United States: Talkin' Trade: Third-Party Subpoenas In ITC Section 337 Proceedings (Podcast)

Many litigations require discovery not just from the parties to the dispute, but from other entities—and Section 337 investigations at the U.S. International Trade Commission are no different. But there are many unique aspects of third-party subpoena practice at the ITC. On this episode of Ropes & Gray's ITC-focused podcast series, Talkin' Trade, IP litigators Matt Rizzolo, Matt Shapiro, Rachael Bacha, and Brendan McLaughlin discuss the ins and outs of obtaining, enforcing, and responding to third-party subpoenas under the tight timelines of Section 337 proceedings.

Transcript:

Matt Rizzolo: Welcome back to Talkin' Trade, a podcast where we explore the ins and outs of Section 337 investigations at the U.S. International Trade Commission. I'm Matt Rizzolo, and with me today are my colleagues Matt Shapiro, Brendan McLaughlin, and Rachael Bacha. Glad to have everyone here. Today's episode of Talkin' Trade is going to focus on an oft-overlooked aspect of Section 337 proceedings, but it's something that comes up in almost every investigation. That's right—we're talking about the scintillating world of third-party subpoenas! The ITC has nationwide subpoena power, but with fact discovery lasting for just a few months, there's a lot that parties seeking to procure subpoenas—or responding to them—need to understand. But before we get into that: Brendan, what's been new at the Commission?

Brendan McLaughlin: Thanks, Matt. Over the past few months, the ITC has been unusually quiet. Since October, the Commission has received just under 20 complaints, but some of these complaints are related to the same broader disputes. Over that same time, the Commission has instituted approximately 10 investigations, has issued four opinions, and the ALJs have issued four final initial determinations.

But there have been a few interesting developments. First, the Commission recently instituted the -1381 investigation. There, the complainant pled several different violations of Section 337, including a Lanham Act claim based upon the proposed respondent's alleged false advertisement of products as FDA-approved. The FDA submitted a letter prior to institution stating its position that this claim should not be instituted in view of existing FDA policy and the realities of the marketplace. At institution, the ITC decided to not institute this claim and sided with the FDA because doing so "would usurp the FDA's authority to enforce the FDCA and impermissibly grant a private right of action to enforce the FDCA." However, Commissioner Kearns dissented, finding that Section 337's plain language doesn't allow the Commission latitude to accept the FDA's policy decision at institution—rather, that would only weigh on the public interest factors after an investigation is instituted. The full Commission institution decision, as well as dissenting opinions, are worth reading, as this is only one of three issues related to institution in that investigation.

Second, a Congressional appropriations bill introduced in October included an interesting ITC-related provision. H.R. 5893 provides that the ITC may not use certain funds to "conduct Section 337 investigations asserting patent infringement, until the Commission implements a standing rule requiring each party to disclose the real parties in interest in all Section 337 patent litigation to ensure, inter alia, disclosure of any and all beneficial owners and investors in the litigation." However, the bill has not advanced beyond the Committee.

Third, it will be worth monitoring whether President Biden nominates any new Commissioners to the ITC. Currently, there are only four out of six Commissioners, and Commissioner Kearns's term expires this December. New Commissioners could change the Commission's outlook on some issues, especially given a current two-to-two deadlock over certain issues, such as whether it is necessary to demonstrate a respondent has "commercially significant inventory" before issuing a CDO. But because it is an election year, politics may take priority over appointing new Commissioners.

Finally, in a recent Commission notice from the -1352 investigation, the ITC sua sponte vacated an initial determination granting a motion for summary determination because the ALJ incorrectly made findings as to whether domestic inventories are "commercially significant" or "significant" in the context of whether a CDO would be appropriate. According to the Commission, such findings are reserved for the remedy phase of the investigation, and thus, such findings cannot be made at MSD, even if investigation-dispositive.

Matt, do you have any other thoughts?

Matt Rizzolo: Thanks, Brendan. And thanks for giving what is probably going to be your last update on Talkin' Trade, unfortunately. Brendan will soon be leaving us for a clerkship.

The non-institution in the -1381 investigation was notable because it came on the heels of the Commission's decision to institute on similar false advertising claims in investigation -1377. In -1377, the Commission said that the false advertising claims it issued there did not rest on a determination that needed to be made by the FDA. That's a distinction that we've seen in some past FDA-related Lanham Act claims at the Commission.

Finally, that appropriations bill rider provision that you flagged regarding real-party-in-interest disclosure is an interesting one—even though it ultimately wasn't enacted, those types of disclosure issues remain at the forefront of IP litigation in a variety of forums. We'll see if 2024 brings activity in this area at the ITC.

With that, onto today's main topic: ITC subpoenas. Matt, let's start with the basics: What is an ITC subpoena?

Matt Shapiro: An ITC subpoena is issued by an ALJ, upon request of a party, for the purpose of obtaining documents or other physical exhibits for use as evidence during a Section 337 investigation, or to request testimony from a party. A subpoena may require the recipient to produce and permit inspection and copying of non-privileged documents, papers, books or other physical exhibits that constitute or contain evidence relevant to an investigation. ITC subpoenas may be ad testificandum, which requires a party to appear and testify at a deposition, prehearing conference or hearing, or as a subpoena duces tecum, which requires a party to produce specific documents.

Any party to an investigation may apply for a subpoena, which must "specify the material to be produced as precisely as possible, showing the general relevancy of the material and the reasonableness of the scope of the subpoena." In most cases, ITC litigants apply for subpoenas to obtain discovery from third parties who are not otherwise involved in an investigation.

Matt Rizzolo: This sounds a lot like a district court subpoena—are there other differences between subpoenas in district court and subpoenas in the ITC?

Matt Shapiro: Yes—different rules govern district court subpoenas and ITC subpoenas. For example, the ITC has different rules regarding deadlines to respond to a subpoena—in the ITC, the standard deadline is 10 days, but parties typically negotiate a longer period of time to respond.

Also, since the ITC is a federal agency, it has nationwide subpoena power that allows the complainant to gather evidence and testimony from third parties that are remote from the ITC's offices in Washington, D.C. In contrast, district court subpoenas limit the location of compliance to within 100 miles of where the subpoenaed party resides, is employed or regularly conducts business.

Matt Rizzolo: The 10-day response time can be challenging, and it makes it important for a subpoena recipient to act quickly and let outside counsel know about the subpoena ASAP. While the recipient will not be expected to provide all information requested within 10 days, it is critical to begin preparing responses and objections as soon as possible—and also, to begin collecting documents and identifying a potential witness, if necessary.

At this point, a non-party subpoena recipient might be asking: "What if.... I just don't want to get involved? This is an ITC proceeding. My company is not a named party. This seems expensive. I want nothing to do with this." Rachael, what are the options?

Rachael Bacha: There are two primary options, but honestly, neither of them is great. First, a subpoena recipient can file a motion to quash. By ITC rule, the motion to quash must be filed within 10 days of receipt of the subpoena, unless the ALJ provides otherwise. To quash a subpoena, the movant must show that "the subpoena is unreasonable or oppressive," and not just inconvenient. The ALJ will then balance the relevance of the discovery sought, the need of the requesting party, and the potential hardship to the responding party. The motion should demonstrate that the information is difficult and costly to retrieve, is privileged, or is otherwise unavailable. The movant can then increase the chances of success if it can show that the requesting party could obtain the information sought in an easier or an alternative way (such as, for example, from a counterparty in the investigation).

A simple attorney argument that the subpoena is overbroad or unduly burdensome just won't win the day—if a subpoena recipient moves to quash, it really should be ready to back up its arguments with evidence.

Matt Rizzolo: Right—it's really important to have all your ducks in a row when moving to quash. One other consideration is whether the subpoena recipient actually has possession, custody, or control over the requested documents. For example, the requester might have subpoenaed the wrong corporate entity—one that doesn't have actual control of the documents or actual possession of the information that's sought. In such a situation, it may be worth moving to quash. We'll also dig a little deeper into this type of situation in a bit.

If a subpoena recipient files a motion to quash, what happens next?

Rachael Bacha: Next, the parties to the investigation have a chance to respond to the motion, just like with typical ITC motion practice. After briefing closes, the ALJ normally issues an order pretty quickly. This order is not reviewable by the Commission.

If the motion to quash is granted, the subpoena recipient will not need to produce the requested discovery at all. If it's denied, then the recipient must be prepared to substantively respond and produce the requested information.

Matt Rizzolo: That's why filing a motion to quash is a bit of a gamble. Unless there are particularly compelling reasons to not produce the requested information, it is often best to forgo this option, as it will be more difficult to negotiate the scope of the subpoena with the requestor to narrow the information down after you've submitted a failed motion to quash.

Matt Shapiro: Which segues nicely, Matt, into the second, more common type of response for a subpoena recipient that does not want to produce any information: First, serve written responses and objections to the subpoena requests and deposition topics, and then second, negotiate a more narrowed scope of production that you can live with.

Often, this will resolve the dispute altogether. But even if it doesn't, and there is still a category of requests that the subpoena recipient refuses to produce, the recipient would look much more reasonable if it negotiated and produced at least some information.

Matt Rizzolo: Let's say that a subpoena recipient doesn't want to produce even a little bit of information, but the requestor believes that it needs that information. Can the requestor do anything at that point?

Matt Shapiro: Yes, but even though the ITC has nationwide subpoena power, it doesn't technically have the authority to enforce its own subpoenas. So, a requestor must instead file a motion requesting that the ALJ certify to the Commission a request for judicial enforcement, which then, if granted, will allow the Commission to seek to enforce the subpoena through a district court—and this can be a very long process.

Matt Rizzolo: Can you walk us through the certification process and what the requestor and subpoena recipient can expect?

Matt Shapiro: Sure—there are a number of steps to this process. A requestor's motion must, again, explain the purpose of the subpoena and show that the requested discovery is relevant and reasonable. The other parties to the investigation—as well as the subpoena recipient—may then file responses to that motion. These responses may explain that the motion should be denied for a number of reasons, such as the requestor failed to carry its burden as to purpose, relevance, and reasonableness; that the requestor unreasonably delayed in seeking judicial enforcement; or that the issue is moot in view of information already shared.

As with a motion to quash, the ALJ will then typically issue a ruling fairly quickly. If the motion is denied, then that's the end of the story—the requestor has no options and must live with the information it has received. But if the motion is granted, it kicks off a long enforcement process.

When an ALJ grants a motion to certify, by rule, she must provide a written report on the purpose, relevance, and reasonableness of the subpoena. Typically, the ALJ will include a statement in the order granting the motion that states that the order itself serves as the written report to the ITC that the rules require.

The ALJ's order then goes to the Commission, which typically issues a notice granting the ALJ's request for judicial enforcement. In the notice, the Commission normally authorizes its Office of the General Counsel to seek judicial enforcement of the subpoenas.

Now, after receiving this authorization, the Office of the General Counsel will file a petition for an order to enforce the subpoena with an appropriate district court—which is typically the D.C. District Court.

The recipient of the subpoena then has the opportunity to oppose the petition, but district courts are generally very deferential to these types of subpoenas—and generally, will order compliance absent evidence that the ITC is acting outside of its authority.

Matt Rizzolo: That is a lot of steps. How long does it take from the requestor filing a motion requesting judicial enforcement to the time where a district court might order compliance with the subpoena?

Matt Shapiro: With the caveat that subpoena enforcement proceedings rarely make it this far—often because the subpoena recipient and the ITC reach an agreement that moots the issue—in the few proceedings we've surveyed, this whole process can take several months, if not significantly longer. So, in other words, a long time in the course of an ITC investigation.

Matt Rizzolo: And for parties involved in an investigation, that makes persistence and diligence in the subpoena process vitally important. Any delay in moving the ALJ to request certification to the Commission for judicial enforcement may result in a denied motion. We've seen this recently in the -1343 investigation, where the complainant filed two motions seeking judicial enforcement of two different subpoenas—both of which were denied because the complainant waited until the last several weeks of fact discovery to file the motions. Full disclosure, Ropes & Gray represented one of the subpoena recipients (Roku), and we successfully argued that the complainant had unreasonably delayed in filing its motion for judicial enforcement for approximately four months after the parties' dispute was ripe. The orders denying subpoena enforcement in that investigation serve as great reminders to always move quickly at the ITC.

Okay, so let's say that the district court orders compliance, but the subpoena recipient still refuses to comply. What then?

Rachael Bacha: That is just not advisable. Failure to comply with the district court's order may result in civil contempt findings, sanctions, or something else really terrible. If you get all the way to this point, you really should find a way to comply.

Matt Rizzolo: Yes, at this point, the subpoena has probably been negotiated down a reasonable degree or narrowed down by the ITC or the courts, so hopefully compliance shouldn't be all that burdensome—you really don't want to go flout a district court order. So, if a subpoena fight ever gets here—which is exceedingly rare—it's probably time to give up that fight.

Okay, so let's back up a moment and cover a couple of more miscellaneous topics. You mentioned earlier that subpoenas can request deposition testimony from a witness. If a deposition is requested, does a subpoena recipient need to provide a witness to sit for a deposition?

Rachael Bacha: That is the default rule, but recently, depositions usually take place by video conference, which does help reduce that burden. However, if you still don't want to have a witness sit for deposition, it is possible to make alternative arrangements. For example, the subpoenaed party may produce a sworn declaration from a witness or a stipulation as to certain facts that the requestor may try to elicit from the witness during a regular deposition.

However, if a subpoena is for trial testimony, the witness will likely need to appear before the Commission in D.C., unless the Commission approves a video conference.

Matt Rizzolo: Since COVID, video conference depositions have almost become standard. While it's not always ideal, especially if you're the one asking the questions, it does make depositions much more cost- and time-effective. So, they can be a useful tool, especially in a fast-paced ITC investigation.

Switching gears again: What if the subpoenaed company is based outside of the United States? Does it still need to respond to the subpoena?

Rachael Bacha: Yes, absolutely—ITC subpoenas apply to foreign companies. However, service might be difficult for the requestor because of local prohibitions against discovery and depositions in foreign courts or agencies. The Hague convention is another option, but its very slow timetable often renders it unrealistic for the ITC.

So, instead, requestors typically seek discovery from a related U.S. entity that has regular access to or control of the foreign entity's documents. This allows the requestor to seek judicial enforcement if the U.S. entity fails to comply with the subpoena.

Matt Rizzolo: That touches on the other topic we briefly mentioned before: What if the subpoenaed party does not have the requested information, but a related entity does? Does the subpoenaed party need to obtain and produce the requested information?

Rachael Bacha: It depends. If the requestor can show that the subpoenaed party has "possession, custody, or control" of the requested information, you'll likely need to obtain and produce those documents. Now, as a general matter, a subpoenaed party typically does not control its parent's information unless the subpoenaed party has a legal right to obtain that information. That said, if the subpoenaed party refuses to produce on this basis and the requestor brings the issue to the ALJ, the ALJ may order the subpoenaed party to produce responsive information.

Matt Rizzolo: Right, this is an issue that we see time and again, both representing a requestor as well as a subpoenaed party—it is critical that the subpoena asks the right party for the right information. And as with the other issues we've discussed today, it goes to show that ITC subpoenas can be tricky—especially given the tight timeframes for fact discovery, and that's a common theme with issues at the ITC.

With that, that takes us to the end of today's episode of Talkin' Trade. You can find this podcast and other Ropes & Gray podcasts on Apple Podcasts, Spotify, or ropesgray.com/podcasts. I'm Matt Rizzolo, and on behalf of Matt Shapiro, Rachael Bacha, and one last time for Brendan McLaughlin, thank you all for listening.

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