A recent ITC enforcement decision highlights the importance of redesigns as an effective strategy for Respondents at the ITC.
In Certain Network Devices, Related Software and Components Thereof (I), Inv. No. 337-TA-944, Cisco Systems, Inc. accused Arista Networks, Inc. of infringing certain patents. The Commission ultimately found that Arista violated § 337 as to some, but not all, of the patents and issued a limited exclusion order (LEO) and cease and desist order (CDO) on June 23, 2016. On August 26, 2016, Cisco filed an enforcement complaint alleging that Arista violated the LEO and CDO. Arista argued that the products were redesigned and no longer infringed the patents at issue. On June 20, 2017, ALJ Shaw issued an Enforcement Initial Determination holding that the redesigned products did not violate the June 23, 2016 CDO.
In his opinion, ALJ Shaw held that the “colorable difference” test established by the Federal Circuit in its en banc Tivo v. Echostar opinion was not the appropriate test to determine whether the CDO was violated. In that case, the Federal Circuit held that in order for a defendant to be found in contempt of an injunction, a district court must first find that a newly accused product is not more than colorably different from the adjudged infringing product and, second, that the newly accused product actually infringes.
According to ALJ Shaw, in contrast to a district court, the ITC’s inquiry with respect to violation of a CDO is limited to infringement and there need not be a finding on colorable difference. Therefore, even if a respondent makes material changes to a product, if that new product still infringes, the respondent violates the CDO by engaging in domestic commercial activities relating to the new product. Enforcement ID at 77 (June 20, 2017). As a result, not only are injunctions more easily obtained in the ITC than in district court (no ebay factors to prove in the ITC), but sanctions for violating an ITC CDO are also more easily obtained than sanctions for violating a district court injunction.
In the end, it appears that Arista successfully utilized their redesigned products to avoid the LEO and CDO issued against some of their earlier products. Had they been able to include these redesigned products in the underlying investigation, they may have avoided the expense and uncertainty of an Enforcement Proceeding.
This decision highlights the importance for Respondents in ITC proceedings to develop and introduce potential product redesigns early in the underlying investigation. By asking the ITC to consider the redesigned products in the underlying investigation, Respondents can avoid having to defend their redesigned products in a later Enforcement Proceeding which will likely involve a full evidentiary hearing on the issue of infringement to determine whether there was a violation of the earlier order from the Commission.