Asserting trademarks and available remedies at the ITC

SneakersTrademark owners seeking non-monetary relief for infringement can turn to the U.S. International Trade Commission. The ITC offers a variety of powerful remedies pursuant to Section 337 of the Tariff Act of 1930, as amended. These remedies include exclusion orders that bar infringing imports, and cease and desist orders that prohibit respondents from engaging in specified commercial activities with respect to infringing articles. Since 2010, the commission has instituted approximately 16 investigations involving allegations of trademark infringement or dilution. This article discusses asserting trademarks at the ITC and the remedies available for trademark infringement, provides a statistical analysis of the 16 recent trademark-based Section 337 investigations, and concludes with an in-depth examination of two recent high-profile cases and the remedies achieved in those investigations.

  1. ITC PRACTICE AND TRADEMARKS

The ITC is an independent, quasi-judicial federal agency with broad authority to investigate unfair methods of competition, including trademark infringement, pursuant to Section 337, 19 U.S.C. §1337. Unlike federal courts, which are limited to national boundaries by in personam jurisdiction, the ITC has in rem jurisdiction over allegedly infringing goods. For the commission to find a violation of Section 337, trademark owners must prove infringement and additional ITC-specific elements that vary depending on whether a registered or common law trademark is asserted. If a violation of Section 337 is found, the commission has discretion to issue an exclusion order and/or cease and desist order(s).

    1. The Process of Section 337 Investigations

With a statutory mandate to conclude investigations “at the earliest practicable time,” Section 337 investigations proceed much faster than a typical district court action. See 19 U.S.C. §1337(b)(1). Indeed, target dates for completion of investigations are typically set at approximately 16 months.

When an investigation is instituted, the commission typically names OUII, an independent litigant representing the public interest, as a party to investigations. Shortly thereafter, one of the ITC’s six administrative law judges will be assigned to the investigation. Discovery proceeds much like it would in district court, although responses to written discovery are due within 10 days. Parties can move for summary determination (akin to summary judgment) up to 60 days before the ALJ’s evidentiary hearing.

The assigned ALJ will conduct an evidentiary hearing approximately 8-9 months after an investigation commences. A few months thereafter, the ALJ will issue an Initial Determination (“ID”) on whether Section 337 has been violated, and a recommended determination on remedy and bonding. The ID is subject to review by the commission, which will ultimately issue a final decision as to whether Section 337 has been violated, and if so, issue the appropriate remedy. If a violation is found, the President, via delegation to the U.S. trade representative, has 60 days to veto the commission’s action. See 19 U.S.C. §1337(j).

    1. Elements of Violation

Section 337 investigations are available to both owners of registered and common law trademarks, although the requisite elements for violation differ. Both causes of action require complainants to prove infringement of articles that are imported into the United States, sold for importation, or sold within the United States after importation by the owner, importer, or consignee. However, as investigations for infringement of registered and common law trademarks are conducted under separate subsections of Section 337, complainants must satisfy one additional element that differs depending on the type of asserted trademark.

      1. The “Domestic Industry” Requirement for Registered Trademarks.

Investigations for infringement of a registered trademark are conducted pursuant to 19 U.S.C. §1337(a)(1)(C), which requires complainants to prove that “an industry in the United States, relating to the articles protected by the … trademark … concerned, exists or is in the process of being established.” See 19 U.S.C. §1337(a)(2). Known as the “domestic industry” requirement, registered trademark owners must satisfy both “technical” and “economic” aspects or “prongs.” See, e.g., Alloc, Inc. v. Int’l Trade Comm’n, 342 F.3d 1361, 1375 (Fed. Cir. 2003). The “technical prong” requires a complainant to prove that it is using the asserted trademark. The “economic prong” requires “significant” or “substantial” qualifying activities in the United States, with respect to the articles that practice the asserted trademark (the articles that satisfy the technical prong). Specifically, the statute lists three subparts that set forth the type of investments that complainants must show to demonstrate that an economic domestic industry exists:

        • significant investment in plant and equipment;
        • significant employment of labor or capital; or
        • substantial investment in its exploitation, including engineering, research and development, or licensing.

19 U.S.C. §1337(a)(3).

A failure to satisfy both prongs is grounds for the commission to find no violation of Section 337.

      1. The Injury Requirement for Common Law Trademarks.

Investigations of common law trademark infringement are conducted pursuant to 19 U.S.C. §1337(a)(1)(A), which pertains to non-statutory methods of unfair competition. Under this subsection, in addition to demonstrating the existence of a domestic industry, common law trademark owners must also prove that the importation of infringing articles has the “threat or effect of which is to destroy or substantially injure an industry in the United States.” 19 U.S.C. §1337(a)(1)(A)(i). Known as the “injury” requirement, “there must also be proof of a nexus between the Respondents’ unfair acts and the injury to [complainant’s] domestic industry.” See Certain Bearings and Packaging Thereof, Inv. No. 337-TA-469, ID at 195 (Apr. 10, 2003) (unreviewed in relevant part). The Commission has historically considered a “broad range of indicia” to determine whether common law trademark infringement has the threat or effect of substantially injuring a domestic industry, “including a respondent’s volume of imports, and penetration into the market, the complainant’s lost sales, underselling by the respondents, and the complainant’s declining production, profitability and sales.” See id. at 195-196. A failure to satisfy the injury requirement is grounds for the commission to find no violation of Section 337.

    1. Remedies for Violation

If a violation of Section 337 is found, the commission has “broad discretion in selecting the form, scope, and extent of the remedy.” See Viscofan, S.A. v. Int’l Trade Comm’n, 787 F.2d 544, 548 (Fed. Cir. 1986). The principal remedies available under Section 337 are limited exclusion orders (LEO”), general exclusion orders (GEOs), and cease and desist orders (CDOs).

      1. Limited Exclusion Orders.

LEOs bar infringing imports of a named respondent. See 19 U.S.C. §1337(d); Kyocera Wireless Corp. v. Int’l Trade Comm’n, 545 F.3d 1340, 1356 (Fed. Cir. 2008). Before an LEO can be issued, the appropriate scope of the remedy and the effect of the remedy on the four public interest factors identified in the statute must be determined. See 19 U.S.C. §1337(d)(1). LEOs are effectively the default relief for a finding of violation of Section 337.

      1. General Exclusion Orders.

GEOs bar all infringing imports regardless of their source. This means that customs will exclude infringing imports even if the importer was not a party to the ITC investigation from which the GEO resulted. In order for the commission to issue a GEO, a complainant must satisfy one of two additional criteria:

        • a general exclusion from entry of articles is necessary to prevent circumvention of an exclusion order limited to products of named persons; or
        • there is a pattern of violation of this section and it is difficult to identify the source of infringing products.

19 U.S.C. §1337(d)(2)(A)-(B).

Given the right circumstances, a GEO can be especially appealing to trademark owners. Rather than having to name as a party and litigate against each and every infringer, a trademark owner can pursue named and unnamed infringers in one ITC investigation.

      1. Enforcement of Exclusion Orders.

Exclusion orders are enforced by customs, which excludes products within the scope of the orders prior to entry into the United States. Customs’ Intellectual Property Rights Branch (IPRB), together with the industry-focused Centers for Excellence and Expertise (CEEs), assumes the primary responsibility for the interpretation and implementation of ITC limited exclusion orders. Complainants and respondents often have ex parte meetings with IPRB and CEE officials to discuss the scope of exclusion orders and assist customs in the identification of infringing or non-infringing products. Pursuant to the procedures set forth in 19 C.F.R. §12.177, Respondents can submit a request to customs for a formal ruling (Part 177 Ruling Request) regarding whether new or design-around products are within the scope of an LEO.

      1. Cease and Desist Orders.

CDOs prohibit the domestic use, sale, and marketing of imported infringing products. CDOs are often issued in addition to an exclusion order against named respondents. The ITC enforces CDOs and has the power to impose civil penalties that are “not more than greater of $100,000 or twice the domestic value of the articles entered or sold” for each day of violation. 19 U.S.C. §1337(f)(2). Typically, the commission requires complainants to prove that a respondent has commercially significant inventory of imported infringing products in the United States. Complainants bear the burden to prove that CDOs are necessary to address a violation of Section 337.

      1. Other Remedies.

A number of related remedies are available to owners of both registered and common law trademarks, including temporary relief, consent orders, and default judgment.

Temporary relief proceedings, relatively rare at the ITC, are similar to district court preliminary injunctions proceedings. See 19 U.S.C. §1337(e)(3). A complainant seeking temporary relief under Section 337 must establish: (1) a reasonable likelihood of success on the merits; (2) irreparable harm if temporary relief is not granted; (3) a balance of hardships tipping in the complainant’s favor; and (4) the temporary relief’s favorable impact on the public interest. See, e.g., Certain Sulfentrazone, Sulfentrazone Compositions, and Processes for Making Sulfentrazone, Inv. No. 337-TA-914, ID at 9 (Aug. 12, 2014) (citations omitted).

Consent orders are based on an agreement that the respondent will cease further importations during the remaining term of the asserted trademark and submits to continuing jurisdiction of the ITC to allow the commission to enforce the order in the case of the future unfair imports by or on behalf of the respondent. It is not uncommon for respondents with limited imports or otherwise with limited economic stakes in the U.S. market for the subject articles to move for termination of Section 337 investigations based on the entry of a consent order.

Respondents that fail to respond to the complaint and notice of investigation, and fail to show cause for such failure shall be found in default. See 19 U.S.C. §1337(g)(1). If a respondent is found to have defaulted, the facts alleged in the complaint are presumed to be true, and the commission may issue a LEO and/or a CDO. Investigations in which complainants seek GEOs often have one or more defaulting respondents, with the activities of defaulting respondents factoring into the GEO analysis.

Inv. No. Caption Judge Disposition/Status
337-TA-1008 Certain Carbon Spine Board, Cervical Collar, CPR Masks and Various Medical Training Manikin Devices, and Trademarks, Copyrights of Product Catalogues, Product Inserts and Components Thereof Essex Pending; all respondents found in default
337-TA-1007 Certain Personal Transporters, Components Thereof, and Packaging and Manuals Therefor Shaw Pending; consent orders entered; certain respondents found in default
337-TA-1006 Certain Passenger Vehicle Automotive Wheels Pender Terminated based on consent orders, settlement agreements, and withdrawn complaint
337-TA-981 Certain Electronic Devices Containing Strengthened Glass and Packaging Thereof Bullock Terminated based on withdrawn complaint
337-TA-977 Certain Arrowheads with Deploying Blades and Components Thereof Shaw GEO (default)
337-TA-975 Certain Computer Cables, Chargers, Adapters, Peripheral Devices and Packaging Containing the Same Bullock LEOs for defaulting respondents
337-TA-936 Certain Footwear Products Bullock GEO (default)
337-TA-924 Certain Light Reflectors and Components, Packaging, and Related Advertising Thereof Bullock Terminated based on settlement
337-TA-919 Certain Archery Products and Related Marketing Materials Bullock LEO (default)
337-TA-891 Certain Laundry and Household Cleaning Products and Related Packaging Bullock Terminated based on settlement
337-TA-838 Certain Food Waste Disposers and Components and Packaging Thereof Pender Terminated based on withdrawn Complaint
337-TA-835 Certain Food Containers, Cups, Plates, Cutlery, and Related Items, and Packaging Thereof Bullock Terminated based on settlement
337-TA-780 Certain Protective Cases and Components Thereof Essex GEO + CDOs (default as to non-patent claims)
337-TA-763 Certain Radio Controlled Hobby Transmitters and Receivers and Products Containing Same Luckern LEOs (default)
337-TA-754 Certain Handbags, Luggage, Accessories and Packaging Thereof Bullock GEO (default)
337-TA-719 Certain Lighting Products Essex Terminated based on consent order
  1. RECENT SECTION 337 TRADEMARK CASES

Since 2010, the commission has instituted approximately 16 investigations with allegations of trademark infringement or dilution, with 11 of those investigations also involving allegations of another statutory or common law unfair competition claim. The following chart lists each of the 16 investigations by investigation number and caption, the ALJ that presided over each investigation, and the disposition/status of each investigation:

More than half of the investigations involved defaulting respondents, and complainants were successful in achieving some form of remedy or settlement in all but two investigations. Chief Judge Bullock has presided over half of these investigations. Two of these investigations are particularly noteworthy for the trademarks asserted and the broad relief granted: (1) Certain Footwear Products, Inv. No. 337-TA-936 (the “Converse Investigation”); and (2) Certain Handbags, Luggage, Accessories, and Packaging Thereof, Inv. No. 337-TA-754 (the “Louis Vuitton Investigation”).

    1. The Converse Investigation

In Footwear Products, Converse filed a complaint alleging infringement of registered and common law trademarks used by the Chuck Taylor All Star shoes, by over 30 respondents, including Ralph Lauren Corp. and Sketchers U.S.A. Inc. Converse alleged infringement of two aspects of the Chuck Taylor shoes: (1) the “midsole” portion between the upper and bottom portion of the shoe that can provide cushioning and/or support structure to the shoe; and (2) the “outsole” portion which refers to the tread or bottom portion of the shoe ordinarily in contact with the ground. Converse sought a GEO and CDOs as remedy for violation of Section 337.

Over the course of the investigation, almost all of the respondents entered into consent orders or were found in default. By the time of the evidentiary hearing, only four respondents remained in the investigation, including Sketchers and intervenor-respondent New Balance Athletic Shoe Inc. The ALJ’s ID held that the trademarks that covered the midsole and outsole portions of the Chuck Taylor shoes were valid and infringed, the domestic industry requirement was satisfied, and recommended that the commission issue a GEO. See Certain Footwear Products, Inv. No. 337-TA-936, ID at 130-32 (Nov. 17, 2015).

The commission reviewed the ID and upheld the finding that the two asserted trademarks that covered the outsole portion of the Chuck Taylor shoes were valid and infringed by a defaulting respondent. See id., Comm’n Op at 19 (July 6, 2016). Regarding remedy, the commission found that the defaulting respondent was likely to circumvent an LEO by using third-party intermediaries to import infringing shoes, and that there was a widespread pattern of importation of infringing shoes by sources difficult to identify. See id. at 31-33. Thus, the commission issued a GEO barring all infringing imported shoes, regardless of source. However, the commission held that the registered and common law trademarks covering the midsole portion were invalid for lack of secondary meaning. See id. at 12-28. Converse has appealed the commission’s invalidity determination. See Converse Inc. v. Int’l Trade Comm’n, No. 16-2497 (Fed. Cir.).

Even though the commission found the midsole portion trademarks invalid, the success of Converse’s complaint is readily apparent. Twenty-one companies agreed to voluntarily cease importations of infringing products by entering into consent order or reached settlement agreements with Converse. Moreover, Converse was able to achieve a powerful GEO that bars all imported shoes that infringe the outsole portion trademarks, regardless of source.

    1. The Louis Vuitton Investigation

The Louis Vuitton investigation is another noteworthy trademark case where the complainant was able to achieve a GEO barring all infringing imports. In Handbags, Louis Vuitton filed a complaint alleging infringement of several registered trademarks covering the Toile monogram. Louis Vuitton sought a GEO and CDOs as remedy for violation of Section 337.

During the course of the investigation, all domestic respondents executed consent orders, and Louis Vuitton entered into two settlement agreements, one with a set of domestic respondents and one with a set of foreign respondents. The remaining respondents were all found in default. The ALJ granted Louis Vuitton’s summary determination of violation as to the defaulting parties and recommended that the commission issue a GEO. See Certain Handbags, Luggage, Accessories, and Packaging Thereof, Inv. No. 337-TA-754, ID (Mar. 5, 2012).

The commission determined not to review the ALJ’s finding of violation, thus adopting the decision. See id., Comm’n Op. at 4 (June 13, 2012). Regarding remedy, the commission found that there was a “pattern of violation” of infringing and counterfeit goods sold throughout the United States via a wide variety of retailers, and that it was difficult to identify the source of the infringing/counterfeit imports. See id. at 5-9. The commission also credited Louis Vuitton’s extensive civil and criminal enforcement activities related to the infringement/counterfeiting of the asserted trademarks. See id. at 6-7. Thus, the commission issued a GEO barring all infringing imported shoes, regardless of source.

  1. CONCLUSION

The Louis Vuitton case exemplifies why the ITC is an attractive and useful forum for resolving trademark disputes. Louis Vuitton was able to protect and enforce its trademark rights in one fast-paced investigation by achieving a GEO, when it had previously been unable to curb the relentless importing from a broad spectrum of sources of infringing or counterfeit products in other actions. The numerous and powerful remedies at the ITC, coupled with customs’ enforcement capabilities, provides trademark owners the ability to achieve effective non-monetary relief against infringing products.