Polsinelli - USA
With its accelerated schedules and injunction-like exclusion order remedy barring infringing imports, the US International Trade Commission (ITC) can provide rights holders with an attractive venue. It has recognised procedures to determine whether a new or redesigned product infringes the IP rights at issue and comes under an exclusion order. Understandably, these can be hotly contested disputes and recent developments have made them more complex, likely increasing the effort required to decide whether a redesign is within the scope of an exclusion order.
In broad terms, there are three avenues for ascertaining this. First, a redesign can be adjudicated along with the originally accused products in the initial violation phase. Second, when the ITC issues an exclusion order, US Customs and Border Protection implements it, blocking goods at the ports of entry. Procedures available through Customs provide the second route. An importer can request a prospective Customs ruling to determine whether a redesigned product falls outside an ITC exclusion order; Customs has a relatively fast process (involving the rights holder) for making such rulings. Separately, if Customs prevents the import of a (redesigned) product, the importer can protest via a process not involving the rights holder. If unsuccessful, the importer can appeal to the Court of International Trade. The third avenue is with the ITC, which provides procedures both for modification of an exclusion order (eg, to carve out a redesigned product), and for issuing an advisory opinion if a redesigned product would violate an existing exclusion order.
Litigating product redesigns in the initial proceeding
The ITC has cited a four-part test to decide whether a redesigned product is ripe for adjudication during the initial violation proceeding if:
- the product is within the scope of the investigation;
- it has been imported;
- it is sufficiently fixed in design; and
- it has been sufficiently disclosed during discovery.
Recent decisions have made it harder to predict whether a redesign will be adjudicated in the proceeding. For example, where a judge initially rejected adjudication of a redesign with relatively sparse disclosure during fact discovery that was later explained during expert reports and via trial witnesses, a divided commission reversed this. “This approach,” a dissenting judge observed, “obligates a complainant to investigate alternative or redesigned products of dubious viability, including products that a respondent has repeatedly represented were not made altogether, intended for, or imported into the U.S. market”. Other recent decisions tend in the other direction.
The upshot is that, on the one hand, rights holders need to be prepared to diligently pursue potential redesigns during discovery to avoid surprises and to ensure they have adequate time to develop their case. On the other, accused infringers must be prepared to design, document, manufacture and test concrete product redesigns believed to be clear of infringement under the normally compressed schedule in the ITC as well as import and provide timely discovery on them.
Growing redesign disputed complexity after entry of an exclusion order
After entry of an exclusion order, multiple uncoordinated options for litigating product redesign are producing increasingly complex disputes. An importer can obtain a ruling that a redesign is outside of an ITC exclusion order both via Customs and the ITC. Many claim that Customs, on average, acts more quickly and prefer it tactically as a means of clearing a redesign promptly. However, this can lead to parallel, potentially inconsistent proceedings from the two authorities.
Recent disputes highlight the potential problems. In one, the accused infringer unsuccessfully tried to have its redesign adjudicated in an ITC proceeding. After entry of an exclusion order, it protested when Customs excluded some of the redesigned product, then brought its challenge to the Court of International Trade (CIT). The ITC unsuccessfully attempted to intervene in the CIT proceeding to press the position it should decide the issue. In parallel, the ITC instituted its own modification proceeding to determine if the exclusion order should be modified. Ultimately, the same substantive decision was reached on the redesign, but not on harmony among the competing fora.
In another recent dispute, after the ITC entered an exclusion order, the accused infringer redesigned its product and requested a Customs ruling that it was not covered by the exclusion order. With the patent-owner participating, Customs found the redesigned products were outside of the exclusion order. The patent owner then requested that the ITC institute a modification proceeding to specify the exclusion order covered the redesigned product. Over the importer’s objection that it lacked the authority to do, the ITC instituted the proceeding. The importer unsuccessfully petitioned the appellate court to halt the proceeding, raising two basic challenges to the ITC’s authority to act as contemplated in the modification proceeding. The appellate court rejected the petition without ruling on those basic challenges, leaving open questions about current modification proceeding practice.
Moreover, the ITC also recently ordered that an importer who unsuccessfully sought to have a redesigned trade dress adjudicated, was required to obtain a ruling from the ITC via an advisory opinion or a modification proceeding first, instead of adjudicating a determination by Customs.
Current and future practice
For would-be importers, having a redesign adjudicated in the first instance during the ITC’s initial violation determination still provides the quickest path to market. If that is practically or legally unfeasible, after an exclusion order is entered, an accused infringer faces trade-offs in timing, certainty and simplicity among competing tribunals available to adjudicate redesigns, with the potential to encounter serial oppositions from the rights holder.
Under the current regime, rights holders confront a more complex landscape of potential challenges to surmount after obtaining an exclusion order to apply it to attempted design-arounds. Looking forward, expect to see efforts by the ITC and other stakeholders to reduce the complexity involved in definitively determining whether a redesign is, or is not, within the scope of an exclusion order.