The US International Trade Commission has been giving more weight to public interest factors in recent times, as Carl Charneski explains.

Section 337 of the Tariff Act of 1930, as amended, empowers the US International Trade Commission (ITC) to investigate unfair trade practices such as unfair methods of competition and unfair acts in the importation of articles, as well as patent, copyright, trademark, and mask work infringement, where the infringing products are imported into the US.

In the course of its investigations, the ITC takes into account 'public interest factors'. This is done both at the beginning and the end of an investigation. Until recently, public interest factors received little attention. Certainly there have been times when they took centre stage and stole the spotlight, but overall, they just didn't seem to be important at the ITC—at least, not consistently. Today, that is no longer the case and public interest factors have grown hugely in relevance.

In the public interest

The public interest factors are:

  • Public health and welfare;
  • Competitive conditions in the US economy;
  • The production of like or directly competitive articles in the US; and
  • US consumers.

These factors are first taken into account when a complaint is fi led, and before a notice of investigation is issued. This early consideration of public interest allows the ITC to determine at the very start of an investigation whether the administrative law judge (ALJ) should take evidence on these factors.

The second time that public interest factors come into play is after the ALJ issues an initial determination and recommends a remedy (also known as a Recommended Determination). This article addresses the ITC's consideration of the public interest in fashioning a remedy in the event of a Section 337 violation.

To understand the potential importance of the public interest factors, one need only look to the statute. Section 337(d)(1) provides that the ITC is to issue a "limited exclusion order" upon finding a Section 337 violation, "unless, after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the US economy, the production of like or directly competitive articles in the US, and US consumers, it finds that such articles should not be excluded from entry".

A big step forward

So what is changing at the ITC relative to the public interest factors? They are becoming more important when the investigation is before the ITC on review. When the ITC is crafting a remedy, the public interest factors can play a huge role. Two ITC investigations that bear this out are discussed below. They illustrate the growing importance of the ITC's public interest analysis with respect to remedy.

The first investigation is Certain Variable Speed Wind Turbines and Components Thereof. It is noteworthy because of the high level of public interest that it generated at the ITC review stage. This matter concerned variable speed wind turbines and it pitted General Electric Company (GE) against Mitsubishi Heavy Industries, and Mitsubishi Power Systems. The ALJ found a Section 337 violation and recommended a limited exclusion order.

Specifically, in response to the ITC's request for public comment, no fewer than 10 US senators, nine congressmen, and one governor, as well as other interested non-parties, submitted correspondence to the ITC expressing their interest in (and the importance of) the wind turbines investigation. Some of the commentators took sides, with both GE and Mitsubishi having their champions.

For example, one commentator urged the ITC to uphold the finding that Mitsubishi infringed, noting that "South Carolina has a focused objective to become an international leader in attracting companies, such as GE, which will develop ways to use our vast domestic resources in a cleaner, more efficient manner". Another commentator remarked that "GE's facilities in Pensacola, Florida, and across the country employ more than 4,000 people involved in the renewable energy sector". This was cited as proof that GE's jobs and investments were needed for the US to compete in the global marketplace.

Other commentators went in the other direction, noting Mitsubishi Power Systems of America's plan to construct a new wind turbine facility in Arkansas. Said one: "This investment will create hundreds of jobs in our state and help us achieve our objective of becoming an important hub for wind power and other renewable energy innovation." As did the GE supporter, Mitsubishi's advocates focused on the public interest in terms of job creation and overall contribution to the economy.

What effect these comments would have had on the ITC's remedy selection, if any, may never be known, because the ITC did not find a Section 337 violation. Nonetheless, these comments regarding the public interest show their enormous potential to affect the ITC's choice of sanction. It is also noteworthy that non-party members of the public can make submissions to the ITC regarding the public interest, without regard to the rules of evidence under which the parties have toiled for the previous 12 months.

Smartphone wars

The second ITC investigation deserving of comment is Certain Personal Data and Mobile Communications Devices and Related Software. This investigation is a part of the 'smartphone wars' at the ITC. Here, Apple sought the issuance of a limited exclusion order against HTC. While the ITC did ultimately issue a limited exclusion order, the order was tailored in light of the public interest factors. It is this 'tailoring' that deserves a closer look.

First, the ITC determined that the limited exclusion order would not commence until April 12, 2012, a full four months after the issuance of its decision. Second, in the order the ITC provided for a "narrow exception". It held that "HTC shall be permitted to import into the US until December 13, 2013, refurbished handsets to be provided to customers as replacements under warranty or an insurance contract (whether the warranty is offered by HTC, a carrier, or by a third party)."

In crafting the remedy as it did, the ITC was moved by one of the public interest factors—ie, the competitive conditions in the US economy. In that regard, the ITC acknowledged that the President had determined "that the build-out of high-speed wireless coverage is one of several vital infrastructure developments for the nation". It also acknowledged that the Department of Justice had recently sought to block the proposed merger of AT&T and T-Mobile (a major distributor of HTC smartphones).

Therefore, in the spirit of preserving competition, the ITC observed: "T-Mobile itself has advised the Commission that a four-month transition period would likely be sufficient for it to replace its infringing HTC smartphones with Android smartphones produced by other manufacturers, ultimately offering consumers the same range of product and price point choices they have today."

Finding T-Mobile's suggestion to be "reasonable", the ITC adopted a four-month transition period to apply equally to all infringing smartphones, not just those sold by T-Mobile.

In the past, the public interest factors at the remedy stage of an ITC investigation were an afterthought. No more. As ITC jurisprudence evolves, public interest factors are emerging as an important consideration that have the ability to influence the scope of the ITC's remedy when a Section 337 violation is found.

Previously published in the World Intellectual Property Review

This article is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. Brinks Hofer Gilson & Lione does not intend to create an attorney-client relationship by offering this information and review of the information shall not be deemed to create such a relationship. You should consult a lawyer if you have a legal matter requiring attention. For further information, please contact a Brinks Hofer Gilson & Lione lawyer.