Luxury bed sheets, high-strength steel, and synthetic fish oil tablets. What do these products have in common? They’ve all been the focus of recent investigations by the International Trade Commission.
This small federal agency is authorized to address unfair practices regarding imported articles, and it can provide significant protection for companies that do business in the United States, large and small. As companies face increasingly savvy competitors from all corners of the world—many of which are pursuing increasingly creative strategies and competitive techniques—the ITC continues to represent a powerful ally for businesses that want to eliminate unfair competition arising from imported products.
The ITC does this by issuing remedial orders that can halt activities shown to be “unfair” within the meaning of the its governing statute, 19 U.S.C. § 1337 (often referred to as “Section 337”). The majority of the import investigations undertaken by the ITC involve accusations that imported goods infringe one or more U.S. patents.
But the ITC can and often is used to combat copyright theft and trademark misuse. In fact, the ITC has very broad power to take action against imported articles that threaten to destroy or substantially injure an industry in the U.S., including trade secret theft, false advertising or other false or misleading labeling, and efforts to restrain or monopolize trade in the U.S.
Creative thinking about the powers (and limits) of the ITC’s authority may identify new, additional ways to combat unfair acts in the importation of articles into the U.S.
Thread Count, Steel, Fish Oil Tablets
In the examples discussed below, the complainant was successful in getting the ITC to investigate the alleged unfair acts in two cases but was unsuccessful in the third.
A Texas-based company found the ITC receptive to its complaint of unfair competition regarding the advertised thread counts in imported cotton bedsheets. The company was able to show that its competitors were inflating their actual thread counts, the false labeling was misleading consumers, and an industry in the U.S. was being injured. The ITC found a Section 337 violation and ordered Customs to stop the importation of falsely labeled textiles.
In May 2016, the ITC instituted an investigation based in part on alleged false designation of origin under the Lanham Act, the federal statute that governs trademarks, service marks, and unfair competition. Specifically, U.S. Steel alleged that a number of Chinese steel companies were avoiding duties on imported steel by falsely designating that the steel originated from countries other than China. The ITC ultimately concluded that U.S. Steel had failed to show a violation of Section 337.
In August 2017, Amarin Corp. filed a complaint with the ITC alleging that 18 domestic and international companies were marketing synthetic fish oil tablets improperly labeled as “dietary supplements” instead of “unapproved new drugs.” Amarin argued that the alleged mislabeling violated federal law and was an unfair method of competition in violation of Section 337.
The ITC declined to institute an investigation, concluding that the law at issue gave the FDA exclusive jurisdiction over labeling of these types of products. Amarin’s Section 337 complaint failed because the labeling alleged to constitute the unfair act was a matter over which the FDA had exclusive authority.
What Can Companies Learn?
Although the complainants in these cases were not always successful, companies facing unfair competition from imported goods should assess whether the alleged unfair acts are something that can be remedied by the ITC.
A company evaluating whether the expansive reach of the ITC is appropriate must consider whether its dispute meets the basic requirements for an ITC investigation:
- The unfair method of competition or unfair act must relate to articles imported into the U.S.
- Where IP rights are at issue, the complainant must show that a domestic industry exists, which may be shown by significant investment in plant and equipment, significant employment of labor or capital, or substantial investment in exploitation of the IP such as through engineering, research and development, or licensing
- For non-IP based violations of Section 337, the complainant must show that the unfair act has the threat or effect of destroying or substantially injuring the domestic industry, preventing the establishment of such an industry, or restraining or monopolizing trade and commerce in the U.S.
The seriousness with which the ITC has taken recent complaints alleging unfair acts in marking or labeling, for example, illustrates the broad scope of its potential authority. As the global economy continues to evolve, bringing with it the inevitable tensions in trade, companies operating in the U.S. would be wise to consider how the ITC may resolve unfair methods of competition arising from imported goods.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Matthew Bathon is a partner at Steptoe & Johnson LLP and former senior investigative attorney with the ITC’s Office of Unfair Import Investigations. He focuses on litigating Section 337 investigations before the ITC and IP disputes in district courts.