In the right circumstances, U.S. businesses can enforce their intellectual property against foreign companies through litigation in the United States. In particular, intellectual property enforcement actions against foreign businesses filed at the International Trade Commission ("ITC") and in U.S. district courts can be highly effective. An understanding of the benefits and limitations of actions filed in the ITC and in district courts is important both for U.S. companies considering how to enforce their intellectual property rights against foreign businesses and for foreign companies that have been threatened with litigation or find themselves defending intellectual property cases in the United States.
Jurisdictional Hurdles
The subject matter jurisdiction of U.S. courts to hear cases involving U.S. intellectual property rights asserted against foreign companies is limited. As a general rule, subject matter jurisdiction exists only where an infringing act took place in the United States. For example, the jurisdiction of the ITC is specifically limited to cases involving the importation of articles alleged to infringe U.S. intellectual property. Similarly, jurisdiction of district courts in patent cases usually is predicated on a party making, using, offering to sell, selling within the United States or importing into the United States a patented invention. See 35 U.S.C. § 271(a). But, in certain circumstances, the subject matter jurisdiction of district courts is more expansive. For example, a U.S. company may bring a lawsuit in a district court against a company that supplies or causes to be supplied from the United States components of a patented invention intended to be combined abroad. See 35 U.S.C. § 271(f). In other words, a U.S. company can seek redress for infringement of its U.S. patents in a U.S. district court even if the infringing product is assembled overseas and does not re-enter the United States. Similarly, subject matter jurisdiction for trade secret misappropriation may exist in a U.S. district court when the trade secret was misappropriated from the United States, even if products incorporating the trade secrets were never sold, offered for sale or used in the United States.
While the subject matter jurisdiction of the ITC to hear cases involving intellectual property infringement is more circumscribed than that of district courts, personal jurisdiction over foreign defendants is necessary in district courts but not in the ITC. In a district court, personal jurisdiction must be established over each and every defendant and service abroad must often be accomplished pursuant to the Hague Convention. Depending on the nationality of the parties involved, the personal jurisdiction and service requirements of district courts can raise obstacles to filing suit and lead to months of delay. In contrast, the ITC has in rem jurisdiction over the imported products accused of infringement, and a default judgment and exclusion order can be entered against a respondent even if the respondent never appears in the ITC. Sealed Air Corp. v. ITC, 645 F.2d 976, 987 (1981).
Time to Trial
One important distinction between actions filed in the ITC and in district courts is the swift pace of ITC litigation. In the ITC, the entire discovery period is typically about six months (with only 10 days to respond to interrogatories and document requests). Additionally, a trial before an Administrative Law Judge ("ALJ") typically occurs in less than a year, and the entire investigative process, including review of the ALJ's decision by the Commission, is usually 15 to 16 months from institution. In contrast, the median time to trial for a patent litigation in 2009 in the 20 district courts where patent lawsuits were most commonly filed was 25 months.1 A related speed advantage is that the ITC generally will not stay an investigation pending reexamination of patents-in-suit, whereas district courts grant stays to patent defendants over half the time when the asserted patents are placed into reexamination.2
The Decision Makers
The Seventh Amendment codifies the right to a jury trial in civil cases filed in district courts. Trial success rates for patent holders are much higher in cases decided by juries as compared to bench trials, and patent owners unsurprisingly exercise their right to jury trials in district courts almost as a matter of course. In the ITC, however, there are no jury proceedings. ITC hearings are conducted by an Administrative Law Judge who functions like a district court judge in a bench trial. As a practical matter, the unavailability of a jury in the ITC may not make much of a difference as the success rates in the ITC and in district courts for patent holders who file cases in both venues is nearly identical.3 However, the types of cases that can realistically be adjudicated by a jury in a district court and an ALJ in the ITC may differ. Almost all cases heard by ALJs at the ITC involve intellectual property, which enables them to develop expertise in that area of the law. Consequently, the ALJs are capable of adjudicating multi-patent suits involving several different technologies. On the other hand, the challenges inherent in presenting complex issues involving many patents on several different technologies to a lay jury may necessitate bifurcated jury trials, which can delay final resolution.
Remedies
From the perspective of both U.S. businesses and their foreign competitors, the most important difference between intellectual property actions filed in the ITC and in district courts may be the remedies available in each forum. In the ITC, unlike in district courts, money damages are not available. Instead, a prevailing party in the ITC will typically obtain an exclusion order. ITC exclusion orders come in two forms: general exclusion orders apply against anyone importing the infringing products, but are available only in limited circumstances;4 limited exclusion orders only apply against respondents found to infringe. In addition to an exclusion order, the ITC generally issues cease and desist orders against domestic respondents, prohibiting the sale, distribution or use of infringing products in the United States.
If a U.S. company is interested in obtaining injunctive relief against a foreign entity infringing its intellectual property or interested in the settlement leverage this relief provides, a lawsuit in the ITC makes good sense. The Supreme Court's eBay decision does not apply in the ITC, and the ITC therefore need not weigh the four factors used to determine if an injunction should issue before issuing exclusion or cease and desist orders.5 Moreover, if a complainant obtains a general exclusion order in the ITC, which is more likely to be awarded in trademark and grey market goods cases, that order is much broader than the injunctive relief available in a district court. If, on the other hand, the objective of an enforcement action brought by a U.S. business is the recovery of monetary damages, the only available option is a district court action.
Filing In Both Venues
Many complainants file concurrent lawsuits in both the ITC and in a U.S. district court. For example, in a lawsuit that garnered a great deal of media attention, Apple recently filed concurrent lawsuits against HTC, a Taiwanese smartphone maker, in the ITC and in U.S. District Court in Delaware on 20 Apple patents related to the iPhone.6 In most instances, rather than fight similar cases on two fronts, defendants will seek to stay the case filed by the patent plaintiff in district court pending the outcome of the ITC investigation. Such stays are automatic so long as the defendant requests the stay within 30 days of the later of being named as a respondent in the ITC investigation or the filing of the district court action. See 28 U.S.C. § 1659(a). Stays will remain in place until the ITC case is final, which includes all appeals.
Conclusion
U.S. companies considering how to enforce their intellectual property rights against foreign businesses must be aware at the outset of litigation of the important distinctions between actions in the ITC and in district courts. If the primary goal of a U.S. entity is to swiftly shut down the importation of infringing goods, the ITC is the logical venue. Because there is no need for personal jurisdiction and service need not be made pursuant to the Hague Convention, a lawsuit can be commenced without delay. Time to trial in the ITC is very short, and injunctive relief to the prevailing plaintiff is awarded as a matter of course. If, on the other hand, the intellectual property holder wishes to try its case before a jury, recover monetary damages or knows that the eBay four-factor test will not be an obstacle to obtaining desired injunctive relief, a district court may be the appropriate venue. Additionally, particular district courts may offer special advantages. For example, a lawsuit filed in the Eastern District of Virginia is sensible for companies seeking speedy relief since the median time to trial in patent cases is even less than in the ITC. A company may also choose to file in the district court where the company is headquartered if this is perceived as a strategic advantage.
Footnotes
1. PriceWaterhouseCoopers 2009 Patent Litigation Study, "A Closer Look: Patent Litigation Trends and the Increasing Impact of Nonpracticing Entities."
2. Statistics regarding stays in district courts pending reexamination are based on a survey of over 150 published decisions from 2000-2009 evaluating a motion to stay.
3. In a study of patent investigations initiated and adjudicated at the ITC from 1995 to mid-2007, plaintiffs who filed claims both in the ITC and in district courts won 54%of the time in the ITC and 50% of the time in district courts. See Colleen Chien, "Patently Protectionist? An Empirical Analysis of Patent Cases at the International Trade Commission," 50 Wm. & Mary L. Rev. 63, 97 (2008).
4. Under 19 U.S.C. § 1337(d)(2), a general exclusion order is only appropriate where either (a) such an order is necessary to prevent circumvention of a limited exclusion order, or (b) there is a pattern of violation of the statute and it is difficult to identify the source of the infringing products.
5. The Supreme Court's holding in eBay is based in large part on the fact that the relevant statute, 35 U.S.C. § 283, states "courts . . . may grant injunctions." eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392 (2006). Section 283 is directed to Article III courts and does not apply to administrative agencies such as the ITC. See John F. Rabena and Kim E. Choate, Injunctive Relief in the ITC Post eBay.
6. HTC also recently filed its own complaint in the ITC against Apple.
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