CD: Could you provide a brief overview of Section 337 as it relates to intellectual property? What particular significance does this have for technology companies?

Yonan: In the US, there are two primary ways for domestic patent holders to enforce intellectual property. One is through the US District Courts under Title 35 of the Domestic Patent Act; the other is through the United States International Trade Commission under 19 USC Section 1337 (Section 337), a trade statute that addresses unfair acts of competition in the import trade. The latter, enacted by Congress in the early 1900s, evolved over the years and affords domestic US patent holders two key remedies: one, an exclusion order, and the other, a cease and desist order, both of which may be applied against imported products that infringe their patents. These powerful remedies work in tandem with each other to keep infringing articles out of the US market – while an exclusion order prevents the importation of infringing goods, a cease and desist order restricts companies from selling or otherwise distributing infringing inventory already stockpiled within the US. Experienced Section 337 practitioners have noticed an increase in the ITC’s popularity over two key periods – first, in the mid-1980s, when we saw an influx of electronic goods from Japan, Taiwan and other Far East countries that were competing in the US market; and the second beginning about three years ago, largely the result of the smartphone wars. From these experiences, we have learned that when the market share of a ‘bet-the-company’ type of product is on the line, US companies will aggressively seek to prevent infringement of key patents and stem the loss of market share by enforcing their intellectual property rights before the Commission. While there are thousands of patent infringement actions filed each year in District Court under Title 35, it is important to note that there are far fewer investigations instituted each year under Section 337 – at their peak in 2011, there were just 70 ITC investigations, 48 in 2012, and 39 in 2013. Partly because of the cost associated with such investigations, the time constraints and speed under which they must be completed, as well as the unique requirements imposed by Section 337 – the accused products must be imported into the US and the patent holder must show that a domestic industry exists in the US or is being established – the use of Section 337 is not appropriate in every instance. However, when the ‘facts’ make sense, Section 337 can be a very effective tool for a US patent holder, as part of a larger, more sophisticated IP enforcement strategy.

Apr-Jun 2014 issue

Sterne Kessler Goldstein Fox