INSIGHT: ITC ALJs Rule Quickly on IP Rights—Attorneys Risk Sanctions for Not Cooperating

The unique nature of the International Trade Commission—and how it differs from U.S. federal district courts when enforcing U.S. intellectual property rights—was on full display in an ITC administrative law judge’s recent decision in Certain Movable Barrier Operating Systems, and Components Thereof,

Two of the main differences concern speed and cooperation. Given the increased importance of the ITC in patent matters in recent years as a result of the America Invents Act and a 2017 U.S. Supreme Court decision, this case offers important lessons to anyone involved in the battles over U.S. intellectual property rights.

As required by statute and its own rules, the ITC must proceed as quickly as practicable. It’s not uncommon to reach trial seven or eight months after the litigation begins, and within just a few weeks if temporary relief is being sought. A company failing to appear can be found in default.

Because ITC proceedings proceed so quickly, ITC ALJs typically permit broad discovery, and they expect cooperation among the parties, particularly those represented by experienced ITC counsel, so the matter can be ready for trial in a timely fashion. For this reason, an ALJ will sanction parties who are not cooperating or acting in good faith—which is part of what happened in the aforementioned action.

Complainant Sanctioned Twice, Almost Three Times

In that proceeding, the ALJ sanctioned the complainant, the Chamberlain Group, twice and noted that it had likely engaged in sanctionable conduct a third time.

First, the complainant was sanctioned after producing over 160,000 pages of documents the day prior to the close of fact discovery without advanced notice and after fact depositions had been completed. The late production was purportedly due to an error in the privilege review that may have been conducted by an outside vendor.

The complainant was ordered to pay respondents’ additional costs and legal fees resulting from the late production, including costs and fees resulting from the second depositions of complainant’s witnesses that was necessitated by the late production.

The complainant was sanctioned a second time after it announced it was dropping four claims the day before the start of the evidentiary hearing. Throughout the litigation, and during the week leading up to the hearing, the ALJ reminded the parties to narrow their respective cases as much as possible.

Nevertheless, the complainant waited until the day before the start of the hearing to notify the ALJ and the respondents that it was dropping several asserted claims, which was prejudicial to the respondents who wasted time preparing to defend those claims. This was after the hearing was postponed several months due to the government shutdown. The ALJ sanctioned complainant by taking away some of its hearing time.

The ALJ noted that complainants had likely engaged in sanctionable conduct a third time after its counsel made repeated, baseless objections during examination of the witnesses at the hearing. For example, complainants repeatedly made baseless objections during the examination of one of respondents’ technical experts, in what the ALJ appeared to view as an attempt to waste time and interrupt the flow of the expert’s testimony.

The ALJ found that those objections misconstrued her prior Markman order, needlessly delayed the hearing and disrupted the testimony of the witnesses.

Lessons From the Sanctions Rulings

There are several takeaways from the sanctions-related rulings in this investigation. First, each party is responsible for its conduct during discovery, including any errors caused by its discovery vendors, who must be adequately supervised, and a party’s document production should be substantially complete before the start of the first fact deposition.

A party who produces relevant documents after the start of the fact depositions may be forced to pay for a second deposition of its own fact witnesses. In addition, parties should make good faith efforts to promptly communicate with each other and the ALJ when significant, unexpected issues arise in discovery.

Next, as explained above, the ITC ALJs operate under tight deadlines not commonly imposed on district court judges, and they must issue rulings by certain announced due dates. For this reason, they typically instruct the parties to narrow their cases as much as possible and as soon as possible to limit the issues that need to be adjudicated. Parties who are seen to be disregarding those instructions and dropping issues at the last minute as a litigation tactic may be subject to sanctions.

Moreover, the ALJs have significant discretion in fashioning such sanctions, including a reduction in hearing time, which is already very limited.

Finally, the ALJs are interested in listening to and evaluating the live testimony of the witnesses at the hearing, and they have significant discretion under the Administrative Procedure Act to admit evidence into the record, including testimony that may not be admissible in a district court proceeding such as hearsay.

Thus, repeated objections during live testimony of a witness can often do more harm than good if such objections annoy the ALJ, particularly if the ALJ believes the objections are actually part of a cynically motivated litigation tactic.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

James Coughlan is a partner in Perkins Coie’s Intellectual Property practice and serves as the co-chair of the firm’s ITC Section 337 Actions practice.

Kevin Patariu, intellectual property partner at Perkins Coie, litigates complex intellectual property matters throughout the United States and before the ITC.

Matthew Bernstein is managing partner of Perkins Coie’s San Diego office and a member of the Intellectual Property practice. He focuses on patent litigation matters, including before the ITC.