14 September 2020

Moving Quickly at the PTAB Could Prevent Enforcement of a Remedial Order in ITC Patent Cases

Executive Summary

The US International Trade Commission (“ITC”) recently suspended enforcement of its remedial orders in a patent investigation pending the appeal of a decision by the U.S. Patent and Trademark Office’s Patent Trial and Appeals Board (“PTAB”) to invalidate the patent at issue in the ITC investigation.  Importantly, this recent ITC decision suggests that in certain circumstances an alleged infringer in ITC actions may be able to prevent an adverse remedial order, or suspend enforcement of such an order, provided that the alleged infringer moves quickly to challenge the validity of the patent at the PTAB and has success.

ITC Patent Actions Generally

The ITC is a popular venue for US patent owners to enforce their rights.  The ITC is a federal agency with the authority to adjudicate trade related matters, including through a patent infringement investigation under Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337).  Such actions involve a patent owner who is domestically exploiting its US patent rights (the “complainant”) who initiates an ITC proceeding by alleging a Section 377 violation by adverse parties who import allegedly infringing goods (the “respondents”).  ITC actions are presided over by an Administrative Law Judge (“ALJ”).  While the ITC is not a court of law and does not have the authority to award monetary damages, the ITC can issue exclusion orders that direct U.S. Customs and Border Protection to stop infringing imports at the border.  Exclusion orders can be enormously costly for respondents whose goods become stuck at the border and cannot be imported into the U.S. and sold. 

Patent owners often choose to initiate an ITC patent investigation because ITC proceedings move relatively quickly, with a decision typically issuing fifteen to eighteen months after initiation of the proceeding.  Respondents incur substantial costs (often several million USD) in legal fees, expert fees, and related expenses over this short period of time and have few mechanisms to halt or delay the proceedings.  But a recent ITC decision suggests that respondents may find relief by promptly challenging the validity of the asserted patents in a parallel proceeding before the PTAB and requesting that the ITC ALJ hold off on issuing, or suspend enforcement of, any remedial orders.

PTAB Patent Validity Challenges and Associated Stays

Accused patent infringers often request review of asserted patents’ validity via a PTAB review proceeding.  When a federal district court litigation involving the same patents has been first filed, the district court judge typically stays the litigation pending the outcome of the PTAB review.  This decision to grant a stay depends on the relative timing of the two proceedings and whether a successful PTAB validity challenge would resolve issues in the district court litigation.  

It has been uncommon, however, for ITC ALJs to issue stays pending decisions in parallel PTAB validity challenges.

Recent ITC Decision Suspending Enforcement of Remedial Order Pending PTAB Appeal

In an ITC patent investigation related to Certain Unmanned Aerial Vehicles and Components Thereof (i.e., drones), the ITC suspended enforcement of its remedial order pending final resolution of a decision by the PTAB invalidating the relevant claims of the patent at issue.  The ITC’s suspended remedial order included a limited exclusion order on importing certain related goods, cease and desist orders, and a bond provision.   

In this case, the complainant initiated the ITC patent action in August 2018.  A respondent then separately filed multiple validity challenges with the PTAB, including one in November 2018 that resulted in a May 2020 final written decision invalidating all patent claims remaining at issue in the ITC action.  In July 2020, the patent owner appealed the PTAB’s final written decision.  

In August 2020, the ITC found respondents violated Section 337. The ITC issued remedial orders but suspended the enforcement of the remedial orders pending the final resolution of the appeal of the PTAB’s decision.  If the Court of Appeals of the Federal Circuit affirms the PTAB’s decision, the ITC respondents will be able to avoid any penalty from the ITC for their infringement.

The ITC’s suspension of its remedial order to await related PTAB proceedings, while rare, has precedent.  In an unrelated action in 2016, the ITC similarly suspended a limited exclusion order and cease and desist orders barring infringing imports of certain goods after the PTAB invalidated the claims of a patent asserted in that case.

The specific timing of the ITC and PTAB actions can be an important factor.  ITC actions typically result in a final written decision and remedial order within fifteen to eighteen months of the action being filed, while the PTAB typically issues a final written decision in its actions within eighteen months.  Therefore, a delayed PTAB challenge could produce a favorable ruling after the ITC enforces its remedial order, costing the respondent the benefit of the invalidity ruling. 

Accordingly, any respondent in an ITC patent investigation should immediately consider whether to challenge the validity of the patents at issue before the PTAB.  Acting promptly before the PTAB will increase the likelihood that the respondent will benefit at the ITC from a favorable ruling by the PTAB on patent validity.

Conclusion

Should any company anticipate being a respondent in an ITC patent investigation, it should consider immediately initiating a patent validity challenge with the PTAB for the patents at issue.  Prompt action to challenge patent validity with the PTAB could provide another avenue to effectively defeat an ITC patent investigation by preventing enforcement of any associated remedial order by the ITC, should the company be successful in invalidating the patents at issue in front of the PTAB.  

Key contacts

A Guide to Doing Business in China

We explore the key issues being considered by clients looking to unlock investment opportunities in the People’s Republic of China.

Doing Business in China
Share on LinkedIn Share on Facebook Share on Twitter
    You might also be interested in

    As of May 1, 2020, parties making a voluntary notice filing with CFIUS will have to pay a filing fee. There is no fee for declarations under the mandatory filing regime. The Treasury Department’s...

    26 May 2020

    As of May 1, 2020, parties making a voluntary notice filing with CFIUS will have to pay a filing fee. There is no fee for declarations under the mandatory filing regime. The Treasury Department’s...

    19 May 2020

    There is no doubt China deals have been more difficult to clear during the Trump years than they were previously. A database maintained by KWM shows a clearance rate of over 95% during the final...

    08 May 2020

    On April 27, 2020 the United States Supreme Court denied a petition to overturn an appellate ruling in favor of KWM client ChanBond, LLC.  This decision puts an end to a long and unsuccessful...

    04 May 2020

    Legal services for your business

    This site uses cookies to enhance your experience and to help us improve the site. Please see our Privacy Policy for further information. If you continue without changing your settings, we will assume that you are happy to receive these cookies. You can change your cookie settings at any time.

    For more information on which cookies we use then please refer to our Cookie Policy.