An Impossible Remedy for a Sympathetic Complainant
The ITC recently released a public version of its Commission Opinion in Food Processing Equipment (Inv. 1161). In many ways, this case resembled an ideal, uncontroversial Section 337 investigation—the complainant faced a difficult situation with multiple foreign operations obviously infringing its rights, and all the named respondents defaulted, prompting the ITC to issue a general exclusion order. But there were also a few odd things going on in the case that raise interesting policy questions.
For one thing, the investigation was the first ever (as far as I know) Section 337 case based on the unauthorized use of a certification mark. The complainant was 3-A Sanitary Standards, Inc., a non-profit entity that promulgates a set of standards for equipment used in food processing and allows manufacturers to use the “3-A” symbol if they meet those standards and pay an annual fee of $975.
Because the complainant doesn’t make a product or even use the mark itself, the domestic industry analysis was quite peculiar. 3-A’s “domestic industry” consists of three staff employees at an office near Washington DC that administer the standard on behalf of various trade associations in the food processing and dairy industries. The ITC has thankfully expected more significant investment for licensing-based domestic industries in patent cases.
In order to prevail on a claim of false advertising under Section 337, a complainant has to show that its industry has been or will be injured by the respondents’ unfair acts. Typically, injury can be shown through evidence of lost sales or declining production in the face of foreign competition. But in this case, there is no competition, and the complainant had no sales or production to begin with. Instead, 3-A argued successfully that it “suffered from a loss of licensing fees and harm to its goodwill and reputation.”
It’s worth noting, however, that a cause of action for false advertising under the Lanham Act already requires a plaintiff to prove this kind of injury. Indeed, in its analysis of 3-A’s false advertising claim, the ITC’s administrative law judge properly includes injury as an element of the claim. But then he explicitly equates the injury element of a false advertising claim with the injury requirement of Section 337. But if Section 337 requires no greater amount or different type of injury than what is necessary to make a false advertising claim in court, what purpose does the trade law’s injury requirement serve?
What’s most interesting about this investigation is that the general exclusion order issued by the Commission appears practically impossible to enforce. That order prohibits the importation by anyone from anywhere of “food processing equipment and packaging materials thereof that are falsely advertised through the unlicensed use” of the 3-A certification mark. But the false advertising committed by the named respondents involved placing the 3-A symbol or the text “3A” on their websites or in pictures used for product listings on online marketplaces. Because the symbol is not used on the product or the packaging, Customs has no way of distinguishing between permissible and prohibited shipments.
Curiously, the Commission Opinion makes no mention of this impracticality. Neither does the ALJ’s Initial Determination or any briefs from the agency’s Office of Unfair Import Investigations.
So while Section 337 provided the complainant with relatively quick proceedings before a clearly sympathetic adjudicator, it’s not apparent what help if any the final remedy will truly provide for the complainant.