Law Times

Law Times • February 3, 2014 Page 11 www.lawtimesnews.com International Trade Commission alternative Ottawa company's success may reshape IP enforcement strategies he U.S. Court of Ap- peals for the Federal Circuit will be hearing an appeal from the In- ternational Trade Commission that could well shape the intel- lectual property enforcement strategies of many Canadian and foreign companies. e appeal revolves around an "exclusion order" the com- mission granted to Ottawa-based Standard Innovation Corp., a manufacturer of sexual wellness products, against the Lelo group of companies aer Standard In- novation alleged infringement of a game-changing patent regard- ing a sexual stimulation device for women. e order banned the importation, sale, and mar- keting of Lelo's infringing prod- ucts into the United States. Brad White, of Osler Hoskin & Harcourt LLP's Toronto office and global co-ordinating intellec- tual property litigation counsel for Standard Innovation, believes the case highlights a unique op- portunity for Canadian busi- nesses, especially smaller ones, to protect their market space with- out protracted court battles. "Canadian companies with an international footprint re- quiring a timely resolution to IP disputes should explore resorting to the [commission]," says White, who teamed up with Gary Hnath of Mayer Brown LLP's Wash- ington office and Robert Lord's intellectual property litigation team from Osha Liang LLP in a collaborative cross-border ap- proach that had the trade com- mission complaint at its core but was supplemented by lawsuits in U.S. and Canadian federal courts. "It would have been easy to go the traditional route of a lawsuit alone," says White. "But [Standard Innovation] is a small company with limited resources, it was not likely to get an interlocutory injunction, and the years it would have taken to resolve a lawsuit would have interfered considerably with the exponential growth it was experiencing." Increasingly, the trade com- mission has become the in- tellectual property litigation venue of choice for patent and trademark infringement cases in the last few years and the number of matters heard there has risen exponentially. "e [trade commission]'s popularity has grown because the process is speedy and the com- mission has the power to ban the importation of the product in question," says White. Standard Innovation filed its initial pleading in late fall of 2011 and aer the requisite internal review, the commission accepted the brief for investigation at the beginning of 2012. e hearing was set for September 2012. "at meant we had only eight months to work up a full case for what amounted to a full infringe- ment action," says White. "e deadlines were brutal." e hearing, however, took only about five days. "What's unique about the [trade commission] forum is that it's a three-party affair," says White. "Not only are the complain- ant and the infringer repre- sented but so is the commission through a staff attorney who is responsible for the interests of the American public." In January 2013, approximately FOCUS 24 Duncan Street, ird Floor, Toronto, Ontario, M5V 2B8 Telephone: (416) 864 -6200 Facsimile: (416) 864 - 6201 www.taxandtradelaw.com Almost two decades ago, a leading Canadian lawyer's magazine featured Millar Kreklewetz LLP in an article on Canadian Super Boutiques, calling us a "brand name for international trade work". Nothing much has changed. Today we continue to assist a wide range of national and international companies with international trade and customs issues, and provide specialized advice to Canadian and U.S. lawyers seeking assistance in these matters for their own clients. Please think of us as a national resource for international trade, customs and tax! MillarKreklewetz_LT_Feb3_14.indd 1 14-01-29 11:19 AM three months aer the hearing, the presiding administrative law judge found that infringement had occurred and made an exclu- sion order banning the importa- tion, sale, and marketing of the infringing products. He refused, however, to make a general exclusion order on the grounds that Standard Innova- tion's products didn't have suffi- cient U.S. domestic content to jus- tify such an order, something that would have banned not only the respondent's infringing products but all infringing products. "General exclusion orders are granted in under five per cent of cases, and in these cases the pro- tected product has had at least 20 per cent domestic content," says White. Standard Innovation's prod- ucts, however, had domestic content of only five per cent. But that didn't deter its legal team, whose members laid an evidentiary groundwork for a qualitative approach to domestic content before the administrative judge. "We asked the administrative judge to look at the criticality of the components without which our de- vice would not have functioned as patented — what we called the 'secret sauce' — and which were in fact manufactured in the U.S.," says White. On review and following written submissions in April 2013, the commission reversed the adminis- trative judge's conclusion regarding domestic con- tent and, in a decision released in July 2013, grant- ed a general exclusion order. e commission ruled that the reality of the marketplace meant small companies would inevitably seek to manufacture at the lower costs available abroad and found that the production of the crucial components in the United States was in this case sufficient to satisfy the domestic content requirement. Standard Innovation also commenced a separate action seeking damages before the Federal District Court in Texas. "While the [trade commission] decision is not binding, it will be persuasive in [Standard Innova- tion's] efforts to recover dam- ages," says White. Despite the efficacy of the proceedings and the client's suc- cess, White cautions that the costs weren't necessarily less than Stan- dard Innovation would have ex- perienced in an infringement suit. "e [commission] route is faster, which was crucial in this case, but despite the truncated nature of the proceedings, it re- quired the same expenditure of time, effort, and money as a full infringement action," he says. Still, it's not over yet. Lelo ap- pealed the commission's final ruling and brought a motion to stay the exclusion orders pending the out- come of the appeal. Standard Innovation successfully opposed the motion and the orders remain in force. Lelo has also launched two additional products that Standard Innovation believes fall within the scope of its patent and therefore should be subject to the exclusion order. Lelo has requested an advisory opinion from the commission as to whether those products also infringe and are subject to the order. Meanwhile, Lelo's appeal brief relating to the orig- inal order was due toward the end of January. For his part, Hnath is optimistic that the Federal Court will uphold the trade commission's decision. "Courts traditionally afford deference to the [commission], which decided on the way in which its jurisdiction should be exercised and how to de- fine the term 'domestic industry' found in its own legislation," he says. "at's the sort of decision courts do and should leave to a specialized tribunal's discretion." LT Canadian companies with an international footprint that need a timely resolution to intellectual property disputes should con- sider turning to the International Trade Commission, says Brad White. BY JULIUS MELNITzER For Law Times T

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