Despite a brief hiatus stemming from the government shutdown, 2019 has already been a very busy year in Section 337 practice at the International Trade Commission (ITC). Two administrative law judges (ALJs) considered whether the public interest weighed against remedial orders in two separate but related proceedings, and each ALJ reached a different conclusion. This year has also seen ITC developments related to the impact of Patent Trial and Appeal Board (PTAB) proceedings, the domestic industry requirement, and the Commission's authority to decline to institute an investigation. This two-part series will discuss meaningful ITC developments in 2019, spanning from ALJ rulings to Federal Circuit guidance.
In part one of this series, we will examine the latest ITC developments involving PTAB proceedings, the public interest, and importation. In part two, we will discuss the latest ITC developments on domestic industry, as well as recent ITC decisions from the Federal Circuit.
Interaction of PTAB and ITC Proceedings
Impact on the Investigation
District courts routinely stay litigation in view of an inter partes review (IPR) proceeding pending before the PTAB. The ITC, however, applies a strict five-factor test to a motion to stay, and it is extremely rare for an ALJ to stay an investigation in view of pending IPR proceedings.1 Recent ITC litigation confirms that staying an ITC investigation in view of PTAB proceedings remains rare, with one ALJ denying a stay even though the PTAB had already issued its final written decision.2 Nevertheless, a stay of ITC litigation is possible in certain circumstances. For instance, one ALJ stayed ITC litigation last August where the complainant did not oppose, and the PTAB had issued a final written decision seven months prior to the scheduled ITC hearing.3
Impact of Estoppel
In the last twelve months, ALJs have addressed IPR estoppel under 35 U.S.C. § 315 (e)(2), clarifying that IPR estoppel does not apply against the Office of Unfair Import Investigations (OUII) Staff, but that IPR estoppel does apply against a respondent regardless of whether the respondent prevailed in the PTAB final written decision.
In Magnetic Tapes, the ALJ concluded that IPR estoppel does not apply against OUII Staff.4 There, the evidentiary hearing concluded five days before the PTAB issued a final written decision. As a result, the respondent presented all evidence relating to invalidity at the ITC hearing before IPR estoppel was in effect. The ALJ concluded that the question of whether the respondent was estopped from making invalidity arguments was essentially irrelevant because "the statute does not prevent Staff from raising the [prior art] references in this investigation, which it did."
Later in the year, another ALJ concluded that IPR estoppel applies to an IPR petitioner regardless of whether the petitioner is unsuccessful during the IPR proceedings, a question that has not yet been addressed by the Federal Circuit.5 Because the PTAB final written decision issued prior to the ITC hearing, the ALJ precluded the respondents from presenting any invalidity evidence. Staff acknowledged that the respondents were estopped from asserting the disputed invalidity theories, but nonetheless opposed precluding invalidity evidence in view of the fact that estoppel does not apply to Staff.6 The ALJ did not specifically address that point.
Impact on Remedy
Finally, on the issue of remedy, the Commission Opinion in Magnetic Tapes considered how the PTAB final written decision that issued days after the ITC hearing would impact the remedy entered. The Commission noted that it has "broad discretion in selecting the form, scope and extent of the remedy," and determined that it was appropriate to partially suspend enforcement of its remedial orders pending the appeal of the PTAB final written decision.7 Notably, however, the Commission suspended the remedial orders only in part and expressly acknowledged that suspending them had "no practical effect since [the accused products] will still be subject to immediate exclusion" in view of other asserted claims.8 Commissioner Schmidtlein agreed that the remedial orders should be suspended but did not support the "no practical effect" rationale for doing so.
Takeaways and Practice Tips: ITC respondents should carefully consider the expected timing of a final written decision when filing a petition for IPR. If the final written decision issues before the ITC hearing, the respondent may be precluded from presenting any evidence of invalidity at the hearing. Without supporting evidence in the record, Staff will not be able to support any invalidity arguments despite the fact that Staff is not formally estopped under 35 U.S.C. § 315(e)(2). The practical impact is significant. In Magnetic Tapes, the final written decision issued after the hearing, Staff's post-hearing briefing repeatedly cited the respondent's expert testimony, and the initial determination credited the arguments and evidence that the respondent was estopped from making.
At the same time, a respondent has the greatest likelihood of avoiding remedial relief in a patent infringement investigation if the PTAB issues a final written decision before the Commission issues its final determination. For a respondent balancing the impact of estoppel against the benefit of a final written decision before the Commission opinion, the ideal timing for a final written decision to issue is after the ITC evidentiary hearing but before the Commission opinion.
In practice, however, it is extremely difficult to obtain a final written decision before the Commission opinion because a final written decision typically issues about 18 months after an IPR petition is filed, while the Commission opinion typically issues within 16-18 months of institution of the ITC investigation. Moreover, even if the final written decision issues during the respondent's ideal time period, it remains uncertain whether the full Commission would entirely suspend remedial orders in a scenario in which the PTAB issues a final written decision finding that all claims at issue in the ITC investigation are unpatentable.
Diverging Rulings on Appropriate Weight of Public Interest Factors
In separate but related investigations, ALJ Pender and ALJ McNamara reached opposite conclusions on whether the public interest factors weighed against a remedy for Apple's violation of Section 337 by importing iPhones that infringe Qualcomm's patents.9 Both decisions garnered widespread attention, with dozens of interested third parties submitting public interest statements.
In both investigations, Apple argued that issuing an exclusion order to remedy its violation would lead to a cascading sequence of events that would be detrimental to the public interest. Namely, if Apple could not import infringing products, then Apple would stop purchasing chips from its supplier, Intel, which would cause Intel to exit the market, and Intel would then stop investing in R&D for 5G technology, which in turn would create U.S. national security concerns.
Despite being presented with nearly identical evidence, the two ALJs reached opposing conclusions. ALJ Pender concluded that Apple's sequence of events was "nearly certain" to occur and would pose a significant risk to national security. He, therefore, recommended that the Commission issue no remedy. He was the first ALJ in history to make such a recommendation, and the Commission itself has declined to enter an exclusion order due to public interest concerns in only three cases.10
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1. Certain Memory Modules, Inv. No. 337-TA-1089, Order No. 49 (Apr. 11, 2019).
2. Memory Modules, Inv. No. 337-TA-1089, Order No. 49.
3. Certain Integrated Circuits, Inv. No. 337-TA-1024, Order 55 (Aug. 31, 2018).
4. Inv. No. 337-TA-1058, Init. Det. (August 18, 2018).
5. Memory Modules, Inv. No. 337-TA-1089, Order No. 51 (June 26, 2019).
6. Inv. No. 337-TA-1089, Staff's Response to Complainant's Motion (June 3, 2019).
7. Magnetic Tape Cartridges, Inv. No. 337-TA-1058, Comm'n Op. (Apr. 9, 2019).
9. Certain Mobile Electronic Devices, Inv. No. 337-TA-1065, Init. Det., (Sept. 28, 2018); Certain Mobile Electronic Devices (II), Inv. No. 337-TA-1093, Findings on Public Interest, (April 16, 2019).
10. Inv. Nos. 337-TA-60, 337-TA-67, 337-TA-182/188.
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