ITC Section 337 Update – March 2017

by King & Spalding
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Commission Reverses ALJ’s Dismissal Of U.S. Steel’s False Designation Of Origin Claim And Sets Hearing On U.S. Steel’s Antitrust Claim In Certain Carbon Steel; U.S. Steel Withdraws Trade Secret Theft Claim – 2017 has produced a number of significant developments in the landmark Section 337 investigation on Certain Carbon Steel, Inv. No. 337-TA-1002. Last year, U.S. Steel filed a Section 337 complaint against 40 Chinese steel producers and distributors alleging a number of novel legal theories, including antitrust price fixing by certain Chinese steel producers, Lanham Act violations based on false designations of origin of imported steel, and a trade secret theft claim based on alleged cybertheft by the Chinese Government, which allegedly benefitted a Chinese steel producer. Since then the the ALJ has issued several decisions that were designed to terminate the investigation of these novel claims. On November 14, 2016, Administrative Law Judge Dee Lord issued an Initial Determination (i.e., Order No. 38) terminating the investigation into U.S. Steel’s antitrust price fixing claim based on U.S. Steel’s alleged failure to allege “antitrust injury.” On January 11, 2017, the ALJ issued an Initial Determination (i.e., Order No. 46) terminating U.S. Steel’s Lanham Act false designation of origin claim based on U.S. Steel’s alleged failure to allege importation by “direct evidence” of “specific instances of importation.” Finally, U.S. Steel voluntarily withdrew its trade secret theft claim on February 15, 2017.

On February 24, 2016, however, the International Trade Commission (“the Commission”) scheduled a hearing on U.S. Steel’s antitrust price fixing claim. The Commission modified that announcement on March 3, when it asked for briefing on additional issues from members of the public and re-scheduled the hearing. Comments from the public are due on March 27, 2017, and the parties’ responses to the public interest comments are due on April 3, 2017. The hearing on the antitrust price fixing claims is now scheduled for April 20, 2017.

Moreover, on February 27, 2017, the Commission issued a notice reversing the ALJ’s termination of the Lanham Act claim and remanded the investigation to the ALJ for further proceedings. The Commission’s full opinion is not yet available in public form. As a result of these actions, potentially two of U.S. Steel’s novel Section 337 claims may be resurrected for final decision by the ALJ and the Commission. – By Jeffrey Telep

Commission Entertains Multiple Section 101 Arguments In 2016 – The Commission has experienced an increase in the number of patents being challenged under 35 U.S.C. § 101 in the wake of the Supreme Court’s decisions in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014) and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). In calendar year 2016, ALJs issued five Initial Determinations (“IDs”) in Section 337 actions resolving whether the asserted patent claims were invalid under 35 U.S.C. § 101. Every ID concluded that the asserted claims were invalid because they failed to claim an invention eligible for patent protection under 35 U.S.C. § 101. The Commission elected not to review or affirmed as modified four of the five decisions and vacated the fifth due to fact issues that required a hearing to resolve.

The issue of invalidity under § 101 typically is raised after discovery has been undertaken through a motion for summary determination.  In Certain Portable Electronic Devices and Components Thereof, Inv. No. 337-TA-994 (the “-994 Investigation”), however, the Commission instructed the ALJ to conduct an evidentiary hearing on the issue of § 101 validity within 100 days of institution of the investigation pursuant to the Commission’s 100-Day Procedure.

The challenged claims in all of these Investigations generally have involved patents that claim computer-implemented methods or computer-based systems. Examples include wearable health and fitness tracking devices, imaging and manipulating information on a paper check, and selecting a track stored on a portable media player. To assess patent eligibility, the Commission has applied the two-part test enunciated by the Supreme Court in Alice. The first step determines whether a patent is drawn to a natural phenomenon or an abstract idea. If the answer to the first step is yes, then the second step asks whether the claim nonetheless identifies an “inventive concept” sufficient to transform the ineligible idea into patent-eligible subject matter.

Under the first step, as in the -973 Investigation ALJs have followed the ad hoc practice of comparing the claims at issue to those claims already found to be directed to an abstract idea in previous cases, employed by both the Supreme Court and Federal Circuit. The Commission has consistently determined that a claimed invention is an abstract idea when the patent claims can be characterized as something that is just a computer replacing human activity. Examples of abstract ideas include claims to something “which can be performed mentally,” claims “which are the equivalent of human mental work” or claims to “activities described generally [that] can be performed by human beings without computers (albeit less quickly and efficiently),” as seen in the -963 Investigation. This result is not altered when the claims recite an idea performed by conventional electronic devices like a general purpose computer or CPU. For instance, as quoted in the -994 Investigation, “the use of generic computer technology, however ‘specific’ to the particular environment, will not rescue a claim from ineligibility, if the functionality described constitutes an abstract idea.”

Under the second step, the Commission consistently determined that an abstract idea was not transformed into a patent-eligible inventive concept. The Commission has made clear that it is not sufficiently inventive to employ conventional means or implement the abstract idea on a generic computer or processor. Nor is it sufficient to claim as inventive the improved speed or efficiency inherent in applying the abstract idea on a computer. Rather, the claims must disclose, as in the -994 Investigation, “additional features indicating more than ‘well-understood, routine, conventional activity” and must “narrow, confine or otherwise tie down the claim so that, in practical terms it does not cover the full abstract idea itself.”

In view of the Commission’s growing track record of invalidating computer-based claims under 35 U.S.C. § 101, and other factors, § 101 challenges are likely to continue to be a prevalent feature of Section 337 Investigations when the asserted patent claims involve a computer-based invention. – By Jeff Mills

Commission Issues Final Determination in Lithium Metal Oxide Cathode Materials Affirming Initial Determination In Part Following First Commission Hearing In 10 Years – Following a rare Commission hearing on laches, remedy, and the public interest, on January 26, 2017, the Commission issued its final determination in Certain Lithium Metal Oxide Cathode Materials, Inv. No. 337-TA-951. The Commission’s hearing was the first hearing since the hearing on remedy in Certain Baseband Processor Chips, Inv. No. 337-TA-543. In the -951 investigation, the Commission affirmed, in part, the initial determination (“ID”) that Respondents Umicore N.V. and Umicore USA Inc. (collectively “Umicore”) violated Section 337. The Complainants, BASF Corporation (“BASF”) and UChicago Argonne LLC (“Argonne”), alleged that Unicore indirectly infringed certain patent claims when its customers used the accused products in a “positive electrode, electrochemical call, or battery in the United States.”

In addressing the laches defense raised by Umicore, the Commission vacated the portion of the ID that held that laches was an available defense in Section 337 investigations. Umicore had argued that SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 807 F.3d 1311 (Fed. Cir. 2015), authorized the defense of laches in Section 337 investigations because it overruled A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992)), on which the Commission relied to preclude the laches defense. The ALJ held that SCA Hygiene did not “alter the principle that ‘laches does not provide … any meaningful defense in a Section 337 investigation.’” The Commission took no position as to whether laches is available as a defense in Section 337 investigations because SCA Hygiene is currently pending before the U.S. Supreme Court. But it found that even if the defense were available, the facts did not support it.

The Commission also found that Umicore contributorily infringed the asserted patent claims, but reversed the ID’s finding that Umicore did not induce infringement because it had a good-faith belief of non-infringement. While the Commission took no position on the legal issue of whether a good-faith belief in non-infringement can rebut a prima facie showing of contributory infringement, it found that the facts did not support Umicore’s claim of good-faith belief of non-infringement.

The Commission issued a limited exclusion order, but rejected the request of BASF and Argonne that it include a provision requiring that the Commission, rather U.S. Customs and Border Protection (“CBP”), adjudicate any purported redesigns before importation, noting that CBP is tasked with administering Commission exclusion orders. The Commission also declined to issue a cease and desist order, and found that the limited exclusion order was not precluded by the public interest factors under Section 337(d). – By Kevin Dinan

Supreme Court Denies Certiorari Over Sino Legend’s Trade Secret Theft Challenge – On January 9, 2017, the Supreme Court denied the petition of certiorari from Sino Legend Chemical Co., Ltd. (“Sino”) in a litigation stemming from SI Group, Inc.’s (“SI”) Section 337 complaint. In 2012, SI – a New York company – filed a complaint with the Commission alleging a Section 337 violation with regard to the sale for importation, importation, or sale after importation into the United States of rubber resin by means of trade secret misappropriation. On June 17, 2013, the presiding administrative law judge (“ALJ”) found that Sino and certain of its affiliated companies and shareholders were in possession of an SI trade secret that it misappropriated, leading to a violation of Section 337. In January 2014, the Commission upheld in part the ALJ’s decision, finding Sino Legend ZJG; SLHG Ltd.; Sino Legend Marshall Islands; PMI; Red Avenue Hong Kong; Sino Legend HGL; Shanghai Lunsai; and Red Avenue BV to be in violation of Section 337. The Commission issued a limited exclusion order over the rubber resin products that infringed on SI’s specific trade secrets.

Facing a ten-year import ban, Sino challenged the Commission’s decision in the Federal Circuit and, when unsuccessful, petitioned for certiorari at the Supreme Court. Sino challenged the Commission’s jurisdiction to rule on trade secret misappropriation claims which were “alleged to have occurred outside the United States.” Sino criticized the Federal Circuit’s ruling in TianRui Grp. Co. v. ITC, 661 F.3d 1322 (Fed. Cir. 2011), where “the Federal Circuit holds that Section 337(a)(1)(A) reaches across the globe, permitting the [Commission] to apply U.S. law to regulate unfair business practices wherever they occur—as long as the alleged unfair business practice is in some way connected to the production of a good subsequently imported into the United States.” This, Sino argued, is an impermissible extraterritorial extension of Section 337.

Significantly, Sino was joined in its Supreme Court gambit by the Chinese government, whose Ministry of Commerce Trade Remedy and Investigation Bureau (“TRB”) filed an amicus brief in support of Sino’s position. TRB wrote that it was “disappointed by recent actions of the [Commission],” and “[i]n wrongly interpreting Section 337 of the Tariff Act to allow the Commission to bar imports into the United States based on alleged actions conducted, and adjudicated, wholly within the borders of China, the Commission has impugned the sovereignty of China and refused to accord the comity expected of a trade partner.”

With the Supreme Court’s denial of certiorari, the Commission continues, at least for the present, to maintain broad jurisdiction over alleged trade secret misappropriations for articles imported into the United States. – By Elizabeth Owerbach

President Obama Ends Term with Commissioner Designations – On January 13, 2017, President Obama designated Commissioner Rhonda Schnare Schmidtlein as Chair of the Commission. Chairman Schmidtlein’s chairmanship will extend through June 16, 2018. Chairman Schmidtlein, a Democrat from Missouri and formerly with the Public Company Accounting Oversight Board, the United States Trade Representative’s office and the U.S. Department of Justice, was confirmed as a Commissioner by the U.S. Senate on March 6, 2014. Her term expires on December 16, 2021.

On January 17, President Obama nominated Jason E. Kearns to replace Dean A. Pinkert as a Commissioner. Mr. Kearns comes from the U.S. House of Representatives Ways and Means Committee, where he serves as Chief International Trade Counsel for the Committee’s Democratic staff. Ranking Member Richard Neal (D-MA) says of Mr. Kearns “Jason has been an invaluable part of the Ways and Means trade staff for more than a decade, and has built a knowledge base that is second-to-none. . . . He understands the importance for our nation’s trade deals to be crafted in a way that spreads the benefits of trade to all Americans, and has been a vocal proponent of ensuring our trade agreements are properly and rigorously enforced.” Mr. Kearns is awaiting confirmation by the U.S. Senate. – By Elizabeth Owerbach

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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