(as published by ITC TLA)
DBN Holding, Inc. v. Int’l Trade Comm’n, No. 2017-2128, 2018 WL 6181653 (Fed. Cir. Nov. 27, 2018)
Summary: In a non-precedential opinion, the Federal Circuit held that the Commission must analyze whether it should modify or rescind a penalty (previously affirmed by the Federal Circuit), after the underlying patent was invalidated, and that the prior Federal Circuit opinion affirming the penalty did not constitute res judicata with respect to the petition to modify or rescind it.
In 2012, the Commission instituted a 337 investigation against DBN, but terminated it based on a consent order. In the month following the termination, however, the Commission instituted an enforcement proceeding, eventually finding that DBN had violated the consent order and imposing a penalty of $6.2 million. In parallel, the Eastern District of Virginia invalidated the patent underlying the sole patent protected by that consent order. The losing parties appealed both the Commission’s penalty and the district court’s finding of invalidity, but the Federal Circuit affirmed both findings. See DeLorme Pub. Co. v. BriarTek IP, Inc., 622 F. App’x 912 (Fed. Cir. 2015); DeLorme Publ’g Co. v. Int’l Trade Comm’n, 805 F.3d 1328 (Fed. Cir. 2015).
The following month, DBN filed a petition with the Commission to rescind or modify the civil penalty in light of the Federal Circuit affirming the invalidity of the patent. Citing “res judicata,” based on the Federal Circuit’s opinion affirming the penalty, the Commission denied the petition. DBN appealed and the Federal Circuit reversed and remanded.
The Federal Circuit held that while the Commission did not abuse its discretion in imposing the penalty, it erred as a matter of law in refusing to consider the petition to rescind or modify it. The Federal Circuit explained that for either issue or claim preclusion to apply (the Commission had not explained which flavor of res judicata it had relied upon), a second, separate case must exist. But where there is only a continuation of the same proceeding, as in the case of the enforcement proceeding, neither issue nor claim preclusion apply. The Federal Circuit also analyzed the doctrine of the “law of the case,” but held that doctrine did not apply because neither the Commission nor the Federal Circuit had ever evaluated whether the penalty should be modified or rescinded – only whether the penalty was proper in the first place. The Federal Circuit lastly noted instances where it had affirmed the Commission in rescinding or modifying orders after the original penalty had been affirmed on appeal. The Federal Circuit thus reversed the Commission and remanded the matter for further consideration.