What is the Role of the ITC in Patent Cases?

Edith Harold: Hello everyone and welcome to this Federalist Society virtual event. My name is Edith Harold and I'm an Assistant Director of Practice Groups with the Federalist Society. Today we're excited to host this webinar discussing the role of the ITC in patent cases. This panel features professors George Contreras, Michael Doane, and F. Scott Kieff as speakers. Michael Friedland will be moderating who is a founding partner at Friedland Cianfrani LLP and has decades of intellectual property enforcement experience. If you'd like to learn more about today's moderator or speakers, their full bios can be viewed on our website fed so.org. Near the end of the program, we'll turn to the audience for questions. If you have a question, please enter it into the Q&A function at the bottom of your Zoom window and we'll do our best to answer as many as we can. Finally, I'll note that as always, all expressions of opinion today are those of our guest speakers, not the Federalist Society. And with that, Michael, thank you for joining us today and I'll hand things over to you.

Michael K. Friedland: Hi. To people on the West Coast, good morning. For people on the East Coast, good afternoon. We're going to talk today about the ITTC and its role in patent litigation. Specifically to the uninitiated, the ITCs role in patent disputes is sometimes surprising and by initially they just don't mean sophisticated lay people. I also mean sophisticated lawyers who understand a lot of litigation and familiarity with it, but they're just not involved in patent litigation. They'll read news coverage about a high profile patent dispute and they'll see that there's a regular patent case filed in district court and that makes sense to them. But then they see that there's a parallel case that's been filed in a court or some type of body that maybe they've heard of but they don't know that much about. It's called the ITC. And then they'll see that the ITC has the power maybe to ban the importation, an extremely high profile profile product like a Blackberry or an iPhone or an Apple Watch.

But then they're told that at the end of the day, whatever the ITC decides might not really matter anyway, the president might just decide to reject whatever recommendation the ITC makes if the it's recommendation is to ban the product. And so to even the sophisticated lawyer who's not familiar with the ITC, that just sounds bizarre to patent owners, particularly patent owners who have no other meaningful way to prevent infringing products cut from coming in overseas. The ITC though is critically important as a way to protect their investment in developing their technology. We're privileged today to have with US experts will provide us with background on the ITC and its role in patent cases and to have different perspectives on whether the current regime is appropriate or whether it should be modified or reconsidered. Our first panelist today is Professor Michael Doane. Professor do recently testified before the House Judiciary subcommittee on the intellectual property and the internet at a hearing that was titled "IP Litigation and the US International Trade Commission."

So extremely timely. Professor Doane received his bachelor's degree in economics and political science from Kent State University, his master's degree in International Studies from the University of Washington, his law degree also from the University of Washington and his LLM from Georgetown. Michael has extensive experience in ITC litigation having spent a large portion of his career with the Ucci Law Firm and with Miles and Stockbridge. He's currently the General Counsel of Kent Displays Incorporated and is a visiting professor at the University of Akron School of Law.

Our second panelist is Professor George Contreras. Professor Contreras also testified at that same house committee a week or so ago, he received his Bachelor's Degree in English and in electrical engineering from Rice University. He received his law degree from Harvard. In a graduating class that not only included me, but also President Barack Obama and Justice Neil Gorsuch, he clerked on the Supreme Court of Texas. He was a partner at Wilmer Hale. He was a council member of the National Human Genome Research Institute, a director of IP programs and senior lecturer of law at the Washington University of St. Louis. He's been a professor at the American University, a fellow at Tilburg University of Netherlands, a visiting fellow at the London School of Economics, the James T. Jensen Endowed Professor of Transactional Law at the University of Utah, SJ Quinney School of Law, and is currently a visiting professor at the University of Minnesota.

And then last but absolutely not least, our next panelist is Professor Scott Kieff. Very relevant to the discussion today. Professor Kieff once served as a Commissioner at the National Trade Commission himself. He received his bachelor's degree in biology and economics from MIT, his law degree from the University of Pennsylvania. He served as a law clerk to the Honorable Giles Judge Giles Rich at the federal circuit. He practiced at Pennie & Edmonds and at Jenner & Block and Nicole Smith, he was a professor at Washington University of St. Louis, a senior fellow at the Hoover Institution and is currently the Stevenson Bernard professor of Law, George Washington University School of Law. He's also the founder of Kieff Strategies, LLC. And with those introductions, I'll turn the microphone over to Professor Doane. Thank you professor, and thank you for joining us.

Prod. Michael Doane: Thanks, Mike. I guess as the lead off person here, I'm going to answer your first question is why are we talking about a trade remedy statute? Because that is what a Section 337 is. It is a trade revenue statute. It's not an intellectual property statute, but it is designed and said to address unfair imports, basically unfair competition and unfair acts in the importation of products into the United States. And basically we are here because patent infringement is one type of unfair act, which has been before the commission almost from the beginning of the statute back in 1920 or 1916, I guess originally. But one of the first investigations was a patent infringement case. Patent infringement fits very neatly into the framework of a Section 337 investigation. And Section 337 has become one of the most effective mechanisms for enforcing US IP rights from imported infringing articles. From my perspective, at least from my area of interest, it is particularly valuable to innovators such as small startup companies and individual inventors.

So just to give you just a general overview of what Section 337 is, like I said, it addresses unfair competition and unfair acts and the importation of articles In the United States, there are basically two types of 337 investigations. They're the ones that involve federally registered IP, and there are the ones that do not the federally, if you are asserting as your unfair act infringement of a federally registered IP, right patent infringement, registered trademark infringement, et cetera. What you have to prove under the statute is the unfair act infringement of the patent that the article in question is imported into the United States and that you have a domestic industry related to the ip, right? This can be in the form of manufacturing, but also importantly, it can also be based on research and development or licensing or engineering or actions otherwise related to manufacturing. So manufacturing and non-manufacturing types of domestic industry that relate to the IP, right?

So you have to show, because it's a trade remedy, you have to show that you've exploited your IP right in some way in the United States. The other types of actions, the other form of unfair acts is most commonly, I guess nowadays it's trade secrets, but misappropriation of trade secrets, false marking, things like that. And in that you have to prove a domestic industry importation and those you do have to prove injury to the domestic industry. Section 337 is administered by the US International Trade Commission. It's made up of six commissioners, which there are currently four. And interestingly of those four, only two are actually on current terms. The other two are continuing to serve even though their terms have expired. There are six ajs currently there, and they are experts in trade and ip. And also one part of your investigation is that there's an organization called the Office of Unfair Import Investigations.

They represent the public interest and are part of, they can be a part of any investigation because of the number of investigations. Now, sometimes their participation, they choose to be limited on based on the nature of the investigation, but they're always watching and almost always have at least one attorney that participates in the investigation. The remedies available, and this is one of the most important aspects of section 337, is our exclusion orders. It is an order to the custom service to bar the infringing product from importation in the United States. And obviously as most things nowadays are manufactured abroad, this is a very effective remedy. It effectively removes the product from the US marketplace. There could be a limited one that is directed to only named respondents in the investigation, but there can also be, under certain circumstances, a general exclusion order, which can bar the importation of product of any infringing product regardless of source, regardless of whether the importer or manufacturer of it was named as a respondent in the investigation.

And also the commission issues cease and desist orders usually to prevent the sale of inventory that's already in the United States after the issuance of the order, after the finding of violation. And ultimately once a remedy is determined, then the commission also will consider public interest before determining whether to issue the remedy. And there is, as Mike mentioned, a presidential review period. Anytime there's a finding of violation, it is reviewed by the president action. Now that has been delegated to the United States Trade Representative and the president can disapprove a exclusion order for policy reasons he doesn't overrule or otherwise address the issues of the investigation. He can't say, no, I disagree that, and there was no infringement in this case. It's just policy reasons for not finding violation. Now with over, I believe 1200 investigations, this has only happened six times and the most recent was in 2012.

Before that, it hadn't been done for almost over 20, maybe 30 years. But in 2012, there's an investigation which had the exclusion order gone into effect, iPhones would've been barred from importation in the United States, but there was questions about the role of standard essential patents in that case. So President Obama rejected the remedy in that case. Section 3, 3 7 provides many advantages that make it attractive to patent litigators. You have, first of all, the expert administrative law judge for a judge that sees almost exclusively IP cases and trade cases, and all determinations are made by them under the a PA on the record and in writing.

And secondly, they're comparatively expedited proceedings. They're investigations are usually completed 16 to 18 months. At one point in time, it was supposed to be done in 12 months, but that's slowly moved back as the docket has increased and the cases have gotten more complex, but they're still generally complete . And this is from filing to issuance of the final determination of the commission. So for those of you in patent litigation, that means that after the institution of the investigation, which is the start, you are in trial. If you go to trial, you were in trial within seven or eight months. So it's a very quick proceeding and very expedited. One of the reasons that it has become also attractive is because it has rem jurisdiction, it is actually against the product. It is not necessarily against the respondent per se is against their product. So there's no need for a lot of the service requirements that you would have in district court.

You don't have to serve under the hate convention or anything. It is an in REM action. It's also broad discovery, a automatic protective order, and also for patent infringement cases, there are no eBay considerations. Congress expressly removed injury from the statute for patent infringement and other IP infringement investigations. So there's no eBay considerations. And perhaps most importantly is the effective relief, which I've discussed the exclusion order, which effectively removes products from the marketplace. There are some disadvantages to a three seven investigation. You do have to prove that trade remedy elements. You have to prove domestic industry and importation. And you also, in most cases, you have to deal at least at some point with public interest, whether the remedy would be in the public interest. There's no preclusive effect on patent issues. If the commission finds your patent infringed and valid, a district court is still free to find it not infringed and invalid.

So no preclusive effect and also no monetary damages. If you want monetary damages, that's what district court is for. So you go there. But like I said, of these advantage, perhaps the last advantage, effective relief in the form of an exclusion order is the most significant. As so many products are manufactured abroad, particularly in China, it is not surprising that Section 337 is a popular and effective IP enforcement mechanism that should be considered by anyone seeking to enforce their IP rights, assuming they meet the domestic industry standard against infringing imports. Particularly, like I said, startup companies and small innovators because of this remedy. Section 337 is frequently the most effective, if not the only option for addressing two specific challenges that startup companies face. The first is known as patent holdout, and the second is a knockoff products offered in online marketplaces. Patent holdout is where a large well-funded infringer uses its size and market dominance to ignore an IP owner's claims impose its own product on the market and usually seek to litigate the IPR owner into oblivion.

There are a couple of recent investigations involving Chinese manufactured smart watches that arguably illustrate this scenario. Section 337 provides a remedy removing the infringing product from the marketplace in a reasonably expedited manner. Since eBay, such a remedy is at best, difficult to obtain, and in many cases too late to be of value, such a remedy in district court, an injunction is difficult to obtain and in many cases it comes too late to be of much value without the exclusion order. Small entities could be forced in effect to license their technology to large importers at only a reasonable royalty as determined by a district court. As to knockout products, numerous infringers, usually Chinese offer their products in large online marketplaces.

These infringing goods, the infringing goods are offered by countless difficult to identify entities. Such entities are not burdened by the expense of developing the technology or creating a new product. Simply create a low quality copy that is sold at a discount when challenged such online entities easily disappear, reemerge elsewhere under a different name. Continuing the selling in the online marketplace, policing large online marketplace from infringing products would be substantially more difficult, if not impossible, without Section 337, Section 337 relief, particularly in the form of a general exclusion order has been used frequently and is frequently the only way to remove such knockoff products from the marketplace.

So this is what Section 337 provides. And this is why I think it is a valuable part of any patent litigation strategy. It provides effective relief, and as I said, particularly for small entities, in fact, Congress expressed the amended Section 337 to make this relief more easily available to small innovators. Senator Frank Lautenberg, one of the drafters noted of the amendments noted, small businesses should not be denied the right to seek relief merely because they may have made smaller financial investments than large companies in developing or exploiting an intellectual property. As you can tell, I'm a proponent of section 337 and the relief it provides, it provides effective relief, and I think it's something that should be considered by anybody enforcing their intellectual property against an infringing importer.

Michael K. Friedland: Thank you so much, professor. I'll turn the microphone now to Professor Contreras.

Prof. Jorge L. Contreras: Great, thanks very much Michael, and thanks to Professor Doane for that really comprehensive introduction. So Congress created the Tariff Commission, which is the predecessor to the ITC in 1916 for the purpose of advising the president on tariff levels. A few years later, Congress expanded that jurisdiction to cover what referred to as unfair acts relating to US imports. And those at the time were primarily dumping of cheap infringing goods by European manufacturers who were trying to recover from the economic difficulties caused by World War I. By 1930, the courts had interpreted those unfair acts to go beyond just dumping and to cover the importation of articles that infringed US patents. And so this was important because it filled some gaps in the patent law as it existed at that time. So for example, the Patent Act back then didn't offer a remedy against the sale of non infringing products that were made abroad using a process that was patented in the US. 

And by the same token, the US courts were hearing patent cases couldn't assert jurisdiction over foreign producers of infringing products. So that was all fine a hundred years ago, but today I think the world is a different place and the Patent Act has been amended to correct some of these problems. So today the sale of non infringing products made a broad using an infringing process is addressed by the Patent Act and manufacturing firms based overseas, pretty routinely established subsidiaries in the US that brings them within the jurisdiction of the US courts. So that today in the last couple of years, when you look at all of the ITC patent cases, only 6% of them by my count, involved only foreign manufacturers that were allegedly beyond the jurisdiction of the US courts. The other 94% of those cases are interesting, their cases being brought by domestic companies against other domestic companies who simply have their products manufactured overseas.

And as Professor Doane mentioned, many, many products, especially in the tech sector, are manufactured overseas. These cases are brought by non-practicing entities that are seeking ITC exclusion orders solely to pressure manufacturers to enter into monetary settlements. They don't want to exclude product from the market, they want a monetary settlement. The way to pressure someone get that settlement is by threatening them with an exclusion order. And then the most surprising thing about ITC litigation today is that nearly a third of the ITC cases in the last two years involving patents were actually brought by foreign companies that were seeking to prevent US companies from importing their own products back into the United States for sale to US consumers. So it's a very weird situation, right? The ITC, which was created to protect US markets from unfair foreign imports is now a place where foreign companies can seek to prevent domestic manufacturers from selling their products in the US.

That 2012, 2013 case that Professor Dylan mentioned where the Obama administration intervened involved Samsung, a Korean company who got an exclusion order against Apple from importing its own iPads and iPhones back into the us. So there's not surprising that patent asserts are happy with the ITC, but some of the claims that are made are questionable, right? So there are claims that the ITC gives patent holders exclusionary remedies that are not really available in the courts, but that's just not true. Any of the empirical studies that you look at will show that the district courts are granting about 70% of the injunctions that are sought even post eBay. Non-practicing entities have less luck getting permanent injunctions in court. They're only granted about 16% of the time, but no one with any credibility is asserting that injunctions are granted by courts 0% of the time under eBay.

There are also claims that the ITC is fast, but courts can be fast as well. We have the Rocket Docket in the Eastern District of Virginia and these days courts in Texas, especially in the Eastern District, and Judge Albright in the Western District of Texas are quite fast with patent cases, some say too fast. And then finally, there are the claims about the expertise of the ITC judges and staff in patent matters, which is, I don't disagree that many of the judges are expert in this area, but so are many district judges. Again, look at the district court judges in Virginia, Northern District, California, Texas, Delaware. They're quite expert in patent cases. And on the technical side, no judge whether at the ITC or District court as an expert in all of the technology areas, they all invariably rely on experts provided by the parties.

So whether or not these benefits exist and how powerful they are from a systemic standpoint, there's little justification for maintaining this duplicate patent litigation system in the us. And the cost is not insignificant. The taxpayers spend roughly $40 million a year about a third of the ITCs budget to support the patent investigations and staff that are out there, not to mention millions of additional dollars paid by the parties to these duplicative litigations in addition to what they pay to litigate in court. And those costs, of course, are simply passed on to increase the prices of products for US consumers. And I believe that there truly is a remedy in district court to address almost all of the wrongs that are being addressed at the ITC in the last two years that 83% of all ITC patent cases had parallel proceedings in district court, and they usually involve the same parties, the same patents or nearly identical members of the same patent families and the same infringing products.

And while the courts have discretion to stay some of their proceedings pending, the resolution ITC matters, they don't always do it because of course the parties will argue that there are enough differences in the cases that the case shouldn't be a state. So it's a costly result and a result that is often inconsistent with district court litigation, right? There have been examples in which patents are found invalid at the ITC then asserted again in court and are found valid, which courts don't have to give preclusive effect to ICT validity determinations. We've seen the ITC extend its reach beyond even the patent statute blocking the import of non infringing goods just because they might someday be used for infringing purposes, going well beyond judicial jurisprudence around contributory infringement and inducement to infringe. So what the ITC offers today is basically a second bite at the apple, the chance that a patent holder has to succeed in one venue on claims that might've been rejected, and another generally used to put pressure on defendants to enter into monetary settlements.

And so this is unusual, right? I mean, no other form of litigation in the US has this type of dual litigation system, whether it's medical malpractice, breach of contract tax evasion, you generally have one venue subject to appeals of course, in which you can bring your case. So what I do about this, there have been numerous proposals over the last 20 years or so to reign in the patent jurisdiction of the ITC. Those have not been successful. That being said, last month in Loper Bright, the Supreme Court signaled I think that at least the court feels that administrative agencies in the US have gone a little bit too far and that the authority of those agencies ought to yield to that of the courts. And so this might be an opportune time for Congress to reconsider the patent jurisdiction of the ITC. So what are some specific measures?

I'll just take a minute to rattle through a few of these or many more. But some have proposed limiting the availability of the ITC as a venue to parties over which the federal courts cannot assert personal jurisdiction, that 6% of cases that I mentioned possible to narrow the definition of the US domestic market so that it excludes simple patent assertion and licensing by parties that don't actually manufacture or sell products in the us. You could require the ITC to follow judicial precedent when it issues patent remedies to at least eliminate some of the inconsistency that we see. Likewise, you could align the ITCs public interest analysis, which it must obligated by statute to conduct, but is different than the public interest analysis conducted by the courts under the eBay test. And finally, you could eliminate the ITC's patent jurisdiction entirely and through relatively modest modifications to the code of federal regulations, enable the courts to work directly with the Customs and Border Protection Agency to prevent the importation of patent infringing goods as they already do with thousands of products every year that are blocked at the border for infringing, copyrights and trademarks. So those are just a few suggestions and I look forward to the discussion.

Michael K. Friedland: Thanks so much, professor. One thing that you mentioned was that there were two forms, and I would suggest there's probably actually three, right? Because you also have the P tab. So with that, thank you again, let's switch to Professor Keith. You have the microphone and I don't think you'll fully agree with everything that Professor Contreras had to say.

Hon. Prof. F. Scott Kieff: Well, thank you so much, Michael for bringing us together and Professors Contreras and Doane for presenting such a great set of clear and understandable ideas and to the audience for joining. We hope this is of help and at least of some interest. So to just dive right in, let me, if I may just start with some, let's call it big picture cash on the dash context. So $40 million, sure, sounds like a lot of money. It is to almost any professor. I mean after all, a small law school's budget is probably $40 million. A large law school's budget is probably twice that. But to anybody who's talking about how the United States government and economy function, we should notice that it is common in Washington to talk about things that are problematic after they grow far beyond the tens of billions of dollars. And that would be three more decimal points.

Billions. And anybody who's ever used an Excel spreadsheet knows you just can't pay attention to stuff that's past the third or fourth decimal point. Usually people pay attention only to the first two. And just this week, our economy, just our stock market alone lost a trillion dollars in market cap and may have regained it. So if the kind of day-to-Day fluctuations in our economy are six decimal points beyond Professor Contreras horrible $40 million number, I think these are the kind of six decimal point away from really mattering problems. So I think this is a problem that really is invented the idea that this is an expensive entity for the public. Now, it is expensive for the parties who litigate before it, both the petitioners and the respondents. It's about as expensive and maybe in some ways slightly more than district court commercial litigation, but you get what you pay for.

The thing that most people who talk about good government talk about when they talk about administrative law or what lawyers call civil procedure or litigation law, what they usually are talking about is they're talking about how is the decision granted? How is it grounded? What are the facts and legal reasons applied? And if what we want out of our adjudicatory dispute resolution processes is well-reasoned rule of law like decision-making, we don't want them fast and cheap. Fast and cheap is politics and policy. Expensive is build a factual record and require the adjudicators to ground their determinations with articulated reasons, make them explain and make them cite to the facts and the record, the rules of civil procedure, the rules of evidence and their analogs and administrative law. So this particular administrative entity is not anchored in the new deal of the start of the 20th century.

This administrative agency is quite different than most of the due deal agencies, and it's not an accident. It's anchored in the shadow of the Civil War. The early days of the Tariff Commission, it was created based on an architecture sketched out by an economist at Harvard named Frank Taussig, who later became one of its first commissioners and the Taussig model of the then tariff commission. What became ITC was to take seriously how human professionals will choose rationally to interact with each other if their power is shared and only if their power is shared. And so while most of the new deal agencies have five commissioners, the ITC has six, and it's not as if, as Nigel says, just adding one more to 11 or something five to six makes the difference. The difference here is an even number versus an odd number, an even number of commissioners where the chair that unlike the other commissions, is required by statute to rotate every two years with a chair who is removable by the president in the other commissions, a chair who otherwise sits for the two years even regardless of presidential determination, the ITC has this rotating chair, this ability for the other commissioners to overrule the chair and the required split of three.

Three, all of that is designed for deadlock that is designed for what we might think of as coerced collaboration. And in these days of people shouting at each other or engaging in political favoritism for their friends or anti favoritism for their enemy, wouldn't it be nice to return to a rule of law world where the people in power have selfish incentives to collaborate with each other? We saw in the Civil War how that can play out badly. That's why the people chose to create through Congress this new entity after the Civil War. Yes, we have renewed its name and its small mandate a few times, but its basic core structure and intuition have remained the same. So let's talk about that for a minute. Let's talk about the idea that we have this rule of law coerced collaborative system where the parties inside the building, the commissioners and the staff have these, dare I say, wonderful incentives to speak up, say what they disagree with about what the other person is doing, articulate their reasons why.

If there is an indictment that can be made of ITC opinions, especially in patent cases, it's that they are very long. They cite extensively to the record and they give their reasons and their reasoning. Now, we all as observers might in any particular case or even across a plethora of cases, disagree, but as one who can disagree, as an academic, I'm supposed to disagree and cite to things and explain why. I like being able to cite to a 300 page written opinion that has its own hundreds of footnotes to the detailed record so that I don't have to guess as to what the adjudicators were doing. That to me sounds a lot like the rule of law, and that to me sounds like at $40 million, several decimal points off everybody's spreadsheet of the economy or of the government. Now, let me just briefly address a few points.

The idea that in reality what parties want is to transact with each other, of course, but it's hard to get transactions without getting from this great thing that we call government, whether you are on the left or right or in the middle, we're not anarchists. We want our government and we want our government to do the things government can do at its best. And one of the things government can do at its best is just remind the private actors, here are the rules of the game. You are a trespasser or you are not an infringer or you are not. When parties have that kind of clarity, they can and indeed do negotiate. Now maybe the IP owners are holding out for too high of a price, but I think it's interesting that the specific articulated concern that Professor Contreras and others have raised are not manufacturing entities who are asserting patents but rather non-manufacturing entities who are asserting patents.

And it seems to me, if you take seriously in any way the concept of specialization and division of labor, then it seems to me you want your inventors going out and doing inventing and you want them to be able to negotiate with manufacturers. You don't want inventors to have to become manufacturers before they can get someone to negotiate with them. Now, I'm not suggesting that every inventor or every manufacturer is not also the other. I'm suggesting that it turns out some are only one and not the other. So some manufacturers are not doing a lot of patenting, some are, some inventors are also patenting and manufacturing, but some are not. But lastly, let's take seriously how the world of business truly works because sitting behind, I think the professor is I think part of his university, but if it's not, let's imagine that's a university building.

If that's a university building, you might imagine that that I guess horrible to Professor Contreras way of seeing things is a troll, a patent troll. It's an entity that produces people who go ahead and do research and then have the temerity to expect that that research get commercialized. And the only way things are going to get commercialized is if they get negotiated. And once again, in order to get negotiation, you need the government to make clear who has the property rights and where the boundaries are.

So it seems to me whether you're ExxonMobil a huge oil company and you form separate entities like Exxon Chemical Patents Inc, or you are a university and you generally are not in the business of competing with foreign motor company, you might for lots of reasons. In lots of ways, the average CEO who thinks of themselves as running a big operating enterprise, if they talk to their lawyers, they may notice their IP portfolios, may many days of the year, many years of the decade, their IP portfolio may be residing in business entities that are not the same entities that actually run the ops or do the manufacturing. And so trying to draw these distinctions between manufacturing, non-manufacturing, practicing non-practicing, these are great discussions for the faculty lounge and totally confusing at best for the real world judges, commissioners and lawyers and dare I say, people who actually run businesses. So I'll pause there.

Michael K. Friedland: Thanks so much, professor. We have a few questions from the audience. Before we go to that, I'll just give Professor Contreras a moment if he wants to respond to Professor Kieff since there was a little bit of potential interchange between the two of you.

Prof. Jorge L. Contreras: Sure, thanks. I won't take long. And I appreciate Professor Kieff's thoughts and I don't disagree about the institutional integrity of the International Trade Commission. I utterly buy into the six person commission and its dispute resolution mechanisms. I mean, my main point is that with respect to the ITCs patent jurisdiction, not dumping, not tariffs, not any of the other things that it does with the other two thirds of its budget, with the patent jurisdiction, it is duplicative of what we see in the courts as far as non-practicing entities. A, you're entirely right. They do have a right to have their day in court, but that's court and you are right. That's the University of Utah's main academic administration building behind me. And by coincidence, yeah, my university does get patents. In fact, $40 million is the amount that my university received in royalties from the BRCA gene patents that I've written about and have debated in other contexts.

And so yeah, universities are absolutely entitled to seek their recourse, but they have the court system to do that. And I do take some issue though with the characterization of judicial resolution of disputes as somehow being at odds with the rule of law and the fact that jury verdicts are short by necessity. They don't have 300 page explanations, but that is how, that is what the Seventh Amendment calls for. And that is how we resolve disputes of factual matters here in the United States. And I think it's entirely consistent with the rule of law to have jury verdicts even in patent cases, even if they don't have written decisions. And I wish they did because it's harder to write a law review article about a jury verdict form or they check off infringing yes or no. But I think that is our system and I have the highest degree of respect for that system.

Michael K. Friedland: Professor Kieff?

Hon. Prof. F. Scott Kieff: Thanks. Just super briefly, I'm not suggesting that our district court judges respond to politics or do policy. I think we all agree they're at their best when they do neither. I'm suggesting that the entire rest of the executive branch almost is designed to be responsive to policy and political preference of the executive. And so those parts of the government, like the Federal Trade Commission, the Department of Justice, antitrust Division, the patent office, those are entities whose budgets have many more zeros, many more people and ground their decisions in much more politics and policy.

How do we know that? Because we stick them in the part of the government that is engineered to operate that way. And when you engineer something to operate a particular way, when you say that the president can remove the director of the patent office or can remove the head of the Department of Justice antitrust Division or can be backed up by the chair of the Federal Trade Commission who's also backed up by a three to two majority, then of course you should expect those entities to be number one, as expensive as their budgets indicate, which is orders of magnitude greater than the 40 million you are discussing. And at the same time, far more politically responsive because that's what we structure them to do.

Michael K. Friedland: Thank you, professor. So I'll take the first audience question, and this one is directed to, directed to Professor Contreras. And the question is, given the in rem jurisdiction in the ITC, isn't that a significant difference that's not addressed by federal district court? In other words, for a foreign manufacturer, there may be cases when you can't assert personal jurisdiction against the foreign entity, you can bring in ITC action because of rem jurisdiction. Do you want to comment on that, professor?

Prof. Jorge L. Contreras: Yes, that's accurate. And that's really why the ITCA a century ago was recognized as having jurisdiction over these infringing products. And so I would say two things. First, again, as statistics show today, it gets about 6% of cases in which you couldn't get district court jurisdiction over the respondents in an ITC case. But those are 6% is not nothing. And so we should think about those. The rem jurisdiction is important. However, there are other ways to get jurisdiction over products on an rem basis, courts could do this working with customs and border protection with respect to copyright and trademark cases. There are far more imports of infringing, counterfeit handbags, wallets back in the day, CDs, DVDs and so forth, tens of thousands of them were imported into the country in containers every year. And even in recent years, customs and border protection of its own accord and under the Code of Federal Regulations has the authority to inspect shipments and stop those sorts of infringing shipments. They also are the ones who make the assessments of patented infringement when the ITC issues an exclusion order, the ITC doesn't have employees who go to the ports and inspect the shipments. That's also CBP. And so you could achieve the same sort of in REM effect with district courts issuing orders that were then received by CBP to go do exactly the same thing that they're doing now with the ITC, except you eliminate one of the routes of jurisdiction that parties have to deal with.

Michael K. Friedland: So I'd like to address the next question to Professor Doane. Are there any reforms to the ITC that you would support? I think you're on mute and I apologize.

Prod. Michael Doane: Well, the reforms I would suggest actually would make its jurisdiction even broader. For example, right now based on the interdigital decision by the federal circuit, a non-manufacturing entity is required in order to establish jurisdiction that there is a product that practices its patents somewhere in the world. It doesn't have to be manufactured in the United States, it could be manufactured abroad. And I don't think that's anything Congress intended when it put this in. I think it meant that when it said that no US based manufacturing was required for this branch of the domestic industry, it was saying that no manufacturing was required. I don't think it was required considering whether that foreign manufacturing could support a domestic industry. So I think that's one thing that could be clarified is that, and as was the standard of the ITC for almost 20 years before the inter digital, that no product was actually required if you were basing your domestic industry on licensing or research and development.

Because I mean, in effect, this continues to be a problem for small companies. I mean, you're trying to, for example, you run up against a large manufacturer who's been able to get their product under the market and you face the difficulties of funding and getting your product developed and you might have prototypes or something, but there's difficulty getting something created because of something that's already beaten you to the marketplace by a much better funded company. And for example, you can see in the one of the current smartphone smartwatch cases, the majority of the appeal by far is not whether the importer infringed. If you look at the brief of the respondent, more than two thirds of the brief goes to did Massimo have a domestic industry product and not whether they barely even mentioned whether their own product in fringes. It was this whole thing about the existence of a domestic product. And I don't think for purposes of this type of domestic industry that should be required.

Michael K. Friedland: Thank you, professor. This question will be for Professor Kieff, in some instances, and as might be true in the instance that Professor Doane just described, where the patent only relates to a very small portion of a product, some commentators have suggested there should be a threshold that, for example, if the patent only covers 10% of the value of a particular important product, maybe an importation ban isn't appropriate. Would you care to comment on that type of a proposal?

Hon. Prof. F. Scott Kieff: Yeah, so I think it's interesting some of the numbers that get thrown around. I mean, if the concern is that the adjudicated infringement represents a small thing, then it's a small thing to design around or a small thing to negotiate. And there are lots of ways to negotiate. You can negotiate for something called a patent license. You can negotiate to buy the patent, you can negotiate to buy the patentee. So there are a lot of pathways to negotiation, and those are all peaceful, collaborative, win-win negotiations that simply required good fences, making good neighbors, the government stepping in and saying, here's where the boundaries are. And so let me, if I may take a second and just also contrast the ITC with district court because I want to be clear about what the benefit is. I think it's in any rule of law based system. If you think about this as a lay person, you think about a scale of one to 10, where one is or zero is the, so-called plaintiff or petitioner side, they always lose and 10 would be they always win.

I think we all agree that a relatively stable equilibrium rule of law system ought to be averaging around a five. It shouldn't always favor petitioners or plaintiffs. It shouldn't always favor defendants or respondents. One of the things that I think is interesting to observe about the US patent litigation system as a system over the last 20 to 30 years is that it is gone in district court from Patentees on average landing at around a five to on average landing around A one at the ITC, they landed around a five. The ITC is not plaintiff patentee petitioner friendly. It is just not as unfriendly as the district courts have become. And the reason the district courts have become unfriendly to patentees is because a lot of these newer, more esoteric ways of counting or measuring relative contributions of a particular IP asset to a particular commercial assets relative value, that kind of angels on the head of a PIN dance has become common in district court.

It's become even more common in the other politicized agencies, more politicized agencies like the antitrust Division, the patent office, and the Federal Trade Commission. And dare I say, the ITCs Central reason for being the target of today's indictment is that it's right down the middle of the strike zone. It's a five ITC opinions and patent cases routinely favor the alleged infringer just as much as they routinely favor the patentee. They are, dare I say, fact specific and law specific. They don't rule in big categories. They adjudicated and make determinations based on the record. There're a five. Five is where you want to be for your adjudication. That doesn't favor one side or the other. Big thing to keep in mind. By the way, I think the district courts try to be fair. I think we've shifted some of our legal rules in the policy areas and the district courts have struggled to figure out should they catch up with these policy pronouncements.

But I think both the district courts and the ITC generally are fair, generally are five. The central difference though between the ITC and the district courts is five to seven versus 1.5. The time to a serious complete record in district court is on average five to seven years. The time to that at the ITC is 18 months, 1.5 years. So again, I think it's interesting that the last time we did a total overhaul of our patent statute, which was the 2011 America Events Act, it was in the name of a faster, more clear adjudication of these property rights and the ITC delivers that at a tiny fraction of the patent office's budget. And it does it unlike the patent office, not in a way that is politically responsive and yes, in a way that is grounded in a expensive but detailed factual record.

Michael K. Friedland: Well, thank you Professor. I'm just going to, before I go to the next question, I'll make one quick comment as an exertion of my privilege. There were two notions about district courts that I wanted to mention very quickly. I agree with Professor Keith that district courts have become a one, I wonder how much that one is skewed by patents that are found invalid under Section 101. That could be an enormous number and if you exclude 101, maybe district courts are two or a three are a little bit better. And something that Professor Contrera said earlier, professor Contrera said that 70% of the time injunctions are issued in patent cases where the plaintiff wins. I'm wondering if that number might be skewed a little bit by the number of cases that we refer to here at our firm as Schedule A cases where it's a plaintiff filing a case in the northern District of Illinois against just a plethora of unknown Chinese entities and they routinely get default judgments and permanent injunctions.

That probably skews it just a little bit, but I don't know for sure. Okay, so I have another question from the audience and this one is directed to Professor Contreras and I'll just go ahead and read it. It's a follow up to an earlier question. It says, professor Contreras, you proposed to work with the CBP, but you can only do that after you have a district court judgment. You can't get the judgment without having personal jurisdiction. So are you now proposing that Congress amend the laws to allow district courts to exercise personal jurisdiction over entities that have no US context based on importation of products?

Prof. Jorge L. Contreras:Yes. So we're back into that 6% category. There are a number of ways that this could be done right? Right now, the code of Federal Regulations allows copyright and trademark holders to register their copyright of their trademark with the CBP, which then allows them to bring an action directly at the CBP against imported products on a rem jurisdiction basis. Patent cases are, I don't think anyone would disagree that by and large are more complex than your typical trademark copyright counterfeiting case. So you probably do need more fact finding than CBP has available. So yes, there would have to be an amendment to the, at least a code of federal regulations to allow the result of a district court proceeding to be taken in by the CBP in order to run its own investigation and enforcement. But the district courts, again, just consider a different area of law. They're all, any number of court district federal cases against 12 kilos of cocaine or four speedboats and 12 Lamborghinis. This happens all the time in ram. Jurisdiction of this, of course, is not a strange concept and I think it would be easily importable to the patent area.

Michael K. Friedland:

Well, this is one of those panels where you wish that we had more time. I wish we had another half hour, even another hour because there's so many more questions that we have to ask and so many more things that need to be responded to. But unfortunately, we are at that time. So I will thank all of the professors for having joined us. I'm going to go ahead and thank Edith Harold for organizing this and arranging it, and thank everyone for tuning in and further questions and look forward to further discussion on this topic in the future. Thank you so much.

Edith Harold: Yes, and on behalf of the Federalist Society, thank you so much, professor Contreras, professor Do and Professor Kieff for speaking and Michael Friedland for moderating. We're so grateful for your time and expertise today, and thank you to our audience for joining us. We greatly appreciate your participation. You can stay up to date with announcements or upcoming webinar webinars on our website fedsoc.org or on all major social media platforms. Thanks again for tuning in and we are adjourned.