Potential Shifts in Section 337 Precedent: What The Data Tells Us

“In the last six months, the Commission has instituted several high profile investigations with allegations that appear poised to involve FRAND defenses. The Commission, therefore, has several near-term opportunities to set key precedent in this space.”

Section 337The U.S. International Trade Commission (the “Commission”) is typically made up of six individual commissioners, but after Commissioner Randolph Stayin’s unexpected return to private practice last year, there are now just four. As a result, upcoming changes to the make-up of the Commission may cause a shift in its positions on various legal issues. What happens next is anyone’s guess, but a careful analysis of Commission opinions can help unearth possible future changes in precedent.

Searching for Clues in Dissents and Concurrences

It is not a new phenomenon for individual Commissioners to issue dissents or concurrences to a Commission opinion, but new data shows that the volume of these separate opinions has significantly increased over the past ten years, suggesting an increasingly fractured Commission. More and more, individual Commissioners are separately voicing their views, often within footnotes or other subtle statements buried within opinions in the form of  “mini-opinions.” A close look at the data starts to uncover not just key disagreements, but potential alliances among the Commissioners on certain issues.

Longer dissents in excess of 1,000 words have remained somewhat constant in frequency over the past decade. In contrast, mini-opinions have grown much more frequent, as demonstrated by the below plot of footnote dissent word counts. Nuggets of controversy can now regularly be found buried in footnotes of Commission opinions.

Footnote opinions are, in general, much shorter than dissents or concurrences written in the bodies of opinions or in their own separate opinions. Whereas the median length of footnote dissents/concurrences is 103 words, the median of non-footnote separate opinions is 2,088.

Within these mini-dissents/concurrences, Commissioners are primarily focused on issues specific to Section 337, rather than substantive matters involving patent invalidity or infringement. For instance, issues pertaining to remedial orders (61%) and the domestic industry requirement (24%) are the primary focus of the Commissioners’ dissents/concurrences. Patent merits, by contrast, are the subjects of just 12% of dissents/concurrences.

 

From the data, four areas of law appear poised for potential change

Tailoring Remedies Without Relying on Public Interest

The Commission is well known for the broad impact of its remedies due to its ability to issue sweeping injunctions in the form of exclusion orders. Unlike federal district courts, the ITC can issue such remedies without satisfying the four-factor test of eBay v. MercExchange. This power has not gone unchallenged. For instance, members of Congress have repeatedly introduced the Advancing America’s Interests Act, which would require the ITC to affirmatively determine that an exclusion order serves the public interest before issuing one. Yet, two Commissioners believe that even under their current statutory authority, they already have broad discretion to modify the scope of their remedies.

To date, the Commission majority has held that its ability to curtail the scope of its remedies is limited and based only on public interest considerations. See e.g.,  Inv. No. 337-TA-1293, Comm’n Op. at 53 (Commission deemed one year delay to limited exclusion order necessary, agreeing with respondents’ arguments about impact on public welfare). Commissioners Kearns and Karpel have repeatedly aired their disagreement that public interest is the sole statutory ground for exemptions from the scope of remedial orders by citing to the Federal Circuit’s statement that the Commission has ‘“broad discretion in selecting the form, scope, and extent of the remedy.” See Certain Automated Put Walls and Automated Storage and Retrieval Systems, Associated Vehicles, Associated Control Software, and Component Parts Thereof, Inv. No. 337-TA-1293 (Aug. 17, 2023), Comm’n Op. at 29 n.26 (citing Viscofan, S.A. v. Int’l Trade Comm’n, 787 F.2d 544, 548 (Fed. Cir. 1986)).

With the departure of Commissioner Stayin, the Commission is currently an even 2-2 split on this issue, which means that just one new appointee could swing the balance in the other direction. As a result, Respondents may soon be better situated to avoid one-size-fits-all exclusion orders and instead request that such orders be delayed or reduced based on the facts of the investigation.

Importation of Components

The question of when importation of a non-infringing component may give rise to Section 337 liability also appears to be in flux. Section 337 says that the Commission has authority to adjudicate the importation of “articles that . . . infringe.”  19 US.C. § Section 1337(B)(1). Yet, quite commonly, components that alone are non-infringing are imported into the United States and later assembled into an infringing product. The Federal Circuit stated in Suprema, Inc. v. Int’l Trade Comm’n, 796 F.3d 1338 (Fed. Cir. 2015) that Section 337 liability is broad enough to capture circumstances where the infringement only occurs post-importation, such as certain cases of induced infringement. However, Suprema left unresolved the circumstance where a respondent imports a non-infringing component and later develops and sells an infringing product domestically, absent indirect infringement. To illustrate, if a Complainant had a patent for a peanut butter and jelly sandwich, but the Respondent imported only the bread and added the domestically grown peanut butter and jelly in the United States, is that a violation of Section 337?  According to Certain High-Density Fiber Optic Equipment, 337-TA-1194, the answer is yes. In fact, the majority appeared to take the position that the importation of any component of an infringing product could give rise to section 337 liability.

At least Chair Kearns thinks differently. In his dissent in that investigation, he suggested that the Commission should also analyze what is being imported and whether there is a sufficient nexus between the infringer’s unfair acts and importation to find a violation of Section 337. Although Commissioner Schmedtlein did not join this dissent, in Certain Blood Cholesterol Test Strips, Inv. No. 337-TA-1116, she did appear to agree that liability depends on the particular article imported and circumstances of infringement. Accordingly, there may be a 2-2 split on this issue as well. Notably, Chair Kearns has also expressed his desire to further expand on this issue when the right case arises. Depending on the views of future Commissioners, he may soon be able to do so as the majority.

Cease-and-Desist Orders Against Defaulting Respondents

While an exclusion order is the default remedy for violation of Section 337, parties should not underestimate the significance of a cease-and-desist order, which prohibits marketing and sales of products already inside the United States when a violation is found. The standard and scope of cease-and-desist orders has been a regular area of disagreement between the Commissioners, resulting in about 60% of all dissents/concurrences involving remedial orders. Recently, Commissioners Schmidtlein and Karpel have exhibited a relatively predictable pattern of dissenting/concurring on the standard for issuing cease-and-desist orders against defaulting respondents, creating what has become a 2-2 split among the Commissioners.

While generally the issuance of a cease-and-desist order requires a showing of domestic inventory or domestic operations, in the view of these Commissioners, no such finding is required for defaulting respondents. Specifically, in separate opinions between 2019 and 2020, as well as joint and separate opinions from 2021 forward, both Commissioners have urged that 19 U.S.C. § 1337(g)(1), rather than § 1337(f)(1), should govern the issuance of CDOs against defaulting respondents. See e.g., Certain Earpiece Devices and Components Thereof, Investigation No. 337-TA-1121; Certain Powered Cover Plates, Inv. No. 337-TA-1124; Certain Vacuum Insulated Flasks And Components Thereof, Inv. No. 337-TA-1216. The former provision states that the Commission “shall” issue a cease-and-desist order, while the latter uses the more permissive “may.” Accordingly, if Schmidtlein and Karpel’s position becomes the majority, a cease-and-desist order may effectively become the default remedy against defaulting respondents.

Fair Reasonable and Non-Discriminatory (FRAND) Defenses

While active dissents and concurrences can indicate an upcoming change of law, sometimes notable silence can signal the same. Injunctive relief for FRAND cases may be one such area.

More than a decade has passed since the Obama administration tossed out an exclusion order on iPhones due to SEP concerns in Certain Electronic Devices, 337-TA-794. Since then, commentators have continued to debate whether standard essential patent (SEP) holders may obtain injunctive relief for infringement. Though the ITC is limited to only injunctive relief, the Commissioners have not provided much guidance on the topic. Instead, in several instances where an ALJ found that a FRAND defense either does or does not apply, the Commission has opted to take no position on the issue, instead relying on findings of non-infringement to resolve the dispute. See, e.g., Certain UMTS and LTE Cellular Communication Modules (337-TA-1240); Certain Memory Modules and Components Thereof (337-TA-1089).

Unlike the four issues discussed above, dissents or concurrences concerning FRAND defenses are also rare. In the 337-TA-794 investigation, former Commissioner Pinkert stated in his dissent that the complainant’s FRAND obligations were relevant to the issue of public interest and, at least in that circumstance, issuance of a remedial order was not consistent with the public interest. With no active Commissioners voicing an opinion, whether a FRAND defense may prohibit a remedial order is still a question mark. What’s more, in the last six months, the Commission has instituted several high profile investigations with allegations that appear poised to involve FRAND defenses. The Commission, therefore, has several near-term opportunities to set key precedent in this space.

Final Thoughts

With several splits between the existing Commissioners apparent from existing dissents and concurrences, the addition of just one new Commissioner could make waves in the ITC’s treatment of remedies and various other topics. Approval requires nomination by the President and confirmation by the U.S. Senate. So candidates’ treatment of these issues in their testimony or other writings may shed light on changes to come.

 

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