ASK CUSTOMS TO ENFORCE YOUR PATENT? YOU MAY LOSE CONTROL OVER ITS FATE

Imagine being a patent owner whose patent claims are being litigated in Federal Court –but being barred from participating in the litigation. That’s precisely the position that Chamberlain Group, a manufacturer of garage door openers, recently found itself in at the United States Court of International Trade.

Chamberlain had filed and successfully prosecuted a claim in the United States International Trade Commission under Section 337 of the Tariff Act [19 U.S.C. §1337] charging a competitor, Ryobi, with importing garage door openers that infringed certain claims of its patent. The Commission issued a Section 337 Limited Exclusion Order (LEO), directing United States Customs and Border Protection to exclude infringing Ryobi garage door openers from entry into the United States.

In response, Ryobi undertook a re-design of its product which, it claimed, avoided the Chamberlain patent claims which were the subject of the Section 337 order. It sought a ruling from Customs to this effect, but Customs ruled that the redesign did avoid the patent claims embodies in the Section 337 LEO. Customs at the Port of Charleston then excluded from entry a shipment of Ryobi’s garage door openers, claiming violation of the Section 337 LEO. Ryobi protested the exclusion, and when its protest was denied, brought suit in the Court of International Trade challenging the exclusion.

In One World Technologies v. United States, Slip Op. 18-173 (December 14, 2018) Ryobi’s parent company asserted that its redesigned garage door openers were not barred by the Section 337 order, and that Customs should be directed to admit them. Chamberlain sought to intervene in the action, to defend his patent. The United States Trade Commission also sought to intervene, to protect the integrity of its Section 337 exclusion order. However, both parties were denied leave to intervene, based on a provision in the Customs Courts Act which prohibits intervention in protest cases, see 28 U.S.C. §2631(j)(1)(A). Chamberlain was forced to watch from the sidelines – not even allowed to file a brief amicus curie, as the CIT held that the redesigned garage door opener did not infringe the Chamberlain patent claims that were at the heart of the Section 337 order.

The Court went even further, granting a preliminary injunction directing Customs to release the excluded garage door openers. Usually, a court will not grant a preliminary injunction when the relief sought – in this case, admission of the merchandise at bar – is identical to the final relief sought in the protest. But the CIT did so in this case.

The statutory ban against intervention in Customs protest cases is based on a longstanding rule that the assessment of a duty – typically the subject of a protest case – is a matter only between the taxpayer/importer and the government. At the time the rule was promulgated, all protest cases had involved duty assessments. Congress did not likely imagine that protest cases would come to involve such issues as the litigation of patent claims. But that is in fact what has happened, in One World Technologies and a handful of other suits. And in those cases, the CIT has not only strictly enforced the ban against intervention as a party, but – more remarkably – even barred the patent owner from submitting an amicus brief to communicate its views to the court.

In banning intervention, the Court is merely following the dictates of the law. In preventing patent owners from even participating as amici, however, the Court is exercising its discretion in a way which further disenfranchises the patent owner, which not only has made substantial investments in its patents, but also in prosecuting the Section 337 Complaint.

The Court’s reaction probably is based, to some extent, on its experience in one of the first such cases involving protest exclusions under Section 337 orders. In Jazz Photo, Inc. v. United States, an importer challenged the exclusion of its goods for alleged violation of a Section 337 order. The patent holder, Fuji Photo Film, was denied permission to intervene, but granted permission to participate as amicus curiae. As amicus, however, Fuji repeatedly overstepped the bounds of its allowed participation in the suit, filing motion after motion, some quite frivolous.

After the Court ruled in the importer’s favor, Fuji even filed an appeal to the Court of Appeals for the Federal Circuit – a patently frivolous move, given that it was not a party to the underlying case.

That is not to say, however, that every patentee would be as reckless with its behavior as Fuji was in the Jazz Photo case. While participation as party is clearly prohibited by statute, refusing to hear a patentee’s arguments at all seems excessive. This is one of the many areas in which the jurisdiction and powers of the Court of International Trade – fixed since enactment of the Customs Courts Act of 1980 -- needs reconsideration by Congress.

It might be argued that the patent holder in this case invited this situation, by turning to the ITC for a Customs-enforced import ban. But the Court made clear that it was in no way interpreting the Section 337 Exclusion Order, only Customs’ ruling that Ryobi had successfully designed around that order. But for the Section 337 order, of course, Customs would never have been involved in patent enforcement at all.

While the case remains set for trial – perhaps a formality, since the subject goods have been released – the case poses a cautionary tale for patent holders who turn to the ITC and Customs to enforce their intellectual property rights.