No Quick Hill Fix Seen to CBP Patent Order Problems

The Office of the U.S. Intellectual Property Enforcement Coordinator said in June it would start an interagency effort to diagnose exclusion order enforcement problems (http://1.usa.gov/1elCYwu). Public comments from patent holders largely focused on the opaque ex parte process, which they said prevents them from contributing insight or evidence of violation (CD July 26 p14). “Patent holders should be paying careful attention to possible infringement anyway. But getting patent holders more closely involved would help the enforcement effort,” said IP lawyer Vann Pearce of Orrick Herrington. “Patent holders may want to go talk to Customs or they may file enforcement actions at the ITC if they perceive someone as violating exclusion orders. I'm sure Customs’ resources are stretched pretty thin, considering they need to monitor all border facilities. The patent holders may want to independently make sure exclusion orders are enforced."

In the longer term, CBP could potentially issue a rule that alters the ex parte procedure for contesting alleged violations, industry representatives said. The exclusion orders are issued by the ITC, and enforced by CBP, based on Section 337 of the 1930 Tariff Act. “I imagine they could amend Title 19 and the particular statute that applies. That’s something that people have talked about before as an option,” said Pearce. “Customs could just give the patent holders some right to respond. The way it could potentially increase enforcement is by getting patent holders involved at an earlier stage and giving them notice.” CBP didn’t comment.

The ITC provides some recourse options to CBP’s actions, said industry representatives, particularly in circumstances where the technological sophistication levels of patents go beyond the reach of CBP expertise. “There is a procedure where a complaining party can go back to the ITC for clarification on a modification, a design around, for an exclusion order. In practice, that hasn’t worked well because proceedings are lengthy and drawn out. And if you have to go back and re-litigate your case, it is a significant waste of time and money,” said Deanna Tanner Okun, an attorney at Adduci Mastriani who was an ITC member for 12 years. “The scope of the exclusion orders at ITC is written broadly. When it goes to Customs and a respondent is trying to get a product in, in my view, Customs should be able to call up the ITC and say ‘we have an issue here.’ Then the ITC can say ‘yes, no or maybe’ or call for an expedited decision."

CBP’s ability to detect infringement is far inferior to ITC, said Okun and others. That expertise could potentially be improved through the infusion of more resources, but that’s an unnecessary objective, in light of the ITC expertise already at the CBP’s disposal, said Okun. “To have Customs, with limited staff and a focus on trade facilitation, make those sophisticated technology determinations ... I think Customs officials even would say that’s very difficult,” she said. “Customs on occasion is permitting products to pass through because they are not able to make an infringement determination. That shows a broken system. The ITC spent months issuing an exclusion order. The ITC needs to change practice and procedure, so parties can get back to it quickly, after going through Customs."

House and Senate members have expressed concern, in separate letters to Department of Homeland Security officials over recent weeks and months, on CBP enforcement of IP exclusion orders. Sens. Ron Wyden, D-Ore.; Maria Cantwell, D-Wash.; John Thune, R-S.D.; and Rob Portman, R-Ohio, submitted a request for exclusion order enforcement clarification on Oct. 22 in a letter to acting CBP Commissioner Thomas Winkowski.

House Intellectual Property Subcommittee Chairman Howard Coble, R-N.C., expressed similar criticism in an Aug. 2 letter to then-DHS Secretary Janet Napolitano. “Mounting evidence indicates CBP’s process for implementing exclusion orders is broken,” said Coble. “Little progress has been made to address persistent concerns about the lack of transparency and due process safeguards that result from the ex parte nature of CBP’s enforcement process.” Coble also asked DHS to do an independent review of CBP exclusion order procedure, as part of its plans for FY 2014. DHS hasn’t issued an official response to the request, said a spokesman for Coble.

The prospect for a legislative approach to addressing insufficient exclusion orders, through providing more resources to CBP or changing the issuance and enforcement proceedings, appears bleak in the both the House and Senate, said industry lawyers. The Senate Finance Committee leadership introduced the Trade Facilitation and Trade Enforcement Reauthorization Act of 2013 in March, but S-662 doesn’t address exclusion order enforcement. “There’s no mention of patents in the legislation. The exclusion orders can encompass other IP rights and trade secrets, but they mostly target patents,” said patent-litigation attorney Andrew Riley of Finnegan Henderson. “It seems like a lot of background going on and a lot of specific requests. But legislation for ITC exclusion orders hasn’t come out yet."

The debate about preservation of intellectual property, patents and trademarks surfaced in 2013 in a number of House Judiciary Committee bills, though none directly address exclusion orders. Committee Chairman Bob Goodlatte, R-Va., introduced the Innovation Act (H-3309) Oct. 23. The ITC is a Ways and Means Committee jurisdiction issue, rendering Judiciary bills nearly incapable of addressing exclusion order issues through the markup process, said Coble’s spokesman. “To include ITC provisions in legislation coming from Judiciary would complicate the process exponentially. Often times when you vote on a bill that has jurisdiction of another committee, it’s viewed with suspicion,” he said. “It would almost have to be a Ways and Means Committee bill that Judiciary would comment on, if it had the ITC in it.” The Ways and Means Committee had no comment.

The alleged insufficient exclusion order enforcement may be discouraging patent holders from seeking federal recourse, said Pearce. “The number of ITC 337 cases filed over the past five years has gone down significantly. It hit a high point around 2010-2011,” said Pearce. “One reason for that might be a concern that exclusion orders are being enforced insufficiently. ITC 337 cases are really expensive. If it’s a case where both sides are participating, the case could cost $5 million or more.”