- within Intellectual Property topic(s)
- in United States
- U.S. trademark owners can rely on two primary legal mechanisms to enforce their rights against counterfeiters.
- Schedule A cases offer speed when targeting dozens of anonymous sellers at once, but face growing scrutiny.
- Section 337 investigations deliver permanent, border-wide protection, but require greater resources.
With the growth of e-commerce and the escalation of foreign counterfeiting, protecting IP rights has become more challenging and more important than ever. For U.S. trademark owners, the stakes have become even higher, as anonymous foreign sellers continue to flood the market.
To combat this phenomenon, U.S. federal trademark owners can rely on two primary legal mechanisms to enforce their rights:
- Schedule A cases in federal district courts; and
- Section 337 investigations before the U.S. International Trade Commission (ITC).
While these two mechanisms share the same purpose, they:
- rely on vastly different legal frameworks;
- involve different procedural requirements; and
- provide unique remedies.
Schedule A cases offer speed and a broad reach, but may not lead to long-lasting solutions and face increasing judicial scrutiny based on due process concerns.
Section 337 investigations provide powerful, sustainable remedies, but require more resources and have higher costs.
Schedule A Cases
Schedule A cases emerged in the early 2010s and are filed in federal district courts under the Lanham Act. These cases are uniquely characterised by their ability to target numerous anonymous online sellers who allegedly infringe IP rights. Most defendants are foreign actors operating storefronts on e-commerce platforms such as Amazon, Etsy and Walmart. As these actors often use aliases, it can be challenging to determine their real names and locations.
Procedural features
A typical Schedule A case begins with the plaintiff filing a complaint with the identities of the defendants listed in a "Schedule A". The defendants are generally identified in the complaint as "the Individuals, Corporations, Limited Liability Companies, Partnerships, and Unincorporated Associations Identified on Schedule A Hereto", or some variation, with a Schedule A containing a barebones list of the defendants filed under seal.
Sealing the defendants' identities addresses concerns of the defendants destroying evidence before the plaintiff serves the complaint.
Following the filing of the complaint (or sometimes simultaneously), the plaintiff typically files a motion for ex parte temporary restraining order (TRO) to enjoin the defendants' allegedly infringing behaviour and freeze the defendants' assets allegedly derived from the infringement.
If a judge grants the ex parte TRO, the plaintiff submits the order to the relevant online marketplaces and financial institutions, which in turn normally enforce and implement the TRO obligations by freezing all the defendant-merchant's marketplace activity and related assets.
Schedule A cases are typically not litigated in the usual adversarial fashion; plaintiffs almost always seek and obtain leave to proceed under seal and ex parte. Therefore, defendants do not become aware of the proceedings against them until their online marketplace storefronts and related assets are frozen. At that point, there is substantial pressure on the defendants and resolution often quickly follows.
Preliminary injunctions, settlements, voluntary dismissals and default judgments are common in Schedule A cases.
Advantages
The unique procedural features of Schedule A cases are their greatest advantage. These cases allow plaintiffs to target large numbers of online anonymous sellers in a single action.
Because Schedule A cases normally proceed ex parte, they move quickly with possible early injunctive relief, which can halt infringing activity before causing irreparable harm.
There is also the potential for prejudgment asset freezes, which exert substantial pressure on defendants to settle.
Schedule A cases may also provide cost-saving benefits. Plaintiffs in Schedule A cases need only pay one complaint filing fee, rather than multiple filing fees if infringement cases were filed against each defendant separately.
These cases can also be self-funding if sufficient assets are seized and the court orders them as an award to the plaintiff.
Challenges and criticisms
Despite the effectiveness of Schedule A cases for plaintiffs, some courts have expressed concerns and criticized Schedule A procedural features as shortcuts; the same benefits that Schedule A cases provide to plaintiffs are considered unfair for defendants.
The Federal Rules of Civil Procedure (FRCP) require, among other things, that representations to the court be made to the "best of the person's knowledge, information, and belief" after a reasonable inquiry. Complaints in Schedule A cases frequently lack particularised facts for each defendant, raising concerns that the pleadings do not comply with the FRCP's inquiry standards.
Similarly, the FRCP permits joinder of defendants when, in part, "any right to relief is asserted... with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences". While joinder can provide efficiency to plaintiff rights holders, defendants that are independently infringing may not satisfy the permissive joinder standard under Rule 20.
Because anonymous foreign sellers using aliases are hard to find, the FRCP's requirements for issuing a TRO without notice are often bypassed as well. Many Schedule A complaints lack particularised facts with respect to each defendant, undermining Rule 65(b)'s specificity requirement.
The lack of specific facts for each defendant also means that allegations supporting the exercise of personal jurisdiction over each defendant can be lacking.
The asset and e-commerce storefront freezes that often result in these cases also face criticism. The asset freezes, in particular, exert immense pressure on defendants to settle rather than participate in the proceeding, which raises potential due process concerns.
A recent order denying the plaintiff's motion for a TRO in Eicher Motors Limited v The Partnerships & Unincorporated Associations Identified on Schedule "A" (No 25-cv-02937) echoed these concerns and stated that "[a]lthough the scourge of intellectual property theft and abuse is real, persistent, and highly damaging, the remedy for that problem must be sought by other means".
The court further noted while the Schedule A model was created to enforce IP rights, the model "works only by stretching applicable procedural rules past their breaking point".
Schedule A cases make powerful remedies (ie, injunctions, asset freezes and expedited discovery) easily accessible to plaintiffs. But missing from these powerful tools is the ability to impose import bans. Schedule A orders are limited to the specific named defendants and related entities, and do not extend to unrelated parties that may infringe the plaintiff's trademark in the future.
In the same vein, enforcement relies on court orders, which can be circumvented if defendants launch new e-commerce websites or storefronts.
Section 337 ITC investigations
Section 337 investigations are conducted at the ITC pursuant to the Tariff Act 1930 (19 USC § 337). Section 337 investigations most often involve claims regarding IP rights, including allegations of patent infringement and trademark infringement by imported goods. These investigations, while less common, may also involve copyright, trade secret and trade dress infringement, passing off, and false advertising.
Procedural features
Investigations before the ITC are typically a faster alternative to traditional federal court litigation. To initiate an ITC investigation, a complainant files a complaint alleging three key elements:
- the existence of an unfair act;
- importation of the accused products; and
- the presence of a domestic industry.
With respect to the domestic industry requirement, Section 337 requires that a complainant demonstrate an existing or developing domestic industry related to the asserted intellectual property.
This requirement may be satisfied by providing evidence of:
- a significant investment in plant and equipment;
- significant employment of labour or capital; or
- a substantial investment in the exploitation of the asserted patent, including engineering, research and development, or licensing activities.
Once the complaint is filed, the ITC determines whether it will institute an investigation. When an investigation is instituted, the parties conduct discovery and then the matter proceeds to an evidentiary hearing before an administrative law judge (ALJ).
Following the hearing, the ALJ issues an initial determination on all issues related to the alleged violations of Section 337.
The commissioners who oversee the ITC may then elect to review and adopt, modify or reverse the ALJ's initial determination. If the commission does not review the ALJ's determination, it adopts it. If the commission finds that there was a violation or upholds the ALJ's finding of a violation, it may issue orders barring the importation of certain infringing products into the United States.
In addition to requesting permanent relief, complainants may also move for temporary relief based on a showing of, in part, irreparable harm in the absence of such temporary relief. While temporary relief is an option, complainants rarely file such motions given the speed and the burden of showing entitlement to such relief.
Advantages
One of the greatest benefits in pursuing trademark enforcement through Section 337 investigations is the remedies available. While monetary damages are not available at the ITC, exclusion orders are and, if issued, they direct U.S. Customs and Border Protection (CBP) to stop infringing imports from entering the United States.
If a general exclusion order is obtained, this remedy applies broadly to future and unnamed third parties. This contrasts with Schedule A remedies, which do not prevent infringers from importing infringing goods through new e-commerce sites or marketplaces that were not listed in the complaint.
The ITC may also issue cease-and-desist orders against identified importers that hold a significant inventory in the United States. These orders direct the party to cease and desist from engaging in a number of commercial activities, including selling the infringing products from inventory, or marketing and advertising the infringing products. Respondents that violate ITC cease-and-desist orders are liable for civil penalties of up to $100,000 a day or twice the value of the imported articles.
Well-known companies have used Section 337 investigations to enforce their trademark rights. For example, in Certain Footwear and Packaging Thereof (No 337-TA-1270), certain respondents were accused of importing shoes that infringed two U.S. federal trademark registrations covering the design of the Converse shoe outsole. The respondents defaulted and the ITC ordered a general exclusion, prohibiting the unlicensed importation of infringing footwear products with this outsole design. After these orders were issued, CBP was directed to enforce them against the defaulters.
Section 337 investigations have discovery tools that are similar to district court litigations, including:
- document requests;
- interrogatories;
- depositions; and
- requests for admission.
But unlike district court litigations, Section 337 investigations grant very broad discovery.
Further, at the outset of the investigation, the ALJ will issue a protective order limiting access to confidential information to outside attorneys and experts.
These investigations also move swiftly in comparison to federal district court litigations, normally taking only 16 to 18 months. Because of this speed and the broadly construed relevance standard during discovery, immense pressure is put on respondents, which ultimately provides substantial leverage.
Challenges
While the advantages of proceeding with a Section 337 investigation are apparent, one of the greatest challenges is speed. The compressed schedule may present challenges for:
- discovery;
- development of expert opinions; and
settlement discussions. - Preparation is key. Therefore, parties must be prepared to litigate complex issues quickly and efficiently.
Strategic Considerations: Selecting the Right Path
When to enforce rights using Schedule A
Schedule A cases are best reserved for rapid actions against anonymous counterfeiters operating on online marketplaces. Because of their speed and broad reach, Schedule A cases are ideal for matters that require immediate injunctive relief. However, plaintiffs should weigh the constitutional risks, and recent judicial trends before proceeding, as the courts are increasingly criticising and scrutinising the routine procedural shortcuts of Schedule A cases.
When to enforce rights using Section 337 investigations
Section 337 investigations are preferable for complex infringement claims involving imported goods. Because importation is a required element, ITC jurisdiction almost always involves foreign respondents and overseas manufacturing and is not limited by district court requirements (eg, personal jurisdiction and service of process).
Because of the ITC's powerful remedies (eg, exclusion orders enforced by CBP) and the broad application of exclusion orders, ITC investigations offer long-term relief that is not easily circumvented and often serves as a deterrent for counterfeiters and potential importers.
ITC judges are experienced in deciding IP disputes, including patents and trademarks. Accordingly, complex matters requiring specialised IP expertise are well-suited for the ITC.
Hybrid approach
In some instances, using both Schedule A cases and Section 337 investigations may be optimal. Filing infringement claims using Schedule A and Section 337 allows for both immediate relief (through Schedule A cases) and long-term enforcement (through Section 337 investigations).
Trademark owners dealing with infringement or counterfeiting must assess certain criteria before proceeding with enforcement. Rights holders must evaluate:
- their goals;
- the nature of the infringement; and
- the legal benefits and risks associated with each forum.
Despite recent developments impacting global trade, the world around us is rapidly expanding its reliance on e-commerce and globalised manufacturing. The proliferation of online marketplaces and the continued ease of many aspects of international trade have prompted incredible advancements but have also generated concerns.
This growth has created fertile grounds for counterfeit and infringing goods to enter the U.S. market. As reported by CBP, the manufacturer's suggested retail price of goods seized by the U.S. government in 2024 was over $5.4 billion. This is a significant jump from $2.7 billion in 2023. The number of products seized grew, as well – from 21 million in 2023 to 32 million in 2024.
As the landscape for counterfeit goods continues to evolve and become more complicated, being aware of the strategic enforcement mechanisms available is essential for effective and efficient IP protection.
Originally published by World Trademark Review.
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.
