Originally published in Asia Pacific Biotech News, Vol. 13(6), June 2009.

What Chinese Biotechnology Companies Should Know About Patent Litigation In The United States International Trade Commission Introduction

In April 2006, the Japanese chemical giant Ajinomoto brought a complaint in the United States International Trade Commission (ITC) alleging that lysine made in China infringed two Ajinomoto patents and should be banned from the United States. Unlike many other Chinese companies accused of patent infringement in the ITC, Global Bio-Chem Technology Group Company Limited ("GBT"), the Chinese biotechnology company that manufactured the allegedly infringing lysine, vigorously defended itself. GBT hired patent litigators (including the authors of this article) and ITC specialists in the United States who, working with GBT's counsel in China, prepared GBT's defense and tried the case before a judge at the ITC. Two years after the case began, the ITC ruled that Ajinomoto's patent claims were invalid, and that one of the patents was unenforceable, because Ajinomoto's inventors failed to comply with the disclosure requirements of United States patent law. This decision marked the first time that a Chinese company convinced the ITC that claims in a biotechnology patent were invalid. This result allows GBT to continue importing lysine into the United States.

As China's biotechnology industry grows, and the importation of biotechnology-related products into the United States increases, it is likely that more complaints will be filed in the ITC against Chinese biotechnology companies. As a result, it is increasingly important for Chinese biotechnology companies to understand the nature of ITC proceedings and be prepared to defend themselves. Our experience successfully defending GBT against patent infringement allegations in the ITC offers several poignant lessons for any Chinese biotechnology company making products that are imported into the United States.

Section 337 Investigations in the ITC

In a Section 337 action based on patent infringement, the complainant files a complaint with the ITC alleging that the respondents have violated Section 337 of the Tariff Act of 1930 because particular goods imported into the United States infringe one or more patents owned by the complainant. The complaint must also allege that the complainant is engaging in a "domestic industry." If the complainant wins, the ITC can grant several remedies, including an order excluding the infringing goods from entering the United States. A complainant cannot recover money damages in a Section 337 action.

Once the investigation is initiated, the parties conduct fact and expert discovery. During this phase of the investigation, the parties develop their theories more fully by reviewing documents produced by the opposing party, posing written questions, deposing witnesses under oath, and working with experts, who file written reports on the issues in dispute.

After the discovery stage of the investigation is concluded, the parties prepare for a trial-like hearing before an administrative law judge. The parties then submit final briefs and detailed findings of fact and conclusions of law for consideration by the judge. The judge will consider these documents and the evidence presented at the hearing and prepare a decision and an opinion explaining the decision. If the patent claims are valid, infringed, and enforceable, the judge may find a violation of Section 337 and may issue an order excluding infringing goods from the United States.

Parties may request that the full ITC review the Judge's decision. If, upon review, the ITC finds a violation of Section 337 and issues an exclusion order, its determination is subject to review by the president of the United States, who may alter or revoke the exclusion order (which, as a practical matter, almost never happens). If the President approves the determination or takes no action, the ITC's determination becomes final and may be appealed to the Court of Appeals for the Federal Circuit. A decision adverse to the complainant may also be appealed to the Federal Circuit.

Respondents in ITC patent litigation typically focus on three types of defenses. With a non-infringement defense, a respondent argues that the imported goods are not covered by the asserted patent. An invalidity defense claims that the asserted patent should not have been issued because, for example, the claimed invention was obvious. Finally, with an unenforceability defense, a respondent argues that the plaintiff should not be able to enforce its patent, usually because it has engaged in inequitable conduct. Sometimes respondents also argue that the complainant has not demonstrated the existence of a "domestic industry."

Developing A Successful Defense

Begin work as soon as possible. Because ITC investigations operate on an expedited schedule, once the investigation is initiated, a significant amount of work must be accomplished in a short time. The parties must review and produce documents, answer written questions, and conduct depositions of witnesses at a very fast pace. It is therefore important to begin preparing a defense immediately after the complaint is filed.

Consider a design-around. In addition to pursuing the typical defenses described above, a respondent should consider whether it can "design around" the asserted patent by changing the imported goods, or the way in which they are made, or by switching from the accused products to alternates that clearly do not infringe. A design-around may be appropriate even if the imported goods do not infringe because it will ensure access to the United States market and could cause the complainant to drop its complaint. At the time of the hearing in the GBT case, Ajinomoto admitted that certain GBT bacterial strains could be used to make lysine for importation into the United States without any infringement. Thus, even before the Judge decided the case, it was clear that GBT would not be excluded from the U.S. market.

Focus on the best arguments. It can be tempting to argue every possible theory supporting a defense, but that strategy is rarely successful and can be very expensive. By the time a case gets to the hearing, a respondent should determine which arguments are the strongest and should present only those arguments to the judge. In the GBT case, we focused particularly on the argument that the patents were invalid and unenforceable because the Ajinomoto inventors had failed to disclose the best mode of practicing their invention, as required by the Patent Act. We also argued that the patents were obvious. By focusing on only a few defenses, we were able to give a focused and compelling presentation.

Choose the right team. Chinese biotechnology companies facing an ITC investigation need to find attorneys with a wide variety of skills. The defense team should have experience litigating biotechnology patent cases through trial and appeal; a deep understanding of the science involved in the investigation; familiarity with ITC practice; and the ability to communicate with the Chinese client. To defend against Ajinomoto's complaint, GBT hired Adduci, Mastriani & Schaumberg, which specializes in Section 337 investigations; East Associates, a Chinese law firm with unique ability to coordinate with U.S. counsel to defend ITC investigations that involve the importation of products made in China; and our firm, Foley Hoag LLP.

About the Authors
 Foley Hoag has extensive experience litigating life sciences patent cases for a broad spectrum of clients in the pharmaceutical and biotechnology industries. Our litigators are seasoned trial lawyers experienced at explaining complex technology to laypeople like ITC judges and all of our teams include attorneys or technology specialists with degrees in chemistry or molecular biology from leading universities. Claire Laporte and DeAnn Smith, both partners in Foley Hoag's Intellectual Property Group, and associate Jeremy Younkin, also a member of the Intellectual Property Group, are experienced with cases before the ITC. The firm's IP practice is comprised of more than 80 professionals including lawyers, scientists, engineers, medical doctors and other practitioners experienced in patent prosecution, patent litigation, technology transfer, IP due diligence and strategies, copyright and trademark prosecution, and trade secret litigation.

About the firm
 Foley Hoag LLP is a leading national law firm in the areas of dispute resolution, intellectual property, and corporate transactions for emerging, middle-market, and large-cap companies. With a deep understanding of clients' strategic priorities, operational imperatives, and marketplace realities, the firm helps companies in the biopharma, high technology, energy technology, financial services and manufacturing sectors gain competitive advantage. The firm's 225 lawyers based in Boston, Washington, and the Emerging Enterprise Center in Waltham, Massachusetts join with a network of Lex Mundi law firms to provide global support for clients' largest challenges and opportunities.

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