By Wil Rao
IP protection and litigation continue to demand ever-increasing attention by biotech, pharmaceutical, and chemical companies. Having the right weapons readily available to combat IP infringement is, to state the obvious, of paramount importance.
In particular, the U.S. International Trade Commission (ITC) has become an increasingly viable and important battleground for patent litigation, in addition to, or instead of, the U.S. district court system.
Many life sciences companies such as Merck, Amgen, Pfizer, and Bristol-Myers Squibb have already used (or have had used against them) the ITC to protect U.S. IP rights in an attempt to bar the importation into the United States of certain products. Turning to the ITC, of course, is not the right venue for every life sciences company’s IP disputes. But, in the right circumstances, it can provide a highly effective option.
The ITC is one of two venues for U.S. IP litigation, and it is described as an “independent, quasi-judicial federal agency with broad investigative responsibilities on matters of trade.” Its panel of six commissioners is the ultimate decision maker. The ITC is authorized to investigate unfair methods of competition and unfair acts in the importation of articles into the United States, not including import and volume pricing. As a sign of the growing influence of the ITC, in 2008, nearly 15% of the patent trials conducted in the United States took place at the ITC.
ITC Proceedings And Available Remedies
ITC investigations are litigation-like proceedings. Like a district court case, an ITC investigation is initiated by a private party filing a complaint. An IP rights holder, though, must show additional evidentiary proof beyond that required in a U.S. district court case (e.g., a “domestic industry” and “importation”). An administrative law judge (ALJ) presides over each IP investigation and has initial decision-making authority on behalf of the commissioners. There are no juries.
During an ITC investigation, the private parties and the ITC’s Office of Unfair Imports and Injury (OUII) conduct discovery, which may be followed by a hearing (i.e. trial) on the merits. OUII represents the U.S. public’s interest by investigating the factual and legal bases of an IP infringement claim.
After an initial determination by the ALJ (before or after a hearing), the commissioners may review or affirm that determination and issue any appropriate, authorized remedy, which may then become the ITC’s decision. Unlike district court cases, the ITC’s decision is then subject to review by the President. The ITC’s decision can be appealed to the U.S. Court of Appeals for the Federal Circuit.
Only certain remedies are available at the ITC. The ITC is not authorized to award patent infringement damages, but it can issue an exclusion order barring the infringing products. An exclusion order directs U.S. Customs and Border Protection (U.S. Customs) to exclude products from entry into the United States. The ITC may also issue cease and desist orders (CDOs). A CDO forbids unfair practices in the United States by restricting existing inventory of infringing products. Violation of an ITC’s CDO can be severe — $100,000 per day or twice the imported goods’ domestic value, whichever is greater. The ITC’s exclusionary power is obviously attractive to both foreign and domestic life sciences companies because obtaining an injunction (i.e. to prohibit a competitor from infringing a U.S. patent) in U.S. district court has arguably become more difficult, more time-consuming, and potentially more expensive overall.
The ITC Can Protect A Wide Range Of Life Sciences IP
ITC investigations may involve statutory and nonstatutory IP and can include a wide range of IP rights. In the patent and trade secret context, investigations could involve, for example, an imported life sciences product, intermediate or derivative, or process for making such an imported article. The ITC has conducted investigations involving a wide range of life sciences technologies as well as products being imported from locations throughout the world.
The ITC Is Not The Right Weapon For Every Dispute
ITC litigation is complex. It involves special legal procedures, high technology, and fast resolution — a recipe for success or, if a company is unprepared for whatever reason, disaster. As an initial matter, competent patent counsel is a must. Counsel must have experience in managing complex IP litigation, technical backgrounds to grasp the life sciences technology, knowledge of ITC procedures and complexities, and an ability to navigate foreign clients/opponents and discovery. Disadvantages of ITC litigation can include the following:
No money damages are available for infringement. The ITC issues prospective relief (i.e. an exclusion order). Money damages must be sought through parallel litigation in U.S. district court.
Additional proofs are needed to prevail at the ITC. For example, an IP rights holder must show there is a “domestic industry” and “importation.” These additional requirements do not exist in U.S. district court litigation.
Juries are not available. In cases before the ITC, a single judge (the ALJ) is the fact finder.
The U.S. district courts are not bound by the ITC decision and record. In practice, district courts show deference to the ITC’s record and decisions. The practical downside, though, is that if money damages are significant, one could be faced with paying for two litigations (if both the ITC and district court are selected and pursued) instead of one district court case.
The ITC litigation’s breakneck pace may not be conducive to highly complex/nuanced cases, for example, due to the number of issues or parties. Some lawyers counsel clients to litigate in the district court because the controlled and slower pace allows for the case development.
The ITC’s speedy case track risks missteps. The fast pace allows little time to change course or correct strategies that do not work out as planned. The demanding schedule can work to a complainant’s favor, since it has time to prepare and chooses when to file. At the same time, infringers can benefit from the speed factor as well, particularly where there are multiple infringers coordinating against a sole IP rights holder or if the IP rights holder half-heartedly approaches preparation.
The powerful remedy can be limited by effect on the “public interest.” The ITC balances the IP holder’s rights against the effect of exclusion upon the public health and welfare, competitive conditions in the U.S. economy, the production of like or directly competitive articles, and U.S. consumers. Decisions refusing to issue an exclusion order are rare. But, the public interest consideration may have significance in life sciences-based investigations.
Additionally, some life sciences matters may not benefit from the ITC. For example, certain life sciences patent disputes may involve claims of “safe harbor” protections. Acts falling into the “safe harbor” category can allow for importation of an infringing drug to the extent that the imported drug was used for activities “reasonably related” to obtaining FDA approval of the drug, for example. Such protections apply at the ITC. In addition, some disputes may be better, faster, and more cheaply handled in a completely different administrative forum, like the FDA. Other disputes involving generic manufacturers seeking abbreviated new drug application (ANDA) approval are normally brought in U.S. district court. Due to these issues and others, each case must be evaluated closely before deciding to go to the ITC.
Advantages Of Leading Your Company Into Battle At The ITC
At a high level, for those IP disputes suited for the ITC, advantages the ITC offers include:
A powerful remedy (i.e. exclusion order). This injunctive-type remedy may be valuable for life sciences products with short product-life cycles and longer regulatory/patenting cycles.
Reasonably fast resolution. The ITC strives to complete investigations within 12 to 15 months. The evidentiary hearing typically occurs within six to nine months from initiation of the investigation. Such time frame “certainty” can translate into more controllable fees and costs, though the time-compressed nature of an ITC proceeding can also accelerate fees and costs much earlier than in district court cases.
A narrow scope of legal issues heard by the ITC. There are no counterclaims that can be decided at the ITC (but they can be transferred to or separately filed in a district court), and certain legal and equitable defenses are not available at the ITC.
In rem jurisdiction. Essentially, this means the ITC has jurisdiction over products imported (or imminently to be imported) into the United States. A foreign entity, therefore, need not be subject to personal jurisdiction to exclude such products as in a U.S. district court. Such jurisdiction can reduce issues that sometimes exist in U.S. district court litigation in exercising power over a foreign entity.
A remedy policed by U.S. Customs. U.S. Customs provides special procedures for enforcement of an ITC exclusion order.
Expertise in patent and other IP litigation. The ALJs hear almost exclusively IP cases and typically have had litigation experience before becoming ALJs. Thus, the decision maker will have extensive IP knowledge.
Powerful Litigation Asset
With the increasing globalization of the life sciences marketplace, industry executives are currently navigating a much broader range of IP issues than they have in the past. In this constantly evolving industry, the ITC can offer a powerful litigation weapon. But, the ITC is a weapon to be wielded with care, and life science executives should carefully consider the pros and cons of using the ITC (or having it being used against them) when shaping their IP strategies.
About The Author
Wil Rao is a shareholder at the IP-focused law firm of McAndrews, Held & Malloy, Ltd. in Chicago. He is a patent lawyer with extensive IP-based patent litigation experience, including cases involving the ITC and U.S. district courts in connection with IP disputes outside of the United States. This article represents his present views alone.