It is said that on August 2, Cree received a preliminary ruling notice from the U.S. International Trade Commission regarding the investigation of 337-TA-947 (some LED products and similar components). Among them, the ITC judge’s ruling showed that Feit and Dombe had been found guilty of violating Section 337 of the Tariff Act.
In fact, dating back to 1997, LED patent litigation cases in the United States have been on the rise, and in February 2008, Chinese companies were affected for the first time. Data show that since 2008, Chinese LED companies have been unknowingly subjected to Section 337 investigations by the United States many times.
On the whole, the companies that have been sued have been mostly in areas with developed LED industries such as the Pearl River Delta, and most of them are small and medium-sized enterprises. However, when Chinese LED companies respond to such incidents that affect the entire industry, they generally choose to adopt an evasive and indifferent attitude, and few actively respond. The research summary found that the United States’ Section 337 investigation against China has the characteristics of simplicity, discrimination, severity, extensiveness and persistence.
In practice, Section 337 investigations also show trends such as an increase in the number of investigations, patent infringement as the main cause of action, and the high-tech industries involved. Due to China's relatively weak industrial foundation and intellectual property strength, Chinese companies often face intellectual property barriers when exporting. In particular, the investigation and relief measures imposed on Chinese LED companies under Section 337 of the U.S. Tariff Law have caused Chinese LED export companies to suffer a lot.
If it is found to be infringing without settlement, the ITC will be able to issue a general exclusion order, a limited exclusion order, and a cease and desist order. A general exclusion order prohibits all imported products of a certain type from entering the U.S. market, a limited exclusion order only prohibits the infringing products of the company under investigation from entering the U.S. market, and a cease and desist order requires the infringing company to stop infringement, otherwise it will be fined US$100,000 per day.
Whether the case is settled by settlement or by an exclusion order or prohibition order, it will have an export trade inhibitory effect on the Chinese companies involved and their upstream and downstream industries. Even if the case is settled by settlement, high patent fees will still need to be paid, and the export of the products involved and the upstream and downstream industries to the United States will be affected; if the case is settled by an exclusion order or a prohibition order, the products involved and related products will be permanently excluded from the U.S. market, which is a major blow to the entire LED lighting industry chain in my country.
It is true that China’s LED industry has developed on the shoulders of giants, which has also resulted in a weak position in the LED patent landscape. In the future, if China’s LED industry wants to develop and expand, it will inevitably encounter various patent disputes. However, looking at the current situation of the "patent war" in the LED industry, we can find that foreign LED companies pay more attention to patent applications, but many domestic companies have not yet realized the awareness of protecting intellectual property rights. Some people point out that this is also an important reason why most of the vigorous "patent wars" in the LED industry remain in the international arena, and domestic LED companies have petty disputes over patents but cannot go to court.
Section 337 investigation is a sharp tool for the United States to safeguard its own intellectual property interests. Chinese LED companies only have to deal with it if they don’t encounter it. Once they encounter it, whether they choose to passively evade it or actively respond to the lawsuit, it can only be said that they will never be able to escape what is coming. Since we can't escape, we need to take precautions and "know ourselves and the enemy". We can't understand it half-knowingly, let alone be ignorant.
According to Section 337 of the U.S. Tariff Act of 1930 (now compiled in Section 337 of Volume 19 of the United States Code), if there is infringement of knowledge or other unfair competition in any import trade, the U.S. International Trade Commission (USITC) can conduct an administrative investigation. If the ITC determines that an imported product infringes upon U.S. domestic intellectual property rights, or does not infringe intellectual property rights but has the effect of destroying or substantially damaging a U.S. industry, hindering the establishment of the industry, or causing restrictions or monopoly on U.S. commerce or trade, the ITC has the right to take sanctions. This is the so-called "337 investigation".
The 337 investigation has four major characteristics. First, it is easy to file a case. The applicant who initiates the "337 investigation" only needs to prove that there is an industry in the United States related to the intellectual property rights claimed by the applicant, and does not need to prove damage; second, its penalties are severe. Once it is found to be infringing, not only the respondent's related products, but also other similar products may be banned. Third, its investigation period is short. In most cases, the ITC’s investigation period is 12-16 months, and complex cases may be extended to 18 months, while the federal district court’s patent case review period is as long as two years or even longer; finally, it has jurisdiction in rem, and applies ratione materiae jurisdiction to all products imported into the United States. As long as it can be proven that the imported products involved in the case exist, the applicant can request the ITC to simultaneously investigate the accused companies around the world. Personal jurisdiction needs to be considered only where an injunction is involved.
Parties involved in the 337 investigation
The 337 investigation involves multiple parties, usually including the ITC, the applicant, the respondent, and third parties. As shown in the following table:
Basic procedures for 337 investigation
The basic procedures of Section 337 investigation mainly include case filing, evidence discovery, hearing, administrative judge’s preliminary ruling, review and final ruling, and presidential review. For example, in the above-mentioned 337 investigation initiated by Cree, what was received at the beginning of this month was the preliminary ruling notice of the U.S. International Trade Commission regarding the 337-TA-947 (some LED products and similar components) investigation case, due to infringement of U.S. Patent No. 8596819 (LED lighting product efficiency), U.S. Patent No. 8628214 (LED lighting product efficiency), U.S. Patent No. 7976187 (all-round LED lighting products) , U.S. Patent No. 8766298 (LED component structure). In the preliminary ruling stage, the ITC judge's ruling showed support for Cree's complaint against Feite Electric Company and its Asian supplier Dongbei Optoelectronics Technology Co., Ltd. for patent infringement and false advertising (in addition, Feite and Dongbei pasted Energy Star labels on some products that failed to meet Energy Star standards/or requirements, and this act of publishing false and misleading advertising was ruled illegal). According to the current situation, it can be expected that the U.S. International Trade Commission will make a final ruling on this investigation on November 29, 2016.
Since the preliminary ruling is only a preliminary opinion, if the parties have objections, the ITC can review the preliminary ruling, and the committee itself can also take the initiative to conduct a review. The ITC's review decision is final and will take effect immediately once announced, and its corresponding relief measures will also take effect. Generally speaking, it is difficult to change the final ruling. Although the President of the United States has the power to veto the final ruling, this rarely happens in practice. As for the final decision, the defendant can appeal to the U.S. Federal Court of Appeals, but it needs to be filed within 60 days. If the appeals court also believes that the ruling is valid, the accused product will completely lose the opportunity to be sold in the U.S. market.
It can be seen that the entire process of 337 investigation is very short, usually no more than 18 months from filing to closing, and the cost during this period is usually as high as 3-6 million US dollars, or even higher. It requires a lot of manpower, material and financial resources to be consumed in a short period of time, which is a major burden for Chinese enterprises, especially small and medium-sized enterprises.
According to the provisions of the "337" investigation general exclusion order, if a company loses the case, it will also withdraw from the U.S. market together with other companies that produce the product in the country. Based on this, U.S. companies sometimes choose small and medium-sized enterprises in industries with strong export capabilities in China as the subjects of Section 337 investigations. Once a small and medium-sized enterprise loses the case, a general exclusion order can be used to restrict the export of products to the United States by all companies in the entire industry in my country. Therefore, the harm of the Section 337 investigation is very great. If you do not respond, you will lose the relevant market and endanger the development of the entire industry. It is like a weapon of large-scale destruction, and its harm is no less than anti-dumping.
Penalty results of Section 337 investigation
If the ITC determines that imported products infringe intellectual property rights in the US market, the possible penalties are as follows:
Response to Section 337 investigation
For 337 investigations, companies can carry out targeted work at different stages such as before, during and after the investigation to respond.
.
ANNA