May 29, 2013
Law360
Authored by P. Andrew Riley and Anthony D. Del Monaco
On March 22, 2013, the U.S. International Trade Commission instituted Investigation No. 337-TA-874, Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof. In the notice of institution, the commission requested that the administrative law judge issue an early initial determination on the economic prong of the domestic industry requirement within 100 days. This new requirement significantly deviates from prior commission notices, and it could substantially impact any future party appearing before the commission. The 100-day requirement shows the commission can creatively police its docket and significantly alter the burdens normally placed on the parties to an investigation.
As background, the party requesting an investigation—called the complainant at the ITC—must establish that it has a domestic industry in order for the commission to find a violation of Section 337. A complainant must satisfy two prongs of domestic industry, technical and economic. The economic prong requires that the complainant demonstrate either (A) significant investment in plant and equipment; (B) significant employment of labor and capital; or (C) substantial investment in the exploitation of its intellectual property rights, including engineering, research and development, or licensing.
Recently, domestic industry has been a hot topic of debate at the commission, as well as in Congress. This debate centers on whether nonpracticing entities or patent-assertion entities can satisfy the domestic industry requirement at the commission. Typically, PAEs derive revenue solely from licensing their intellectual property rights, and thus rely on subsection (C) in order to satisfy the domestic industry requirement at the ITC. A recent hearing before Congress, titled "Abusive Patent Litigation: The Issues Impacting American Competitiveness and Job Creation at the International Trade Commission and Beyond," addressed this exact issue on April 16, 2013.
The commission did not explain why it added the 100-day requirement in Inv. 874. However, the complainant in that investigation, Lamina Packaging Innovations LLC is relying on its licensing activities, as well as activities of its licensees. Inv. No. 337-TA-874, Complaint at ¶ 9.1. In fact, Lamina’s complaint states that it "was founded in 2010 to build a licensing program specifically directed to the Asserted Patents and related patent families," and that it intends to satisfy the domestic industry requirement based on any of the three subsections of the domestic industry requirement. Id. at ¶ 2.4. The commission’s 100-day requirement will quickly put Lamina's allegations to the test.
The presiding ALJ for this investigation, Judge Theodore R. Essex, gave this new requirement a mixed review. In Order No. 3 in Inv. 874, he noted that "the Commission's decision to depart from its own rules and regulations without any justification is of questionable legality." Order No. 3 at 1, fn. 1. Other ALJs, however, believe that a complainant bringing an action before the commission should have its economic prong positions established early in the investigation. Another ALJ at the commission, Judge Thomas B. Pender, requires a complainant to provide its domestic industry contentions as early as three months after the commission institutes an investigation, for example. See, e.g., Inv. No. 337-861/867, Order No. 7 at Exhibit A.
On April 8, 2013, Judge Essex issued Order No. 4 setting forth a procedural schedule to meet the commission-imposed 100-day requirement. The schedule has over 30 deadlines for the parties to meet, including deadlines for fact and expert discovery; prehearing issues like exhibits and motions in limine; a two-day hearing; and post-hearing briefing just for the economic prong ID. These deadlines are in addition to the dozens of other deadlines already required in a standard commission investigation and are just one of the many ways this 100-day requirement may impact parties at the ITC.
In essence, the 100-day requirement creates a second investigation involving a discrete issue usually handled as part of one comprehensive hearing near the end of the investigation. The parties in Inv. 874 will be forced not only to meet standard discovery deadlines, but now they must sort through discovery and prepare for a full hearing on the economic prong of domestic industry during the early months of an already short discovery period.
The 100-day requirement will increase the pressure on both complainants and respondents. Complainants must prepare their domestic industry materials prior to filing the complaint. An unprepared complainant could have its litigation implode if an ALJ terminates the investigation only a few months after institution for lack of a domestic industry. Conversely, respondents will need to quickly sort through a complainant’s discovery to find deficiencies in complainant’s positions. The 100-day requirement will also force respondents to develop and solidify their defensive strategies only a couple of months after their first notice of the ITC complaint filed
against them.
The 100-day requirement will also have a significant impact on cost. Estimating the potential cost of an investigation will be more difficult due to the uncertainty surrounding when the ITC will add this requirement to an investigation. What is clear, however, is that ALJ Essex’s procedural schedule adds many new deadlines to the investigation. This change will add significant costs to both parties.
As noted earlier, the commission provided no indication as to why it implemented the 100-day requirement for this particular investigation. The commission has not added this requirement in any investigation instituted after Inv. 874 at the time of this writing. Thus, it is difficult to determine when, if ever, the commission will again implement the 100-day requirement. All future possible complainants or respondents at the ITC, however, must now plan accordingly for this potential requirement from the commission.
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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