Enforcement Tricky on Section 337 Exclusion Orders, Panelists Say

Panelists at the Center for Strategic and International Studies agreed that the process to determine whether imports violate domestic companies' intellectual property works well, but said once an exclusion order is issued by the International Trade Commission, enforcement can be tricky.

Deanna Tanner Okun, a former ITC commissioner and a partner at Adduci, Mastriani & Schaumberg, said that during the Obama administration an evaluation identified problems with the way CBP was enforcing exclusion orders. "A rights owner had no idea what the respondent was down there telling them," she said, when the would-be importer was arguing to CBP that the goods should not be blocked. For four years, she said, CBP tried to do rulemaking, but no rule was published (see 1611030009 and 1502120061). Now, there's an informal procedure allowing arguments from both parties when an importer is contesting whether goods should be blocked under an exclusion order. "They recently instituted informal inter-party procedures when there's a dispute whether a given good falls in or out of an exclusion order," said Ben Levi, a principal at Levi & Snotherly. Levi said the process he was involved in was thorough, with a hearing, briefs and five attorneys from Customs.

Okun said while CBP does take its duties seriously, there are problems in the inter-parties process, for instance, when the two sides are disagreeing on whether an expert should be allowed to weigh in. She said rulemaking would be clearer. She added that if she has a foreign client who has exports that are in question, she recommends that the firm put its new design, aimed at eliminating the infringement, in front of the ITC. "If it gets blessed, you have no issues," she said.

The panel also discussed why the administration has used Section 301 to react to Chinese IP violations, given that the Section 337 process at ITC is well established. Okun noted that three-quarters of the products that infringe come from China. However, she said the 301 action is useful because it is aimed at a different set of practices that Section 337 cannot address. And, she added, the safeguards law (Section 201) allows you to protect domestic industry even when IP violations are not happening, as long as there is sufficient volume of imports. But fundamentally it's about control, said Bill Reinsch, moderator of the March 28 panel and CSIS Scholl Chair in International Business. "This president's preference is for tools where he's the decision maker. His use of 232 and 301 suggests he prefers a process where his administration takes the initiative."