ITC Respondents Are Mostly American Companies

Every Section 337 investigation at the ITC obviously has at least one complainant and at least one respondent.  But while there's usually only one complainant (the owner of a U.S. patent seeking relief for infringement through an import ban), there's almost always more than one respondent.  In fact, since the beginning of 2018 there have been 34 new complaints filed at the ITC against 321 named respondents, averaging more than 9 respondents per investigation.  Who are these respondents and what does their identity tell us about Section 337?

American Respondents at the ITC

MOSTLY AMERICAN

Despite the the fact that Section 337 was enacted in order to protect domestic industries from foreign competition, most respondents at the ITC have a U.S. address.  The prevalence of American companies among ITC respondents is due to a number of factors.  

One factor is the common practice of redundantly naming multiple respondents that are part of a single company.  This is particularly notable when the alleged infringer is a large multinational with offices and facilities in the United States.  For example, complaints against Nintendo include both the Nintendo Company in Kyoto, Japan, and Nintendo of America in Redmond, WA.  In a current investigation brought by Broadcom against Toyota, the Japanese car maker is listed as eight named respondents, one with an address in Japan, three with addresses at Toyota's North American headquarters in Plano, TX, and four others at Toyota manufacturing sites spread around the United States.

Another reason there are so many American respondents at the ITC is that American companies import a lot.  Global supply chains enable Americans to design and market products in the United States that are made abroad.  Even companies manufacturing their own products in the United States need imported components, which could easily become the subject of an ITC investigation in a patent dispute.  

Also contributing to the high number of American respondents at the ITC is the fact that complaints can be brought not just against companies that import accused products but also against people who sell or use those imported products in the United States.  In a recently filed complaint against imported carburetors, for example, respondents named in the investigation include Amazon, Walmart, Target, and Home Depot.  Moreover, the ITC has been willing to block imports even when the infringer is an American service provider that merely uses the product in its business.

Parallel Litigation

PARALLEL LITIGATION

The prevalence of American respondents means Section 337 investigations often involve parties that can be sued in court for the same actions at issue at the ITC.  Indeed, most investigations at the ITC have a district court counterpart involving the same parties and patents.  Of the 34 complaints filed to date in 2018, 20 (59%) are the subject of parallel litigation in federal court while 14 (41%) are not.  The portion of complaints that cannot be filed in district court or that would face serious jurisdictional or enforcement difficulties is lower still.

CHINA

Where are ITC Respondents Located

China is home to more foreign respondents than all other locations combined.  Looking again at 2018 filings, 61% of respondents (196) are in the United States while 22% (71) are in China.  The remaining 17% (54) are located in one of 16 other countries.

One reason for China's strong showing among respondents is fairly obvious.  Just as America imports a lot, China exports a lot.  Imports from China made up over 20% of all goods imports by value in 2017.  And many more of the things we buy are produced through supply chains that prominently feature Chinese manufacturing activity.

Another reason for China's prominence in ITC investigations is that China is a convenient location for producers trying to evade liability in American courts.  A common justification for the ITC's power to investigate and block infringing imports is the concern that district courts may be incapable of preventing infringement by foreign companies.  This is certainly not true of all or even most patent disputes involving imports, but some ITC complaints are indeed filed by patent owners alleging infringement by a large number of enigmatic entities operating overseas with no presence in the United States.    In those investigations, the respondents tend to be from China.  

Overall, the peculiar mix of both difficult-to-sue and easy-to-sue respondents in ITC investigations indicates that Section 337 may be serving two distinct roles within the U.S. patent system.  On  the one hand, ITC litigation appears to be helping U.S. patent owners fend off shady foreign infringers.  But it also, indeed in most cases, is used as an administrative patent court enabling some patent owners to bypass the rules and remedies of federal courts when ITC litigation is more favorable.