backITC Section 337 Update – April 11, 2016
Legislation Introduced to Amend Section 337 – On March 22, 2016, Representatives Cárdenas (D-CA) and Farenthold (R-TX) introduced the “Trade Protection Not Troll Protection Act,” which amends Section 337 with respect to, among other things, the domestic industry requirement. The purpose of the legislation is to effect the following: (1) ensure that the resources of the International Trade Commission (“Commission”) are “focused on protecting genuine domestic industries,” (2) restore the confidence of U.S. trading partners that the Commission “will not be a duplicative forum for enforcing intellectual property rights” that can be enforced in U.S. district courts, and (3) “safeguard the public health and welfare and the United States economy (including competitive conditions).”
The Act would amend Subsection (a) of 19 U.S.C. § 1337 in several respects. Subparagraph (a)(3)(C) would be amended by striking “engineering, research and development, or licensing” and inserting “engineering and research and development; or” and by adding after subparagraph (C) the following: “(D) substantial investment in licensing activities that leads to the adoption and development of articles that incorporate the patent, copyright, trademark, mask work, or design.” And it adds after paragraph (3) the following: “(4) [f]or purposes of paragraph (3), the complainant may not rely upon activities by its licensees unless the license leads to the adoption and development of articles that incorporate the claimed patent, copyright, trademark, mask work, or design for sale in the United States.”
The Act also would amend Subsection (b) by adding proposed subparagraphs (4)(A) and (4)(B) at the end of the existing subsection. Proposed subparagraph (4)(A) would state, in part, that “[t]he Commission shall identify, at the beginning of an investigation, whether the investigation presents a dispositive issue appropriate for an expedited fact finding and an abbreviated hearing limited to that issue, and shall direct the assigned administrative law judge to rule on such issue early in the investigation.” Proposed subparagraph (4)(B) states that “[i]f the Commission identifies a domestic industry as the dispositive issue in question, the Commission shall direct the assigned administrative law judge to expedite fact finding in the investigation on the domestic industry requirement, including an early evidentiary hearing, and to issue an initial determination on this matter within 100 days after the investigation is instituted.”
Federal Circuit Denies Petition for Rehearing En Banc in ClearCorrect – On March 31, the Federal Circuit denied petitions for rehearing en banc in ClearCorrect Operating LLC v. ITC, Investigation No. 337-TA-833. As previously reported in the Update, this case addressed an important question regarding Commission jurisdiction over Section 337 claims. The Commission had originally upheld the administrative law judge’s Initial Determination that the articles accused of infringement, electronically transmitted digital models used in constructing dental appliances, were “articles” under Section 337. The Federal Circuit then issued a panel opinion reversing the Commission, claiming that the Commission had improperly expanded the scope of its jurisdiction to include electronic transmissions.
In January 2016, the Commission and Align Technology, Inc. petitioned the Federal Circuit for rehearing en banc. The Commission argued against the Federal Circuit’s narrow definition of “articles,” asserting that the panel erred in finding that there was no ambiguity in the statute, and in subsequently denying the Commission the deference required by the Supreme Court’s decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Several interested parties - including the Association of American Publishers, the International Association for Law & Economics, the Motion Picture Association of America, the Recording Industry Association of America, and the International Trade Commission Trial Lawyers Association – filed amicus curiae briefs in support of rehearing.
The Federal Circuit’s denial of rehearing means that the panel decision remains in effect, and the Commission does not have Section 337 jurisdiction over electronic transmissions of digital goods. The denial was supported by Chief Judge Prost, Judges O’Malley, and Judge Wallach. Judge Newman wrote in dissent, highlighting in particular the conflict between the Federal Circuit’s ruling in this case and its recent decision in Suprema, Inc. v. International Trade Commission, where “the court reaffirmed that ‘the legislative history [of Section 337] consistently evidences Congressional intent to vest the Commission with broad enforcement authority to remedy unfair trade acts.’”