(as published by Law360)
Despite a brief hiatus stemming from the government shutdown, 2019 has already been a very busy year in Section 337 practice at the U.S. International Trade Commission. Two administrative law judges 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 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 U.S. Court of Appeals for the 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 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.
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. 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.
Impact of Estoppel
In the last 12 months, ALJs have addressed IPR estoppel under 35 U.S.C. Section 315 (e)(2), clarifying that IPR estoppel does not apply against the ITC Office of Unfair Import Investigations staff but does apply against a respondent regardless of whether the respondent prevailed in the PTAB's final written decision.
In Certain Magnetic Tape Cartridges and Components Thereof, the ALJ concluded that IPR estoppel does not apply against OUII staff. 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. Because the PTAB final written decision issued prior to the ITC hearing, the ALJ precluded the respondents from presenting any invalidity evidence. The 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 the staff. 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 Patent Trial and Appeal Board 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.
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. Commissioner Rhonda 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, the staff will not be able to support any invalidity arguments despite the fact that the staff is not formally estopped under 35 U.S.C. Section 315(e)(2).
The practical impact is significant. In Magnetic Tapes, the final written decision issued after the hearing, the 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 Thomas Pender and ALJ MaryJoan McNamara reached opposite conclusions on whether the public interest factors weighed against a remedy for Apple Inc.’s violation of Section 337 by importing iPhones that infringe Qualcomm Inc.’s patents. 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 Corp., which would cause Intel to exit the market, and Intel would then stop investing in research and development 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.
Six months after ALJ Pender’s decision, ALJ McNamara determined that the very same sequence of events was merely “predictive or speculative” rather than nearly certain or even likely. ALJ McNamara explained that a noninfringing redesign would resolve essentially all public interest concerns and was readily achievable according to Apple employee testimony. ALJ McNamara determined that the public interest did not weigh against a remedy. However, she did recommend that the exclusion order have carveouts specifically designed to encourage Apple to develop a noninfringing redesign.
Takeaways and Practice Tips
ALJ Pender’s conclusion that the public interest favored no remedy was highly unusual. The tailored exclusion order recommended by ALJ McNamara, on the other hand, was more in line with the existing state of public interest analysis. Nevertheless, her analysis strongly suggests that the mere possibility of a noninfringing redesign generally will be sufficient to resolve public interest concerns unless the patents at issue are standard-essential patents or directly relate to the public’s physical well-being, as in the case of hospital beds.
Both investigations have terminated, the commission did not weigh in on which conclusion was correct, and ALJ Pender has retired.
Going forward, absent a concrete demonstration of certain harm to the public, even expert testimony is likely insufficient to establish that the public interest weighs against a remedy. However, such evidence may support a tailored remedial order. In some cases, respondents may even be in a position to argue that the public interest evidence supports delaying the date on which an exclusion order goes into effect.
For example, ALJ Clark Cheney recently recommended that an exclusion order “not take immediate effect” in view of certain unrebutted comments from members of the public regarding the length of time it would take to switch from the infringing products to a replacement. ALJ Cheney recommended that “the effect of any remedy be delayed by a period of at least 12 months.”
Developments on Importation
Two recent investigations have addressed when it is appropriate for one entity to be considered an “importer” within the meaning of Section 337 based on the importation activities of another entity.
In Certain Digital Video Receivers, the commission held that, although Comcast Corp. was not the importer of record, Comcast was an “importer” based on the activities of suppliers, who were not named in the investigation. The commission determined that Comcast was “sufficiently involved with the design, manufacture, and importation of the accused product” via its relationship with suppliers. Comcast has appealed the decision to the Federal Circuit, which held oral argument on March 6. The Federal Circuit decision is still pending.
The initial determination in Certain Subsea Telecommunications Systems and Components Thereof confirmed that a parent corporation may be found to satisfy the importation requirement based on the actions of its subsidiaries. There, ALJ Cheney rejected the notion of a “context-agnostic” rule, explaining that the commission applies a fact-intensive inquiry to determine whether a respondent’s conduct satisfies the importation requirement.
Takeaways and Practice Tips
The importation requirement continues to be a low bar for subject matter jurisdiction, to which most respondents are likely to stipulate. By stipulating to importation, respondents can save costs and allocate hearing time to other defenses.
 Certain Memory Modules, Inv. No. 337-TA-1089, Order No. 49 (Apr. 11, 2019).
 Memory Modules, Inv. No. 337-TA-1089, Order No. 49.
 Certain Integrated Circuits, Inv. No. 337-TA-1024, Order 55 (Aug. 31, 2018).
 Inv. No. 337-TA-1058, Init. Det. (August 18, 2018).
 Memory Modules, Inv. No. 337-TA-1089, Order No. 51 (June 26, 2019).
 Inv. No. 337-TA-1089, Staff’s Response to Complainant’s Motion (June 3, 2019).
 Magnetic Tape Cartridges, Inv. No. 337-TA-1058, Comm’n Op. (Apr. 9, 2019).
 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).
 Inv. Nos. 337-TA-60, 337-TA-67, 337-TA-182/188.
 Certain Fluidized Supporting Apparatus, Inv. No. 337-TA-182/188 (Oct. 5, 1984).
 Certain Strontium-Rubidium Radioisotope Infusion Sys., Inv. No. 337-TA-1110 (August 1, 2019).
 Inv. No. 337-TA-1001.
 Inv. No. 337-TA-1098.