The ITC has dealt a significant blow to the use of Inter Partes Review as a defense to a Section 337 investigation.  In an order issued this week, the Commission denied a request to stay remedial orders that are currently on appeal after the asserted claims were found unpatentable by the USPTO Patent Trial and Appeal Board in IPR proceedings.

In Certain Network Devices, Related Software and Components Thereof (II), Inv. No. 337-TA-945, Cisco Systems, Inc. accused Arista Networks, Inc. of infringing six patents.  The Commission ultimately found that Arista violated § 337 as to two of these patents, U.S Patent Nos. 7,224,668 (“the ’668 patent”) and 6,377,577 (“the ’577 patent).  Accordingly, the ITC issued a limited exclusion order (LEO) and cease and desist order (CDO) on May 4, 2017.

On May 25, 2017, the PTAB issued a final decision finding all of the asserted claims of the ’577 patent unpatentable (IPR2016-00303) and a week later, on June 1, 2017, similarly found all asserted claims of the ’668 patent unpatentable (IPR2016-00309).  Arista filed emergency petitions requesting that the ITC suspend or rescind the remedial orders pending appeal of both the PTAB’s May 25, 2017, and June 1, 2017, final written decisions.  Cisco opposed the petitions, but the Staff supported Arista’s request noting that “[w]hile this is a close question, Commission precedent and consideration of the equities support suspension of the remedial orders pending appeal.”

On July 20, 2017, despite the Staff’s support of Arista’s petition, the ITC issued a notice of its decision denying Arista’s request to stay the remedial orders.  The Commission explained that the PTAB’s decisions do not become final until the USPTO issues a certificate canceling the claims following the exhaustion of all appeals.  Therefore, the Commission declined to stay the remedial orders because the PTAB’s final written decisions do not constitute a change of circumstances that satisfies the requirements of 19 U.S.C. § 1337(k) and 19 C.F.R. § 210.76.

This decision appears to conflict with the Commission’s prior decision in Certain Three-Dimensional Cinema Systems and Components Thereof, Inv. No. 337-TA-939.  In that case, the ITC held that although a final IPR decision does not have preclusive effect in a Section 337 investigation, it nevertheless determined to stay remedial orders covering products that infringe a patent found unpatentable in an IPR final decision (prior to the exhaustion of any appeal).  However, as we noted in a prior post, the stay had little practical effect because the respondent’s products were still subject to immediate exclusion based on remedial orders with respect to two other asserted patents.  The ITC specifically cited this as a factor that favored suspension of enforcement.  We also noted at the time that it remained an open question whether the ITC would have suspended remedial orders if the accused products were not going to be subject to immediate exclusion.  The ITC appears to have answered that question here in the negative.

Takeaway

In its recent decisions, the Commission has shown little deference to PTAB IPR decisions. This decision appears to be the culmination of that trend.

While IPR petitions remain an effective strategy in defending patent infringement suits in district court, their value as a defense in the ITC is limited.  The speed of an ITC investigation, and the ITC’s refusal to stay investigations in favor of IPRs, makes it unlikely that a respondent could obtain a final decision from the PTAB before the ITC issues remedial orders and all appeals are exhausted.  Moreover, based on the ITC’s decision here, even if the PTAB finds all of the asserted claims unpatentable, the ITC will not stay or rescind its remedial orders until all appeals are exhausted.  Thus, a respondent’s products would still be excluded from importation and subject to a CDO during the appeal.