Part I – The Hard Fought Battle By Brita

The Unfair Import Investigation For Brita Is A Success

Brita, an Ontario, Canada limited partnership, of the water filter fame won an important decision in International Trade against 5 of its competitors, or accused infringer Respondents – both domestic and foreign. Administrative Law Judge MaryJoan McNamara handed down her 316 page decision on February 28, 2023 finding that the competitors violated 19 U.S.C. § 337 ("Section 337”).¹ The 337 action is entitled Matter of Certain High-Performance Gravity-Fed Water Filters and Products Containing the Same, Investigation No. 337-TA-1294.   With its victory, and subject to review, Brita, as a Complainant, will be able exclude its competitors’ infringing products from the US market, and have their inventories seized and removed from US soil. The decision follows on from an evidentiary hearing, where the parties also discussed NSF/ANSI standards and testing protocols, that took place last August. The decision became public on March 22, 2023.

Interestingly, Brita sought leave to make “clerical changes” to its pre-hearing brief and certain respondents opposed. During the pre-hearing conference, the parties discussed monetary compensation as a possible remedy to the opposing respondents’ alleged prejudice. Opposing respondents, however, did not submit billing statements and a motion for sanctions on the issue, so Judge McNamara granted Brita’s motion for leave to file a correct pre-hearing brief.

It was a very hard fought case that delved into a full validity attack on the asserted patent requiring Brita to defend its single patent and take a deep dive into the activities of the inventors and the dates of those activities.

The ALJ Holds That Brita Has A Domestic Industry To Protect. 

The ALJ  found that “Respondents have infringed asserted claims of US Patent No. 8,167,141 [], and that one of [sic] more of Complainant’s domestic industry products have satisfied the technical industry prong of the domestic industry requirement for the [] patent.”  importantly, the ALJ found “Complainant has satisfied the economic prong of the domestic industry requirement.” In summary, the ALJ found that Brita has a domestic industry to protect, i.e., substantial investments for plant and equipment, labor and capital, R&D, and domestic activities/investment of a subcontractor. Judge McNamara’s decision is not final, as the full Commission ITC has the discretion to review and reverse the ALJ. The relief issued by the ITC is, in turn, subject to disapproval by the President of the United States, during the 60-day Presidential Review Period.

The ALJ Recommends Issuing Exclusion Orders And Cease And Desist Orders.

ALJ McNamara recommended the ITC issue Limited Exclusion Orders (“LEOs”) against all five competitors and Cease and Desist Orders (“CDOs”) against the US inventories of three of the competitors. LEOs are effectively strong injunctions that exclude infringing imports from entering the United States, and CDOs prohibit the maintaining of inventories and sale of the subject imported products within the United States. US Customs and Border Protection (“Customs”) enforces LEOs by blocking the infringing products from entering the US market at Customs, and the ITC enforces CDOs by seizing inventory of the infringing products in the US and requiring regular reports from the infringing company.

The ALJ Recommends Bonds For The Infringing Imports During The Presidential Review Period.

ALJ McNamara recommended a 100% of sales bond on all products except those of LifeStraw, whose bond was set at $6.00 per unit due to a price differential between the average retail price for Brita’s products and LifeStraw products.  Should the respondents desire, they can still import the infringing products for 60 days after the Commission issues its LEOs and CDOs, i.e., during the Presidential Review Period.

The Commission Must Consider The Public Interest Factors Prior To Issuing Remedies.

Before issuing the LEOs and CDOs, the ITC is required to consider the public interest. To this end, on March 7, 2023, the ITC issued a request for statements on the public interest in the Federal Register / Vol. 88, No. 44.

“In particular, the [ITC] is interested in comments that:

1. Explain how the articles potentially subject to the recommended remedial orders are used in the United States;
2. Identify any public health, safety, or welfare concerns in the United States relating to the recommended orders;
3. Identify like or directly competitive articles that complainants, their licensees, or third parties make in the United States which could replace the subject articles if they were to be excluded;
4. Indicate whether complainants, complainants’ licensees, and/or third-party suppliers have the capacity to replace the volume of articles potentially subject to the recommended orders within a commercially reasonable time; and
5. Explain how the recommended orders would impact consumers in the United States.”

The request is to the public at large, and the deadline for the written submissions was March 31, 2023. Typically, only parties participating in the investigation provide such comments; however, consumers, customers, suppliers, and even members of Congress have submitted public interest comments when the situation arose. The parties to the Investigation are frequently ordered to provide such statements.

Part II – How the ITC Can Benefit YOU

For IP Owners

337 actions are MORE, BETTER, FASTER, CHEAPER. If your client has a domestic industry in the US, has a patented or trademarked product, and the competitors are importing products that infringe, you must file a 337 action as that is the way to go.  To do what Brita did in District Court would take many more years and many more millions in dollars.As illustrated in the Brita case, the ITC is a powerful legal tool for Complainants, as intellectual property owners, and should be among first choice of venue for enforcing a patent. The requirements in bringing a Section 337 Investigation are: (1) the infringing party/parties’ products are imported; (2) the patentee has a product covered by its patent(s); and (3) the patentee has invested in its domestic industry involving expenditures such as labor, engineering, R&D, and manufacturing prior to the date of filing the complaint. If a violation of Section 337 is found, the Complainant(s) can exclude the competitor’s infringing products for the remaining life of the patent. As shown in the Brita case, even the activities and investments of subcontractors count

The ITC powers are strong!  The ITC can issue orders excluding the world not just named infringers.  General Exclusion Orders (“GEOs”) forbid importation of offending products, irrespective of their source.  Like Courts, the ITC can expedite proceedings, and issue temporary exclusion and/or cease and desist orders that remain in effect during the pendency of an investigation. Section 337 also empowers the ITC to levy sanctions for abuse of discovery and abuse of process, to the extent authorized by Rules 11 and 37 of the Federal Rules of Civil Procedure. Once in effect, violations of the exclusion orders are punished with draconian sanctions.

A key reason that the ITC proceedings are streamlined is because money damages are NOT litigated there. Damages are pursued by filing a parallel case in US District Court.  Upon completion, the ITC record will be transferred to the parallel District Court case.

For Parties Named As Respondents

On the Respondent side, the ITC is a good way for an accused infringer to resolve IP issues with a patentee. If successful, it will usually take a patentee an average of 14-17 months to obtain remedial orders against the accused imported products. All this time the Respondent can continue to import the accused products. In addition to having no risk of monetary damages, the ITC does not adjudicate willful infringement claims. Importantly, for a Respondent, Section 337 Investigations provide time to design-around the asserted patent(s) if necessary, and a chance to have the design-around adjudicated as non-infringing. Respondents, like other parties, also have the opportunity to submit comments on public interest factors prior to the issuance of GEOs, LEOs, or CDOs to build the record denying or limiting the scope of Complainant’s remedy.

The ITC favors settlements, and requires negotiations and mediations to encourage them.

Respondents may also agree to consent orders that will terminate them from the Investigation. If navigated correctly, Respondents can exit an ITC investigation with no exclusion orders, and still have their products imported into the United States through Customs. Most importantly, if time runs out for full consideration of a design-around, there is still a procedure to have the design-around considered by the ITC after an investigation. If sought, the ITC may issue an advisory opinion on non-infringement on a design-around, which will then protect the Respondent’s importation of the design-around product from the patentee. Additionally, Respondents may seek modifications of an exclusion order from the ITC based on a change in law or fact, where Respondents can seek clarification that new products do not infringe.

Takeaways:

• The parties know the outcome on infringement and invalidity will occur in about 14-18 months (including the Markman hearing), which is faster than most District Courts.
• With the issuance of LEOs, Customs will stop goods infringing Brita’s patent from entering the United States by the PUR Respondents, Zero Water Respondents, and LifeStraw Respondent. With the issuance of CDOs, the ITC will enforce the seizure of inventor goods infringing Brita’s patent that the PUR Respondents and LifeStraw Respondent already have in the United States.
• ALL IS NOT LOST for the Respondents. PUR Respondents, Zero Water Respondents, and LifeStraw Respondent can still focus on design-around products that do not infringe Brita’s patents while they await ITC and Presidential review. After the investigation they can seek an advisory opinion. Judge McNamara’s  infringement analysis provides reasonable certainty of the boundaries of the ‘141 patent.  Indeed, there is much more certainty now than before the decision, making design-around efforts more certain as well.

¹ Section 337 investigations are conducted by the ITC, an independent government agency charged with administering several US trade laws. Pursuant to Section 337, the ITC has the authority to investigate and issue decisions on unfair methods of competition and unfair acts in the importation, and/or sale of imported articles.