The International Trade Commission: An Ideal Forum For Patent Cases Involving Imports

Editor: Tony, please describe your practice in the IP area.

Pezzano: I’ve been litigating in the patent area in a variety of different technologies for over 20 years. I’ve been fortunate from the very beginning of my career to be on major patent litigation cases, beginning with Mobil Oil Corporation v. Amoco Chemicals Corporation, 915 F. Supp. 1333 (D. Del. 1991), aff’d, 980 F.2d 742 (Fed. Cir. 1992), in the early 1990s, in which we prevailed on behalf of Mobil in a case involving the ZSM-5 catalyst and process for making plastic, leading to further litigations on behalf of the major oil companies. Another highlight was Procter & Gamble Company v. Paragon Trade Brands, Inc., 989 F. Supp. 547 (D. Del. 1997), involving patented diaper technology in which we won a favorable judgment and damages award. In still another case, we successfully defended our client Bombardier Inc. in Certain Personal Watercraft and Components Thereof, Inv. No. 337-TA-452 (2002) against Yamaha in the ITC and the Federal District Court for the Central District of California. I could go on and on, but I’ll just say that over the last ten years, although my litigation practice has focused on a wide variety of technologies in the patent area, much of my time has been spent on Hatch-Waxman litigation and in Section 337 Investigations before the ITC. We’ve represented Hoffmann-La Roche as well as Merck in a number of Hatch-Waxman cases involving drug products over the past several years, primarily in the District of New Jersey. I have also focused on major cases before the International Trade Commission over the past ten years. I’m a past president of the ITC Trial Lawyers Association.

Editor: While your practice has been before the federal district courts as well as the ITC, would you describe the jurisdiction of the ITC under Section 337 and the types of cases that come before it?

Pezzano: The ITC has in rem jurisdiction only over imported products, that is, it has jurisdiction only over the product itself. There is no personal jurisdiction or venue requirement for the ITC. Another important potential advantage for the ITC for a complainant is speed. I would consider it to be the foremost rocket docket jurisdiction in the country. One good example is the Bombardier case in which we represented Bombardier’s personal watercraft against Yamaha that had sued on 11 patents. That case went to trial within eight months of its filing. The strategy in that case was to either invalidate or render certain patents non-infringed or lacking a domestic industry on summary determination before going to trial so that we didn’t have such a voluminous case at trial. We were successful in that regard. We basically eliminated six of the patents before we even reached the hearing stage on summary determination, an example of the speed of disposition and why the complainants favor the ITC.

Also, the six administrative law judges are very knowledgeable. They constantly handle patent cases, becoming expert in this area. Both complainants and respondents can take comfort in knowing that the judges are constantly handling those types of cases.

Editor: Why are certain cases conducted in parallel with the ITC and the federal district court?

Pezzano: Often a party will sue both in the ITC as well as in federal district court, the reason being that a complainant in both tribunals wants to preserve its right to the jurisdiction of the federal district court since there is only injunctive relief in the ITC; damages are not available. If the complainant in the ITC prevails in an ITC investigation, it could then move over to the federal district court and seek damages if there are any damages to be recovered.

Editor: What remedies are available from the ITC in Section 337 investigations?

Pezzano: Only three forms of injunctive relief are available: limited exclusion orders, general exclusion orders and cease and desist orders. Limited exclusion orders are party specific as compared with a general exclusion order, which is not party specific. For example, a limited exclusion order would be with respect to the named respondents in the investigation – if the complainant prevails, the named respondents (including their affiliates) would be prohibited from importing the specific products into this country. A general exclusion order is directed specifically to the product itself. A general exclusion order occurs in the ITC under Section 1337(d) when there is circumvention. There could be a circumvention of an exclusion order, for example, in a case where it’s hard to determine who the parties are that are importing the product, or there might be a pattern of infringing importation that is occurring. If a party gets a general exclusion order, any product meeting the description of the excluded article will be enjoined from importation into this country regardless of the source of importation.

Editor: I understand the general exclusion orders are much harder to obtain than the limited exclusion orders.

Pezzano: That is correct. The ITC focuses on the statutory language relating to general exclusion from entry of articles to prevent circumvention of an exclusion order or if there is a pattern of violation. Unlike the limited exclusion order, this is another hurdle that has to be met to obtain relief.

I also want to mention in more detail the other form of injunctive relief – a cease and desist order. This relates to stockpiling of infringing goods in warehouses in this country. If a party has an inventory in the U.S. of goods that should be excluded, a cease and desist order will then prevent those goods that are already in the U.S. from being sold and distributed.

Editor: What are the steps one follows in bringing a matter to the ITC? How is the dispute finally put to rest if settlement does not occur earlier? What body enforces exclusion orders?

Pezzano: You first file a complaint. Then the commission investigates the complaint to determine if the allegations meet the pleading requirements. The ITC has 30 days after a complaint is filed to declare whether an investigation is warranted and to assign it to a judge. Much more often than not, the commission will initiate an investigation. There follows an adversarial proceeding involving discovery that lasts for about six months on average. Within ten months, a hearing will be held before an administrative law judge who issues an initial determination as to whether or not the patent has been infringed, is enforceable or unenforceable, is invalid or lacks a domestic industry. The parties then have the opportunity to petition the commission to review the initial determination, which it may or may not approve, may modify in some manner, and will finally issue a final determination, which can ultimately be appealed to the Federal Circuit Court.

For a couple of years now the ITC has instituted a mediation program that is starting to take root. Thus far this year there have been about 29 investigations that are currently subject to mediation in the ITC, representing a growing number of investigations. I will point out that mediation in the ITC proceeds in parallel with a proceeding. There are several very reputable judges who act as ITC mediation judges, one of whom is a former chief judge of the Federal Circuit Court, Paul Michel.

As to your question: how do ITC exclusion orders get enforced? Customs enforces the ITC exclusion orders and prevents the importation into this country of excluded goods. Customs does rely time and again on the parties in an ITC investigation to provide it with information to assist in its exclusion of goods that are under an ITC exclusion order. From a respondent’s standpoint, if there is an exclusion order that does not include a given product, respondents can provide information to assist Customs in its determination that the non-excluded product can continue to be imported.

Editor: Please describe the case involving Hoffmann-La Roche et al. v. Amgen dismissing a patent infringement proceeding commenced by Amgen.

Pezzano: This case (Certain Products and Pharmaceutical Compositions Containing Recombinant Human Erythropoietin, Inv. No. 337-TA-568) is interesting because there aren’t many pharmaceutical cases before the International Trade Commission. One reason is that many pharmaceutical cases are Hatch-Waxman cases in the federal district courts, which revolve around the 30-month FDA stay date, wherein, once the brand pharmaceutical company files a complaint, the FDA will not grant the generic final approval of its ANDA product for 30 months absent a final judgment that the brand’s asserted patent is not infringed, invalid or unenforceable. That 30-month stay is not available for cases filed in the ITC. The Roche v. Amgen ITC case did not involve a generic product, however. In that case, Amgen initiated a proceeding against Roche directed to the importation of a product into the United States that Amgen believed was infringing their patent. Roche’s position was that the importations solely related to importations to obtain FDA approval for the product. For example, to assist in clinical studies in obtaining FDA approval to be able to market the product, those types of activities are sanctioned under 35 U.S.C. Section 271(e)(1). Early in that case we filed a summary determination and obtained an early dismissal from the ITC. Ultimately, the case went up on appeal before the Federal Circuit but was then remanded back to the ITC on certain issues. However, the bottom line is the case did not proceed with full discovery in the ITC, never proceeded to a hearing and was ultimately terminated in January of this year as a result of a settlement between the parties.

Editor: You have participated on panels sponsored by the ITCLA relating to improving electronic discovery at the ITC. What were some of your recommendations?

Pezzano: I’ve been very fortunate to speak on behalf of the ITC Trial Lawyers Association, a subcommittee of which I chaired, that put together a proposal on electronic discovery revisions to the rules at the ITC as well as a proposal relating to administrative law judges’ ground rules and one directed to amending protective orders on electronic discovery. Those proposals are currently being considered by the commission along with other proposals on streamlining e-discovery submitted by the Federal Circuit Advisory Committee, the American Bar Association and other associations. The ITCLA’s proposals before the commission include that the parties should meet and confer early in a proceeding on electronic discovery issues and perhaps form agreements on the number of custodians that are required to produce electronic information in an ITC investigation; the number of search terms that are to be utilized to collect and gather electronic information; still other proposals relating to electronic discovery related to protective orders; and protecting a firm’s source code, considered the crown jewel of a company in an ITC investigation. That is just a short summary that does not list all the issues we presented to the commission.

Editor: Please cite a case that you have resolved using mediation, redesigning around patents or stipulated settlements?

Pezzano: In one of the cases, we represented Ericsson and Sony Ericsson in two pending investigations against Samsung. In one investigation, Certain Wireless Communication Devices, Components Thereof, And Products Containing Same, Inv. No. 337-TA-583, Ericsson asserted patents against Samsung while Samsung asserted patents against Ericsson in another investigation (Certain Wireless Communication Equipment, Articles Therein, And Products Containing The Same, Inv. No. 337-TA-577), both of which proceeded simultaneously. While parties are encouraged during the course of an ITC investigation to settle, negotiations in settlement oftentimes escalate during important benchmarks in an investigation. For example, claim construction is one such benchmark that occurs during an investigation, and some of the judges at the ITC are now having claim construction pre-hearings, called Markman hearings, which often result in the parties deciding to settle the matter. In our case, for example, one of the cases was about ready to proceed to a full hearing before the administrative law judge and the other case had just completed briefing on claim construction, both instances marking a benchmark the parties reached in assessing the merits of their respective cases, situations that lent themselves to a settlement of both cases.

Editor: I suppose one reason so many of these companies, both the medical instrument and pharma companies as well as the software companies, are trying to accrue so many patents is so that they have a countersuit in the event their patent is challenged.