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ITC: Understanding Section 337 of the United States Tariff Act and its Storied Evolution


According to Section 337, it is illegal to engage in import trade when a U.S. patent, copyright, registered trademark, or mask work is violated. Moreover, Section 337 proclaims illegal additional unfair business practices and unfair activities that have the potential to destroy or significantly harm domestic industries, obstruct the development of such industries, or impede or monopolize trade and commerce in the United States. These practices include unfair methods of competition adopted in importing goods into the country and selling them afterward.


An inquiry under Section 337 is started by submitting a complaint to the USITC, which can be done by any interested party, including foreign governments or corporations as well as U.S. businesses or people. The inquiry procedure normally lasts 12 to 16 months, and the USITC's ultimate decision may be challenged in court by the Federal Circuit of the United States.


Establishment of the United States International Trade Commission

By 1916, many Americans favored the establishment of a tariff commission for several different reasons. One of the main reasons was the possibility that the world war would result in significant global economic changes, and that a tariff commission might determine how those changes would impact U.S. trade. It was anticipated that a body studying tariff-related issues would assist Congress in drafting tariff and trade laws. Thus, the United States Tariff Commission was established by the Revenue Act of 1916, which was signed by President Woodrow Wilson on September 8, 1916. Later, the organization was renamed the United States International Trade Commission (Commission).


The Tariff Act of 1930

In the early 1900s, concerns arose among US companies as they complained that foreign manufacturers were unfairly competing with them by producing and importing goods that infringed upon their intellectual property rights, such as patents and trademarks. In response, Congress passed the Tariff Act of 1922, with provisions allowing U.S. companies to file complaints with the U.S. Customs Service to block the importation of infringing goods. As this was a slow process, Congress passed the Tariff Act of 1930, with a new provision, Section 337, that empowered the U.S. International Trade Commission (USITC) with the power to investigate allegations of unfair import trade practices.


Amendments in Section 337:


1. The Trade Act of 1974

The Trade Act of 1974 is the focal point of several laws created by Congress with the aim of encouraging global reductions in trade barriers while both safeguarding and advancing the interests of American-owned enterprises.

The Trade Act of 1974 was a reaction to shifts made to the worldwide economic context that served as the foundation for earlier U.S. trade regulations. The use of nontariff trade barriers by other countries, such as specialized subsidies to protect local industries by allowing goods to be sold abroad at a reduced cost, has increased despite the fact that tariffs as a trade barrier have become less of a factor. A legal response to measures like the oil embargo imposed by the OPEC states in 1973 was seen as necessary since emerging nations had grown to be a significant power in international markets.

The GATT's lengthy dispute resolution processes dissatisfied Congress, which urged the president to exercise executive authority more assertively to shape global trade practices and policy. Congress debated a new trade measure for twenty months before finally passing the act on December 20,1974.

Impact on Section 337:

Before the Trade Act of 1974, Section 337 only provided for exclusion orders, which prohibited the importation of infringing goods. However, the Trade Act of 1974 expanded Section 337 to allow for cease-and-desist orders, which prohibit the importation of goods that violate intellectual property rights and prevent the sale of existing inventory of infringing goods in the United States.

Additionally, the Trade Act of 1974 authorized the International Trade Commission (ITC) to investigate unfair trade practices, including those related to intellectual property rights, and to issue exclusion and cease and desist orders against infringing imports. This gave the ITC greater authority to investigate and enforce intellectual property rights in imported goods, which helped to protect American industries from unfair competition from foreign imports.


2. The Omnibus Trade and Competitiveness Act of 1988:

The Omnibus Trade and Competitiveness Act of 1988 was introduced in response to several economic and trade-related challenges facing the United States at the time. In the 1980s, the United States faced significant competition from foreign markets, particularly from Japan and other East Asian countries. This competition led to concerns about the loss of US jobs, declining domestic industries, and a widening trade deficit. It was created to meet these problems by fostering trade and investment, bolstering US companies, and defending US intellectual property rights.

Impact on Section 337:

The establishment of the Office of Intellectual Property Rights (OIPR), tasked with coordinating US efforts to safeguard intellectual property rights abroad, was one of the act's most important features. To implement Section 337 and to promote its use as a tool for defending US intellectual property rights, the OIPR collaborated closely with the US International Trade Commission (ITC).

The measure also broadened Section 337's application to cover unfair business practices involving patents, trademarks, and copyrights.


3. The Uruguay Round Agreements Act of 1994:

The Uruguay Round Agreements Act of 1994 (URAA) was passed to put into effect the agreements reached during the multilateral trade discussions that took place between 1986 and 1994 under the aegis of the General Agreement on Tariffs and Trade (GATT).

The World commerce Organization (WTO) was founded because of the Uruguay Round agreements, which also established new guidelines and requirements for international commerce, particularly those pertaining to the defence and enforcement of intellectual property rights.

Impact on Section 337:

One of the most significant modifications brought about by the URAA was the addition of patent infringement to Section 337's usual purview of trademark and copyright infringement.

Other significant amendments to Section 337 imposed by the URAA include the requirement that ITC investigations into alleged unfair trade practices be completed within 12 to 16 months after receiving a complaint. New procedural guidelines for Section 337 investigations were also created by the URAA, including the need for parties to provide all pertinent evidence and the use of mandated mediation.


4. The Intellectual Property Rights Enforcement Act of 2005

The Intellectual Property Rights Enforcement Act (IPREA) was intended to strengthen the protection and enforcement of intellectual property rights in the United States by providing law enforcement officials with new tools to combat intellectual property infringement, increasing penalties for IPR violations, and creating a coordinated national strategy for the enforcement of intellectual property rights.

Impact on Section 337:

Although it did not have a direct impact on section 337, the IPREA included provisions that would toughen the penalties for those who violate others' intellectual property and give law enforcement officers more instruments to do so. Parties wanting to engage in unfair trade practices, including those protected by Section 337, may have been discouraged by these prohibitions.


5. Fuji Photo Film Co. v. International Trade Commission (ITC) 2007:

The case involved a dispute between Fuji Photo Film Co. and several other Japanese companies (collectively referred to as "Fuji") and the Eastman Kodak Company over alleged patent infringement related to digital cameras.

In a complaint submitted to the ITC, Fuji claimed that Kodak had violated numerous of its patents pertaining to digital camera technology. The ITC opened an investigation and decided in Fuji's favor, determining that Kodak had in fact violated the patents owned by the firm.

Kodak, on the other hand, appealed the ITC's ruling to the Federal Circuit on the grounds that Fuji had not complied with Section 337 of the Tariff Act's "domestic industry" criterion. To begin an investigation into unfair trade practices, a complainant is required to show that they have made a "significant investment" in the US with regard to the goods covered by the disputed patent.

In the end, the Federal Circuit sided with Kodak, concluding that the ITC had used an excessively lax standard when deciding whether a domestic industry existed, and that Fuji had not complied with the conditions for opening an investigation under Section 337.

Impact on Section 337:

The Fuji Photo case has important ramifications for how Section 337 should be interpreted and applied, notably with regard to the requirement for domestic industry.


6. Broadcom Corp. v. Qualcomm Inc. (2007)

The case involved a dispute between two major semiconductor companies, Broadcom and Qualcomm, over alleged infringement of several of Broadcom's patents related to wireless communications technology.

Broadcom had filed a complaint with the ITC, alleging that Qualcomm had imported products that infringed on its patents in violation of Section 337 of the Tariff Act. The ITC initiated an investigation and ultimately found in favor of Broadcom, ruling that Qualcomm had indeed infringed on the company's patents.

Qualcomm appealed the ITC's decision, arguing that the Commission had made several legal errors in its claim construction and that the patents were invalid. The Federal Circuit ultimately upheld the ITC's decision, finding that Qualcomm had indeed infringed on Broadcom's patents and that the patents were not invalid.

Impact on Section 337:

The case's most important ramification was that it proved the ITC could stop the importation of goods that violated US patents, even though those goods were not made or marketed there. This decision emphasized the significance of safeguarding US intellectual property rights in a more globally integrated economy and assisted in extending the application of Section 337.


7. Spansion LLC v. Macronix International Co. (2010)

The lawsuit was centered on Spansion's patents on flash memory, a type of memory utilized in electronic gadgets like mobile phones and digital cameras. By creating and marketing flash memory products that illegally used the protected technology, Macronix, according to Spansion, violated its patents. Macronix responded with a countersuit and refuted the accusations.

The International Trade Commission (ITC), which has the power to impose exclusion orders prohibiting the importation of goods that violate US patents, heard the case. The ITC determined that Macronix had violated Spansion's patents in this instance and issued an exclusion order prohibiting the importation of specific Macronix items that used patent-protected technology.

Impact on Section 337:

The case established a precedent for the use of Section 337 in cases involving flash memory technology, a key component of many electronic devices. The ruling in this case has been cited in subsequent Section 337 cases involving flash memory, demonstrating the enduring impact of the Spansion LLC v. Macronix International Co. case on intellectual property law and trade policy.


8. Tessera Inc. v. Amkor Technology Inc. (2012)

Tessera Inc. v. Amkor Technology Inc. (2012) was a patent infringement case that was heard by the United States International Trade Commission (ITC). The case involved a dispute between Tessera, a technology licensing company, and Amkor, a major semiconductor packaging and testing services provider, over the alleged infringement of several of Tessera's patents related to semiconductor packaging technology.

Tessera had filed a complaint with the ITC, alleging that Amkor had imported products that infringed on its patents in violation of Section 337 of the Tariff Act. The ITC initiated an investigation and ultimately found in favor of Tessera, ruling that Amkor had indeed infringed on the company's patents.

Amkor appealed the ITC's decision, arguing that the Commission had erred in its claim construction and that the patents were invalid. The Federal Circuit ultimately upheld the ITC's decision, finding that Amkor had indeed infringed on Tessera's patents and that the patents were not invalid.

Impact on Section 337:

With regard to the importation of goods that might infringe on US patents, the Tessera Inc. v. Amkor Technology Inc. case had a significant impact on the interpretation and application of Section 337. The lawsuit brought attention to the risks associated with importing goods that might breach US patents and emphasized the necessity of strong intellectual property protection in the technology sector.


9. Ericsson Inc. v. Samsung Electronics Co. (2014)

The dispute centered on Ericsson's patents covering wireless communication technologies used in portable electronics like smartphones and tablets. Samsung was accused of violating Ericsson's patents by creating and distributing mobile handsets with unlicensed use of the protected technology. Samsung refuted the claims and filed a counterclaim, accusing Ericsson of acting in an anti-competitive manner.

The International Trade Commission (ITC), which has the power to impose exclusion orders prohibiting the importation of goods that violate US patents, heard the case. The ITC determined that Samsung had violated Ericsson's patents in this instance and issued an exclusion order prohibiting the importation of specific Samsung items that used the patented technology.

Impact on Section 337:

The Ericsson Inc. v. Samsung Electronics Co. case demonstrated the effectiveness of Section 337 in protecting American industries from unfair trade practices, particularly those related to intellectual property rights in the mobile device sector.

Additionally, the case established a precedent for the use of exclusion orders in situations involving patent infringement, giving patent holders a strong instrument to defend their rights and enforce their intellectual property. As a result, Section 337 and the enforcement of intellectual property rights in the United States have been significantly impacted by the Ericsson Inc. v. Samsung Electronics Co. case.


10. The Trade Facilitation and Trade Enforcement Act of 2015

The Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) was introduced to modernize and streamline trade processes and strengthen enforcement of trade rules in the United States. The TFTEA's specific goals were to speed up and facilitate cross-border trade while simultaneously strengthening government enforcement of trade regulations and countering unfair trade practices.

Impact on Section 337:

The TFTEA did not directly affect Section 337 of the Tariff Act, but by enhancing the general enforcement of U.S. trade rules, it may have had an indirect impact on the ITC's decisions and the actions of parties under its jurisdiction.


Future of International Trade - Challenges and Opportunities

The future of international trade in light of this provision of the US Tariff Act presents both challenges and opportunities.


Challenges:

1. Trade tensions: The US Tariff Act's Section 337 may result in greater trade friction with other nations, particularly with those whose exports may be subject to this provision's scrutiny.

2. Reduced competitiveness: The US Tariff Act's Section 337 might result in less competition because businesses might be reluctant to import goods that might violate US intellectual property rights.

3. Rise in Costs: Businesses that are found to be violating US intellectual property rights may be subject to fines, which would raise their expenses and possibly reduce their ability to compete in the international market.


Opportunities:

1. Protection of intellectual property: The US Tariff Act's Section 337 can aid in safeguarding US intellectual property rights, which may ultimately encourage more innovation and financial investment in R&D.

2. Levelling the playing field: Section 337 of the US Tariff Act could help level the playing field for businesses that are abiding by the regulations and not violating intellectual property rights by preventing unfair trade practices. Reforms in section 337 will make it simpler to impose exclusion orders against imports from businesses that routinely benefit from unfair trade practices in non-market, non-rule-of-law economies like China.

3. Investment growth: Industries that depend on intellectual property, like technology and pharmaceuticals, may see an increase in investment because of the protection of intellectual property.


In conclusion, the development of Section 337 of the Tariff Act over time has significantly shaped the landscape of American trade policy. Protecting domestic businesses from unfair competition and blocking the entrance of illegal goods into the country have both been made possible thanks in large part to Section 337.

Overall, Section 337 of the Tariff Act will remain a vital instrument for upholding American trade laws and defending home businesses against foreign competition. Section 337 has changed throughout time, demonstrating its adaptability and ongoing importance in a constantly shifting global economy.


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