This is the final installment in our multipart series designed to help right holders and importers better understand the opportunities and obligations that attach to intellectual property rights (IPR) in the U.S. Customs regulatory environment. This installment explores the main issues surrounding the protection and enforcement of patents in the international trade arena and offers best practice tips for the benefit of both right holders and importers.
The final topic in this multipart blogpost series exploring the linkages between international trade and intellectual property involves patents. Though there are relatively few studies which attempt to estimate the impact of patent theft (a phenomenon that is sometimes referred to as “efficient infringement”), indirect insight into the scope of the problem can be gleaned from the fact that court-based infringement actions in the United States alone have, between 1996 and 2008, resulted in the awarding of over $4 billion in damages. Viewed against this backdrop, the protection and enforcement of patent rights is, not surprisingly, a priority trade issue for CBP.
Protecting and Enforcing Patents in U.S. Trade
The administrative protection and enforcement of patent rights in the U.S. trade environment is accomplished through the combined efforts of the United States International Trade Commission (ITC) and U.S. Customs and Border Protection (CBP). The key points that characterize this joint approach are best understood with reference to the two discrete stages involved:
Stage 1: Creating a Foundation for Enforcement
During the first stage, the ITC, an independent, bipartisan body based in Washington, DC, receives (or initiates), reviews, investigates, and issues determinations with respect to complaints regarding the importation of articles that infringe valid and enforceable design or utility patents. In carrying out this work, administrative law judges (ALJs) conduct trial-like proceedings that culminate in the making of an initial determination (ID). These Administrative Procedures Act-rooted proceedings are fast (the ITC’s caseload is commonly referred to the “rocket docket”) and economical (compared to the cost of pursuing a civil infringement action in court). Should it be determined that the rights of a patent holder have been infringed and, further, assuming there is no settlement by way of agreement or consent order, the ITC can, depending on the circumstances and relief requested, issue: (i) a general or limited exclusion order; (ii) a seizure order; (iii) a cease and desist order; and/or (iv) a penalty. Parties who are dissatisfied with an ITC determination/order can appeal the matter to the U.S. Court of Appeals for the Federal Circuit.
Stage 2: Taking Enforcement Action
In the second stage, the responsibility for protecting and enforcing patents in the context of international trade shifts to CBP. If, following the passage of 60 days, the ITC’s findings/actions have not been disapproved by the USTR, the Commission’s orders will become final and fully enforceable. This means, in effect, ending the review period practice of allowing entry of otherwise excludable articles under a single entry bond, denying entry (in a way that allows for export) to articles coming within an exclusion order, or, in cases where there has been a prior attempt at importation, seizing the merchandise. No mitigation relief is available in connection with CBP’s seizure of articles found to be within the scope of an ITC order.
As for the other forms of patent protection noted above, i.e., cease and desist orders and the penalties that can result from their violation, it is important to recognize that CBP does not play a role in the enforcement of these matters. The enforcement of these remedies remains within the purview of the ITC.
CBP does not, in general terms, maintain as high a level of enforcement activity for patents as it does for trademarks and copyrights. This observation is borne out in statistics which show the agency has, over the past 5 years, enforced an annual average of 123 exclusion orders and carried out an annual average of 169 seizures (with a corresponding annual average MSRP of $4,134,173). The diminished size of these figures relative to volumes and values associated with trademarks and copyrights suggests that IPRs do not, when it comes to CBP protection and enforcement, receive the same prioritization and resources.
Tips for Managing Patents in the U.S. Customs Regulatory Environment
There are several measures right holders and importers can take to protect their intellectual property rights and avoid unwanted scrutiny in the international trade arena.
Absent having the ability to record patents, as is the case for trademarks and copyrights, with CBP’s IPRR system, the best proactive measure a right holder can take to counter trade-related infringement entails monitoring industry competitors and preemptively seeking out evidence of unlawful use.
In the event infringement is detected, the most important reactive measure a patent holder can pursue involves filing a complaint under Section 337 of the Tariff Act of 1930. As laid out above, this measure, where successful, puts CBP on the alert for infringing products, facilitates subsequent CBP exclusions and seizures, and, on the ITC side, opens the door to penalty-backed cease and desist orders. While the most common complainants in 337 actions are large corporations with deep pockets, the ITC’s Trade Remedy Assistance Office (TRAO) is available to help smaller- and medium-sized entities (SMEs) on a free of charge basis. This resource ensures that SMEs are able to protect patents against trade-related infringement in much the same way as their larger counterparts.
The final measure right holders can take to protect patents in the U.S. trade environment consists of offering to meet with CBP field officers at all logistically relevant ports with an eye to providing guidance on the distinctive characteristics and attributes that attach to a particular patent. This information can, when provided, enhance CBP’s monitoring and enforcement capabilities.
Importers can, for their part, avoid unwanted scrutiny from right holders and/or CBP by adopting and implementing the following best practices.
The first involves clearing trade-sensitive patent rights. Though there is no searchable and centralized database similar to that maintained by CBP for trademarks and copyrights (i.e., the IPRS portal), importers should, in advance of entering merchandise, screen the ITC’s lists of current investigations and outstanding orders. This will provide an importer with useful insight into whether the merchandise they seek to import is or could become the subject of a patent-driven enforcement action.
Should an importer come across information that gives it pause, the second best practice involves accessing the ITC’s EDIS portal for the purpose of digging down on the issue. Importers can register for an EDIS account here.
If the foregoing measure does not adequately resolve an importer’s doubt, the final best practice entails asking CBP to issue a ruling that clarifies whether merchandise to be imported comes within the scope of an ITC order. Ruling requests can be prepared and submitted here. A favorable ruling provides importers with transactional certainty by ensuring that merchandise conforming to the facts and circumstances set forth in an underlying request will, upon entry, be treated in a way that is consistent with the conclusion it reaches.
Navigating patent issues in international trade can, as this blogpost highlights, be tricky and complex. This is especially the case for small- and medium- sized entities that lack the legal spend resources of larger corporations. Understanding the concepts and following the best practice tips laid out in this piece will go a long way to ensuring that right holders protect their hard-earned intangible assets and importers avoid the delay and expense that can be triggered by non-compliance with the laws and regulations that apply to IPR in the U.S. Customs regulatory environment.