The International Trade Commission ("ITC") is an increasingly popular forum for patent and trademark litigation, with a record number of 70 unfair competition cases filed in 2011 alone. There are currently 73 cases pending in the ITC, and the statutory vehicle for this growing litigation is 19 U.S.C. § 1337, which prohibits "unfair methods of competition and unfair acts in the importation of articles. . . in the United States." (U.S. ITC, FY 2011 Press Release: Highlights: USITC Sees Record Number of Intellectual Property Infringement Cases Filed at http://1.usa.gov/Jicc9z U.S. ITC, Pending 337 Investigations, at http://1.usa.gov/Jicc9z OpenView (both visited Feb. 28, 2012).

Given the forum's growing popularity, attorneys representing commercial clients should have a basic understanding of this forum, its procedural particularities and its advantages. For patent and trademark holders faced with unfair competition from abroad, it may be a desirable alternative to federal district court. On the other side, businesses who import their products may find themselves brought before the ITC in a section 337 case, and they may turn to their general commercial litigators for advice about litigating in this forum.

Basic Overview of the ITC

After a complaint is filed with the ITC, the Commission decides whether to institute an investigation. The notice of the investigation is published in the Federal Register, which starts the clock ticking for the named respondents to file their response. The case will be assigned to one of six Administrative Law Judges ("ALJ") who will set his procedural schedule for case milestones.

Each ALJ also has his own Ground Rules, which supplement the procedural regulations set forth in 19 C.F.R. § 210. These regulations are similar, although by no means identical, to the Federal Rules of Civil Procedure. The ALJ also will issue a standard protective order governing confidential information. Attorneys for parties entering an appearance in an ITC case must agree to abide by the protective order, and confidential business information designations are treated very seriously.

The ITC's jurisdiction is directed at the imported goods at issue in the case, and is, therefore, in rem rather than in personam. Limited remedies are available in the ITC. Its primary mechanism of enforcement is the issuance of exclusion orders, either general or specific in nature. A general exclusion order bars any infringing products from entry into the United States, regardless of its source. A limited exclusion order bars importation of infringing products by a named respondent to the investigation. Exclusion orders are enforced by the U.S. Customs & Border Patrol. The ITC also can issue cease and desist orders enjoining the distribution or sale of imported, infringing products already in U.S. warehouses of an infringing party. Cease and desist orders are enforced by the ITC.

After trial, the ALJ issues an Initial Determination, which is then presented to the Commission. If the Commission declines to rule on the Initial Determination, it becomes final. The Commission also can issue its own ruling or can remand the case for further consideration. Appeal from the Commission is directly to the Federal Circuit.

Procedural Considerations

Litigation in the ITC is governed by ITC regulation and specific rules set forth by the ALJ. Because these regulations differ from the federal rules, they should be carefully reviewed. The ALJ's Ground Rules also can be very specific, and litigants should adhere closely to them. Beyond this different procedural framework, several other key differences from typical federal court IP cases are worth understanding at the outset.

• The Office of Unfair Import Investigations: The United States is a party to active ITC investigations, and its interests are represented by the Office of Unfair Import Investigations ("OUII"). Until mid-2011, each case brought before the ITC was automatically staffed with an OUII attorney. This is no longer true with new cases. Instead, the OUII staffs cases in which its specific expertise is required. Whether representing a complainant or a respondent in an ITC action, if your case is staffed with an OUII attorney, consider yourself lucky. The OUII brings a wealth of experience with the forum and can help you navigate its particularities.
• The Domestic Industry Requirement: To bring a case in the ITC, a complainant must demonstrate that "an industry in the United States, relating to the articles protected by the patent . . . exists or is in the process of being established." (19 U.S.C. § 1337(a)(2)). There are two prongs of the domestic industry requirement: the technical prong and the economic prong. (In the Matter of Certain Display Controllers and Products Containing Same, Inv. No. 337-TA-491/481, 2005 WL 996252, Commission Op. (Feb. 4, 2005)). To establish the technical prong (in a patent case), the complainant must demonstrate that at least one of its products practice the patent in suit. Id. To establish the economic prong, the complainant must show that it has made a significant investment in plant or equipment in the United States, a significant employment of U.S. labor or capital, or a substantial investment in exploitation of the patent, such as by engineering, research and development or licensing. (19 U.S.C. § 1337(a)(3)). The domestic industry requirement is in constant refinement as ALJs and the Commission issue new interpretative rulings that provide further guidance about the interplay of the factors and the level of proof necessary to show a domestic industry.
• Parallel Federal Court Proceedings: Where parallel proceedings exist before the ITC and a federal district court, a respondent in the ITC proceeding may seek a stay of the federal district court action until the determination of the ITC becomes final. (28 U.S.C. § 1659(a)). A stay under this statutory provision is mandatory. A final decision by the ITC may be persuasive authority to a federal district court; however, it is not binding. Thus, parties to parallel ITC and federal court litigation may potentially litigate the same intellectual property dispute twice. Practically, however, even if a federal court judge does not defer to the ITC's findings, the ITC proceeding likely will simplify or narrow the federal case. The parties already will have conducted relevant discovery, honed their positions, and filed expert reports.

Key Advantages of Litigating in the ITC

Should you counsel your client to file a complaint in the ITC rather than in federal court? There are a few commonly cited advantages to the ITC.

• Speed: For better or worse, your client will have an answer from the ITC in well under two years. Once a complaint is filed and an investigation initiated by the Commission, the ALJ will set a procedural schedule for the case. The typical target date for completion of the investigation is approximately 16-18 months. Last year, the average time from institution to a finding of violation or no violation was 13.7 months. (U.S. ITC, FY 2011 Press Release: Highlights: USITC Sees Record Number of Intellectual Property Infringement Cases Filed, at http://www.usitc.gov/press_room/documents/featured_news/337_timeframes_article.htm (visited Feb. 28, 2012)). Trial is typically scheduled within the same calendar year that the case is filed. The discovery period is usually around six months. By regulation, the time period for responding to discovery requests is 10 days, as is the time for answering most motions. (See, e.g., 19 C.F.R. §§ 210.15(c), 210.30(b)(2)).
• Experience: From the Commission members to the ALJs to the OUII staff, the ITC personnel have a wealth of experience with intellectual property matters. While the federal courts are certainly accustomed to intellectual property disputes, these legal challenges are the ITC's focus and specialty. For very complicated technology, complex patents, or multi-party disputes, this sophistication may be extremely beneficial. The ITC also offers free mediation sessions, staffed by experienced intellectual property mediators. If the parties choose to engage in mediation, dispute resolution also will be enhanced by the level of experience of the forum.
• Streamlining: The ITC has eliminated some of the inconveniences or uncertainties associated with litigation in the federal court system. For example, the ITC has nationwide service authority, facilitating service of subpoenas for testimony at depositions and trial. The evidence for trial is presented largely by written testimony submitted in advance, significantly streamlining the actual in-court hearing. The hearing itself is before an ALJ, eliminating the uncertainties associated with a jury trial. Especially for foreign litigants unaccustomed to U.S. trial procedure, this can be an advantage.

Practical Tips for Surviving an ITC Investigation

How should you advise a client considering an ITC complaint or finding itself brought before the ITC as a respondent? How should you prepare yourself? Below are some basic tips for surviving in this forum.

• Staff the case early, and stay organized. Depending on the amount of early discovery, an ITC case may begin deceptively slowly. Trust that it will speed up very soon. When it does, you will need an informed team staffed at all levels of experience. Assemble that team early and begin taking the organizational steps necessary to ensure that the team is communicating well and often.

• Make sure the client goes into ITC litigation with eyes wide open. It is not enough to simply tell the client that an ITC investigation will be finished in just over a year. For many clients, especially if your primary point of contact is a business person (rather than general counsel), this still will seem like a long time. Unless educated early, the client will not be able to anticipate and fully understand the rigors of litigation at this pace. Make sure you have the full commitment of all leadership who will be necessary for you to do your job. Make sure that any employees with relevant information are briefed about the tight deadlines for production of discovery. Give your client realistic estimates of costs. As the case gets moving, you will have some large bills, and you will thank yourself for preparing the client in advance.
• Take a proactive approach. A common pitfall for any busy litigator is to allow the procedural schedule to drive your case strategy, e.g., taking depositions the week before the discovery period ends, or thinking about summary judgment once the deadline begins approaching. This is simply not an option in the ITC. Treat the procedural schedule like it is sacrosanct, and try to stay several steps ahead of its deadlines. You also need to strategize early with your client about the desired result, keeping that in sharp focus as you tend to the details of litigation.
• Don't pay short shrift to the domestic industry requirement. Because the domestic industry is a threshold issue the complainant has to prove, it is a natural area for attack by respondents. As the complainant, make sure you support your complaint with robust evidence of your domestic industry and that you have gathered the supportive evidence on the front end. You will be asked to support your client's domestic industry in discovery, and early preparation will avoid scrambling for documentation on a tight timeframe. As a respondent, make sure you are asking for detailed support of the domestic industry. Look behind the company representative's statements to identify any potential vulnerabilities and weaknesses in documentation.
• Spend the time to find a strong expert. Expert witnesses are crucial to most intellectual property cases, and the ITC is no exception. However, Markman hearings are not automatic in the ITC, so you may find yourself making your expert arguments largely through reports and other paper filings. A strong expert will only make that process easier on you.
• Try to enjoy it. ITC investigations are rigorous and, at their busiest time, will take center stage in your life. But for intellectual property litigators, they can be a very rewarding and enriching career experience.

Eileen Hintz Rumfelt is an associate at Miller & Martin PLLC in the firm's Atlanta, Georgia, office. She focuses her practice on business litigation, including intellectual property litigation, and white collar crime. She is a member of the DRI Young laywers Steering Committee and currently serves as the Chair of the Young Lawyers Publication Subcommittee.

This article from Corporate Counsel provides great advice on how to protect your trade secrets while collaborating with third-parties.  As the article notes, you should consider:

Tell Us Why You’re Attending!

#10: You can learn the latest trends in IP and business litigation.

#9:  CLE credit.

#8: It’s a great opportunity to network with in-house counsel & more.

#7: Cool dine-arounds at some of the hottest NY restaurants.

#6:  The best in biz will be sharing their advocacy skills.

#5: Learning how to manage all your information without losing your mind.

#4: Did we mention the networking receptions?

#3: Protecting your client’s business & IP interests is a must.

#2:  Because the Yankees aren’t the only sluggers in town!

And Reason #1: It’s the DRI in the Big Apple! Need we say more?

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Many people will not be shocked by the title of this post.  However, a new report issued by an advocacy group for the U.S. Chamber of Commerce was recently released that was entitled, “The Plaintiffs’ Bar Goes Digital, an Analysis of the Digital Marketing Efforts of Plaintiffs’ Attorneys and Litigation Firms.”  The report found that marketing efforts were being camouflaged as forums or support group sites.   The report estimated that law firms had spent more than $50,000,000 on Google advertising in 2011.  The overwhelming majority of that was spent by Plaintiff’s firms.  However, despite the fact that the amount of spending does not rank with large corporations, it is disproportionate for the size of the industry.  The report is critical of the Plaintiffs’ Bar because of a lack of transparency that many of their sites were actually marketing for law firms.  

In a recent Corporate Counsel article, the authors describe a Federal Trade Commission ruling about the disclosure of connections between corporate advertisers and those who shill, directly or indirectly, the advertisers’ wares. 

The U.S. Supreme Court in Shute v. Carnival Cruise Lines, 499 U.S. 585 (1991) held the Shutes, who were injured on a Carnival Cruise ship in waters off Mexico, must file suit in Florida pursuant to the forum selection provision printed on the back of their ticket.   The Shutes filed suit in their home state of Washington.  The cruise ship departed from California.  Shute is still one of the most far reaching holdings enforcing adhesion-like forum selection provisions.  The Shutes also had a strong argument that they lacked notice of the forum selection/choice of law provisions.  

On January 16, 2012, attorneys filed a class action against Amazon.com relating to an online hacking attack that compromised the personal information of up to 24 million customers of its online shoe retailer, Zappos.com.  Data Breach Legal Watch reported that less than 24 hours after the breach occurred, the plaintiffs’ bar had already filed a Complaint claiming that the attack resulted in the exposure of the following:

Listen up, all you internet users (which is basically everybody but my mother, who still views the Internet as the work of the devil, and will quote from the book of Revelation in support of her theory).  Three bills you need to be aware of, because they may change the way you view (or more correctly, the way you are allowed to view) the Internet.  and from what I’m reading, there are some pretty darned big sites and companies that are ready to either “go dark” in protest (Wikipedia, for example, which is where I do most of my legal research) or lend a big supporting hand to the protests of the current bills being considered (Google is one – who can live a day without Googling something?  I mean for cryin’ out loud the Company has made itself into a verb!!).  Those bills are:

Welcome one and all to something that will undoubtedly change both history and the world as we know it:  the first installment of what will hopefully be a regular publication which we have decided to call From the “What the…?”File.  Basically, I’ll be picking up on out-of-the-mainstream stuff which any of us could have lived without knowing, but it will at least be stuff that is both interesting and has a bit of a twist.  At least in theory, anyway.  So, without further ado, here goes the collector’s item first issue.  I can confidentially say that that when you’re done, you too will be saying “What the…?”

European Copyright – The Write Stuff?

OK, not many of us care about Euro Copyright issues – I fully admit that.  But this is actually kind of interesting (even if it is Euro-centric).  It seems that way back in 2006, a Hollywood-funded, Netherlands-based anti-piracy group (known as ‘BREIN’, and please don’t ask me what it stands for) asked a musician to compose music for an anti-piracy video. The video in question was to be shown at a local film festival, and under these strict conditions the composer accepted the job.

However, the anti-piracy ad was recycled for various other purposes apparently without the composer’s permission. When the composer bought a Harry Potter DVD early 2007 (presumably a licensed one), he noticed that the campaign video with his music was on it. According to the composer And this was no isolated incident. He is now claiming that his work has been used on tens of millions of Dutch DVDs, without him receiving any compensation for it. The total claimed lost revenue is roughly a million Euros (which is about $1.3 mil US). 

But wait -- there’s more.  You’d think that the guy would have received some collection support from local rights societies.  You’d think.  But soon after he discovered the unauthorized distribution and after contacting a local music royalty collection agency not only did he not receive any royalties, one of their Board members offered to help ONLY if the composer assigned all his rights to the organization AND gave the guy a third of what was collected.   Ultimately the board member resigned and the anti-piracy group denied it was their fault in the first place.  But what’s more shocking – that anti-pirates are pirates themselves, or that there is corruption in the music industry? Hmmm – tough question.

A recent Seventh Circuit opinion indicates that plaintiffs' counsel in a class action suit that engages in misconduct will not likely be able to adequately represent the class.  In Creative Montessori Learning Centers v. Ashford Gear LLC, No. 11-8020 (7th Cir. Nov. 22, 2011), Judge Posner's opinion overturned the district court's class certification because the district court applied a standard that was too lenient for misconduct on the part of plaintiffs' counsel. 

The named plaintiff, Creative Montessori Learning Centers, sued Ashford Gear LLC for violating the Telephone Consumer Protection Act, 47 U.S.C. § 227.  The Act provides that the recipient of an unsolicited fax can be compensated up to $1,500 for each fax.  There are 14,573 other members of the class who collectively claim to have received 22,222 unsolicited faxes. 

Plaintiffs' attorneys, attorneys from Bock and Hatch, specialize in bringing suits under the Act, but used some unethical tactics to initiate the suit.  The attorneys contacted a fax broadcasting company that faxes advertisements on behalf of advertisers.  Then the attorneys asked the broadcasting company for information about faxes it had sent – and promised to keep the information confidential.  But instead of keeping the information confidential, the attorneys used the information to drum up lawsuits.  The attorneys found violators of the Act and potential plaintiffs.  Notably, the attorneys found Montessori, the named plaintiff, and misleadingly told them that a class action already existed.     

This behavior prompted defense attorneys to argue that the class should not be certified because plaintiffs' attorneys behaved unethically and would not be able to adequately represent the class.  However, the district court applied an egregious misconduct standard, and found that the conduct was not egregious and certified the class.  On appeal, the Seventh Circuit applied a different standard. 

The Seventh Circuit emphasized the importance of ensuring that plaintiffs' counsel can adequately represent a class.  The court noted that class plaintiffs lack the knowledge and monetary stake to allow them to monitor their lawyers.  Therefore, courts have to take great care in ensuring that plaintiffs' counsel will fulfill their fiduciary duties.  The court then held that the district court erred by applying an egregious misconduct standard; rather, any misconduct on behalf of plaintiffs' counsel should create a serious doubt that plaintiffs' counsel is fit to represent a class.  The court then remanded the case back to the district court so the district court could determine whether the class should be certified. 

With this decision, the Seventh Circuit is leaving less room for unethical conduct on the part of plaintiffs' counsel in class action litigation.  It is a decision that will likely be welcomed by defense counsel and class plaintiffs alike. 

William F. Auther is a partner with an active trial practice in business litigation and Kelly M. McInroy is an associate in the Phoenix office of Bowman and Brooke LLP.