Coatings World - October 2014

Protecting the P&C Industry’s Intellectual Assets

by Steve McDaniel and Jon Hurt, Contributing Editors

You have decided to expand your coatings business globally. Good idea. You have dutifully read all the iPaint articles published in Coatings World for the last two years regarding building a Wall around your company’s intellectual property. Thus, you have exercised reasonable and prudent business care surrounding your IP. You’ve papered up your transactions and disclosures, you’ve prevented employee misappropria-tion, and you are seeing the fruits of your labor in increased revenue and market share over competitors whose products lack the advantages that consumers love about yours. Basking in the glow of this success, you begin serious strategic interactions with a foreign corporate entity to manufacture and distribute your product outside the U.S., and under the proper written agreements, you crank it up. But, the relationship sours shortly thereafter and there suddenly appears in the U.S. market a foreign knock off product that rapidly cuts into your market share, demonstrably erasing the competitive edge you had achieved with your innovations.

Of course, if you have issued U.S. patents, you sue for patent infringement based on those patents. The U.S. patent laws afford protection over importation of infringing articles of manufacture. But, there is an alternative, and it has a nice “hometown” feel to it. It’s called the ITC, or the International Trade Commission.

Under Section 1337 in Chapter 19 of
the United States Code (the ITC legal
beagles shorten this to “Section 337”),
you can seek have unfair trade practices
used to illegally produce imported arti-
cles investigated and the importation of
them stopped on the loading docks. The
ITC is the place to go to get the process
started. Established in 1912, the ITC an-
swers to both the legislative and executive
branches of government, and can act to
enforce any U.S. intellectual property
right. And, that includes rights you may
have in your trade secrets. Cool, huh?
Specifically, Section 337 provides for
investigations to prevent importation, sale
for importation or sale after importation
of articles that infringe or misappropriate
trade secret, patents, copyrights, trade-
marks and trade dress of U.S. companies.
Additionally, articles that use false adver-
tising, whose sale monopolizes trade, re-
strains trade or prevents the establishment
of, injure or destroy a domestic industry
are also subject to action by the ITC. For
example, dumping a product onto U.S.
markets (i.e., selling a product below the
cost of production or the price in the home
country) or export of a foreign govern-
ment-subsidized product to the U.S. could
qualify as injury to a domestic industry.
In most cases, you’re looking to stop a
particular product imported in which your
company has intellectual property protec-
tion. To make a successful ITC case as the
complainant you need to show importa-
tion of the article in question, that it in-
fringes your U.S. intellectual property, and
that you meet the “domestic industry” cri-
teria. For example, you need to show that
you have patents practiced in the U.S. and
that substantial investment activities relat-
ed to the patented articles occur in the U.S.
such as R&D, licensing, engineering, labor,
and capital expenditures (e.g., equipment,
plants), . . . yada, yada. Infringing articles
may include those that will be immediately
sold or imported into the U.S., as well as
those already sold for importation, im-
ported or sold after importation.
Things that typically happen when a
Section 337 investigation is invoked in-
clude: investigations by you prior to filing
a complaint; discovery; trial; U.S. Customs
proceedings; and Appeals to the Federal
Circuit. An administrative law judge
handles the investigation and resolution of
complaints – a critical distinction of Federal
District Courts (where litigators like to say
the judges were “appointed by the President
but anointed by God . . . at least in their
own minds”).

The ITC moves fast . . . very, very fast (especially in relation to your typical patent infringement case in a U.S. Federal District court). So, you gotta be ready and armed for bear (and, since you have read about IP audits in this column in Coatings World,

you are!). The ITC will decide within 30- days whether to institute an investigation. Deadlines for discovery can be as quick as 10 days after a complaint is filed, and includes the power to issue subpoenas nationwide and against foreign respondents. The discovery process can occur outside the United States, and may inundate parties with requests for documents and testimony, and can extend up to and in some instances occur during the hearing.