Three Misconceptions About Filing Design Patent Cases at the ITC

US design patent holders face increasing competition from infringing knockoff products shipped to the United States from abroad.

During fiscal year 2022, US Customs and Border Protection seized almost 25 million counterfeit products that would have been worth approximately $3 billion had they been genuine.

While district court litigation can be effective against these illegal products, it often presents challenges and shortcomings, including difficulty in filing suit against multiple defendants and the possibility that a damages award may not be enough to deter the infringers. Leaders of corporate IP departments should recognize that a strong alternative exists, however: the US International Trade Commission.

Offering one of the most powerful remedies available for patent infringement, one of the fastest dockets in the country, and a favorable rate of violation for patent owners, the ITC has established itself as a popular forum for patent infringement cases,including design patent cases.

The ITC has conducted investigations related to:

• artificial eyelash extensions;
• vacuum insulated flasks;
• electric shavers;
• batteries;
• automotive lamps;
• vaporiser cartridges; and
• Apple iPhones.

Despite the ITC’s many advantages, including its expertise with design patent infringement claims, three common misconceptions often prevent corporate counsel from considering this forum, potentially depriving their organisations from achieving a highly effective outcome. Corporate leaders should be aware that these myths about ITC litigation have long been debunked.

Misconception 1: Suing multiple infringers

Chief IP counsel may believe that if several culprits are infringing their company’s design patents, it is too difficult to sue them all efficiently. This misconception, perhaps, is based on counsel’s experience with district court litigation, where a plaintiff suing multiple defendants may face several hurdles:

• difficulty in joining defendants in a single suit;
• venue challenges; and
• service-of-process challenges.

After enactment of the America Invents Act, multiple defendants can be aggregated in a single suit at district court only if any claim “out of the same transaction, occurrence or series of transactions or occurrences” relating to the infringement. Otherwise, a plaintiff must file separate lawsuits against the defendants. Even if the joinder requirements of the AIA are met, a plaintiff may face challenging venue issues that may prevent a single lawsuit in the same district court. Service of process on a foreign defendant can involve a complicated and time-consuming process under The Hague Convention, a multilateral treaty adopted
by member states of the Hague Conference on Private International Law, which affords litigants a means of serving legal documents on parties in another country.

Welcome to the ITC, and goodbye impediments. An ITC Section 337 complainant may sue multiple respondents in one suit and avoid the joinder, venue, and service-of-process issues sometimes present in district court. The same joinder and venue requirements do not apply at the ITC, and the ITC may serve process via mail without complying with The Hague Convention’s service requirements.

Additionally, the ITC has in rem jurisdiction over property rather than in personam jurisdiction over a person or corporation, like the district courts; thus the ITC does not need personal jurisdiction over respondents.

It also affords complainants a powerful remedy—the exclusion of imported products, without demonstrating the requisite factors of the US Supreme Court’s 2006 ruling in eBay v MercExchange. The ITC’s cease and desist orders have penalties for violation of up to $100,000 per day.

Misconception 2: Stopping unidentifiable infringers

Chief IP counsel may believe that all the infringers cannot be stopped because they cannot be identified.

In an exemplary scenario involving knockoff products, a significant number of entities abroad offer infringing products for sale in the United States via the internet. It is sometimes difficult to identify the manufacturers of the infringing products because the entities routinely change their corporate names or the products’ names.

Even though the rights holder may not know all the infringing entities, it may seek a general exclusion order at the ITC. A general exclusion order, unlike a limited exclusion order, excludes all violative products regardless of source – even products being imported by an entity who was not named as a party to the investigation.

To obtain a general exclusion order, the rights holder must show that it is necessary to prevent circumvention of a limited exclusion order, or alternatively, the existence of a pattern of violation of Section 337 and difficulty identifying the source of infringing products. An example is difficulty resulting from an infringer placing its customer’s logo on its products before importing the products into the United States.

Misconception 3: Meeting the domestic industry requirement

Chief IP counsel may believe that their organisation cannot meet the ITC’s domestic industry requirement because manufacturing of products protected by the design patent occurs abroad.

In addition to patent infringement and importation, a patentee at the ITC must show what Section 337 refers to as a “domestic industry” related to the patented products. To demonstrate this industry, a design patent holder is required to show:

1. the holder or its licensee practices the sole claim of the asserted patent; and
2. certain economic investments, including “significant investment in plant and equipment”, “significant employment of labour or
   capital”, or substantial investment in the IP’s “exploitation, including engineering, research and development, or licensing”.

Prior to amendments to Section’s 337’s domestic industry requirement in 1988, the ITC primarily focused on protecting US manufacturing activity competing with accused importers. But the 1988 amendments explicitly defined the domestic industry as including additional activities, for example, engineering and R&D, and Congress confirmed that Section 337 does not require domestic manufacture.

Other cognisable activities may include domestic packaging, design, testing, quality control, repair, installation, and sometimes sales to a limited extent. A design patent holder who does not manufacture products in the United States – for example, one who only conducts domestic R&D activities – may still satisfy Section 337’s domestic industry requirement if its R&D activities related to the domestic products at issue are significant or substantial.

Setting aside the misconceptions regarding patent infringement at the ITC, this forum offers design rights holders several powerful benefits. Not only may design patent holders avoid certain requirements imposed in district court, they may also benefit in other ways.

Chief IP officers should consider the ITC as part of their strategies for effectively protecting their design rights.