The reason Section 337 proceedings are so attractive to domestic producers and so threatening to United States importers and foreign producers is the severe remedies that can be obtained. If the Commission finds a violation of Section 337, it will issue either orders excluding the products from entry into the United States (exclusion orders) or orders directing United States parties to cease and desist from selling the articles (cease and desist orders), or both.

If an exclusion order is issued, the United States Customs Service becomes the enforcement agent. The Customs Service will monitor imports at all ports of entry, 24 hours a day, at no cost to the domestic producer and will exclude from entry into the United States all articles that the Commission has found to infringe the intellectual property right in question. In addition, the exclusion orders may prohibit the entry of products that contain the infringing product. Exclusion orders are used to reach the foreign suppliers and/or importers of the infringing merchandise. Such orders may be 'limited' or 'general'. A general exclusion order prohibits the entry of all infringing merchandise, regardless of the country of origin and regardless of the manufacturer. As a result, unsuspecting third parties can be affected as well as the foreign respondents in the case. A limited exclusion order, on the other hand, applies only to infringing articles that originate from the particular foreign respondent in the case. Cease and desist orders are used to reach United States parties that have already purchased the infringing merchandise. For example, a foreign supplier may have a network of distributors in the United States, and these distributors may maintain significant inventories of the infringing product. If the only available remedy to United States producers were an exclusion order, the distributors could 'stock up' on the infringing articles during the Section 337 investigation and continue to sell the products even after the Commission had found them to be infringing. Cease and desist orders are routinely issued to protect against such continuing infringement.

Once an exclusion order or a cease and desist order has been issued, those that violate the order may be liable for civil penalties of up to $100,000 a day or twice the value of the imported articles.

If the Section 337 proceeding involves articles that are used as materials, parts or components in other merchandise, the exclusion order may cover these downstream products as well.

The Commission has authority to issue exclusion orders covering downstream products to prevent circumvention and to provide the aggrieved party complete relief and full protection of the patent rights involved. In deciding whether to include downstream products within the scope of an exclusion order and which downstream products to include, the Commission balances the complainant's interest in obtaining complete protection from all infringing imports by means of exclusion of downstream products against the inherent potential of such an exclusion to disrupt legitimate trade.

In applying this balancing test, the Commission generally considers the following factors:

- The value of the infringing articles compared to the value of the downstream products in which they are incorporated;

- The identity of the manufacturer of the downstream products, i.e. whether it can be determined that the downstream products are manufactured by the respondent or by a third party;

- The incremental value to complainants of the exclusion of downstream products;

- The incremental detriment to respondents of such exclusion;

- The burdens imposed on third parties resulting from exclusion of downstream products;

- The availability of alternative downstream products that do not contain the infringing articles;

- The likelihood that imported downstream products actually contain the infringing articles and are thereby subject to exclusion;

- The opportunity for evasion of an exclusion order that does not include downstream products; and

- The enforceability by Customs of an order covering downstream products; and any other factors the Commission determines to be relevant.

This list of factors is not exclusive, however, and the Commission may identify and take into account any other factors which it believes bear on the question of whether to extend the remedial exclusion.

In one case, the Commission was considering the issuance of an exclusion order prohibiting the entry into the United States of certain flash memory circuits and all the products in which they were contained, whether those downstream products were made by the respondent or some other company that simply used these memory chips in the manufacture of its product. Had such an order been issued, it potentially would have excluded computers, digital cameras, and a wide variety of other electronic goods with memory capability simply because one of the chips inside was found to violate a valid and enforceable United States patent.

In addition to the long-term relief requested, complainants may also request temporary relief pending final resolution of the case. Temporary relief can consist of a temporary exclusion order or a cease and desist order. The ALJ considers motions for temporary relief in the first instance. To order temporary relief, it must consider: (1) the likelihood of success on the merits; (2) whether there is a threat of irreparable harm to the domestic industry if no relief is granted; (3) harm to respondents if temporary relief is granted; and (4) the public interest. In fact, temporary relief is difficult to obtain because it is difficult to show that the domestic industry will suffer irreparable harm during the proceedings of the Section 337 investigation.

Source: Business Guide to Trade Remedies in the United States: Anti-dumping, countervailing and safeguards legislation practices and procedures