From time to time, observers have been surprised when a foreign-based complainant pursues an ITC Section 337 investigation to enforce its intellectual property against an American company. Yet that alignment is entirely consistent with ITC law, as long as the foreign company maintains a domestic industry through sufficient investment in the US. Such “inverted” ITC cases are likely to become more common as a result of the US government’s pivot toward industrial policy.

The two major industrial policy statutes passed in 2022—the Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Produce Semiconductors and Science Act (CHIPS)—collectively provide hundreds of billions of dollars in incentives to manufacture products in the United States. By design, this campaign of industrial policy will not only support existing domestic manufacturers, but also lure foreign companies to build production facilities in the United States. In the eight months through April of 2023, foreign investors—primarily from Japan, South Korea, and Taiwan—were involved in about one third of the $204 billion in investment in US semiconductor and clean-tech projects.¹ Under CHIPS, Taiwan Semiconductor Manufacturing Corporation is building advanced manufacturing plants in Arizona with the help of billions of dollars in government support.

These new domestic investments promise to change the landscape of ITC litigation. The ITC is sometimes characterized as a “protectionist” agency, but what it protects is not domestic companies but domestic investment. In simple terms, the ITC cares about American jobs, regardless of who created them. Companies that never had a domestic industry before will be able to start making use of the ITC to enforce their intellectual property rights against imported products or components. And their US-based competitors, to the extent they import foreign-manufactured products and components, face an ITC investigation risk. It would be prudent for both of these types of businesses to learn more about the Section 337 process at the ITC and include it in their intellectual property litigation toolkit. 

The ITC provides a powerful remedy called an exclusion order, which prohibits the importation of infringing products from the US market. This injunction-like remedy is easier and faster to obtain than a district court injunction. To issue a permanent injunction, a district court must find that the aggrieved party has suffered irreparable harm and that damages are insufficient to compensate for the harm. The ITC only requires findings of liability, the existence of a domestic industry, and that the remedy does not outweigh the strong public interest in protecting intellectual property. Moreover, the ITC almost never stays its investigations due to pending inter partes reviews (IPRs) of asserted patents, and it often completes its own investigation before such IPRs reach their conclusion.

Foreign-based complainants, including LG, Heineken, Kia, Samsung, and Canon, have satisfied the domestic industry requirement (or the related “injury to a domestic industry” requirement) either alone or based upon the operations of their US subsidiaries. For example, an LG group that included both US and Korean entities, represented by Dentons’ ITC litigation team led by Mark L. Hogge and Nick H. Jackson, prevailed in a 2021 final determination over trade secret misappropriation related to lithium ion batteries. The US subsidiary of the Chinese drone maker Autel Robotics, also represented by Dentons partners Timothy C. Bickham and Stephen Yang, obtained an exclusion order against DJI in 2020. There will doubtless be more wins by foreign-headquartered complainants as they build up their US operations to take advantage of subsidies. 

International companies whose US operations do more than merely import, market, or sell their products should consider the ITC when looking to enforce their intellectual property rights. And domestic companies ought to carefully evaluate increases in the risk of an ITC action when developing their intellectual property and product planning strategies, including understanding the risks of both foreign manufacturing and foreign-sourced components.

Dentons has a leading ITC litigation team comprising practitioners with decades of Section 337 experience. Please contact the attorneys listed here or your standard Dentons contact attorney for further information.

1 A. Chu & O. Roeder, “‘Transformational change’: Biden’s industrial policy begins to bear fruit,” Financial Times (Apr. 17, 2023).