The International Trade Commission: An Underutilized Forum
April 27, 2023 - The U.S. International Trade Commission ("ITC") is an independent, nonpartisan, quasi-judicial federal agency created by statute whose essential purpose is to stop imports of goods into the U.S. that are manufactured through unfair methods of competition. It is best known as a high-stakes, fast-paced court where companies go to fight patent infringement cases; but its authority and usefulness to investigate "unfair methods of competition" are far broader.
Advantages of the ITC
Litigants choose the ITC for a variety of reasons. It offers a speedy and predictable schedule—on average, cases go to trial within nine months and the Commission issues its final decision within 16 months. The Commission's jurisdiction is in rem (over the product), not in personam (over the person), which makes it an ideal forum for suing foreign-based competitors who cannot be dragged into federal or state court for lack of personal jurisdiction. Cases are decided by knowledgeable, experienced administrative law judges; and the full range of discovery can be obtained from any foreign-based party without needing to invoke burdensome international discovery mechanisms.
Perhaps most appealing, the ITC offers powerful remedies that are issued almost automatically to victorious complainants.1 By statute, the ITC may issue exclusion orders and cease & desist orders. Exclusion orders—which come in two varieties, limited and general—instruct U.S. Customs and Border Protection to "exclude[] [covered articles] from entry into the United States for consumption, entry for consumption from a foreign-trade zone, or withdrawal from a warehouse for consumption;" effectively, a ban on the respondent's products entering the country. A limited exclusion order will be directed to articles manufactured by or on behalf of named respondents, while a general exclusion order covers all products that violate section 337, regardless of owner or manufacturer. Lastly, cease & desist orders preclude the respondent and its agents from participating in virtually every type of conduct pertaining to the banned product in the United States.2
Furthermore, the ITC has "broad discretion in selecting the form, scope, and extent of the remedy."3 It has invoked this broader authority many times to tailor remedies to the particular facts of an investigation.
"Unfair Methods of Competition and Unfair Acts"
The ITC's enabling statute, the Tariff Act of 1930 (19 U.S.C. § 1337), is broken up into subparts (A)-(E) which define "unlawful activities." Subparts (B)-(E), which form the basis of more than 90% of ITC complaints, relate to statutory intellectual property rights like patents and federally-registered copyrights and trademarks.
However, subsection (A) (specifically, § 1337(a)(1)(A)) broadly covers imported articles made through any "unfair methods of competition and unfair acts" that cause injury to a U.S. industry:
(A) Unfair methods of competition and unfair acts in the
importation of articles (other than articles provided for in
subparagraphs (B), (C), (D), and (E)) into the United States, or in
the sale of such articles by the owner, importer, or consignee, the
threat or effect of which is—
(i) to destroy or substantially injure an industry in the United
States;
(ii) to prevent the establishment of such an industry; or
(iii) to restrain or monopolize trade and commerce in the United
States.
The reference to "[u]nfair methods of competition and unfair acts" was meant to be as broad as it sounds. There is no definition in the statute, and the Senate Report on the original bill confirms an expansive interpretation: "The provision relating to unfair methods of competition in the importation of goods is broad enough to prevent every type and form of unfair practice...."4 Courts have also confirmed that "Congress intended to allow wide discretion in determining what practices are to be regarded as unfair."5
Based on this broad interpretation, the ITC has instituted investigations based on claims of:
- Trade secret misappropriation;
- Antitrust violations;
- Common law trademark and trade dress infringement;
- False advertising;
- Violations of the Food, Drug, and Cosmetic Act ("FDCA");
- Breach of contract; and
- Tortious interference with contractual relations and other business torts.6
Other unfair methods of competition and acts that have been theorized can give rise to an ITC investigation, but remain untested, include violations of:
- The Foreign Corrupt Practices Act;
- Data security and the Computer Fraud and Abuse Act;
- Labor laws;
- Product safety regulations;
- Conflict mineral regulations; and
- Environmental regulations.
The Injury and Nexus Requirements
To succeed on a claim under subsection (A), a complainant must prove: (1) an unfair method of competition or unfair act by the respondent relating to the production an article; (2) importation, sale for importation, or sale after importation into the United States of the article; (3) the existence of a "domestic industry" in the U.S.; and (4) injury to the domestic industry from the alleged unfair competition or act. The first three elements are required in all ITC investigations. The injury requirement, however, is particular to subsection (A) cases. The Commission will consider a broad range of indicia in assessing injury, including the volume of imports and their degree of penetration, lost sales, underselling by the respondent, reduction in the complainant's profits or employment levels, and declining production, profitability and sales.7
In addition, the complainant must show a sufficient nexus between the unfair method or act and the injury.8 In other words, the complainant must show a reasonable likelihood that the respondent's unfair acts caused or contributed to the alleged injury to the domestic injury. This is most often established by showing that the complainant (as a participant in the domestic industry) sustained injury from the importation of the respondent's products.
Conclusion
Congress vested very broad authority in the ITC to conduct investigations and exclude products from entering the U.S. if they are determined to be the result of unfair competition from abroad. Yet, over 90% of the complaints filed in the ITC allege patent infringement. Given the unique advantages that the ITC provides over other forums, companies should investigate whether it is the right vehicle to nullify unfair competition by their competitors.
Footnotes
1. The Commission may choose to not issue an otherwise-warranted remedy if, "after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers, [the Commission] finds that such articles should not be excluded from entry." 19 U.S.C. § 1337(d)(1). But such exceptions are exceedingly rare.
2. Specifically, the respondent is typically ordered to "cease and desist from conducting any of the following activities in the United States: importing, selling, offering for sale, marketing, advertising, distributing, transferring (except for exportation), soliciting United States agents or distributors, and aiding or abetting other entities in the importation, sale for importation, sale after importation, transfer (except for exportation), or distribution of" products in violation of Section 337.
3. Viscofan S.A. v. ITC, 787 F.2d 544, 548 (Fed. Cir. 1986).
4. S. Rep. No. 67-595, at 3 (1922).
5. In re Von Clemm, 229 F.2d 441, 443–44 (C.C.P.A. 1955); see also Suprema, Inc. v. ITC, 796 F.3d 1338, 1351 (Fed. Cir. 2015) (en banc) (noting that, despite amending the controlling statute, Congress has not upset the Commission's consistent, broad interpretation of Section 337).
6. See, e.g., Certain Stainless Steel Products, Inv. No. 337-TA-933 and TianRui Group Co. v. ITC, 661 F.3d 1322 (Fed. Cir. 2011) (trade secrets); Certain Programmable Logic Controllers, Inv. No. 337-TA-1105 (price fixing); Certain Woven Textile Fabrics, Inv. No. 337-TA-976 (Lanham Act, false advertising); Certain Hand Dryers and Housings For Hand Dryers, Inv. No. 337-TA-1015 (trade dress); Certain Potassium Chloride Powder Products, Inv. No. 337-TA-1013 (FDCA violations); Certain Electric Fireplaces; Inv. No. 337-TA-791/826 (breach of contract and tortious interference with contractual relations).
7. Certain Electric Power Tools, Inv. No. 337-TA-284, Initial Determination at 246, USITC Pub. No. 2389 (1991).
8. Id.
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