ITC: No Issue Preclusion Where Asserted Patent Found Unpatentable in IPR

On August 23, 2016, the International Trade Commission (“ITC”) issued the public version of its Final Opinion in Certain Three-Dimensional Cinema Systems and Components Thereof, Inv. No. 337-TA-939, clarifying the effect of Inter Partes Review (IPR) proceedings on Section 337 Investigations.  As noted in our July 2016 Client Alert, the ITC issued, but suspended enforcement of, a limited exclusion order for products that infringe a patent previously found unpatentable by the PTAB in a final IPR decision.  The Commission’s Opinion now provides the rationale for that decision.  The ITC holds that a final IPR decision does not have preclusive effect in a Section 337 Investigation.  Furthermore, under the circumstances of this particular case, the ITC decided to exercise its broad discretion to suspend enforcement of the remedial orders with respect to the patent adjudicated by the PTAB.

The Case

On December 16, 2015, Administrative Law Judge Essex issued an initial determination (ID) finding a violation of 19 U.S.C. § 1337 based on infringement of three asserted U.S. patents (Nos. 8,220,934, 7,857,455, and 7,959,296).  On February 16, 2016, the ITC determined to review the ID in part.  During the pendency of the ITC’s review, on April 14, 2016, the PTAB issued a final written decision finding certain of the claims of one of the asserted patents (the ‘934 Patent) unpatentable.  On April 18, 2016, the ITC issued a Notice requesting that the parties brief the Commission on the effect of the PTAB’s final written decision on the ITC’s pending final determination.  On July 20, 2016, the ITC determined to issue an exclusion order and cease and desist order based on the importation of products that infringe all three asserted patents.  It also specifically determined that the asserted claims of the ‘934 Patent, two of which were found unpatentable by the PTAB in its final decision, are not invalid.  However, in light of the PTAB’s decision, the ITC suspended enforcement of the limited exclusion order and cease and desist order with respect to the ‘934 Patent pending appeal.

The newly-issued public version of the Opinion that accompanied the exclusion order provides the ITC’s rationale.  First, the ITC held that an IPR final decision does not have a preclusive effect in Section 337 investigations because (1) the PTAB utilizes a broadest reasonable interpretation of the claims while the ITC uses Phillips claim construction principles, and (2) the burden of proof for unpatentability in an IPR proceeding is preponderance of the evidence while invalidity must be proven by clear and convincing in a Section 337 investigation.

Next, the ITC explained that it is not bound by factual determinations made by the PTAB with respect to secondary considerations.  For example, the PTAB found that there was not a nexus between the claimed invention and evidence of commercial success and industry praise.  The ITC held that it was not bound to this finding because the complainant had satisfied the technical prong of domestic industry (i.e. the complainant proved by a preponderance of the evidence that its commercial product practices the patent).

Finally, the ITC clarified that its decision to suspend enforcement of the remedial orders with respect to the ‘934 Patent was discretionary.  The ITC listed the advanced posture of the IPR proceeding and the fact that the respondent’s products would still be subject to immediate exclusion (the exclusion order was not suspended with respect to the ‘455 and ‘926 Patents) as factors supporting the suspension of the ‘934 remedial orders.

Takeaway

The Commission’s Opinion continues the trend of the ITC showing little deference to PTAB IPR decisions.  While the respondent in this case was able to obtain a suspension of the ‘934 Patent remedial orders, the stay has little practical effect as the respondent’s products are still subject to immediate exclusion based on a violation of Section 337 with respect to the other two asserted patents.  The ITC cited this as a factor that favored suspension of enforcement.  Thus, it remains an open question whether the ITC would have suspended the ‘934 remedial orders if the products were not going to be subject to immediate exclusion.  The ITC’s position on parallel PTAB proceedings makes it an attractive venue to obtain swift adjudication of intellectual property rights.

By: Richard Fieman, Blaney Harper and David Maiorana