United States: The Results Are In On The ITC

Last Updated: September 23 2014
Article by Justin E. Pierce, Andrew F. Pratt and Andrew D. Price

The US International Trade Commission is a powerful and cost-effective weapon in the ongoing brand protection war, but remains underused.

The US International Trade Commission (ITC) investigates imports connected with unfair acts such as IP infringement and directs US Customs and Border Protection (CBP) to exclude those products from the United States. In 2012 around 75% of all exclusions by the CBP resulted from ITC investigations into brand protection claims sought by Crocs, Inc (for its foam footwear) and Philip Morris (for counterfeit cigarettes). That figure is remarkable on its own, and even more so in light of the fact that brand protection claims comprise only a small fraction of ITC investigations. Naturally, this begs the question of why more companies do not use the ITC as a weapon in the brand protection war.

The ITC's potency in the fight to protect valuable brands stems from its unique rules, fast docket and the fact that its exclusion orders are enforced by the CBP, whose agents are trained to inspect and seize products subject to ITC exclusion orders. Once an ITC decision is obtained, the CBP can help to carry out the brand owner's work and multiply its efforts to keep infringing goods out of the United States. Further, unlike in federal district court, where jurisdictional skirmishes often frustrate and delay brand protection efforts, the ITC's jurisdiction is in rem – that is, based on the imported article – requiring only a single actionable product to initiate an investigation.

Given the advantages and proven effectiveness of the ITC, companies facing pressure from infringing imports should consider this forum when choosing where to allocate their enforcement dollars. Bearing in mind that the CBP will undertake the enforcement effort for many years following the investigation, the ITC can be great value compared to federal district court enforcement efforts intended to curtail the same imports.

ITC investigates IP infringement claims

The ITC is a quasi-judicial agency located in Washington DC charged with administering Section 337 of the US Code, the powerful statute that allows the ITC to protect US companies from unfair imports. Section 337 broadly prohibits "unfair methods of competition and unfair acts in the importation of articles... into the United States", which can include anything from statutory or non-statutory IP infringement (eg, trademark, trade dress or copyright infringement) to advertising injury and breach of contract. The ITC has much experience investigating brand protection claims concerning trademark, trade dress and design patent infringement, and grey-market imports.

The vast majority of all brand protection claims in the past 15 years ended in default, a consent order or settlement, meaning that such claims rarely go to trial, particularly where the accused products are illicit to begin with. Investigations move fast and a final determination usually issues in 15 months or less. Relief may come as fast as a few months against defaulting parties. This is a stark contrast from federal district court litigation, where the time between filing the case and trial can be years.

Table 1: Approx timeline of events after filing complaint

Event Timing
Complaint filed 30 days before investigation instituted
Investigation instituted Investigation begins
Discovery and pre-hearing filings Zero to nine months
Hearing Seven to nine months
(one to two-week trial)
Judge's decision 10 to 12 months
ITC decision and order issued 13 to 14 months
Presidential review and exclusion 15 to 16 months

Proving a violation of Section 337 is straightforward and is particularly streamlined where statutory intellectual property such as a patent, trademark or copyright registration is at issue. Complainants alleging infringement of patents, and registered trademarks and copyrights must prove the 'three Is':

  • import, sale for import or sale after import of the accused articles;
  • infringement of the statutory intellectual property by the accused articles; and
  • a domestic industry related to articles protected by the statutory intellectual property.

To prove a domestic industry, a company need not produce the article that practises the asserted intellectual property, which can instead be carried out by a contract manufacturer or licensee, either in the United States or abroad. A domestic industry can be established provided that a complainant can demonstrate the following investments relating to articles that practise or embody the asserted intellectual property:

  • significant investment in plant(s) and equipment;
  • significant employment of labour or capital; or
  • substantial investment in its exploitation, including engineering, research and development or licensing.

'Significant' and 'substantial' do not mean that the investments must be most or all of a company's domestic spend. The absolute and relative amounts may be modest, provided that they are significant in the context of the company's business or compared to the broader industry's investments for similar efforts.

When other unfair acts are alleged, such as trade dress or unregistered trademark infringement, complainants must prove injury or threat of injury to the domestic industry. Injury may be shown through, for example, lost actual or potential sales, royalties, income, profits or customers, and other harm to the complainant's business attributable to the unfair imports.

ITC issues powerful remedies

The remedies offered by the ITC are a unique feature of Section 337 litigation. Unlike in federal district court litigation, monetary damages are not available. Instead, the ITC possesses the authority to issue two types of remedial order: limited, general or temporary exclusion orders, and cease and desist orders.

The remedies available under Section 337 are:

  • a limited exclusion order, which bars the named respondent (and its agents) from importing any articles that violate Section 337 through infringement or another unfair act;
  • a general exclusion order, which bars anyone from importing articles at issue into the United States (these are granted in circumstances where widespread counterfeiting and difficulty in identifying the source of the infringement would make circumvention of a limited exclusion order likely);
  • a temporary exclusion order to redress import of the articles during the pendency of the ITC case; and
  • a cease and desist order directed against specified US parties, which may be granted in addition to, or in lieu of, an exclusion order and whose violation can result in a penalty of up to $100,000 or twice the domestic value of the articles at issue for each day in violation.

Exclusion orders are administered by the CBP at the ports and for as long as the exclusion orders are in effect. Cease and desist orders, on the other hand, are administered by the ITC through a separate enforcement proceeding.

ITC is an efficient forum

In addition to speed, the ITC offers several advantages over federal district court to companies grappling with how to stop infringement by imports:

  • Jurisdiction – in rem jurisdiction makes it possible to initiate an action based on a single actionable item, no matter whether the manufacturer has contacts with the United States or can even be identified.
  • Service of complaint – the Hague Convention does not apply to ITC complaints, unlike in federal district court, where service of the complaint in foreign countries can be a lengthy process fraught with pitfalls. Service is handled by the ITC, via overnight mail, when the investigation is instituted.
  • Joinder – all parties can and will be joined in a single action, which promotes the efficient resolution of common legal and factual issues. Investigations naming 20 or more respondents are not uncommon, particularly where widespread infringement of commodity items is at issue.
  • Broad discovery – parties can make use of 175 interrogatories per respondent, unlimited requests for production and requests for admission. There can also be up to 20 fact depositions (each corporate deposition notice counts as a single deposition regardless of the number of corporate designees). The ITC also has nationwide subpoena power.
  • Efficient justice – administrative law judges each have specialised and detailed ground rules designed to promote efficiency and penalise parties that fail to produce discovery in a timely manner.
  • Default – default can be sought soon after a party fails to answer or participate in the investigation, after which an exclusion order will issue. Named parties have 20 days to respond, after which the complainant may move for default, yielding relief against the defaulting parties in as little as a few months.

Companies turn to ITC to protect brands

Under Section 337, the ITC can investigate a number of unfair methods of competition, including trademark infringement, copyright infringement and trade secret misappropriation. Accordingly, companies that are aware of the ITC's remedies and its fast-paced procedure have used the ITC enforcement actions as part of their overall brand protection programme. Three examples illustrate this point: Crocs, Philip Morris and Louis Vuitton.

Crocs obtains a general exclusion order protecting its footwear

Crocs took the world by storm in the early 2000s with its distinctive foam footwear, which it protected with design and utility patents.

In addition, Crocs said, its products' appearance and overall image were protected trade dress. Not long after Crocs' initial market success, competitors flooded the market with imported shoes remarkably similar to the Crocs design.

To stem the flow of these products and protect its brand, Crocs filed an ITC complaint asserting design and utility patent infringement and trade dress infringement (Crocs later dropped the trade dress claims in an apparent effort to streamline the case).

While the ITC initially baulked at finding design patent infringement, the US Court of Appeals for the Federal Circuit, in an important decision for future design patent cases, reversed the ITC and emphasised that the viewpoint of the ordinary observer should predominate when evaluating infringing designs. Thus, despite the fact that Crocs had to appeal its original negative ITC decision to the US Court of Appeals for the Federal Circuit, it ultimately prevailed. In 2011 the ITC issued a general exclusion order barring imports that infringed the design and utility patents from any source, resulting in 39% of all exclusions by Customs in 2012.

Philip Morris achieves a general exclusion order protecting its tobacco products

Philip Morris protects its cigarettes with registered trademarks and sells its branded cigarettes worldwide with regional restrictions on distribution.

However, grey-market cigarettes from outside the United States were being imported to compete with Philip Morris's domestic offerings. The ITC found that the accused companies had violated Section 337 by selling for import into the United States grey-market cigarettes that infringed Phillip Morris's MARLBORO, PARLIAMENT and VIRGINIA SLIMS trademarks. The ITC also found that a lack of English-language warning labels from the surgeon general on the grey-market cigarette packages rendered them materially different from the US-market cigarettes. Moreover, due to the high likelihood of circumvention, the ITC issued a general exclusion order barring infringing product from any source. In 2012 exclusions of grey-market Philip Morris cigarettes accounted for 36% of all seizures.

Louis Vuitton wins general exclusion order

Famous French fashion house Louis Vuitton offers high-end luggage and bags, among other luxury items, on which it uses its Toile Monogram trademark.

Louis Vuitton alleged, and the ITC found, that a husband-and-wife team was manufacturing and importing confusingly similar products and exact copies that traded on Louis Vuitton's Toile Monogram mark.

The couple conducted business through a constellation of companies that made it difficult for Louis Vuitton to identify the source of the infringing product. The ITC found that before resorting to the commission, Louis Vuitton had engaged in extensive civil activities in the United States, including cease and desist letters and district court actions, and criminal investigations that resulted in arrests. However, the fact that one of the named parties could produce up to 200,000 units per style, per month, combined with the inherent anonymity of internet sales operations, made it unfeasible to pinpoint the source of the infringing goods. The ITC also noted that the evidence showed that the accused businesses could be easily formed and dissolved, further frustrating enforcement efforts, and that the barrier to entry on the market was low. In view of these findings, the ITC issued a general exclusion order barring the entry of infringing products from any source.

Comment

Brand owners in all industries should consider adding ITC actions to their arsenals. Methods such as online monitoring, site raids and conventional lawsuits through the US and Chinese court systems are still necessary, but should be seen as elements in a multi-pronged strategy. Site raids are effective because they often raise the costs and risks of doing business for counterfeiters. Counterfeiters may incur fines, face jail time or lose inventory and manufacturing capacity due to raids and seizures. Although district court lawsuits can be effective, they are becoming prohibitively expensive as infringers multiply and often vanish, only to reappear under a new name and address, making it impossible to trace them, let alone add them as defendants to existing actions. Such efforts should be part of a brand owner's armoury. However, as the problem of counterfeiting and grey-market goods distribution escalates, brand owners should look to the ITC and the in rem jurisdiction that it offers as an additional and efficient means of attack. It is a weapon that, when successful, enables the CBP to do the brand owner's work. Indeed, more companies should use the ITC as a weapon in the ongoing brand protection war.

Whether the infringement involves luxury goods, textiles, electronics, pharmaceuticals or other products, brand owners must continue to enhance their enforcement efforts to prevent counterfeits from reaching the stream of commerce. Section 337 actions offer brand owners an additional tool to counteract the negative effects of counterfeit goods.

Originally published by worldtrademarkreview.com.

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
 
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
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 you may opt out by clicking here

    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.

    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.

    By clicking Register you state you have read and agree to our Terms and Conditions