint and will determine whether to initiate or "institute" an investigation. As a practical matter, the USITC very rarely declines to institute an investigation. After institution, the investigation is assigned to an Administrative Law Judge. The Administrative Law Judge presides over discovery, hears evidence, and issues an Initial Determination. The Initial Determination details the Administrative Law Judge's findings on issues of fact and also provides his or her conclusions as to the legal aspects of the investigation. Parties have a right to appeal the Initial Determination to the full Commission. The Commission will ultimately issue a Final Determination, which is appealable to the Federal Circuit.
If the Commission determines that the alleged imports violate Section 337, it may issue an exclusion order barring the goods from entry into the United States. The Commission also has the authority to issue a cease and desist order, which prevents parties from selling any existing inventory located in the United States. The U.S. Customs and Border Protection (CBP) is tasked with enforcing the exclusion orders at the U.S. borders.
Substantively, the party who files the USITC complaint, known as the complainant, must prove three elements in a USITC investigation to enforce a statutory IP right, such as a design patent: (1) infringement of a U.S. statutory IP right by the accused imported product; (2) importation into the U.S. of the accused product; and (3) a domestic industry protected by the IP right. Cases require the same proofs as other IP-infringement cases in district court and the alleged infringer may assert all legal and equitable defenses, including arguments that the design patent is invalid or unenforceable. Typically, the importation requirement is easily satisfied. A showing that a respondent imported just one article, even if only for trade show purposes, is sufficient to satisfy the importation requirement. Domestic industry, however, is an element that may present unique issues for the design patent holder.
As a trade statute, section 337 seeks to protect companies having a domestic industry in the United States from unfair trade.2 Consequently, in a patent-based investigation, a complainant must establish that a domestic industry relating to the articles protected by the patent "exists or is in the process of being established."3 The test for design patent infringement involves a comparison of the design claimed in the patent and the accused product. In federal court, design patent owners are not required to make anything embodying the design to enforce their rights. But to show domestic industry at the USITC, the complainant must establish two separate elements—an economic prong and a technical prong.4 The economic prong requires a complainant to prove that it engages in certain activities related to its intellectual property right in the United States, such as manufacturing a product or engaging in licensing activities with respect to the asserted patents.5 The technical prong, on the other hand, requires a complainant to show that it practices the claims of the asserted patent.
For companies who have pushed most, if not all, of their manufacturing overseas, satisfaction of the economic prong may prove to be a barrier for bringing suit in the USITC. The USITC, however, does not require a showing of actual manufacturing of the domestic products in the U.S. Rather, it will consider a number of different activities that relate to the patented domestic product, including, research and development, engineering, and quality control, for analysis of the economic prong.6 The USITC will even allow a complainant to rely on its sub-contractors' activities with respect to the patented domestic product to support its economic prong showing under certain circumstances.7
To satisfy the technical prong, a design patent holder must prove by a preponderance of the evidence that the domestic product practices the claim of the asserted patent.8 "The test for satisfying the 'technical prong' . . . is essentially [the] same as that for infringement, i.e., a comparison of domestic products to the asserted claims."9
In an investigation involving utility patents, a patentee can rely on one claim to establish that it meets the technical prong requirement, while charging the respondent with infringement on another claim (in the same asserted patent.) But, U.S. design patents have only one claim. Thus, a design patent holder has only one chance to satisfy the technical prong. Outside the counterfeiting context, this difference (between utility and design patents) may present a significant hurdle for the complainant.
Because there is only one claim, in order to satisfy the technical prong and to prove infringement, both the design patent owner's article and the accused article must be "substantially the same" as the design claimed in the asserted design patent.10 Practically speaking, the two articles need to be nearly identical to each other. Indeed, in an investigation brought by Ford against a number of companies selling after-market collision parts for the Mustang, Ford alleged that the accused products and the Ford products were nearly identical, and that the accused products were designed to be replacement parts for the original Ford parts.11 This suggests that the USITC may be practically limited to those imported articles that are counterfeits or nearly so of a complainant's existing products.
In the EU, designers can register their designs or rely on unregistered national or Community design rights. Unregistered design rights are not available in the United States. Under the European Community Design Regulation ("CDR"), a Community design right provides a single right giving uniform protection for designs throughout the entire territory of the EU.
Registered Community designs ("RCDs") are registered through the Office for Harmonization in the Internal Market ("OHIM"), based in Alicante, Spain and a RCD may confer protection for up to 25 years. OHIM does not substantively examine RCDs like the USPTO. A RCD grants its owner an exclusive right to prevent an unauthorized third party from making, offering, marketing, importing, exporting, or using a product in which the design is incorporated or to which it is applied, or holding stock of such a product for those purposes.
The Unregistered Community Design ("UCD"), which lasts for three years from when the design was first publicly available within the Community, grants its owner the exclusive right to prevent unlicensed copying of the design or unauthorized dealing, with or without knowledge.
RCDs and UCDs are enforced by the Community Design Courts and a finding of infringement from the Community Design Court applies throughout the EU. For example, the Community Design Court can award an injunction or seizure of products. The design owner may also seek to enforce its rights before the national courts of an EU Member State (i.e., a court not designated as a Community Design Court), but any remedies would be limited to the territory of that EU Member State.
As of January 1, 2014, EU Customs has a new enforcement power to help police the importation of products that potentially infringe a design patent. This regulation expands the authority of EU Customs by empowering it to detain potentially infringing goods at the EU border. EU Customs also now has the power to detain and destroy "small consignments" without judicial authorization. The new regulation requires the design rights holder to reimburse the customs authorities for the costs incurred in carrying out enforcement activities.
As with the old rule, EU Customs has the authority to detain suspect shipments coming through seaports and airports and notify patent owners. To destroy the detained goods, the patent owner must seek consent of the owner of the goods. If consent is not received within 10 days, then this is taken as implied consent to destruction. If the owner of the goods objects, EU Customs will continue to detain the goods and the patent owner must decide if it wishes to initiate court proceedings.
A design patent holder has options when it comes to enforcing its patent rights. While the USITC provides significant relief, its unique jurisdictional requirements may make it difficult for one to justify bringing an action there. In contrast, although the remedy is not as powerful, the European Union provides a more streamlined (and likely less expensive) approach to enforcing a design patent. Also, the EU may provide some relief for even those designs which were not registered beforehand. Which jurisdiction one chooses, however, is case-specific. Therefore, each case should be individually analyzed to determine the most appropriate jurisdiction.
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.
Endnotes
1 Certain Electronic Digital Media Devices and Components Thereof, 337-TA-796, Notice of Commission's Final Determination Finding a Violation of Section 337; Issuance of a Limited Exclusion Order and Cease and Desist Orders, Termination of the Investigation (Aug. 9, 2013).
2 H.R. Rep. No. 100-40, at 156-57 (1987); see also S. Rep. No. 100-71, at 129 (1987).
3 19 U.S.C. § 1337(a)(1)(A).
4 Certain Stringed Musical Instruments and Components Thereof, Inv. No. 337-TA-586, USITC Pub. 4120, Comm'n Op., at 13-14 (Dec. 2009); Certain Variable Speed Wind Turbines and Components Thereof, Inv. No. 337-TA-376, USITC Pub. 3003, Comm'n Op., at 20-25 (Nov.1996).
5Alloc, Inc. v. ITC, 342 F.3d 1361, 1375 (Fed. Cir. 2003).
6 Certain Printing and Imaging Devices and Components Thereof, Inv. No. 337-TA-690, Commission Opinion at 30 (Feb. 2011).
7 Certain Portable On-Car Disc Brake Lathes and Components Thereof, Inv. No. 337-TA-361, Initial Determination at 15-22 (Aug. 1994); see also Certain Cold Cathode Fluorescent Lamp ("CCFL") Inverter Circuits and Products Containing Same, Order No. 30, Initial Determination, 337-TA-666 (Sept. 2009); Certain Male Prophylactic Devices, Inv. No. 337-TA-546, Order No. 22 (Mar. 2006) (relying on subcontractor activities to satisfy domestic industry requirement);Certain Feathered Fur Coats and Pelts, 337-TA-260, Initial Determination at 24 (May 1998) (same).
8 Crocs, Inc. v. ITC, 598 F.3d 1294, 1307 (Fed. Cir. 2010).
9 Alloc,342 F.3d at 1375.
10 See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 655 (Fed. Cir. 2008)(en banc).
11 Certain Automotive Parts, 337-TA-651, Order No. 30 (Apr. 2009).
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. 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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