United States: Protect Domestic Industry, Not Private Interests

Last Updated: September 18 2013
Article by Bryan A. Kohm

The International Trade Commission now stands as the favored venue for companies, domestic and foreign alike, to obtain injunctions while avoiding the requirements imposed by eBay v. MercExchange, 547 U.S. 388 (2006) – the decision setting forth the current test to determine whether an injunction based on patent infringement should be issued. But the ITC was not intended to be an intellectual property court. Section 337 of the Tariff Act of 1930, which permits the ITC to investigate alleged unfair import practices (i.e., importing products that infringe U.S. patents), too frequently fails to protect domestic jobs and industry. Congress enacted Section 337 (and its predecessor) to prevent domestic industry from being damaged or destroyed by unfair trade practices abroad. Although Section 337 still serves this purpose in certain instances, many times the issuance of an exclusion order harms U.S. industry, albeit not that of the complainant. Section 337 should be amended to allow for an exclusion order only when it will cause more benefit than harm to domestic industry, considering that of complainants, respondents and even third parties.

Industry has changed since the enactment of Section 337. At the time, U.S. industry largely consisted of manufacturing. Not surprisingly, from its inception to the 1980s, in nearly all instances the commission applied Section 337 to protect domestic manufacturing. As the core of the economy began to shift away from manufacturing, Congress and the commission expanded domestic industry to include activities not strictly limited to manufacturing, including research and development, licensing, or anything that entails significant employment or capital. Congress also eliminated the injury requirement, aligning with the then-prevailing view that any patent infringement necessarily causes injury sufficient to justify injunctive relief.

Today most manufacturing occurs abroad, including products designed and sold by domestic companies. And many foreign companies maintain a relatively significant domestic presence – e.g., research facilities or employees servicing products sold in the U.S. Although Section 337 and its interpretation have evolved, the statute fails to adequately account for the extent to which domestic industry relies on foreign manufacturing. If one accepts the premise that the ITC, and Section 337 in particular, aims to further domestic industry, the landscape of modern industry creates a dilemma.

Take for example Domestic Company, which performs all design and development of its computers in the U.S., but manufactures them abroad and then imports them into the U.S. for sale. Foreign Competitor conducts all of its development and manufacturing abroad, yet also maintains a presence in the U.S. to service and repair the machines it sells here. Foreign Competitor holds a patent on a type of camera integrated into both companies' computers, and files a complaint with the ITC seeking to exclude Domestic Company's importation of computers. Because Foreign Competitor's service and repair efforts satisfy the domestic industry requirement, Domestic Company's importation of computers will be barred. This is true even if Domestic Company employs 5,000 people (related to the computers) in the U.S., and Foreign Competitor has only 100 employees here. Would an exclusion order in these circumstances benefit domestic industry? The answer is plainly no, at least in this author's opinion.

A similar problem arises if Foreign Competitor was instead a small domestic designer of the camera. Assume it designs and develops the camera in the U.S., and manufactures the components abroad. Again, its domestic presence satisfies the domestic industry requirement, but would U.S. industry be better served by an exclusion order? At the very least it would be a draw.

The nature of this dilemma did not come about recently. But the Supreme Court's eBay opinion, along with numerous decisions by the Federal Circuit limiting damages, pushed many disputes to the ITC previously handled in the federal courts.

To address this issue, Section 337 should be amended to require a complainant to show that U.S. industry would be better served by an exclusion order. A complainant's own domestic industry may suffice, but the impact on respondents' domestic industry, and even that of third parties, must also be evaluated. A nonexhaustive list of factors for consideration includes: extent of the complainant's domestic industry; scope of damage or injury to that domestic industry by the importation of products at issue; impact to domestic industry at large, including that of respondent, in the event of an exclusion order; and importance of patented technology in the imported items. By weighing these factors, the commission can ensure that domestic industry is actually protected.

Such an approach to domestic industry will also address the concerns of many regarding nonpracticing entities. If a nonpracticing entity engages only in the acquisition of patents to obtain licensing fees through litigation, it may maintain some level of domestic industry, but the target companies likely contribute much more significantly to U.S. industry.

Importantly, would-be complainants in Section 337 investigations would not be left without recourse in the event that the balancing test weighs against them. They may still bring actions in federal court, and obtain injunctions if they can satisfy the requirements under eBay. And in the rare occasion that a respondent lacks sufficient U.S. presence for a federal court to maintain jurisdiction, the complainant should have little problem demonstrating that the injury to its domestic industry outweighs the harm to domestic industry at large.

The ITC has already taken a step in this direction with more serious consideration of the public interest factors – public health and welfare, competitive conditions in the U.S., production of like or directly articles in the U.S., and U.S. consumers. Some parties already use these factors as a conduit to argue that U.S. industry would not be best served by the issuance of an exclusion order, but they do not expressly require the commission to make such a finding prior to the issuance of an exclusion order.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
30 Nov 2017, Conference, San Francisco, United States

The 2017 agenda addresses significant pending legislative and regulatory changes along with our annual substantive updates.

5 Dec 2017, Webinar, California, United States

This highly interactive colloquium will provide a deep understanding and practical advice regarding major e-discovery challenges facing organizations today.

6 Dec 2017, Seminar, California, United States

Network and be seen as an information security thought leader. “The Exchange” colloquium is designed for senior business executives and security practitioners from both the public and private sector.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.