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Section 337 Update - ITC Issues Advisory Opinion in GPS Devices

June 2010

Welcome to the June issue of the Section 337 Update. This newsletter is designed to provide you with practical updates and developments on Section 337 proceedings before the U.S. International Trade Commission.

ITC Issues Advisory Opinion in GPS Devices

The U.S. International Trade Commission (“ITC”) recently exercised its authority to issue advisory opinions to help interested parties navigate the sometimes murky waters of Section 337 exclusion orders. In response to Atheros Communications Inc.’s request for an advisory opinion stemming from the ITC’s limited exclusion order in Certain GPS Devices and Products Containing Same, Inv. No. 337-TA-602, the ITC held that the importation of GPS products incorporating Atheros’ GPS chips would not violate the exclusion order. The ITC’s advisory opinion and exclusion order are available here.

ITC advisory opinions are one method by which an importer or interested party can ensure that its products comply with exclusion orders, thus keeping potentially damaging enforcement actions at bay.

19 C.F.R. § 210.79 permits the ITC to issue an advisory opinion as to whether a particular course of action would violate an ITC exclusion, cease and desist, or consent order. When deciding whether to issue such an opinion, the ITC must consider: (1) whether the opinion would facilitate Section 337 enforcement; (2) whether it would be in the public interest; (3) whether it would benefit U.S. consumers and competition; and (4) whether the requester has fully and accurately articulated a compelling business need for the advice.

The ITC issued its first advisory opinion in Certain Amorphous Metal Alloys and Amorphous Metal Articles, Inv. No. 337-TA-143. There, the ITC considered whether amorphous metals fabricated using respondents’ modified casting processes would violate an exclusion order on goods that infringed the complainant’s patent. The ITC compared the modified processes to the complainant’s patented method and determined that the imports in question would not violate the exclusion order. The complainant (Allied Corporation) appealed to the U.S. Court of Appeals for the Federal Circuit; however, in Allied Corp. v. U.S. International Trade Commission, 850 F.2d 1573 (Fed. Cir. 1988), the court held that it lacked jurisdiction to review the ITC’s advisory opinion. Judge Markey, for the court, reasoned that although 28 U.S.C. § 1295(a)(6) grants the court jurisdiction to review ITC final determinations, the “lack of finality inherent in the word ‘advisory’ . . . dooms review.” Allied, 850 F.2d at 1578 (emphasis added). Thus, ITC advisory opinions, once issued, remain effective until superseded by a later ITC opinion or order.

Since the Federal Circuit’s decision in Allied, advisory opinions have become valuable tools through which parties and nonparties can receive the Commission’s guidance on how to proceed against the backdrop of potentially crippling exclusion orders.

The ITC’s most recent advisory opinion involved a third party chip manufacturer with tremendous interest in clarifying the scope of a limited exclusion order. On March 5, 2010, Atheros requested an advisory opinion as to whether the importation, sale for importation, or sale after importation of GPS products incorporating Atheros GPS chips would violate the ITC’s limited exclusion order. Atheros intended to sell its GPS chips to certain respondents for incorporation into GPS products. Because it was not a respondent in the investigation and due to the limited language of the exclusion order (limited to a certain respondent’s chips and certain products incorporating said chips), Atheros sought an advisory opinion clarifying that respondents’ GPS products incorporating Atheros’ chips were not subject to the exclusion order.

The ITC first analyzed the 19 C.F.R. § 210.79 factors and found that Atheros’ request would facilitate Section 337 enforcement, would be in the public interest, would benefit consumers and competitive conditions in the U.S., and that Atheros had shown a “compelling business need for the advice.” Certain GPS Devices, Advisory Opinion at 3. Next, the ITC turned to the infringement question.

Exclusion orders, it said, must be read in the context of the investigation in which they were issued and the ITC’s finding in that investigation. Here, the ITC reasoned that the language in the limited exclusion order targeting articles made by the named respondents “that infringe” or articles “covered by” complainant’s patent referred to articles that infringe and articles that are “essentially the same,” meaning that the differences between them are unrelated to the limitations of the claim in the patent. Because the ITC’s findings of infringement in the underlying investigation were based almost entirely on the operation of the proprietary software, data services, and hardware in a particular respondent’s GPS chips, the scope of the limited exclusion order is limited to those chips and products incorporating those chips. As such, the ITC’s advisory opinion held that importation of products containing Atheros’ GPS chips would not violate the limited exclusion order.

Third parties are not the only entities who can seek an advisory opinion, however. In Certain Laser Bar Code Scanners, Inv. No. 337-TA-551, Metrologic Instruments, Inc. (“Metrologic”), a respondent in the underlying Section 337 investigation, sought an advisory opinion declaring that its newly designed scan module would not infringe two of the complainant’s patents, and thus would not be subject to the ITC’s limited exclusion order. Additionally, Metrologic requested that the ITC conduct all proceedings related to the advisory opinion in an expedited manner and on summary determination based upon the evidence presented in its request and without a formal hearing or discovery. Before conducting its own analysis, the ITC ordered the complainant and the Office of Unfair Import Investigations (“OUII”) to submit their views on whether Metrologic’s advisory opinion request should be granted. Neither the OUII nor the complainant objected to the request. The complainant, however, objected to the ultimate relief sought by Metrologic. After an affirmative finding under the 19 C.F.R. § 210.79 factors, the ITC examined Metrologic’s physical exhibits and held that the redesigned product was not covered by the Commission’s remedial orders issued in the underlying investigation. A link to the opinion is provided here.

Advisory opinions can also keep producers from making costly mistakes while designing and manufacturing articles not yet in existence. In Certain Lens-Fitted Film Packages, a case with a long and complicated procedural history, respondent CS Industries, Inc. (“CSI”) requested an advisory opinion as to whether certain cameras it sought to import into the United States infringed the claims of complainant Fuji Photo Film Co.’s (“Fuji”) patents and were subject to a general exclusion order and cease and desist orders imposed in Inv. No. 337-TA-406. Fuji complained that because CSI had not yet begun manufacture, importation, and sale in the United States, the issue was at “too theoretical a stage” for an advisory opinion. The administrative law judge, however, disagreed, noting that “one acceptable reason for instituting an advisory opinion proceeding is the ‘obvious risk of building a production facility for the manufacture of an article which may or may not be covered by a United States patent.’” A link to the opinion is provided here.

ITC Advisory Opinions Compared to Customs and Border Protection Rulings

Because the applicable statutes and regulations do not impose a timeline for ITC advisory opinion proceedings, importers seeking quicker guidance regarding ITC exclusion orders often seek rulings on exclusion orders from U.S. Customs and Border Protection (“CBP”). Under 19 C.F.R. § 177.1, importers and other interested parties may seek written rulings “with respect to a specifically described transaction, a definitive interpretation of applicable law, or other appropriate information.” CBP rulings, however, have several characteristics that some importers may find less favorable than ITC advisory opinions. First, unlike ITC advisory opinions, CBP ruling letters are prospective only and may be modified or revoked prior to final disposition by an appropriate CBP official. 19 C.F.R. § 177.9(b). Furthermore, because, CBP rulings are not binding on the ITC, an importer might receive a favorable ruling from CBP yet still face an ITC enforcement proceeding and sanctions. Finally, the perceived time advantage associated with CBP rulings is not always a reality. For example, on November 6, 2003, CBP issued Ruling HQ 474182 regarding the ITC’s exclusion order in Lens-Fitted Film Packages, Inv. No. 337-TA-406; the importer requested the ruling more than six months earlier on April 30, 2003. In comparison, six weeks (March 5, 2010-April 20, 2010) passed between the request and opinion in Certain GPS Devices.

We will periodically provide you updates on developments relating to Section 337 litigation. If you have any questions or for further information, please feel free to contact Charles Schill at 202.429.8162, or Alice Kipel at 202.429.6743, or Steve Barber at 202. 429.6430. Special thanks to Charles Morris for his assistance in preparing this update.