Creating intellectual property portfolios can be a useful way for sports companies to protect their innovations and overall brand. But enforcing these IP rights through litigation in federal court can be time-consuming. Cases take an average of two and a half years to reach trial.
Companies can often, however, seek quicker remedy through the International Trade Commission. The ITC administers U.S. trade laws, including Section 337 investigations concerning allegations of unfair competition based on imported goods that infringe IP rights. Over the first three quarters of 2018, the ITC instituted 41 investigations. The ITC can bar importation into the U.S. market by issuing an exclusion order, and unlike federal courts, ITC investigations, on average, are completed within 16 months.
ITC proceedings can also have a ripple effect that helps shape co-pending proceedings. The outcome of Section 337 investigations can place enormous pressure on an alleged infringer, encouraging settlement negotiations in order to avoid the threat of being excluded from the U.S.
In ITC investigation 337-TA-1018, Reebok filed a complaint against three respondents, alleging that they had imported athletic footwear products into the U.S. that infringed Reebok patents. Those patents related to flexible soles made from lightweight materials that absorb impact forces and can conform to the shape of an individual’s foot. Within three months, the respondents agreed to a settlement agreement preventing importation of those products without consent or a license from Reebok.
Consumers’ access to counterfeit products through online platforms can cause detrimental impact to companies, depriving them of economic gains and damaging brand recognition and consumer confidence. The ITC has become a critical forum for companies seeking to protect their IP rights against unfair imports. In some circumstances, the exclusion of imports can even extend to downstream products or to the products of a company that isn’t a party in the litigation.
Companies have also looked toward the ITC for swift remedies against foreign infringers that fail to make an appearance in federal court litigation. For example, in investigation 337-TA-1108, Jump Rope Systems, LLC filed a district court case against Suzhou Everise Trading Co., Ltd, a Chinese company, for infringement of JRS’s patents. The patents at issue were directed towards certain speed jump ropes primarily used to develop quickness, agility, coordination, and conditioning, but Everise never made an appearance in the case, frustrating its process.
So JRS filed an ITC complaint. Five months after institution, the Commission found the foreign respondent in default and granted a limited exclusion order in favor of JRS. The order prohibited the entry of infringing jump rope systems into the U.S. for the remaining term of JRS’s patents.
But while the ITC can be an effective and powerful forum for sports companies, the specific ITC practices and procedures vary vastly from federal court patent litigation. These differences can span from how complaints are instituted to the existence of a domestic industry to the type of remedy possible.
To begin an ITC investigation, a party must file a complaint at the ITC. Additional requirements for these complaints can put a heavier burden on the complainant. The complaint must substantively show evidence of importation of the accused infringing products and a domestic industry in the U.S. related to the patents. The complaint must also provide detailed infringement claim charts and information regarding the proposed remedy.
The ITC may also arrange a meeting with a staff attorney from its Office of Unfair Import Investigations to ensure the ITC-specific issues of the complaint have been thoroughly considered. The OUII comprises attorneys that function as independent litigants representing the public interest in ITC investigations.
(Based on data from USITC)
While ITC investigations are not subject to the same venue requirements as federal district courts, the ITC requires plaintiffs to show the existence of a domestic industry related to the asserted patents. This includes demonstrating both technical and economical aspects. A complainant can satisfy the technical part by showing that it or its licensees practice at least one claim of the asserted patent, often proved by showing a product covered by the asserted patent.
A complainant can satisfy the economic part by showing a significant and substantial investment in the U.S. related to the articles covered by the asserted patent, such as investment in plants and equipment, employment of labor or capital, or other exploitation that is tied to the patent, such as engineering, research, or development. In some cases, complainants can also rely on licensing activities— its own investments in attempting to license the asserted patents or the domestic activities of its licensees—to establish a domestic industry.
Patent owners bringing an action in federal court for patent infringement can seek monetary damages to compensate for the infringement, or an injunction preventing further use or sale of an infringing device. In the ITC, however, a patent owner can only seek injunctive relief. This remedy comes as either an exclusion order, preventing the importation of products infringing the U.S. patent, or a cease-and-desist order, preventing already imported products from being sold or distributed.
While the ITC issues the exclusion order, the U.S. Bureau of Customs and Border Patrol ultimately oversees enforcement. The Intellectual Property Rights Branch is responsible for the interpretation and implementation of ITC limited exclusion orders. It prepares and issues instructions to the Customs ports of entry, which then develop guidelines for identifying infringing products and preventing importation of those.
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