The Increasingly Popular Section 337

21 June 2017 Manufacturing Industry Advisor Blog

There are a number of ways in which U.S. manufacturers that believe they are being harmed by imports can seek protection.

An increasingly popular tool to consider is filing a Section 337 proceeding at the International Trade Commission, which can be used to combat a wide variety of alleged unfair trade practices.

What is a Section 337?

Under Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, the International Trade Commission is authorized to issue an order to exclude articles from entry into the United States that have been found to violate U.S.-based intellectual property rights, or where the respondent has committed other unfair acts relating to imported products. The exclusion order is enforced by the U.S. Customs and Border Protection (CBP).

Most Section 337 investigations allege violations of intellectual property-based rights involving claims of patent, copyright or trademark infringement. In such cases, the complainant must establish that a valid and enforceable U.S. patent, copyright or trademark is being infringed by the importation into the U.S., the sale for importation, or the sale within the U.S. after importation of an accused article, and that a domestic industry exists or is in the process of being established.

Section 337 also provides remedies for other unlawful acts, such as theft of trade secrets and unfair competition under the Lanham Act.   Recent investigations have also involved allegations of price-fixing, computer hacking, and customs circumvention. In these cases, the complainant is required to show that the respondent’s unfair practices threaten to destroy or substantially injure a domestic industry.

I’m a Domestic Manufacturer, Could I be the Target of a Section 337 Proceeding?

Yes. While Section 337 was initially enacted by Congress to protect domestic industries against unfair trade practices by foreign companies, any company that imports products can be named as a respondent. There are numerous investigations where a foreign company owns a U.S. patent, and is able to allege a domestic company imports components that infringe U.S. patents into the United States that are incorporated into downstream products. Similarly, U.S. companies with overseas operations could be the target of claims of other unfair acts in the importation of goods, such as using stolen trade secrets, or importing counterfeit products.

Steps Manufacturers Can Take to Avoid Being Named in an ITC Complaint

Both foreign companies and U.S. companies that import products should audit their overseas operations to ensure they are in compliance with U.S. laws, the violation of which could form the basis of a Section 337 investigation. Such measures should include:

  • Evaluating your imports to determine if those products infringe any U.S. patents. Such evaluations are commonly referred to as “field of use” studies.
  • Ensuring you are not importing unlicensed products that infringe U.S. trademarks or U.S. copyrights.
  • Ensuring your foreign operations have strong compliance and enforcement policies in non-IP areas is also essential. The most critical areas for heading off a potential Section 337 case include policies against:
    • Economic espionage and theft of trade secrets.
    • Computer hacking.
    • Price-fixing and other antitrust violations.
    • False advertising.
    • Non-compliance with customs regulations, including country of origin designations.
  • Take measures to protect the company from claims alleging trade secret violations, including by:
    • Taking all steps to identify trade secrets that belong to the company and to preemptively document that they are appropriately the property of your company and not owned by another entity.
    • Taking steps to ensure that all new hires are properly vetted, where they are hired from competitors, to ensure that they did not remove trade secrets with them and that no such information is stored at the company.
    • Acting quickly to assess the scope of any identified misappropriation of trade secrets and to stop its use. All steps taken should be documented and preserved.
  • There are also potential claims alleging unfair acts that have not yet been tested at the ITC. Such claims might include claims brought by competitors against importers who commit unfair acts of bribery, who use child or forced labor, or any number of other unfair acts that cause injury to a domestic industry.

This content was originally generated as part of a Legal News: U.S. Regulation of Exports and International Conduct newsletter by David Hickerson and Greg Husisian titled, “Section 337 and the New Trump Administration: Your Top Ten Questions Answered.” Click here for the original publication.

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