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Beginning with the Supreme Court’s decision in 2006 in eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), there has been considerable speculation by commentators and patent practitioners that the U.S. International Trade Commission (ITC) might begin to be seen by so-called non-practicing entities (NPEs) (also known by the more pejorative moniker “patent trolls”) as an attractive alternative to filing patent infringement lawsuits in the federal district courts. NPEs long relied on the threat of permanent injunctive relief to draw their target defendants into early settlement negotiations. After eBay, though, this threat lessened significantly, leading some to predict that NPEs might view the ITC as a more attractive venue in which to make their claims. In addition to providing a fast track for litigation and aggressive discovery, the ITC offers the prospect of entry of orders excluding products from importation into the United States as relief for infringement, which, in effect, amounts to a permanent injunction that was no longer so readily available from district courts after eBay. As a result of recent efforts by the current administration to curtail the activities of patent trolls (in the form of several executive orders and legislative recommendations), there is potentially even greater incentive for NPEs to look to the ITC as a venue for their patent infringement claims.

In an attempt – in part – to help address growing concerns about becoming a “preferred venue” for NPEs, the ITC recently implemented a pilot program under which newly-instituted investigations might be subject to early disposition of certain threshold issues. In particular, under this pilot program, the commission could direct the administrative law judge to which an investigation was assigned to collect facts and make an early determination – i.e., within 100 days after institution of the investigation – as to whether there exists a protectable domestic industry related to the intellectual property rights asserted by the complainant. The ITC’s mandate requires, among other elements, that a complainant demonstrate that there is an industry within the United States with respect to articles protected by the complainant’s intellectual property rights. To meet the economic prong of this domestic industry requirement, the complainant must show significant investment in this county in manufacturing facilities or equipment, engineering, research and development, or licensing, or the significant employment of labor or capital.

In one of the first investigations designated for treatment under the pilot program, an ITC administrative law judge issued his initial determination on July 5, 2013, finding that the NPE complainant could not establish the existence of a domestic industry. Specifically, Administrative Law Judge Theodore Essex determined that Lamina Packaging Innovations, LLC (Lamina) failed to satisfy the economic prong of the domestic industry requirement, and further had not demonstrated that any domestic industry relying upon the patents at issue was in the process of being established. Because it is an NPE, Lamina itself does not manufacture or sell any products under its asserted patents, and attempted to rely primarily upon its licensing efforts and its licensee’s “significant investments in labor, capital, research and development, testing, marketing, sales, customer support, and promotion in the United States related to products that practice” claims of the asserted patents. However, Lamina alleged these facts in its complaint to the ITC only “on information and belief,” and ultimately was not able to introduce sufficient evidence to satisfy the administrative law judge as to the existence of this industry in this country.

Administrative Law Judge Essex’s initial determination is subject to review by the full commission, however, because this is a dispositive issue, all further activity in the investigation will be stayed, subject to the commission’s decision as to whether or not to review the initial determination, and ultimately, whether to adopt the administrative law judge’s finding and terminate the investigation. In light of the ITC’s pilot program and this recent ruling, it is imperative that, before filing complaints there, complainants should take steps to ensure they have assembled sufficient evidence to support the existence of a domestic industry and are prepared to make an early showing to the ITC that they satisfy this critical component of the investigation without extensive discovery.

For more information, please contact:

Joseph J. Jacobi
312.642.6613
jjacobi@mcdonaldhopkins.com

It is critical in today's technology-driven, global marketplace to effectively procure and manage intellectual property. Our clients rely on us to provide prompt, thorough and efficient counsel on matters involving patents, copyrights, trademarks, trade dress, trade secrets, intellectual property procurement, and enforcement. We focus on management and enforcement for Fortune 500 companies, mid-cap companies and start-ups. Supported by the talents of our litigation and business law attorneys, our IP attorneys deliver a complete range of innovative and comprehensive solutions, as well as insightful industry expertise. Our in-depth approach enables us to meet the business goals of our diverse client base. In fact, the hallmark of our IP practice is to dovetail our clients’ intellectual property needs with their business plans and strategies, presenting a cohesive and thorough outcome.

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