國
立
交
通
大
學
科技法律研究所
碩
士
論
文
An Empirical Study on the Emergence and Evolution of
Patent-Based Limited Exclusion Order Relief under 19
U.S.C. § 1337 by Using a Self-Compiled United States
International Trade Commission Determination
Database
使用自編之美國國際貿易委員會
行政處分紀錄資料庫探索
19 U.S.C. § 1337 專利侵害
救濟之
Limited Exclusion Order Relief 的形成與演進
研
究 生： 鮑家慶
指導教授：
John R. Alison
指導教授：
劉尚志 教授
An Empirical Study on the Emergence and Evolution of Patent-Based
Limited Exclusion Order Relief under 19 U.S.C. § 1337 by Using a
Self-Compiled United States International Trade Commission
Determination Database
使用自編之美國國際貿易委員會
行政處分紀錄資料庫探索
19 U.S.C. § 1337 之
Limited Exclusion Order Relief 的形成與演進
研 究 生： 鮑家慶
指導教授： John R. Alison
指導教授： 劉尚志 教授
國 立 交 通 大 學
科技法律研究所
碩
士 論 文
A Thesis
Submitted to the Institute of Technology Law
College of Management
National Chiao Tung University
in partial fulfillment of the Requirements
for the Degree of Master of Laws
in
Technology Law
Hsinchu, Taiwan, Republic of China
July, 2006
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論文題目：使用自編之美國國際貿易委員會 行政處分紀錄資料庫探索
19 U.S.C. § 1337專利侵害救濟之 Limited Exclusion Order Relief 的形
成與演進
指導教授：艾立誠、劉尚志
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96 年 12 月 3 日
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論文題目：使用自編之美國國際貿易委員會 行政處分紀錄資料庫探索
19 U.S.C. § 1337專利侵害救濟之 Limited Exclusion Order Relief 的形
成與演進
指導教授：艾立誠、劉尚志
■ 同意
本人茲將本著作，以非專屬、無償授權國立交通大學，基於推動讀者間
「資源共享、互惠合作」之理念，與回饋社會與學術研究之目的，國立
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內，讀者得進行閱覽或列印。
本論文為本人向經濟部智慧局申請專利(未申請者本條款請不予理會)的
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年____月____日再公開。
授
權 人：鮑家慶
親筆簽名：
______________________
中華民國 96 年 12 月 3 日
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論文題目：使用自編之美國國際貿易委員會 行政處分紀錄資料庫探索19
U.S.C. § 1337專利侵害救濟之 Limited Exclusion Order Relief 的形成與
演進
指導教授：艾立誠、劉尚志
茲同意將授權人擁有著作權之上列論文全文（含摘要），非專屬、無償
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民國
96 年 12 月 3 日
使用自編之美國國際貿易委員會行政處分紀錄資料庫探索
19 U.S.C. § 1337
專利侵害救濟之 Limited Exclusion Order Relief 的形成與演進
學生：鮑家慶
指導教授：
John R. Alison
劉尚志
國立交通大學科技法律研究所碩士班
摘
要
本論文可粗分為兩部分。第一部（
1, 2 章）呈現從 1922 到 1974 年間
（
Tariff Commission），以及 1974 到 2006 年間（USITC，本文討論重
點）「
337 條款」所簽發之禁止進口令之歷史與法理的演變。本論文發現
美國貿易夥伴透過
GATT 的法律管道，加上總統體制內的政治壓力，以及
國會，迫使
USITC 透過行政機關制定規則的途徑，演變出一種新型的禁止
進口令。第二部（
3, 4 章）使用統計學分析支持 USITC 簽發 GEO 或是
LEO 的事實與法理基礎，用以檢定某些因素如何影響 USITC 的決策。本
論文（預設
USITC 並非獨立於一切影響而運作）利用統計方法檢定法律條
文外的因素是否影響
USITC 的決策過程（見 1.1.2 節）。本論文同時發
現，偏差在
USITC 的決策過程中並不扮演統計學上顯著的角色。這段建構
337 條款法律體系的歷史演變，產生了能夠在國際貿易之中更公平、衡
平、與保障貿易的保護美國智慧財產權的工具。
An Empirical Study on the Emergence and Evolution of Patent-Based Limited
Exclusion Order Relief under 19 U.S.C. § 1337 by Using a Self-Compiled
United States International Trade Commission Determination Database
Student：Jia Ching Bao
Advisors：Dr. John R. Alison
Dr. Shang Jyh Liu
Institute of Technology Law
National Chiao Tung University
ABSTRACT
This thesis can roughly be divided into two parts. Part One (Chapters 2 and 3) presents the historical and legal evolution of injunctive relief orders issued in “Section 337” unfair importation investigations from 1922 to 1974 (under the Tariff Commission) and from 1974 to 2006 (under the USITC, which is the main subject of this thesis). This thesis finds that extra-governmental legal pressure from the United States’ main trade partners via the GATT, in combination with intra-governmental political pressure from the President (via the U.S. Trade Representative’s Office) and Congress, forced the USITC to evolve a new form of exclusive order relief through administrative rulemaking processes. Part Two (Chapters 4 and 5) statistically analyzes the factual and legal bases supporting the USITC’s historical issuance of General/Limited Exclusion Orders to test for the effects of bias in the USITC’s decision-making. This thesis (which assumes that the USITC did not operate in a vacuum) statistically examines USITC’s decisions to determine whether non-statutory factors may have affected the agency’s decision-making process. (see Section 1.1.2). We also find that bias does not appear to play a statistically significant role in the USITC’s decision-making process. This historical evolution in the legal structure of Section 337 created a more balanced, equitable, and trade-friendly enforcement tool to protect U.S. intellectual property rights in international trade.
Acknowledgment
There is no way for me to thank my thesis advisor, John R. Alison, Esq.,
adequately. Only God and Microsoft Word know how many otherwise billable or
sleepable hours were spent by you to make this thesis readable. Dear Professor
Alison, your devotion is a gift that I can never repay. Thank you!
CHAPTER 1 USITC EXCLUSION ORDER RELIEF AND ORIGINAL THESIS RESEARCH ... 1
1.1 RESEARCH OUTLINE... 4
1.1.1 Enforcing Intellectual Property Right against Widespread Infringement... 6
1.1.2 The Legislative History of Limited Exclusion Order Relief... 8
1.1.3 Congressional Silence on Administrative Agency Rulemaking ... 12
1.2 ON THE HAHN 2007 RESEARCH... 13
1.2.1 Hahn’s Major Findings... 14
1.2.2 The Differences between This Thesis and Hahn’s Paper ... 16
1.2.3 The Hahn Paper’s Problems ... 16
1.3 AN OVERVIEW TO THE EVOLUTION OF EXCLUSIONARY RELIEF... 18
1.3.1 Violation, Settlement and Non-Violation ... 18
1.3.2 General and Limited Exclusion Order Relief ... 21
1.4 WHAT IS THE USITC?... 23
1.4.1 Permanent Relief ... 24
1.4.2 Policy Changes ... 26
1.4.3 Temporary Relief... 27
1.4.4 Section 337 Investigation Procedure ... 28
1.4.5 Limited Exclusion Order Relief and Its Growth... 29
1.5 ON THE PROCEDURES AND REVIEW... 30
1.6 ON PREDICTABILITY AND BIAS... 31
1.7 RESEARCH PLAN... 33
1.7.1 The USITC’s Policy Regarding Remaining Patent Life... 35
1.7.2 The Timeframe of USITC Investigations ... 37
CHAPTER 2 A SHORT HISTORY OF EXCLUSION ORDER RELIEF AVAILABLE FROM THE U.S. TARIFF COMMISSION ... 41
2.1 LEGAL BASIS FOR PRE-1974 EXCLUSION ORDERS... 42
2.1.1 The “Unhappy” Beginning of the Revenue Act of 1922 ... 42
2.1.1.1 Tariff Commission’s Non-Existent Tariff-Setter Role ...43
2.1.1.2 Further Conflicts Between 1922 and 1974 ...44
2.1.1.3 The 1970s Conflicts ...45
2.1.2 From the Tariff Act of 1930 to the Trade Act of 1974 ... 46
2.2 CASE LAW RELATING TO PRE-1974 EXCLUSIONS... 47
2.2.1 Patent Infringement as a Section 337 Violation ... 49
2.2.1.1 The Constitutionality Attack ...50
2.2.2 Process Patent... 51
CHAPTER 3 THE EVOLUTION OF LIMITED EXCLUSION ORDER RELIEF... 55
3.1 SECTION 337INVESTIGATION’S EARLIER TROUBLES... 55
3.1.1 Enforcement Difficulties ... 55
3.2 DOCTRINES ESTABLISHED BETWEEN 1974 AND 1981 ... 58
3.2.1 The In Rem Doctrine for Exclusion Orders ... 59
3.2.2 The Flexibility Doctrine for Cease-and-Desist Orders ... 60
3.2.3 The “Exclusive Or” Doctrine for Remedial Order Issuance... 60
3.3 ENFORCEMENT WOES... 63
3.3.1 Product Patent Woes... 63
3.3.2 Process Patent Woes... 64
3.3.2.1 Subsequent Exclusion Difficulties ...66
3.3.2.2 The Unsuccessful First Challenge ...66
3.3.2.3 The Applicability of Cease-and-Desist Order Relief...68
3.4 THE CHANGES OF 1981 ... 68
3.4.1 A Short History of Limited Exclusion Order’s Development ... 69
3.4.2 The Legal Basis for General Exclusion Order Relief ... 71
3.4.3 Abolishing the “Exclusive Or” Doctrine ... 72
3.4.4 Towards Limited Exclusion Order Relief... 75
3.4.5 The Birth of Limited Exclusion Order Relief ... 78
3.6 THE URUGUAY ROUND AGREEMENTS ACT OF 1994 ...82
3.6.1 The Section 337 and the GATT ...83
3.6.2 The Failed Canadian Challenge ...84
3.6.3 The Netherlands Challenge...84
3.7 THE COMPOSITION OF THE COMMISSION...86
3.8 THE DECLINE OF PATENT SURVEY...87
CHAPTER 4 SECTION 337 EXCLUSION STATISTICS...89
4.1 DETECTING SYSTEMATIC ERRORS...89
4.1.1 Unknown Factors...89
4.1.2 General Exclusion Order Request Success Rate Errors ...91
4.1.3 General Exclusion Order Review Model ...91
4.1.3.1 General Exclusion Order Determination... 92
4.1.3.2 Presidential Veto... 92
4.1.3.3 Federal Circuit/Supreme Court Review... 93
4.1.3.4 GATT/WTO Finding... 93
4.2 ON THE STATISTIC TESTS...93
4.2.1 The Pearson’s Chi-Square Tests ...94
4.2.2 The Three Tests ...94
4.2.3 Period of Time Test ...96
4.2.4 Estimated Remaining Terms Test ...97
4.2.5 The Administrative Law Judge Test ...101
4.2.5.1 ALJs Then and Now ... 102
4.2.5.2 USITC’s Measures to Maintain Conformity... 105
4.2.5.3 Notes on “Judge Shopping”... 105
4.2.6 Technological Feature Test...106
4.2.7 Apparent Patent Value Test ...109
4.3 TIME NOT AS A FACTOR...111
4.4 FUTURE RESEARCH TOPICS...112
CHAPTER 5 CONCLUSIONS ... 115
5.1 THE FACTORS...115
5.1.1 Periods of Time...115
5.1.2 Estimated Remaining Term ...115
5.1.3 Administrative Law Judge ...116
5.1.4 Technical Features ...117
5.1.5 Apparent Patent Value ...117
5.2 UNEXAMINED FACTORS...117
5.2.1 Respondent Analysis...117
5.3 POSSIBLE FUTURE CHALLENGES...119
5.3.1 The Future Evolution of Limited Exclusion Order Relief ...122
CHAPTER 6 APPENDIX ... 129
6.1 BUILDING THE DATABASE...129
6.1.1 Unincorporated Data and Possible Errors...129
6.1.2 Data Sources ...131
6.1.3 Data Collection ...132
6.1.3.1 The Investigational Database... 132
6.1.3.2 The U.S. Patent Database ... 134
6.1.4 Counting Determinations ...135
6.1.5 Data Selection...137
6.1.5.1 Data Set I ... 137
6.1.5.2 Data Set II... 138
6.1.5.3 Data Set III ... 138
6.1.5.4 Data Set IV ... 139
6.1.5.5 Data Set V ... 139
6.2 THE LIFESPAN OF A PATENT AND ITS CALCULATION... 141
6.2.1 Batch Calculation of Patent Terms ... 143
6.2.2 How to Calculate Patent Terms ... 144
6.2.2.1 Patent Term Extension ...145
6.2.2.2 Patent Term Reduction...145
6.2.2.3 Patent Disclaim ...147
6.2.2.4 The URAA’s Enactment Date...148
6.2.3 How to Calculate Remaining Patent Terms... 149
6.2.3.1 ERT Normalization ...149
6.2.4 Data Source Errors... 150
6.3 SECTION 337HISTORICAL STATUTORY TEXTS... 151
6.3.1 The Revenue Act of 1916... 151
6.3.2 The Tariff Act of 1922... 158
6.3.3 The Tariff Act of 1930... 160
6.3.4 19 U.S.C. § 1337a (1940) ... 161
6.3.5 The Trade Act of 1974... 162
6.4 KNOWN PRE-1974 SECTION 316 AND 337 INVESTIGATIONS... 167
6.5 A LIST OF EXCLUSION ORDERS... 171
6.6 ASTUDY OF THE IN LIEU OF LANGUAGE IN THE U.S.C... 176
6.7 ON CITATION FORMATS... 178
6.8 A LIST OF THE TARIFF COMMISSION AND THE USITC’S COMMISSIONERS (1935-2007) ... 179
Overview
To provide the readers a better grasp on the findings of this complex research beyond the limited scope of the Abstract, the outlines of the two major parts are presented in this extra section.
Part One Outline
From the outset of its operations in 1974, the USITC construed Section 337 as providing solely for “general,” or in rem, exclusionary relief directed to broadly defined classes of imports. This historical construction has been affirmed by the appellate court (see Section 3.2.1). Although General Exclusion Orders provided a highly effective means for protecting patentees’ rights, the collateral exclusion of potentially non-infringing products adversely affected international trade, competition and consumers’ welfare.
By the early 1980s, it had become clear that the historical interpretation of Section 337 could result in irrational decision-making. In some cases, general relief excluded both infringing and non-infringing goods, which unnecessarily injured foreign trading partners and U.S. consumers alike. Moreover, overly broad relief provided a windfall to certain patentees that have no legitimate right to exclude non-infringing competition (see Section 3.3).
Growing U.S. concern regarding the USITC’s issuance of general relief came to a head in early 1981, when President Reagan vetoed a general exclusion order. (See Section 3.4.5). In explaining his action, the President stated that although the
patentee appeared to be “entitled to a remedy … [a]n exclusion order directed only to the respondent’s products … would appear to be entirely justified and appropriate.” In response, in June 1981, the USITC issued its first Limited Exclusion Order. Id. In November 1981, in a subsequent investigation, the USITC imposed a higher standard for proving general relief, making the issuance of limited relief (in theory) a default remedy. Id.
In practice, however, between 1981 and 1987, the USITC only rarely issued Limited Exclusion Order relief. During this period, 20 out of 24 exclusion orders granted general relief. In 1983, Canada filed a GATT complaint stating that its exports had been discriminated because a similar U.S. domestic infringer would not
need to face Section 337 proceedings. Although the GATT panel found that
discriminatory treatment did exist, it concluded that the law was justifiable under the Necessity Clause. It left open, however, whether Section 337 was consistent with the National Treatment Clause. (See Section 3.6.2).
In a further challenge to Section 337, in 1988, the European Economic Community filed another complaint alleging that the statute violated the National Treatment Clause. (See Section 3.6.3). This time, the GATT panel found in 1988 that the General Exclusion Order relief as a sole remedy, “results in less favourable
treatment of imported products” which violated the National Treatment Clause. Id. In response, the USITC amended the C.F.R. by explicitly making limited relief an option, and thereafter, the frequency of general relief sharply declined. (See Section 3.5). Almost as an afterthought, in 1994, Congress ratified Limited Exclusion Order relief in a package of de minimis legislation enabling the U.S. to enter the WTO. (See Section 3.6).
Part Two Outline
Given the close relationship between Congress, the USTR, and the USITC, we may safely infer that both Congress and the Executive Branch actively monitored the USITC’s experiment during the thirteen years.
0 20 40 60
1976 1980 1985 1990 1995 2000
Certain Aramid Fiber decision Omnibus Trade and Competitiveness Act of 1988
L/6439 report adopted by GATT Establishment of CAFC
Uruguay Round Agreements Act of 1988
2005
General exclusion
Limited exclusion
significantly modified its exclusion order issuance behavior between 1987 and 1989. Before 1987, Limited Exclusion Orders were uncommon. After 1989, General
Exclusion Order relief was almost abandoned. The nature and speed of these changes suggest that external pressure had influenced the USITC’s decision-making.
Since Congress did not amend the statute until 1994 and the standards for general relief remained practically unchanged during this period, the findings suggest that non-statutory factors could have played a role. This thesis therefore statistically analyzed the USITC’s decision-making history against available candidate factors to determine whether bias or external influence affected the USITC’s decision-making process. The tests include (see Chart 4.4):
• Test 1: The choice between general and limited relief; • Test 2: Violation, no violation and settlement;
• Test 3: Test 2 plus choice of relief including Cease-and-Desist Order. The tested factors include:
• The time period (the indicator for the USITC’s policy); • The administrative law judge;
• The Estimated Remaining Term of the order;
• The technological feature of the patent (categorized using a publicly available classification system); and
• The quality or value of the patent (using the patent’s citation count as an indicator). (see Section 1.6).
Based on our statistical analysis of these factors, this thesis concludes that, except for the time period factor, non-statutory factors did not appear significantly to affect Tests 1 to 3. However, if we lower the level of proof from a 5% error rate to 20%, all factors did have some influence at least to Test 2. (see Table 4.1). Our findings suggest that the USITC changed its policy under international pressure and/or pressure from the Executive Branch in late 1980s and resulted in today’s Limited Exclusion Order relief.
.
Chapter 1
USITC Exclusion Order Relief and
Original Thesis Research
This thesis examines the historical and legal evolution1 of three types of permanent injunctive remedial relief orders issued by the United States International Trade Commission (USITC)2 in unfair importation investigations conducted under 19 U.S.C. § 1337 (d) and § 1337(f), mainly from 1976 to 2005:
• General Exclusion Order (GEO) relief, • Limited Exclusion Order (LEO) relief, and • Cease-and-Desist Order (C&D) relief.
Understanding the different characteristics that distinguish each type of exclusion order relief, especially the first two, provides critical insight into the USITC’s interpretation and enforcement of so-called “Section 337” investigations.3
The first type of relief — the “General Exclusion Order,” or “GEO” — universally excludes from importation into the U.S. all of a specified class of articles made by any manufacturer upon finding a violation of a valid and enforceable U.S. intellectual property right.4 The class of articles subject to General Exclusion Order relief is defined in the
1 The term “evolution” in this thesis merely refers to the gradual development of remedy at the USITC. It is
unrelated to the universally accepted biological scientific principle first discovered by Charles Darwin and Alfred Russel Wallace in the 19th century. The purpose of this thesis is not to demonstrate the gradual or punctuated changes of ideas. It is also not to show the heritable traits of the ideas that were in cooperation or competition over successive generations. This thesis builds an incomplete history for the USITC’s creation of a new, but not necessarily more complex, legal doctrine in remedy.
2 Many U.S.-based authors prefer to use the term “International Trade Commission” or “ITC.” Unlike most
other federal independent agencies such as the Environmental Protection Agency (EPA), the Federal
Communications Commission (FCC), or the Federal Trade Commission (FTC), the USITC’s full and official title includes the term “United States,” retained from the title of its predecessor agency, the United States Tariff Commission (abolished in 1974). We therefore use the full name’s initials “USITC”.
3 In this thesis, “Section 337” means 19 U.S.C. § 1337 or its predecessors.
4 As of this writing, subject matters eligible to Section 337 relief include any “unfair act.” As a practical matter,
however, the majority of Section 337 investigations have focused on patent-related violations: utility patent, design patent, registered and common law trademark, copyright, mask work, and boat hull design. In 1989, the U.S. Supreme Court struck down a Florida statute that prohibited direct molding duplication of unpatented boat hulls. The Court held that such state protection law was preempted by the federal policy underlying the patent system, which favored free competition in manufactured articles that were not protected by the federal patent system. See Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989). In response to this decision, Congress enacted a form or limited, sui generis boat hull protection under the Vessel Hull Design Protection Act (VHDPA) of 1998.
USITC’s “Notice of Investigation” (NOI), published in the Federal Register following the institution of an investigation. USITC respondents are often slow to realize that the scope of USITC investigations is not limited to the products specifically identified in the complainant’s Section 337 complaint. To the contrary, the scope of an investigation (whether seeking General Exclusion Order or Limited Exclusion Order relief) may encompass any product falling within the scope of the “Notice” published by the USITC.
The second type of relief — the “Limited Exclusion Order, or “LEO” — specifically excludes from importation into the U.S. only those articles made by the named and infringing respondents of the USITC investigation. Historically, the great majority of the disputes involves utility patents and, to a lesser extent, design patents.
For purposes of either General Exclusion Order or Limited Exclusion Order relief, unfair acts establishing a violation of Section 337 can be divided into three categories:
(1) products sold for importation into the United States; (2) products imported into the United States; or
(3) products sold after importation into the United States.5
Upon finding a violation under any one of the three categories identified above, the USITC would issue a General Exclusion Order or Limited Exclusion Order which can reach both the specifically accused products and combinations that contain the accused products (which is often discussed in the case law as “downstream relief”),
The third type of relief — the so-called “Cease-and-Desist” order — provides an alternative remedy whose nature is very different from both types of exclusion orders discussed above. Among other things, a Cease-and-Desist Order prohibits U.S.-based importers, distributors and resellers from continuing the sale or distribution within the U.S of imported articles that have been found to violate Section 337.6 Cease-and-Desist Order relief
Before the 1974 amendment, nearly all investigations were patent-based. The percentage of patent-based investigations decreased a little bit after the 1974 amendment but patent has always been the top subject matter of Section 337 investigations.
5 19 U.S.C. § 1337 (a).
6 According to 19 U.S.C. § 1337(j), the term “United States” means the States, District of Columbia (D.C.) and
Puerto Rico. Insular areas other than Puerto Rico, including American Samoa, Guam, Northern Mariana Islands and U.S. Virgin Islands are not included. Unincorporated U.S. territories (mostly uninhabited islands),
is specific to persons in the U.S. who have possession of imported articles.7 Exclusion orders only deprive the privilege to conduct importation /exportation. Cease and desist orders infringe people’s property rights.
A 1974 U.S. Congress legislative report characterized Cease-and-Desist order relief as an alternative to exclusion order relief, motivated in large part by Congressional concern that the exclusion remedy “may be extreme”:8
Section 337(f) of the Act, as amended by this bill, would be a new provision authorizing the Commission to issue cease and desist orders, in lieu of excluding articles, against any persons violating, or believed to be violating, section 337. … It is clear to your committee that the existing statute, which provides no remedy other than [in rem] exclusion of articles from entry, is so extreme or inappropriate in some cases that it is often likely to result in the Commission not finding a violation of this section, thus reducing the effectiveness of section 337 for the purposes intended.
The power to issue cease and desist orders would add needed flexibility.
Consistent with this view, Cease-and-Desist orders should not be viewed as “less extreme” forms of exclusion orders. They are alternative to exclusion orders.
Other than the issuance of permanent injunctive remedial orders, the USITC may issue Temporary Exclusion Orders (TEOs) at its own discretion before the conclusion of an investigation.9 These temporary orders are very similar to patent litigation’s preliminary injunction orders in their uses, effects, criteria and standards of review.
General Exclusion Order relief is in rem, contrary to the Cease-and-Desist Order relief, which is in personam. Limited Exclusion Order relief has both in personam and in rem aspects. The types of relief issued via GEOs, LEOs, and Cease-and-Desist Orders are, for the most part, mutually exclusive regarding a particular unfair act, i.e., issuance of one excludes the issuance of another. An exclusion order may co-exist with Cease-and-Desist Orders. See Sections 3.2.3 and 3.4.3 for detailed discussions. This thesis, however, primarily focuses on the evolution of GEO and LEO relief.
7 Cease-and-Desist Orders generally are directed at U.S.-based parties such as importers, distributors, retailers
and, if feasible, end-users. By comparison, exclusion orders are generally directed at non-U.S. manufacturers or exporters. As a general matter, however, persons subject to Cease-and-Desist Order relief may be permitted to export the “infringing” articles outside of the U.S. for sale in a foreign country where the patentee does not have a patent. In other cases, the Cease-and-Desist Order will provide for the destruction of infringing articles found in the United States.
8 1974 U.S.C.C.A.N. 7186, 7331, S. REP. 93-1298, S. Rep. No. 1298, 93d Cong., 2d Sess. (1974). 9 19 U.S.C. § 1337(e).
Cease-and-Desist Order relief may be against specific parties, but it does not require personal jurisdiction. In Steel Rod Treating Apparatus and Components, Inv. No. 337-TA-97, German respondents moved to dismiss for lack of in personam jurisdiction. Respondents claimed that there are insufficient “minimum contacts” established by the U.S. Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310 (1945) to justify the USITC’s in
personam jurisdiction over them. This defense was a failure. The USITC stated that the
requirements of “minimum contacts” are not necessary for the exercise of its jurisdiction because the orders are issued in rem and “a cease and desist order … does not require in
personam jurisdiction pursuant to Commission precedent.”10
1.1 Research Outline
The research outline described below both characterizes and analyzes the history of the USITC’s issuance of exclusion orders.
Despite its current cachet, Section 337 has not always been regarded as providing a wholly satisfactory (or, from a public interest perspective, successful) remedial device.11 From the outset of its operations in 1974, the USITC construed Section 337 as providing solely for “general” exclusionary relief directed to broadly defined classes of imports. From a public interest perspective, however, the grant of industry-wide “general” relief often resulted in anti-competitive consequences. Instances illustrating such systematic failures in Section 337’s initial enforcement mechanism provided valuable lessons to the USITC, legal practitioners, international trade partners (via the General Agreement on Tariffs and Trade (GATT) process), and Congress as well.
In 1981, in reaction to these lessons, the USITC administratively reconstrued Section 337, creating a selectively limited form of exclusion order relief. The hallmark of this “evolution” in Section 337 relief was to alleviate most non-participants from potential
10 Steel Rod Treating Apparatus and Components Therof, Order No. 13: Order Denying Motion to Dismiss Korf
Industrie und Handel GmbH & Co. Kg and Korf Engineering GmbH for Improper Service of Process and Lack of In Personam Jurisdiction, Inv. No. 337-TA-97, 1981 WL 178518 (May 8, 1981) (“The argument is that the expansion of our powers in 1974 to include cease and desist powers under section 337(f), required the
Commission to obtain personal jurisdiction over persons subject to such orders. Nothing could be further from the truth … Hence the due process clause only places one significant limitation on the exercise by Congress of its plenary power over foreign commerce — that it not be carried out in an arbitrary manner.”).
11 Other than the false-positive examples discussed in this thesis, many patentees also complained over
ineffectiveness of remedial orders, e.g., DONALD KNOX DUVALL et al, UNFAIR COMPETITION AND THE ITC, 400 (2006). (A 1986 survey by the U.S. General Accounting Office (GAO) revealed “only one-third of the
responding U.S. firms reported that exclusion orders had effectively prevented counterfeit or infringing goods from entering the country”).
enforcement costs.12 This new type of relief provided the model for Congress’ subsequent enactment of a specific “Limited Exclusion Order” provision in 1994.
This thesis primarily focuses upon the emergence and evolution of limited exclusionary relief available under Section 337 since 1981. This thesis also analyzes the process by which the USITC and Congress have attempted to more equitably balance the cost of maximizing protection under Section 337 while, at the same time, minimizing costs associated with its anti-unfair competition statutory duty. Finally, this thesis closely analyzes the development of Section 337 jurisprudence during the period from 1974 to 1994, when Congress, through a policy of administrative delegation, allowed the USITC to experiment with the remedial structure of international trade enforcement without first obtaining a clear statutory basis for its actions. The prolonged period of Congressional silence during made this administrative evolution of Section 337 makes the emergence of “modern” exclusionary relief particularly noteworthy.
The following timeline provides a simplified history of major Section 337-related events from the creation of the Tariff Commission in 1922 to the mid-2000s:
• 1922-1974: Earlier Section 337 investigations (see Chapter 2). o In rem exclusion only.
o Exclusion orders issued at President’s discretion. o Used infrequently.
• 1974-1981: Pre-Limited Exclusion Order period (see Chapter 3). o In rem exclusion.
o Congress authorized Cease-and-Desist Order relief as an additional remedy (Trade Act of 1974).
o USITC established many remedial doctrines based on statutory construction (see Section 3.2).
o Cease-and-Desist Order relief was available but generally not used. USITC issued mainly in rem exclusion orders.
o Widespread perception of anticipated adverse consequences resulting from the grant of “general” exclusionary relief caused the USITC to
12 It becomes a rights owner’s responsibility to name as many respondents as possible within a reasonable limit.
The old rules allowed a complainant to name only a few possible violators and obtain an exclusion order that was good against the world.
begin rethinking the rationale for issuing “general” in rem exclusion orders (see Section 3.3).
o The rationale for Section 337 was challenged by many European and Canadian exporters.
• 1981: Establishment of Limited Exclusion Order relief (see Section 3.4.5). o Limited Exclusion Order relief was created in response of some
difficult remedial requirements.
o USITC justified its new remedy by statutory construction and additional reasoning such as balance of hardships.
o In the mean time, the USITC abolished many earlier doctrines. • 1981-1994: Congressional silence period.
o Congress did not veto USITC’s rulemaking.
o Limited Exclusion Order relief was not frequently issued at first.
o Section 337 was found prone to violate the National Treatment Clause of the GATT.
o Limited Exclusion Order relief became the mainstream remedy.
o Congress amended Section 337 long after USITC changed its order issuance behavior.
o This research concludes Congress knew it and decided to let the USITC experiment.
• 1994-: Post legislation period.
After the investigation of key legislative milestones in the creation of Limited Exclusion Order relief, this research will statistically examine the USITC’s actual issuance of Limited Exclusion Orders. (See Chapter 4). The author will collect and analyze decision data to see if certain non-statutory factors would affect the likelihood of General Exclusion Order issuance.
1.1.1 Enforcing Intellectual Property Right against Widespread
Infringement
Exclusion orders and Cease-and-Desist Order are better viewed as devices created to allocate the burden of non-exportation/importation to some selected/general parties. If used properly, the burden of compliance would be placed upon the party who is most capable or
deserved to carry the cost. Moreover, the cost of enforcement by the U.S. government would also be minimized. The development of these devices took a long time and much international pressure to realize.
The evolution of Limited Exclusion Order relief represents a focused form of intellectual property right enforcement perfected through experience. The history of Section 337 suggests that such experience leads, over time, towards mechanisms that (1) increases efficiency and/or (2) reduce the social cost of private rights enforcement. Following cases are selected tort litigation instances showing that the burden imposed by remedial relief may be shifted to either or both of the goals.
A typical case of intellectual property violation may involve potential claims of infringement directed against a great number of alleged infringers. U.S. law does not require that the patentee simultaneously proceed against all potential infringers in a single legal action. Instead, the patentee may proceed against a single party who acts as a primary contributor to the infringement process in an attempt to “block the conduit” through which infringing products enter the United States. Thus, proceeding against an economically efficient defendant represents, from a social standpoint, the least costly way to obtain an effective intellectual property remedy.13
This research shows the USITC has tried to find a way to maximize protection and minimize costs. It has been forced, under substantial U.S. business and international pressure, to allocate the burden of enforcement in a balanced and equitable manner. The earliest form of General Exclusion Order relief applied by the USITC and its predecessor agency (the U.S. Tariff Commission) failed to strike a satisfactory balance apportioning between private rights and the public interest. The perceived failure in allocating rights lead first to the development of Cease-and-Desist Order relief and, later, to an administratively created form of Limited Exclusion Order relief. As will be shown below, the former represents an established injunctive relief to provide flexibility (see Section 3.2.2), while the latter is an invention to alleviate importer’s burden (see Section 3.4.5).
13 E.g., Sverker K. Högberg, Note, The Search for Intent-Based Doctrines of Secondary Liability in Copyright
Law, 106 COLUM. L. REV. 909, 910-911 (2006). (“Peer-to-peer file-sharing technology consequently has forced
a ‘seismic shift’ in copyright enforcement. Content owners no longer enforce their rights primarily by suing direct infringers but, instead, by suing facilitators under theories of secondary copyright liability. This tactic creates a so-called gatekeeper regime of copyright enforcement that focuses on prosecuting those who design and sell software and services that enable individuals to copy and distribute infringing works cheaply. This approach has resulted in several high-profile lawsuits by music and movie companies against individuals and corporations responsible for creating or operating peer-to-peer file-sharing networks, most notably Napster, Aimster, and KaZaA, Morpheus, and Grokster.”).
1.1.2 The Legislative History of Limited Exclusion Order Relief
The earliest Limited Exclusion Orders were authorized by the USITC’s construction of 19 U.S.C. § 1337 (d) (1974), which mandated the issuance of “exclusion orders”:
(d) If the Commission determines, as a result of an investigation under this section, that there is violation of this section, it shall direct that the articles concerned, imported by any person violating the provision of this section, be excluded from entry into the United States, unless, after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers, it finds that such articles should not be excluded from entry. The Commission shall notify the Secretary of the Treasury of its action under this subsection directing such exclusion from entry, and upon receipt of such notice, the Secretary shall, through the proper officers, refuse such entry. (emphasis supplied).
Although one may argue that the statutory text does not easily support a focused interpretation limiting the USITC’s relief to “General Exclusion Order” relief (see Section 3.4.5), such an interpretation clearly follows from Tariff Commission and earlier USITC precedent.
Judge-made law14 is a feature of the common law15 tradition of “decisional” jurisprudence, often pitting legal precedent against changing circumstance. It remains difficult, in many instances, to distinguish between the “creation” of precedent and the process of holding to precedent. Rapid changes in the evolution of the common law have commonly resulted in charges of “judicial activism.”16 Although the USITC has been outspokenly “activist” in its quasi-judicial interpretation and enforcement of Section 337, its law-making activities have occurred as part of a delegation of Congressional authority to an executive agency. Yet, because the role of an executive agency in interpreting its enabling statute differs fundamentally from the “constitutionally limited” role of a United States district judge in interpreting statutory law,17 cf. U.S. Const. Arts. II and III, the USITC’s role
14 “Judge-made law,” BLACK’S LAW DICTIONARY 858 (8th ed. 2004) (“1. The law established by judicial
precedent rather than by statute. See COMMON LAW. … 2. The law that results when judges construe statutes contrary to legislative intent. See JUDICIAL ACTIVISM”).
15 “Common law,” BLACK’S LAW DICTIONARY 293 (8th ed. 2004). (“The body of decisional law derived from
federal courts when adjudicating federal questions and other matters of federal concern, such as disputes between the states and foreign relations, but excluding all cases governed by state law.”).
16 “Judicial activism,” BLACK’S LAW DICTIONARY 862 (8th ed. 2004). (“A philosophy of judicial
decision-making whereby judges allow their personal views about public policy, among other factors, to guide their decisions, usu. with the suggestion that adherents of this philosophy tend to find constitutional violations and are willing to ignore precedent.”).
in reinterpreting Section 337 cannot be condemned as an improper practice per se (see Section 1.1.3).
From time to time, a federal court judge may establish a useful standard by means of statutory construction.18 If a standard proves to be useful and important, Congress may codify it.19 Many standards remain uncodified. The scope of administrative enforcement powers available to Section 337 relief is not, in the first instance, a matter of judicial interpretation: it is primarily a question entrusted to the agency empowered by the statute, in a semi-sovereign exercise of construing its own implementing legislation. In the evolution of Limited Exclusion Order relief, the USITC even has the option of adopting a substantially different interpretation because an agency’s policy may evolve and may change (emphasis supplied):20
Our review of the EPA’s varying interpretations of the word “source” … convinces us that the agency primarily responsible for administering this important legislation has consistently interpreted it flexibly — not in a sterile textual vacuum, but in the context of implementing policy decisions in a technical and complex arena. The fact that the agency
has from time to time changed its interpretation of the term “source” does not, as respondents argue, lead us to conclude that no deference should be accorded the agency’s interpretation of the statute. An initial agency
interpretation is not instantly carved in stone. On the contrary, the agency, to engage in informed rulemaking, must consider varying interpretations and the wisdom of its policy on a continuing basis. Moreover, the fact that the agency has adopted different definitions in different contexts adds force to the argument that the definition itself is flexible, particularly since Congress has
never indicated any disapproval of a flexible reading of the statute.
The courts traditionally defer to such agency determinations on matters of substance, which are subject to only narrow judicial review.21 Here, the Tariff Commission had interpreted and applied Section 337, and the courts had adopted (for the most part) the agency
18 See, e.g., JANICE M.MUELLER, AN INTRODUCTION TO PATENT LAW 224 (2003). (Regarding the judicially
created patent law doctrine of equivalents: “Section 271 of 35 U.S.C. does not so much define what constitutes infringement, as set forth the categories of acts (i.e., “making,” “using,” “selling,” and so on) that can create liability for infringement. Case law … fleshes out the elements of these acts.”).
19 See, e.g., Michael B. Weitman, Fair Use in Trademark in the Post-KP Permanent World: How Incorporating
Principles from Copyright Law Will Lead to Less Confusion in Trademark Law, 71 BROOK. LAW REV. 1665,
1667-68 (2006) (Regarding the judicially created copyright law doctrine of fair use: “After decades of judge-made law, Congress codified the doctrine in section 107 of the Copyright Act of 1976.”).
20 467 U.S. at 863-864.
21 E.g., VastFame Camera Ltd. v. International Trade Commission, 386 F.3d 1108, 1111-12 (Fed. Cir. 2004).
(“As the agency charged with the administration of § 1337, the Commission is entitled to appropriate deference to its interpretation of the statute.”).
interpretation. Some of the most important points regarding the standard of judicial review of the USITC’s legal and factual issues are listed below:
• “Determination of whether § 337 (f)(2) contemplates a de novo trial in the district court … is a matter of statutory interpretation, a question of law to which we give plenary review. … We uphold the Commission’s interpretation of § 337 if it is “reasonable in light of the language, policies and legislative history of the statute.” … According to the parties, this is a question of first judicial impression in that the Commission’s interpretation has not heretofore been challenged.”22
• “Decisions of the International Trade Commission receive judicial review in accordance with the criteria of the Administrative Procedure Act, as set forth at 5 U.S.C. § 706 (2)(E).”23
• The USITC’s decisions regarding patent infringement receive judicial review in accordance with criteria 19 U.S.C. § 1337 (c) and 5 U.S.C. § 706 (2)(E) (Administrative Procedure Act). I.e., substantial evidence24 on record as a whole.25
• “As the agency charged with the administration of § 1337, the Commission is entitled to appropriate deference to its interpretation of the statute.” The court will uphold the USITC’s statutory interpretation authorizing exclusion if it is reasonable in light of language, policies and legislative history of statute.26 Between 1974 and 1981, there was only the in rem-type exclusion order27 which was created to reduce rights-holder’s costs and to maximize the protection to U.S. interests:28
22 San Huan New Materials High Tech, Inc. v. United States Int’l Trade Comm’n, 161 F.3d 1347, 1351-52 (Fed.
Cir. 1998).
23 Kinik v. United States Int’l Trade Comm’n, 362 F.3d 1359, 1362 (Fed.Cir. 2004); Tanabe Seiyaku Co. v.
United States Int’l Trade Comm’n, 109 F.3d 726, 731 (Fed.Cir.1997); Tandon Corp. v. United States Int’l Trade Comm’n, 831 F.2d 1017, 1019 (Fed.Cir.1987).
24 Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951). (“such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion”).
25 Enercon GmbH v. Int’l Trade Comm’n, 151 F.3d 1376, 1381 (Fed.Cir.1998). 26 Id.
27 Consent orders are in personam, but these orders are based on settlements rather than the USITC’s finding of
an “unfair act.” 19 U.S.C. § 1337 (c) (“The Commission shall determine, … whether or not there is a violation of this section, except that the Commission may, by issuing a consent order or on the basis of an agreement
[T]he purpose of the exclusion remedy was to get away from in personam procedures which United States business found unsatisfactory. Being unable in most cases to sue a foreign supplier, a U.S. business faced with infringing products from abroad was forced to pursue a multiplicity of individual importers, and if a court enjoined one, another could be found to take his place. Thus, the exclusion remedy was conceived.
The in rem exclusion order relief was good at rights protection — but it also could have serious side effects. First, enforcement of in rem exclusion orders can be socially costly. “General” orders may also snare legal importation of competing products by mistake, thereby lessening competition. In 1974, Congress vested USITC the power to issue in personam Cease-and-Desist Orders to solve some difficulties caused by the enforcement of exclusion orders. However, this alternative jurisdictional basis was seldom used following enactment.
The USITC, possibly out of necessity, invented Limited Exclusion Order relief without Congress legislation in 1981 (see Section 3.4.5) despite of its prior insistence to obey the law, rather than to change the law (see Section 3.2.3). In late 1980s, Canadian and European exporters successfully challenged Section 337 at the GATT, which ruled in 1988 that Section 337 and, especially, the General Exclusion Order relief as the sole relief, “results in less favourable treatment of imported products” and therefore constituted a violation of the “National Treatment Clause.”29 (see Section 3.6.1). In 1994, Congress enacted Limited Exclusion Order relief as a part of its de minimis response under international pressure against the U.S.30 The evolution of Limited Exclusion Order relief occurred over a thirteen-year period from 1981 to 1994, encompassing efforts by three administrations, two governing parties, and multiple USITC Commissioners.31
Given the close relationship between Congress, the U.S. Trade Representative’s Office (USTR), and the USITC, we may safely infer that both Congress and the Executive Branch actively monitored the USITC’s experiment during the thirteen years. This research assumes
between the private parties to the investigation, including an agreement to present the matter for arbitration, terminate any such investigation, in whole or in part, without making such a determination.”).
28 Sealed Air Corp. v. USITC and Unipak (H.K.) Ltd. v. USITC, Nos. 79-35, 80-4 (C.C.P.A. March 12, 1981). 29 GATT Dispute Resolution Panel, United States-Section 337 of the Tariff Act of 1930, GATT Doc. L/6439,
BISD 36th Supp. 345 (1990) (panel report adopted November 7, 1989) [hereinafter 1988 GATT Panel Report], at para. 5.19. http://www.sice.oas.org/dispute/gatt/87tar337.asp
30 19 U.S.C. § 1337 (d) (2). (“The authority of the Commission to order an exclusion from entry of articles shall
be limited to persons determined by the Commission to be violating this section unless the Commission determines [two criteria for General Exclusion Order relief]”).
that the USITC did not operate in a vacuum, and statistically examines USITC decisions between 1981 and 1994 to determine whether additional, non-statutory factors may have affected the agency’s decision-making process.
This thesis proposes candidate factors for analyzing the USITC decision-making process and summarizes their use by the author using standard statistical methodologies. Our statistical analysis of USITC decisions from 1981 to January 2006 concludes that the agency’s decision-making process over that period has not been significantly affected by extra-legal factors when implementing Section 337 and issuing exclusion order relief.
1.1.3 Congressional Silence on Administrative Agency Rulemaking
“All legislative Powers herein granted shall be vested in a Congress of the United States.”32 The non-delegation doctrine limits “Congress’s ability to transfer its legislative power to another governmental branch, esp. the executive branch.”33 The Supreme Court has ruled that Congress may delegate regulatory powers to administrative agencies, as long as it provides an “intelligible principle.”34 Within the statutory limits of such Congress delegated power, the agency may exercise discretion based on its expertise and its own policy:35
Judges are not experts in the field, and are not part of either political branch of the Government. Courts must, in some cases, reconcile competing political interests, but not on the basis of the judges’ personal policy preferences. In contrast, an agency to which Congress has delegated policy-making responsibilities may, within the limits of that delegation, properly rely upon the incumbent administration’s views of wise policy to inform its judgments. While agencies are not directly accountable to the people, the Chief Executive is, and it is entirely appropriate for this political branch of the Government to make such policy choices-resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities.
In Chevron, the Environmental Protection Agency (EPA) interpreted the statutory language “stationary source” as to “treat all of the pollution-emitting devices within the same
32 U.S. CONST. art. I, § 1.
33 “Delegation doctrine,” BLACK’S LAW DICTIONARY 459 (8th ed. 2004).
34 J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409-10 (1928). (“If Congress shall lay down by
legislative act an intelligible principle to which the person or body authorized to fix such rates is directed to conform, such legislative action is not a forbidden delegation of legislative power.”)
industrial grouping as though they were encased within a single ‘bubble’.”36 This revolutionary approach was against its precedent. The Supreme Court determined to grant deference to the EPA’s interpretation of its own statutory mandate because this administrative agency was created to provide specialized services that demand expertise. Neither Congress nor the judges may instruct the EPA how to do its job properly.
The findings of this research suggest that Congress, years before Chevron, permitted the USITC to exercise an unusually high degree of freedom of statutory construction during the creation of Limited Exclusion Order relief (see Section 3.4.3). Whether or not Congress had in fact provided “intelligible principle” for the USITC is unknown. This question has not been subject to known judicial review. We can only provide observations, rather than a formal legitimacy analysis. Congress did not disapprove USITC’s innovative thinking. It amended the law after USITC’s rulemaking thirteen years later. Nonetheless, our observations, as far as they go, do not suggest the operation of extra-legal factors motivating the USITC’s decision-making process.
1.2 On the Hahn 2007 Research
In early 2007, one brief but harsh working paper37 authored by Robert W. Hahn of the
AEI-Brookings Joint Center for Regulatory Studies of Washington, D.C. proposed that: A. The district courts should obtain jurisdiction of the Section 337 proceedings. B. Otherwise, the USITC shall adopt the Supreme Court’s eBay decision38 and
issue injunctive relief orders according to the traditional four-factor tests for any kind of injunctive relief.
36 467 U.S. at 840.
37 Robert W. Hahn, Assessing Bias in Patent Infringement Cases: A Review of International Trade Commission
Decisions (AEI-Brookings Joint Center Working Paper No. RP07-03, February 2007), available at http://papers.
ssrn.com/sol3/papers.cfm?abstract_id=950583 .
38 eBay Inc. v. MercExchange, L.L.C., 547 U.S. ___, 126 S.Ct. 1837 (2006). (“(1) that it has suffered an
irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that
considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” The last factor is considered by the President)
The Hahn paper’s analysis is mainly based on a USITC decisional database (January 1972 to July 2006) built by him that is unrelated to this research. Except for the results disclosed in the working paper, I have not seen Hahn’s actual database.
Hahn’s Point A is revolutionary. However, he surely is not the first person to make such a grand proposal. For example, Section 1.4 shows that the Tariff Commission had proposed to relinquish its Section 337 proceedings as early as in the 1930s claiming itself lack of patent law expertise. Patent litigation has always been a specialized branch of the law. As long as an agency is in power, people definitively would want to make recommendations.
In contrast, this thesis assumes that the USITC’s Section 337 subject matter jurisdiction is not fundamentally flawed and has been gradually perfected throughout its eighty-some years of history. This thesis may be more useful to its readers if it insightfully reviews the USITC’s evolution in detail rather than to make just another recommendation that may not be accepted by the powers that be. Being a passive observer and faithful describer, this thesis tells a historical and legal story qualitatively and quantitatively and leaves final value judgments to the readers.
1.2.1 Hahn’s Major Findings
The Hahn paper empirically reviewed the USITC’s Section 337 decisions and found: 1. The USITC has assumed an increasingly prominent role in adjudicating patent
disputes in recent years.39
2. However, that the Section 337 proceedings provide not much benefit to the public because they are seriously biased in two ways:
a. The USITC is more likely to find patent infringement (23%)40 than are district courts (6%).41 About 35% of the USITC’s patent-related determinations are
reversed by the Federal Circuit (in favor of complainant 48%; in favor of respondents 26%).42 In contrast, the district courts’ reversal rates between
39 Hahn at 3. 40 Hahn at 4, 14-15.
41 Hahn cited Jay P. Kesan, Gwendolyn G. Ball, How Are Patent Cases Resolved? An Empirical Examination of
the Adjudication and Settlement of Patent Disputes, (Univ. of Ill. Coll. of Law, Law & Econ. Working Paper No.
52, 2006), 84 WASH. U. L. REV. 237 (2006). (Hahn’s pinpoint citation may be erroneous.)
42 Hahn also cited Greene (2000, 2001) who estimated the USITC’s reversal rates between 1986 and 1999 were
1995 and 2000 are about 18%.43 Hahn used this finding to question the USITC’s decision-making quality.44
b. The USITC usually issues an injunctive relief order automatically once it has found patent infringement.45 Of the 109 patent-infringed cases, the USITC issued injunctive relief orders to 103 of them.46 On the contrary, according to Kesan and Ball (2006),47 the district courts grant injunctive relief only to about 20% of the cases once patent infringement has been found.48
Based on the above findings, Hahn proposed, “either removing jurisdiction from the ITC in most patent cases or imposing the same standard for issuing injunctions as applies in the district courts as two possible methods of reform that would reduce the social costs of ITC patent litigation.”49 Among all, the Hahn paper alleged that the USITC is “biased” to the patentees on three major statutory grounds:
I. The USITC’s subject matter jurisdiction “eliminates wrangling over complex jurisdiction and venue issues that are common in district court proceedings.”
43 Hahn cited mainly Kimberly A. Moore, Are District Court Judges Equipped to Resolve Patent Cases?, 15
HARV. J.L. & TECH. 1, 15 tbl.1 (2001). (“A study by Federal Circuit Judge Kimberly Moore finds an average overall reversal rate for federal district court patent cases before the Federal Circuit between 1995 and 2000 of around 18 percent.”)
44 Hahn at 16-18. 45 Hahn at 4. 46 Hahn at 21.
47 84 WASH.U.L.REV. 279-280. (“Permanent injunctions are more common, though they seem to play a
different role in the process. As shown in Table 10, injunctions are most commonly found in consent judgments and even formal settlements, most likely as a mechanism for formalizing the agreement. They are also
sometimes employed in default judgments as a way of controlling an infringing party who has not presented himself in court. However, they are rare in adjudicated cases: only 19% of cases ending in trials and only 4% of those terminating in summary judgments included an injunction. Note that these numbers correspond only to those cases involving grants of permanent injunction and not to any grants of preliminary injunctions in patent cases. ”)
48 Hahn at 5, 20-21. (“To determine whether the ITC is more inclined to offer injunctive relief because of its
limited arsenal of remedies, I compare the incidence of injunctive relief at the ITC after a finding of infringement — which is extremely high — with the imposition of injunctive relief in a particular group of district court cases. Prior to eBay, many district courts failed to take sufficient account of public interest considerations militating against injunctive relief, but despite this practice, I find that district courts that find infringement impose injunctive relief in only 20 percent of cases. In the future, however, one should expect that district courts will impose injunctive relief as a remedy for infringement less frequently because of the four-part test in eBay. This will make the ITC an even more attractive forum for patent disputes, leading to more
inappropriate injunctions that result in a net harm to social welfare.”)
II. The USITC’s procedures are on a tight schedule, which may compromise respondents’ right to due process.
III. Some patent litigation defenses are not available to USITC’s respondents.50 Based on the empirical finding that the USITC’s Section 337 proceedings have been problematic, the Hahn paper then questions the necessity and public interest value of injunctive exclusionary relief.51
1.2.2 The Differences between This Thesis and Hahn’s Paper
Even though this thesis’s database and Hahn’s database cover almost the same time period of the Section 337 proceeding’s history, differences in data management rules between the two independently developed proprietary databases may result in certain critical incompatible results. These rules are generally created to handle irregular entries and exceptional cases, such as multiple determinations to an investigation or cases reversed by the Federal Circuit. For descriptions of this thesis’ rules, please refer to Section 6.1. This thesis’s final data set was created for the analysis of the USITC’s injunctive order issuance behavior. The data analysis of this thesis follows certain self-created rules that may not be observed by Hahn’s research:
• All available information is collected. However, the final analysis only applies to a relevant subset.
• Only utility patent cases are included. Cases without a utility patent are excluded. Design patent-only cases are excluded.
• Only exclusion orders issued after the creation of the Limited Exclusion Order are analyzed.
1.2.3 The Hahn Paper’s Problems
The Hahn paper may still be in development. Some errors or possible errors may be corrected.
50 Hahn at 3-4.
The Point 1’s finding is generally undisputed and welcomed by patent litigators. Since the scope of this research does not include Federal Circuit reversal rates, this research does not comment on the Point 2.a.
As to the Point 2.b, the USITC’s nearly automatic issuance of injunctive relief orders is a legal fact required by the statute. The USITC’s nearly automatic issuance of remedial orders is a fact. However, the 20% district court injunction issuance rate may be suspiciously too low. Prior to the Supreme Court’s 2006 eBay decision (see Section 5.3), the Federal Circuit had an actively enforced policy that demanded district courts to grant permanent injunctive relief automatically once patent infringement has been found.52 This issue is not within the scope of this thesis.
Some of the problems in Hahn 2007 are discussed in this thesis whether in detail or just briefly covered as a less important side issue. Two out of the three biases named by Hahn paper may be weak or groundless.
The Point I shall be viewed as a non-issue. After all, there must be a court willing to hear a dispute and make the decision if a patentee wants to sue an alleged infringer. The named defendant may persuade a court to transfer the pending legal action to another fairer or friendlier court; it may not request the court to dismiss the case if the court finds the complaint justiciable. Therefore, forum shopping and the jurisdictional disputes between the adversaries may only be seen as a procedural artifact rather than a valuable part of the defendant’s due process.
The Points II has been debated at the GATT in the late 1980s.53 The U.S. then amended the laws despite that the amended laws may still be unfair to academic researchers. Section 337 investigations’ deadlines are now flexible.54 (See also Section 1.7.2).
52 MercExchange, Inc. v. eBay, Inc., 401 F.3d 1323, 1339 (Fed. Cir. 2005). (“general rule that courts will issue
permanent injunctions against patent infringement absent exceptional circumstances.”).
53 1988 GATT Panel Report. (“3.36 The Community argued that … Because USITC Commissioners were not as
well qualified to deal with the legal aspects of patent issues, they might be reluctant to enter into detailed consideration of difficult patent law problems that arose in testing the validity of patents. They were thus more likely to be decisively influenced by the presumption of validity of the patent in the knowledge that rulings on this matter had no res judicata effect and that the respondent could initiate federal district court proceedings to challenge the validity of the patent.”). (“5.19 … The Panel found that the relatively short and fixed time-limits for the completion of proceedings under Section 337 could put the respondent in a significantly less favourable position than it would have been in before a federal district court where no fixed time-limits apply, both because the complainant has a greater opportunity than the respondent to prepare his case before bringing the complaint and because defence in general benefits from delay.”).
54 19 U.S.C. § 1337(b)(1). (“The Commission shall conclude any such investigation and make its determination
