The law journal journalist, sin hung
In september of this year, bh innovations llc, an intellectual property management company in the united states, filed an application under section 337 of the united states customs act 1930 with the united states international trade commission (itc) claiming that specific liquid crystals, components and downstream products exported to the united states, imported and sold in the united states were in violation of article 337 and that a number of chinese enterprises had been listed as defendants。
In recent years, with the acceleration of the international layout of chinese enterprises, more and more cases of “337 investigations” have been encountered. In addition to the “337 investigations”, the european uniform patent court (upc), which was established for only two years, quickly became an important battleground for international patent competition for giants, with many chinese companies present not only as defendants but also as plaintiffs. Before that, the chinese communications, in their capacity as the implementing party, counter-attacked the samsung in the framework of the upc, putting enormous pressure on the other side。
In the face of the two major enforcement mechanisms, the “337 survey” and the upc, what are the easy-to-neglect risk points for chinese enterprises with regard to intellectual property rights, and how should they be addressed? In recent days, corporate journalists have interviewed a number of lawyers from the united states firm faihan。
Efficiency of the award
The “337 inquiry” is a long-standing itc investigation of intellectual property rights abuses in imported trade and other unfair competition practices. In the past, china's industries such as general mechanics, consumer electronics and leds have all experienced the life and death test of the 337 survey。
Chinese enterprises tend to believe that “337 investigations” are mainly concerned with patent infringement, but in practice they are quite extensive. In addition to patents, there are trademarks, copyright infringement and other unfair competitions such as theft of trade secrets, counterfeiting, false indications of origin。
The “337 investigation” has been completed faster than expected. Maleesa frederick, a partner in the washington, d. C., united states of america law firm, was a senior investigator at itc and the chief government legal adviser in a number of 337 article cases. In an interview with a journalist, she described: “the proceedings before the itc, from the very beginning to the end of the proceedings, including the filing of a petition, the opening of an investigation, the disclosure of facts and expert evidence, the hearing, the administrative judge's preliminary decision, the final decision, etc., took approximately 16 to 18 months to produce the results of the first trial, which took much more than three to five years before the united states federal district court”
The difference between itc and the federal district court is also that “it is much shorter than the 30 days granted by the federal district court that the itc will present evidence within 10 days of the opening of the case. And the energy and cost of preparing materials for an enterprise are enormous, and this invisible pressure on the enterprise”。
The upc has also been able to close cases faster than the itc. As of june of this year, the upc, which was established in june 2023, has heard nearly 1,000 cases. Central courts such as munich, paris, the hague, etc. Have become their main places of consideration. According to current observations, upc is popular with patent holders, largely because of the intensive nature of the upc trial proceedings, which basically guarantee a first instance decision within 14 months。
“it is difficult to find a court that is more efficient than upc in the overall litigation situation in europe.” counsel for the munich office of the united states firm of faipule, antje brambrink, stated that “previously the plaintiffs had had to go to various countries to take action, the decisions handed down by the upc courts could now apply to 18 european countries under the jurisdiction of the upc, meaning that corporations could resolve tort disputes in several countries in one court, saving time and costs”. In addition, for the first time, upc had ruled that its award could extend to non-contracting states (e. G., the united kingdom) when the fuji film had been sued by koda。
For both parties involved in the upc proceedings, time nodes need to be strictly controlled. “the defendant has only three months to respond after the tort has been served, that is to say, once the counter-claim of the invalidity of the patent has been filed, all retrievals and lists of evidence need to be completed and filed within three months.” brambrink notes that the upc proceedings are extremely stressful for the respondent party。
It's lethal
For companies focused on international markets, the “337 survey” paper exclusion order was extremely lethal。
Businesses may be subject to “337 investigations” if their conduct involves the sale, import or sale by foreign manufacturers of foreign manufacturers, parts and components, or by united states distributors, distributors and retailers, for import, of the goods against which they are sued, meaning that the “337 investigations” can affect any company in the chain of industries of a product. “sale for import means that the investigation will cover foreign manufacturers of the products being sued, as well as foreign manufacturers of parts and components, so that many chinese enterprises are involved because they are manufacturers of parts and components. "frederick says。
If the respondent is found by itc to have violated article 337, the respondent is subject to an itc exclusion or prohibition order, which may exclude not only products from the united states market, but even similar products from relevant businesses and industries upstream and downstream。
“337 investigations” exclusions are divided into limited exclusions and general exclusions. A limited exclusion order is directed only at the listed respondent, while a general exclusion order is directed at all suppliers and products throughout the chain, with devastating effects on the entire chain. In the case of skull shaver inc. V. Many china electric head shaving manufacturers, which started in 2020, the itc issued a general exclusion order。
In frederick's view, the reasons for the general exclusion order issued by the itc in this case were the following key points: the large number of respondents, with 30 to 40 businesses involved; the fact that most of the respondents were sold on internet-purchase platforms, and that it was difficult for the applicants to trace the origin of the product at great cost, which significantly increased the cost of safeguarding rights; and the low price and technical threshold of such products, which allowed the respondent to resell in one shell. “itc considers that in such a case a general exclusion is justified. It is thus easier for a general exclusion order to be issued for explosive, fast-forward goods.”
In the case of applicants, the use of the “337 survey” to bind the respondent requires an industry in the united states, i. E. An economic activity or investment that is linked to manufacturing, r & d, maintenance, quality control or testing, licensing activities, warehousing, distribution, etc., that will drive the united states economy. However, the case of lashify inc. V. A number of chinese fake eyelashes manufacturers, which started in 2020, lowered the applicant's threshold。
The applicant in the case was a united states company, but its manufacture was completed outside the united states, where only some storage, sales and technical support were provided. At first instance, the itc's administrative judge and member held that the applicant did not meet the requirement of having “domestic property”, while the united states court of appeals for the federal circuit in that case disagreed with the interpretation given by the itc of the requirement of “domestic industry” and held that significant investment in sales could also be used to satisfy the requirement of “domestic property”。
“in other words, an enterprise can be an applicant even if it has manufactured abroad, provided that the product is finally imported for sale and technical maintenance in the united states. “frederick described that after 2023, a chinese solar battery company became an applicant for the 337 survey in the united states, simply because it had investments in the united states.” from this perspective, companies outside the united states would be more likely to use `337 investigations' to defend their rights in international trade.”
Active response
As a result of the lack of experience with the 337 survey and the upc, there were chinese enterprises and even industries that lost their overseas markets because of information delays and unprofessional responses。
Frederick states: “in reality, many chinese enterprises have an area of error: even if they are sued and the itc issue a limited exclusion order, only the products complained of cannot enter the united states market and can continue to sell once redesigned. As a result, he ceased to participate. Ultimately, however, these enterprises are found to have violated their rights in absentia, with the result that not only do they affect the products in question, but even those newly introduced that circumvent design may be covered by the exclusion order.”
From that perspective, she suggested that chinese enterprises should respond positively, so that the scope of control of the “337 investigation” might be only the products involved。
The proceedings are very important. “a number of chinese enterprises were absent from the trial for visa reasons. As a result, they had to check visa requirements early, otherwise the absence of a hearing would be detrimental to the outcome of the case. "frederick says。
According to current statistics, more than 60 per cent of the itc cases ended in settlement. She explained: “if it were a mutual action between competitors, settlement would be more difficult because the applicant's purpose was to exclude the product of the respondent from the united states, but if the applicant was a non-proprietary operator, the main purpose of which was to arrive for money, the two parties would be able to reconcile.”
In addition to reconciliation, consent orders are a means of concluding the itc investigation. “that is the agreement between the respondent and itc not to import the products in question to the united states from now on. If the consent order is signed, the case may be withdrawn, but if the consent order is violated, there may be two penalties: $100,000 a day, or twice the value of the case.”
The major impact of upc on chinese enterprises is the service of documents. “communication is not a problem for entities and enterprises located in european union member states, but it is a very important issue for countries outside the european union, whose regular mode of service is based on the hague convention.”
Brambrink described a case in which the plaintiff sued two entities, the parent company located in china and the subsidiary company based in germany, when the plaintiff, because of the cumbersome procedure followed by the chinese parent company for the delivery of the convention to the hague, delivered the indictment against the chinese defendant directly to the german subsidiary in the hope that the subsidiary would be transferred, but finally the court found that the service had not been successful and that it could not be delivered by other alternative means without the hague convention。
In previous cases, there were numerous trials in absentia resulting from service. The upc judgement shows that the effectiveness of service is centred on “whether the defendant actually received”. Delivery can be considered complete as long as traceable documents exist, such as mail receipt or electronic service records. Even if the parties claimed not to have opened the document, it did not affect its validity。
Brambrink stated that if the plaintiff had exhausted the service and the defendant had not responded, the trial would be considered to have taken place in absentia. Thus, the hint she gave to the chinese enterprise was: “the plaintiff does not want to take a shortcut and the defendant does not want to fail. It is suggested that a local lawyer may be designated as a representative to receive the documents by e-mail.”
Engagement of outside counsel
As a patentee, wang ningling, the management partner of the shanghai office of the faihan law firm, stated that the tools provided by upc to secure the defendant's rights would be well used. At the same time, it was prudent to choose who to prosecute, how to bring a genuinely targeted rival into litigation through flexibility, and where prosecutions were most advantageous to consider。
For the defendant, brambrink considered it important to design its own product supply chain and distribution routes in europe in such a way as to avoid the risk of being prosecuted in the upc as far as possible, while at the same time actively responding and actively filing a patent avoidance declaration to relieve pressure。
Frederick suggested that: “the defendant may often be unaware of the coming of the proceedings, most notably by caring for his client and by comforting the client to ensure that the supply chain is not broken. And i said to them, "i have such a lawsuit, but believe in our technology."
It is also important to hire a very experienced external lawyer. “the firm in which the outside counsel is based needs a global layout, so that professionals around the world can help the business; it also needs a sufficient technical background. After all, `337 investigations' involve expert witnesses, and the strong technical background of lawyers is important for the global use of evidence by businesses; litigation strategies are also important in combining legal action strategies with corporate business objectives。
“from the perspective of intellectual property services, their value is not limited to the legal dimension, but more central to the need for law to operate intellectual property as a business asset.” the cmo terra liddell, the market director of the united states law firm, has observed three significant trends at the moment: first, the trend towards technology integration, many of which are essentially the product of technology integration; secondly, the global layout of technology and intellectual property, both within the framework of itc and the upc, in which the innovation of enterprises is equally critical; and finally, data-driven intellectual property management, which is now increasingly valued by enterprises for data management and application, which also requires that the law be able to understand, capture and apply data more in depth。
Source: legal persons magazine, cover sheet generated by ai
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