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Virus Delays at Int’l Trade Commission Stir Case Backlog Worries

April 13, 2020, 10:30 AM

A potentially extended U.S. International Trade Commission ban on hearing cases has intellectual property litigators feeling uneasy.

The commission, a federal agency that handles intellectual property and trade disputes, is known for its speedy handling of investigations and powerful exclusion orders that can prevent the importation of products into the U.S.

The commission continues to process cases, including accepting new complaints and issuing orders. But the agency has postponed all hearings in intellectual property disputes through mid-May because of the Covid-19 pandemic, which can prevent judges from making determinations.

If the closure lasts into the summer, a backlog of patent and other IP cases will grow, creating delays that cost companies money and potentially leave infringing products on the market longer, attorneys say.

If the commission says “we have to push this out even further, then I think people might really start to suffer the consequences of an extended disruption,” David Vondle, a partner at Akin Gump Strauss Hauer & Feld LLP who represents companies in disputes before the commission, said.

There are 24 unfair import investigations with a final decision target date within the 180 days pending at the commission. Each case involves patents or other intellectual property. More than a dozen open investigations have started in the past six months, including a complaint Philips North America LLC brought against Fitbit Inc., Garmin International, Inc. and other companies over wearable monitoring devices.

Expecting Delays

The commission’s building in Washington D.C. is closed to the public, and its employees have been working remotely for almost a month. In March, the agency suspended rules that require the filing of paper copies and physical media, including CD-ROMs.

The ITC also ordered its judges to postpone all hearings in unfair import investigations until after May 12. The commission has said it will reevaluate that schedule later this month for any additional postponements. An agency spokeswoman said Friday the ITC continues to monitor the situation.

But many attorneys expect the commission to extend the postponements. Washington D.C. could see its number of coronavirus cases peak in late June or early July, Mayor Muriel Bowser said at an April 3 press conference.

“If that’s the case, I don’t see how the ITC is going to be able to proceed with hearings in May,” Vondle said.

Less Flexibility

Coronavirus disruptions have already been felt in some of the commission’s cases.

There have been several schedule extensions, including a handful of cases where the trial date has been rescheduled. Eric Namrow, chair of the ITC practice at Morgan Lewis & Bockius LLP, said he is involved in an investigation where everything has essentially been pushed out by three months.

The ITC operates fast, with trials happening in as little as eight to nine months after a complaint is filed. There is less flexibility built into the schedule than district courts, where patent cases take, on average, over two years to reach trial. Any disruptions at the commission can be more pronounced.

“The longer it takes to get out of something, the worse it becomes,” said Daniel Yonan, head of the ITC practice group at Sterne Kessler Goldstein & Fox PLLC. “That backlog just gets bigger and bigger, then it takes the commission longer and longer to dig out.”

Respondent Advantage

When the federal government shut down for 35 days in 2018 and 2019, there were some intellectual property cases that took months longer than normal to complete. The commission, in some respects, is more functional now than it was during the shutdown, when work ground to a halt.

“The flip side is, we’re in for a longer period of compromised capabilities,” Smith Brittingham, leader of the ITC litigation practice at Finnegan Henderson Farabow Garrett & Dunner LLP, said. “That ultimately will likely have an effect on a fairly broad number of investigations.”

Delays interfere with the plans of patent and other IP owners, who could be forced to watch as products that they believe infringe their rights continue being imported and sold in the U.S. Even a few months can amount to a significant amount of money, attorneys said.

Accused infringers also have more time to prepare defenses and search for evidence that can be used to challenge the validity of the patents.

“Respondents have a huge advantage with what’s going on,” Yonan said.

Virtual Hearings

The ITC has suggested virtual hearings could be an option in anti-dumping and countervailing duty investigations. Attorneys said it’s possible trials in IP cases could go virtual too, should in-person restrictions linger. But there would be challenges.

Holding a patent trial at the ITC can almost be like putting on a Broadway play, with witnesses flying in from all over the world, entire floors of hotels booked, and late nights of preparation work, Oblon McClelland Maier & Neustadt LLP attorney Eric Schweibenz said.

“It would be daunting, to say the least, in order to try to make that all happen remotely,” said Schweibenz, who chairs the firm’s ITC litigation practice group.

Uncertainties surrounding the current pandemic could deter new cases. Schweibenz said he had one client decide not to bring a case at the ITC now, given restrictions on travel and employees working from home.

Other companies, already feeling economic effects and reevaluating their budgets, could be reluctant to invest in new cases.

“There may be a sense in potential litigants that there’s a lot of uncertainty right now and they may want to see how the landscape changes,” Namrow said.

For additional legal resources, visit Bloomberg Law In Focus: Coronavirus (Bloomberg Law Subscription)

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Roger Yu at ryu@bloombeglaw.com; Keith Perine at kperine@bloomberglaw.com

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