Coping strategies of 337 investigation

Most enterprises in China actively respond to Section 337, which is a very gratifying phenomenon. Because a minor infringement exclusion order is fatal enough for the defendant to continue to operate. A series of China products, such as lighters, printer cartridges, lysine products, batteries and other products, have been accused of infringing intellectual property rights in the United States International Trade Commission (ITC). In the past, many China companies chose to ignore it, and most of them responded positively, which is a very gratifying phenomenon. This paper will discuss how to deal with the administrative litigation of section 337 in the United States. The plaintiff who brings a Section 337 lawsuit in the United States can be an American company, a foreign company, such as a Japanese company, or a German company with intellectual property rights in the United States. Section 337 stipulates that if any import act is unfair (mainly for infringement of patent rights or trademark rights, including infringement of copyright, improper use of trade secrets, infringement of common law trademark rights and other commercial infringements), and may inhibit or monopolize American industries, the US International Trade Commission may conduct an investigation. The indictment submitted to ITC must prove that the products covered by the relevant patents have formed domestic industries, or that the above industries are emerging in the United States. The requirements of "domestic industry" are divided into two parts, one involving technology and the other involving economy. In terms of technology, the plaintiff must prove that the products covered by the patent have been produced or sold in the United States. Economically, the plaintiff must prove that he has invested a considerable amount in manufacturing facilities and equipment, spent a lot of manpower and financial resources, or made substantial investment in product development, including engineering, research and development or licensing. If ITC confirms that the imported products infringe intellectual property rights through investigation and trial, it can issue two orders according to Article 337: a "stop order" and a temporary or permanent "prohibition order" or "exclusion order". The former is similar to an injunction issued by the US District Court, requiring the defendant to stop the infringement immediately. If the defendant insists on importing infringing products into the United States and sells them regardless of this order, he may be fined a lot. The latter explicitly prohibits infringing products from entering the United States. ITC can issue a comprehensive exclusion order, not for specific importers, but for infringing products, prohibiting all infringing products of specific types from being imported into the United States. Even the limited exclusion order applies to all infringing products of the defendant. ITC's exclusion order does not specify the specific model, but only describes the infringing products that are prohibited from being imported. Therefore, if the American market is the defendant's main market, then an exclusion order that determines the minimum infringement is fatal enough to prevent the defendant from continuing to operate. The injunction was also used to prevent the defendant from selling the inventory of infringing products that had been imported into the United States. Section 337 divides unfair trade imported by the United States into 1 and ordinary unfair trade. The so-called ordinary unfair trade behavior refers to the unfair competition means and improper behavior of the owner, importer or underwriter when importing products into the United States or selling them after import. But its illegality must meet two conditions: first, there are related industries or industries being established in the United States; Second, its damage has reached a considerable level. 2. Unfair trade in intellectual property rights refers to the act of selling products in the United States that infringe the copyright, patent and trademark rights protected by American laws. As long as there are industries related to the industry in the United States or the industry is being established, unfair trade practices involving intellectual property rights are illegal, and there is no need to prove whether it has caused damage to American industries. Section 337 has two characteristics, one is that the investigation procedure is short and fast (the investigation is limited to 12 or 15 months), and the other is that the remedial measures are very severe. Once the infringement is determined, not only the defendant's related products may be permanently banned from entering the United States, but also similar products in the same industry in the defendant may be permanently banned from entering the American market. Section 337 litigation is an administrative litigation, which does not give the plaintiff any economic compensation except for quick ruling and injunction. Therefore, the plaintiff often takes a two-pronged approach, on the one hand, administrative litigation in ITC, and at the same time, civil tort litigation in the federal district court to obtain economic compensation. In the process of administrative litigation, the federal district court usually suspends the trial of civil litigation. Before the products are exported to the United States, enterprises should first raise their awareness of intellectual property rights to prevent problems before they happen. Enterprises in China should make preparations in advance, first of all, carry out patent search to determine whether it is possible to infringe American patents involving products or product manufacturing methods, including inviting experts to analyze the patent protection status of products in the United States. Compared with the loss of losing the case, the cost of patent search is really negligible. If it is found that the patent rights of American companies may be infringed, the products should be modified in time to avoid infringement of intellectual property rights. If there is the possibility of infringement, other methods can be used to bypass the patent and avoid infringement. If some core patents can't be bypassed, you can also get a patent license from the patent owner, or reach an agreement with the importer, and the importer will bear the tort liability. For the 337 investigation case, if the ostrich policy of not responding to the lawsuit is adopted, ITC will make a default judgment, which means that the products under investigation will lose the American market for a long time or even forever. Once the defendant actively responds to the lawsuit, he can at least get bargaining chips, win the case or settle with the plaintiff out of court. Some defendant companies think that as long as they close the company and re-register a company to make a comeback, they can avoid the consequences of default judgment, which is very fallacious. As mentioned above, ITC's injunction or exclusion order is aimed at infringing products, not specific companies. Even if the company changes its face, as long as it still produces the same infringing products, it still cannot enter the American market. China is transforming into an export-oriented economy, and many enterprises often produce similar products in one industry. Section 337 lawsuits often target many China enterprises at the same time. In this case, Chinese enterprises can unite to respond to the lawsuit, thus reducing the litigation cost. Chambers of commerce in the industry can often organize and coordinate. For example, in Wenzhou lighter lawsuit, Wenzhou Smoking Appliances Chamber of Commerce played an indispensable role. There are three interwoven situations in the actual operation of ITC investigation, which become obstacles for defendants in lawsuits involving multiple patent allegations: (1) The time for obtaining evidence from the plaintiff and the third party is very limited; (2) The time for administrative judges to hold hearings and issue rulings is very limited; (3) The Committee requires the administrative judge to make a ruling on every dispute raised at the hearing. Therefore, even if the administrative judge decides that there is no infringement because the patent is invalid, he must still make a ruling on all disputes concerning the above-mentioned patent raised at the hearing. The time limit will be very beneficial to the plaintiff, and with the increase of the number of disputes and the approach of the trial, it will continue to put pressure on the defendant. The defendant can reduce the pressure exerted by the plaintiff and reduce the risk through the motion of summary judgment. The suggestion of summary adjudication can only be aimed at major disputes, such as non-existence of infringement, invalid or unenforceable patent, lack of domestic industry, etc. If successful, a summary ruling will be made and the patent will be revoked from the scope of investigation without a final hearing. Even if the plaintiff has irrefutable infringement position and patent validity, the above patent is not within the scope of investigation by the Committee. The defendant can spend more time at the hearing to further state the remaining patents and provide sufficient evidence for each defense. Even if the motion of summary adjudication is unsuccessful, it will still help to narrow the scope of the dispute. At least the above motion can test the position of the administrative judge in this defense. If the motion is completely rejected, the defendant may waive the above defense and state other defenses at the hearing. If the administrative judge rejects the motion but is interested in the defense, the defendant can deepen the debate and provide supplementary evidence, which can be submitted at the hearing or in the subsequent summary ruling motion. During the trial, the defendant can also argue that his product does not infringe the patent right of the other party. The right of patent right may include one or more technical elements. Only when the accused product involves all the technical elements of rights can it be judged as infringement, otherwise it is not infringement. In addition, the defendant can also argue that the plaintiff's patent right is invalid, such as: the coverage of the patent right is too wide, the plaintiff already has similar technology when applying for the patent, and the patent lacks novelty. If we analyze the strategy after losing the case, the defendant may lose the case, or be convicted of infringement after defending, it does not mean that the whole army is wiped out. First of all, the defendant can bypass the patent, redesign the product according to the analysis or ITC's infringement, and regain the American market. If you encounter an unavoidable core patent, you can negotiate with the plaintiff to become the defendant's OEM, that is, to produce products with the plaintiff's brand. This will certainly make the plaintiff get more profits, but if the market is huge, the defendant can still survive through small profits but quick turnover. Secondly, the defendant can also negotiate with the plaintiff to obtain a patent license and pay a reasonable license fee. This practice is more beneficial to the defendant, because the patent license fee can be paid from the licensee's profit as the base, which is a win-win situation. Even if the patent holder insists on sales volume as the base, the licensee can try to reduce the license fee through negotiation, not based on the whole product, but only on the value of the part involved in the patent. In addition, the defendant can negotiate with the plaintiff to establish a joint venture, and the plaintiff will provide patented technology to manufacture products in China. Because of the low labor cost in China, many foreign companies are willing to make joint ventures with China companies to reduce costs, which is also a win-win situation.