In a recent U.S. International Trade Commission decision in Certain Unmanned Aerial Vehicles and Components Thereof, Inv. No. 337-TA-1133, the Commission issued remedial orders preventing imports and sales of certain products, but then suspended enforcement of those orders because the patent claims on which the orders rested were previously found unpatentable in a final written decision from the U.S.P.T.O. Patent Trial and Appeal Board. As a result, although the Commission found a violation of Section 337, no products are being excluded. The Commission had hinted at this possible result in two prior decisions, but this is the first case in which the Commission has suspended all potential relief based on an earlier PTAB decision.
The complainant in Certain Unmanned Aerial Vehicles, known more commonly as “drones,” accused the respondent of infringing three patents. Following a trial, the Chief Administrative Law Judge issued an Initial Determination finding no violation as to two of the patents because both patents were invalid and, in addition, one of those patents was not practiced by either the accused or domestic industry products. As to the third patent—U.S. Patent No. 9,260,184—the CALJ found that several accused products infringed at least one claim and that the respondent had not shown that the ’184 patent claims were invalid. Both parties filed petitions seeking Commission review of various aspects of the ID.
While the investigation was pending, the respondent filed inter partes review petitions with the PTAB as to all three patents. After the ID issued, but before the Commission determined whether to review the ID, the PTAB issued final written decisions finding all challenged claims of all three patents to be unpatentable. The respondent submitted those PTAB decisions to the Commission.
The Commission decided only to review certain aspects of the ID relating to the ’184 patent. The Commission did not review the ID’s determination that the ’184 patent was valid, making that portion of the decision final. But in connection with the PTAB decisions, the Commission asked the parties to brief “what, if any, effect the final written decision of the PTAB . . . finding the claims of the ’184 patent unpatentable has on the Commission’s present investigation with respect to the accused products and the ’184 patent, including any impact on the issuance of relief.” The Commission also reviewed some ’184 patent infringement issues and agreed to consider the respondent’s argument that the ID should have addressed certain new designs. The Commission also chose not to review the ID’s decision finding that a domestic industry existed or that there was no violation with respect to the other two patents.
While the parties were briefing the issues on review, the complainant appealed all the PTAB decisions to the Court of Appeals for the Federal Circuit.
The Commission’s Final Decision
The Commission’s final decision modified the infringement findings slightly and affirmed the CALJ’s decision not to address the new designs. Since the invalidity defenses with respect to the ’184 patent were already rejected when the Commission declined to review that issue, the Commission found there was a violation of Section 337 because some of the accused products infringed two claims of the ’184 patent. After reviewing the parties’ positions on remedy, bond, and public interest, the Commission issued a limited exclusion order and cease and desist orders, and set a bond that would apply to imports during the presidential review period.
However, despite issuing those remedial orders, the Commission chose to exercise its discretion to suspend enforcement of the orders, including the bond provision, pending resolution of the PTAB final written decision that found the asserted claims of the ’184 patent unpatentable. The Commission noted that it can issue an exclusion order only if it finds that the accused articles “infringe a valid and enforceable United States patent.” Comm’n Op. at 35 (emphasis in original). And the Commission recognized that it had previously suspended enforcement of its remedial orders, “at least in part,” where the PTAB had found certain of the asserted claims unpatentable before the Commission issued a final order. Id., referring to Certain Magnetic Tape Cartridges and Tape Components Thereof, Inv. No. 337-TA-1058, and Certain Three-Dimensional Cinema Systems and Components Thereof, Inv. No. 337-TA-939.
Although not addressed in the Commission’s Opinion, the decisions in Magnetic Tape Cartridges and Three-Dimensional Cinema Systems to suspend enforcement of the remedial orders “at least in part” left open a significant question as to how the Commission would handle the situation in Unmanned Aerial Vehicles case. In both of those earlier cases, the complainant successfully proved violation of Section 337 based on patent claims, in addition to the claims that the PTAB found unpatentable. As a result, the accused products would be excluded, regardless of whether the Commission suspended enforcement of the portion of the remedial orders that relied on unpatentable claims. Indeed, the Commission noted that fact in support of its decisions to suspend enforcement of the orders in those cases. For example, the Commission stated in Three-Dimensional Cinema Systems that “[i]n light of the advanced posture of the IPR proceeding and the Commission’s finding of a violation as to MasterImage’s products (all of which will be subject to immediate exclusion even if relief is suspended as to the ’934 patent), the Commission has determined to exercise its discretion and suspend enforcement of the remedial orders ….” Three-Dimensional Cinema Systems, Comm’n. Op. at 60 (emphasis added). The Commission reiterated that rationale in Magnetic Tape Cartridges, deciding to suspend part of the remedial order by noting that “as was the case in Three-Dimensional Cinema, a suspension in the enforcement of the remedial orders as to claim 17 of the ’774 patent pending final resolution of the appeal of the PTAB decision will have no practical effect since Fujifilm’s LTO-5 products will still be subject to immediate exclusion based on the Commission’s finding of a violation with respect to claims 1-13 of the ’596 patent.” Magnetic Tape Cartridges, Comm’n Op. at 62 (emphasis added). That generated a dissenting footnote from Commissioner Schmidtlein, who supported suspending enforcement but not the “no practical effect” rationale. Id. at 63-64 n.23.
Unlike Three-Dimensional Cinema Systems and Magnetic Tape Cartridges, the Unmanned Aerial Vehicles case presented the Commission with a situation where all the patent claims that formed the basis of the Commission’s finding of violation and, therefore, the underpinning for the remedial orders, were claims that the PTAB held unpatentable. The “no practical effect” justification no longer could apply, since suspending enforcement would mean the difference between excluding the accused products and no exclusion at all.
The Commission did not reject or address the “no practical effect” rationale articulated in its prior decisions. Instead, the Commission simply stated that suspension of the remedial orders in the Unmanned Aerial Vehicle case is “consistent with the Commission’s past practice on this issue,” and noted that “[n]either party has identified an instance in which the Commission determined not to suspend remedial orders due to a PTAB final written decision that issued prior to the Commission’s determination.” Comm’n Op. at 35 and 36 (emphasis in original). The Commission contrasted “the PTO’s role as the lead agency in assessing the patentability, or validity, of proposed or issued claims,” with the Commission’s own role, noting that “[t]he Commission’s invalidity determinations in patent cases, in contrast, are for purposes of adjudicating whether or not a Section 337 violation has occurred, and are not binding on the PTO, federal courts, or other tribunals, even if affirmed by the Federal Circuit.” Id. at 37. The Commission also stated that suspending enforcement of remedial orders in light of a PTAB final written decision is consistent with the Congressional intent of creating the IPR procedure as “a quick, inexpensive, and reliable alternative to district court litigation to resolve questions of patent validity.” Id. at 38.
The Commission opinion appears to resolve the question left open by the “no practical effect” language in Magnetic Tape Cartridges and roundly endorses the practice of suspending enforcement of any remedial order based on a patent claim that the PTAB has found unpatentable before the Commission reaches its final decision and issues its remedial orders, regardless of whether that suspension results in no relief to the complainant. But the Commission continues to distinguish investigations where the PTAB decision comes after the Commission has issued its remedial orders and the respondent is seeking to rescind or modify those orders. Comm’n Op. at 35-36. In that situation, the Commission has taken the position that there are no “changed circumstances” justifying rescission or modification of an existing exclusion order because the patent claims are not formally cancelled until all appeals from the PTAB final written decision are exhausted. See Certain Network Devices, Related Software and Components Thereof (II), Inv. No. 337-TA-945.
The Commission also distinguished the Unmanned Aerial Vehicles case, where the PTAB final written decisions were issued while the Commission was considering whether to review the ID, from another case that also involved a PTAB final written decision. See Comm’n Op. at 36 n.16. In Certain Memory Modules and Components Thereof, Inv. No. 337-TA-1089, the PTAB issued a final written decision finding the asserted claims of one of the patents unpatentable while the case was before the CALJ. The respondent moved to stay that portion of the case. The CALJ denied respondent’s motion, since things were very far along, and the ALJ noted the Commission’s apparent willingness to suspend enforcement of remedial orders based on patents that were the subject of invalidating PTAB decisions. Comm’n Op. at 36 n.16. But the Commission notes that the ALJ found the unpatentability decision weighed heavily in favor of a stay and could “simplify the issues and hearing of the case.” Id. The CALJ’s decision denying the stay was never reviewed by the Commission. As that case unfolded, the Commission found no violation on all patents and, therefore, did not have to resolve the issue of what to do with any remedial orders based on unpatentable claims. Although the Commission highlighted the ALJ’s findings on how a PTAB decision could weigh in favor of a stay, the respondent in Unmanned Aerial Vehicles did not seek a stay of the investigation, just suspension of the remedial orders.
Practitioners have long observed that the Commission generally prefers to reach its own decisions on patent validity and rarely defers to the PTO or stays its own proceedings in light of PTO activity. The result in Unmanned Aerial Vehicles contrasts with that general practice. To be clear, the Commission reached a final decision on the merits with respect to the ’184 patent, and that decision found the patent claims were not invalid while the PTAB came to the opposite conclusion. Accordingly, the Commission did not defer to the PTAB in its investigation up to the moment it issued its remedial orders. But once those orders were issued, the Commission agreed to suspend them unless the respondent successfully reverses the PTAB decision, essentially elevating the PTAB decision over its own contrary determination. And the Commission did so without relying on the “no practical effect” rationale evident in the Three-Dimensional Cinema Systems and Magnetic Tape Cartridges cases, giving practitioners guidance on how valuable an IPR final written decision finding the asserted claims unpatentable can be if it comes before the Commission issues its remedial orders.
Not all litigants will be able to take advantage of this opportunity. Section 337 investigations typically last about 16 months from institution to final Commission decision, while IPRs last 18 months and petitions take time to prepare. As a result, it is not easy to satisfy the basic requirement for suspension—a final written decision before the Commission reaches its final decision. But Section 337 investigations can and do experience delays. The Unmanned Aerial Vehicles investigation was extended because of the most recent Government shutdown, which allowed the PTAB proceedings to finish before the Commission proceedings. Many current investigations have been extended as a result of COVID-19, while PTAB proceedings appear to be keeping to their prescribed 18-month schedule. Sometimes an IPR petition is filed before the Section 337 complaint is even filed if, for example, a respondent has advanced warning about a potential patent infringement claim through negotiations or earlier district court litigation with the complainant. At a minimum, there have been at least five Section 337 investigations where the PTAB final written decisions issued in time to have a potential effect—Unmanned Aerial Vehicles, Memory Modules, Three-Dimensional Cinema Systems, Magnetic Tape Cartridges, and Certain Integrated Circuits with Voltage Regulators and Products Containing Same, Inv. No. 337-TA-1024—and there likely will be more in the future.
The Commission’s discussion of the motion to stay in the Memory Modules investigation raises an interesting question—will the Commission or the ALJs be more open to staying an investigation in light of a PTAB final written decision that finds some or all of the asserted claims unpatentable if that decision came early in the ITC investigation? There is little to suggest that the Commission is changing its tradition of denying stays based on the mere existence of an IPR petition or institution decision. And the Commission seems to be saying that in cases like Unmanned Aerial Vehicles, where the PTAB decisions issue after the ID issues and the parties have filed petitions for review, the Commission will reach a final decision on the merits and complete the investigation. But what if a final written decision finding some or all of the asserted claims unpatentable issues much earlier, for example in the middle of discovery? In one prior investigation, Integrated Circuits with Voltage Regulators, the CALJ granted a motion to stay in that very scenario, where the PTAB final written decisions issued seven months before the scheduled trial. Id., Order No. 55. The complainant in that case, however, did not oppose the motion. Given that the Commission has now further solidified its practice of suspending enforcement of any remedy based on claims that the PTAB has found invalid, that raises the question of whether the parties and the Commission should bear the cost of finishing a partially complete Section 337 investigation, at least as to the unpatentable claims, when the outcome—suspension of the remedial order—is essentially preordained. This development would seem to provide an additional basis to justify a stay even if the complainant opposes the request, at least in the somewhat rare situation where the PTAB proceeding finishes months before the Section 337 investigation.
Finally, the Commission’s decision to suspend the remedial orders in Unmanned Aerial Vehicles also resolved one potentially problematic issue—“successful” IPR estoppel. A party who files an IPR petition is estopped from pursuing invalidity grounds that it presented or could have presented to the PTAB. 35 U.S.C. § 315(e)(2). This can be true even if the party challenging the patent succeeds before the PTAB and proves that the claims are unpatentable. Indeed, that is precisely what happened to the respondent in the Memory Modules investigation discussed above. After denying the motion to stay the investigation, the ALJ went on to find that the respondent was estopped from raising any invalidity grounds as to the patents that were involved in the IPRs, even though both final written decisions found the claims unpatentable. Certain Memory Modules, Order No. 51 and Initial Determination at 104-112. At that point, the respondent was unable to raise its invalidity arguments before the Commission—arguments that were good enough to prevail at the PTAB—but there was no guarantee of what would happen at the conclusion of the case if the Commission found infringement. In fact, in the recommended determination, the ALJ refused to recommend that any exclusion order be suspended pending appeal of the PTAB decisions. Id., Initial Determination at 169-172. The respondent in Memory Modules avoided the problem when the Commission found neither of the two patents involved in the IPRs was infringed. The Unmanned Aerial Vehicles decision should help minimize any anxiety about “successful” IPR estoppel, since it provides some confidence that no matter what happens during the investigation, and even if the respondent is estopped from raising invalidity as a defense before the Commission because of a successful IPR petition, the Commission will not enforce a remedy based on claims the PTAB has already found unpatentable.