On July 20, 2016, the U.S. International Trade Commission ("ITC") issued a Notice 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. The ITC found a violation of Section 337 based on the infringement of three asserted patents and issued a limited exclusion order and cease and desist order against respondent MasterImage 3D. Of note, certain asserted claims on which the ITC's remedial orders are based were previously found unpatentable by the Patent Trial and Appeal Board ("PTAB") in an IPR final decision. The ITC has stayed enforcement of the remedial orders with respect to the patent adjudicated by the PTAB pending final appellate resolution of the PTAB's decision. A public version of the ITC's Opinion providing the rationale for its Notice has not yet issued.

The Case

As noted in our April 2016 Alert, on December 16, 2015, Administrative Law Judge Essex issued an initial determination ("ID") finding a violation of 19 U.S.C. § 1337 with respect to 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.

As noted above, 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. However, absent intervention by the U.S. Trade Representative within the 60-day presidential review period, the remedial orders will immediately go into effect for the '455 and '296 Patents.

Takeaway

The ITC has already suggested that it will not stay an investigation because of an IPR proceeding. This decision indicates that the ITC also will not provide deference to a final IPR decision on validity from the PTAB. Since the public version of the Opinion is not yet available, we do not know the ITC's specific rationale for its decision. However, it is likely that the ITC cited to the PTAB's use of a broadest reasonable interpretation of the claims—a different standard than the Phillips claim construction principles utilized by the ITC and district courts.

While the ITC determined the issue of validity differently than did the PTAB with respect to the '934 Patent, it still decided to stay the remedial orders pending appellate review of the PTAB's decision. Accordingly, parties accused of patent infringement in the ITC should view an IPR as a good strategic choice, provided the IPR petition is filed early enough to receive a final decision before the conclusion of the Section 337 investigation.

Given the ITC's position on parallel PTAB proceedings, the ITC remains an attractive venue to obtain swift adjudication of intellectual property rights when compared to district courts that routinely stay their patent cases in favor of IPR proceedings.