In yet another decision concerning how rulings in parallel, patent challenge proceedings impact Section 337 investigations, the U.S. International Trade Commission (ITC) has refused to rescind an exclusion order issued against a defaulted party despite a district court’s summary judgment ruling that it did not infringe the patent.

The investigation is Certain Beverage Brewing Capsules, Components, Thereof, and Products Containing Same, Inv. No. 337-TA-929 (Enforcement and Rescission Proceeding).  As reported in our prior posts (here and here), the products under investigation were reusable beverage capsules designed to replace the prior art cup-shaped cartridge (such as the Keurig “K-Cup”) with a reusable capsule version.  The ITC issued remedial orders against certain respondents who had been defaulted for failing to participate in the investigation.  The complainant subsequently filed a complaint with the ITC seeking enforcement of the orders that were allegedly being violated by ongoing importation of infringing products.

After a hearing before an administrative law judge (ALJ), the ALJ recommended that the remedial orders be temporarily rescinded based on an intervening grant of summary judgment of non-infringement in a declaratory proceeding brought by a defaulted respondent (Eko Brands) in the U.S. District Court for the Western District of Washington. The ALJ determined that the district court’s decision represented a “substantial change in circumstances” and that ITC precedent supported temporary rescission of the remedial orders pending appeal and permanent rescission if the district court’s decision was affirmed on appeal.

In its August 15 decision reviewing the ALJ’s determination, the Commission sharply disagreed.  According to the Commission’s opinion, its precedent only supported rescission “based on another tribunal’s ruling that a subject patent is invalid.”  The Commission reasoned that

[a] district court patent invalidity ruling is substantially different from a noninfringement ruling.  An invalidity ruling precludes other tribunals from finding that the patent is infringed . . . [whereas] [a] noninfringement ruling with respect to certain products [before the court] . . . does not preclude a later ruling that other products do not infringe.

The Commission also declined to exercise its statutory authority to rescind a remedial order based on “grounds which would permit relief from a judgment or order under the Federal Rules of Civil Procedure.”  19 U.S.C. § 1337(k)(2).  The Commission observed that the cases in which a court provided relief from judgment under Federal Rule of Civil Procedure 60 also involved findings of patent invalidity and unenforceability rather than noninfringement.  Finally, the Commission noted that “Eko intentionally defaulted as a matter of strategy” and, citing other federal cases, should “suffer[] the consequence of that choice.”

While it may be argued that the Commission’s decision is most important for underscoring the possible adverse consequences of defaulting in a Section 337 proceeding, it is also a significant addition to the string of recent cases concerning the ITC’s power to enforce and/or stay its remedial orders in light of intervening decisions by other tribunals.  For example,

• in Certain Three-Dimensional Cinema Systems and Components Thereof, Inv. No. 337-TA-939, the ITC partially suspended an exclusion order based on a final IPR decision by the PTAB that had invalidated one of the patents at issue in that Section 337 proceeding (see our prior post); but,

• in Certain Network Devices, Related Software and Components Thereof (II), Inv. No. 337-TA-945,  the ITC denied a stay of a remedial order in a case in which both patents at issue were found unpatentable by the PTAB in final IPR decisions, reasoning that the PTAB’s decisions do not become final until the USPTO issues a certificate canceling the claims; and,

• in Certain Network Devices, Related Software, and Components Thereof, Inv. No. 337-TA-944 (Enforcement Proceeding), a proceeding involving alleged violations of a cease and desist order, the ITC required an ALJ to reconsider his noninfringement findings on a redesigned product even though U.S. Customs and Border Protection had also found that the redesigned products were noninfringing (see our prior post).

Currently, in another enforcement proceeding, in which an ALJ recommended a record penalty of $37 million for violation of a cease and desist order (Certain Marine Sonar Imaging Devices, Inv. No. 337-TA-921) (see our prior post), the ITC is considering the impact of an intervening ruling by the Federal Circuit finding the claims at issue invalid.  In that case, the staff of the ITC’s Office of Unfair Import Investigations (OUII) has argued in a recent brief that while not controlling, the Federal Circuit’s decision in ePlus, Inc. v. Lawson Software, Inc., 789 F.3d 1349 (Fed. Cir. 2015) (addressing civil contempt sanctions for violation of an injunction when the Federal Circuit had affirmed the USPTO’s cancellation decision in a reexamination proceeding) is “persuasive authority that no civil penalty should be assessed for violation of the cease and desist orders.”  However, given that the OUII staff views have been at odds with those of the Commission in several of these recent cases, it is not clear that the Commission will necessarily adopt this reasoning.  Either way, the Commission’s decision will add still more substance to this important but fluid area of Section 337 law.