Patent Enforcement at the International Trade Commission: Is It Worth It?

In May, Mitsubishi responded by filing a countersuit in the U.S. District Court for the Western District of Arkansas alleging that the way in which GE was using its patents amounted to a violation of U.S. antitrust laws. (Not coincidentally, Mitsubishi broke ground in early October on a $100 million nacelle manufacturing plant in Fort Smith, Ark.)

The technology covered by GE's patents relates to wind-powered electricity generation. As the renewable industry grows and matures, such lawsuits involving a wide array of alternative energy technology are likely to become more commonplace. 

Patent Basics

The rights associated with a patent issued by the United States Patent and Trademark Office (USPTO) are powerful. An issued patent affords the owner the right to exclude others from making, using, selling, offering to sell, importing or licensing an invention in the United States. In the case of GE and Mitsubishi, GE attempted to use some of its U.S. patents to prevent Mitsubishi from selling, manufacturing and importing Mitsubishi's 2.4 MW wind turbine in the U.S.

The term of a patent is 20 years from the earliest filing date of the patent application, subject to timely payment of maintenance fees. In some cases, because of unreasonable delays caused by the USPTO, the term of a patent may be extended. The rights of an issued patent are considered a property right and can be freely assigned and/or licensed at any time.

After the patent term expires, the invention becomes part of the public domain. The rights that come with a patent are meant to strike a balance between rewarding an inventor for the creativity of an invention and the public's need for this technology to advance society.

While obtaining a patent can be a complex process, enforcing a patent presents its own set of unique considerations. Specifically, a patent may be enforced in a variety of ways, including by using the Federal Courts or the ITC. In the dispute between GE and Mitsubishi, GE brought suit before both the federal courts and the ITC. It's worth noting that GE did not utilize the federal courts until its options with the ITC were exhausted.

Enforcement at the ITC

Under the Tariff Act of 1930, the ITC conducts investigations into allegations of certain unfair importation practices. These investigations can involve U.S. Patents that cover products imported into the U.S. or sold for later importation into the U.S. If a U.S. patent holder believes that products being imported infringe a valid and enforceable U.S. patent, or are made by a process covered by the claims of a valid U.S. patent, that patent holder may initiate an investigation.

The investigation begins when a complaint is filed by a party with rights under the U.S. patent and that is economically harmed by presence of the infringing product in the U.S. The investigation ends when the ITC issues a final decision. Once received at the ITC, the complaint is assigned to an administrative law judge (ALJ), who determines whether a violation of the Tariff Act has occurred.

Within 30 days of receiving a properly filed complaint, the ALJ determines whether to institute an investigation. In nearly all cases an investigation is launched. At that point, a notice of investigation defining the scope of the investigation is published in the Federal Register.

Investigations by the ITC are conducted much like litigation in a District Court. After holding an evidentiary hearing, the ALJ issues an initial determination. The ALJ's initial decision is subject to review by six appointed Commissioners that head the ITC. The Commissioners may review, modify or adopt the initial decision. The Commissioners may also, as in the investigation against Mitsubishi, reverse an ALJ's initial decision. The Commission then issues a final decision, which may be appealed to the United States Court of Appeals for the Federal Circuit.

Monetary damages are not awarded in an ITC action. Rather, the ITC provides two types of remedies: exclusion orders and cease-and-desist orders. An exclusion order provides that U.S. Customs & Border Protection, an agency in the Department of Homeland Security, will deny entry of the infringing product into the U.S. The exclusion order may be either a limited exclusion order or a general exclusion order. A limited exclusion order is directed toward the specific party found to be violating the Tariff Act.

A general exclusion order provides much broader protection by preventing any infringing product from entering the U.S., regardless of the source. Thus, the general exclusion order covers any known or unknown infringing parties at the time of the investigation and in the future. However, to obtain a general exclusion order the complainant must show that it is necessary to prevent circumvention of a limited exclusion order.

Finally, a cease-and-desist order directs the infringing party to cease unfair acts, including selling infringing previously imported products out of U.S. inventory. Cease-and-desist orders are enforced by the Commission.

Any order issued by the ITC does not go into full effect until the Executive Branch of the government conducts a 60-day review. The Executive Branch rarely overturns a decision by the ITC. During the 60-day review period, the banned products may be imported into the U.S., but only if a bond equal to the full value of the products is posted by the importing party.

Some Considerations

There are many factors to consider when deciding whether to go to the ITC, or instead, to the federal courts to enforce patent. The main factors to consider are cost, time to resolution, judicial expertise and available remedies. The table compares ITC enforcement with federal court enforcement with respect to these factors.

ITC enforcement is approximately 25 to 30 percent cheaper and 40 to 50 percent faster than a corresponding federal court enforcement action. However, the remedies available under ITC enforcement are limited, at least on their face, to non-monetary damages. That being said, upon successfully obtaining an exclusion order and/or a cease-and-desist order from the ITC, the patent holder may use any orders as a bargaining tool to pursue monetary compensation in exchange for granting the infringer a license to import its products into the U.S.

In terms of the ALJ's expertise and experience with patent law, the judges at the ITC are well versed in patent law because of the large number of patent-related cases brought to them. As a result, the outcome of an ITC action is more predictable. Finally, any remedy granted is enforced by the ITC or U.S. Customs and Border Protection, relieving the patent holder of the burden of enforcing the exclusion order and/or cease-and-desist order.

In contrast, the federal courts afford a broader range of damages, in particular monetary damages in addition to injunctive relief. However, the patent holder bears the burden of enforcing the remedy, including collecting the monetary damages. Further, because of the cost and time involved in a federal court action, there is a high likelihood that the parties will settle a court action before a case actually goes to trial. As a result, the litigation costs of a federal court action may be substantially less than the $3 to $5 million dollar average cost of a federal court case that goes through a trial and subsequent appeal. Because 40 to 50 percent of ITC cases go to trial, the parties will likely incur higher litigation costs at the ITC than they would in federal court.

Finally, while there may be cost benefit to bring an enforcement action in federal court, this must be balanced with a lower level of predictability on the outcome of a case. Specifically, the experience and expertise of a federal judge with respect to patent law and the technology at issue varies significantly. Consequently, the outcome predictability of the case may vary widely from one District Court to another.

The ITC is an enforcement option that U.S. patent holders should consider when determining how to enforce their U.S. patent rights. Depending upon various business considerations, along with the factors listed above, the ITC may be a preferable alternative to federal court enforcement of U.S. patent rights.

Aly Dossa and Tim Smith are patent attorneys, and Katherine Franco is an associate, at Osha Liang's Houston office. The authors wish to note that this article does not constitute legal advice and that they are not opining on any legal issues in jurisdictions in which they are not licensed.