Speed is almost always of the essence for the victim of trade secret misappropriation. Many companies ground their business in proprietary information that, if made public, would make the exclusive product or service those companies provide a commodity good. The International Trade Commission provides a lightning fast mechanism to address trade secret misappropriation and stop foreign goods embodying misappropriated trade secrets from entering the United States, and thus it is no surprise that when trade secret misappropriation takes place abroad, companies turn to the ITC for relief. A recent decision by the United States District Court for the Eastern District of Wisconsin makes the ability of the ITC to address trade secret misappropriation even stronger by finding, for the first time, that ITC determinations may have preclusive effect in United States District Court.
As 2018 begins and IP strategies are being developed for the new year, it is a good time to reflect on what IP issues were prominent in 2017. According to the many readers of Global IP Matters, hot topics included navigating the waters of U.S. patent prosecution, evaluating obviousness, and ITC treatment of standard-essential patents (SEPs).
The public version of ALJ Shaw’s Initial Determination (ID) in U.S. International Trade Commission (ITC) investigation Certain Magnetic Data Storage Tapes and Cartridges Containing the Same, Inv. No. 337-TA-1012 (1012 Investigation), provides important guidance on enforcement of standard-essential patents (SEPs) in the ITC. Respondent and accused infringer Sony argued that several of the patents asserted by patentee Fujifilm wereessential to the LTO-7 standard (relating to “linear tape open” magnetic media) and therefore that Fujifilm had waived its right to injunctive relief and was obligated to license its patents on FRAND terms. ALJ Shaw ultimately found that Sony had not met its burden of demonstrating essentiality, but he nevertheless provided helpful instructions on the quantum of proof necessary to make out such a claim, as well as other factors relevant to ITC enforcement of SEPs, all of which affirmed that the ITC is a viable forum for enforcement of SEPs. In sum he ruled that:
- The party arguing that a patent is essential bears the burden of proof on that point;
- Unless a patent is, in fact, essential to a given standard, there can be no breach of the standard-setting organization (SSO) agreement(s) giving rise to the FRAND obligation at issue;
- Breach of an SSO agreement and of forum selection clauses are not valid defenses in ITC investigations; and
- Respondents bear the burden of proving that a complainant/patentee relinquished its rights to equitable relief by joining the SSO in question.
The decision in U.S. International Trade Commission (ITC) investigation Certain Magnetic Data Storage Tapes and Cartridges Containing the Same, Inv. No. 337-TA-1012 (“1012 Investigation”), is still confidential, but the ITC has issued a notice stating that ALJ Shaw has ruled in favor of patentee Fujifilm against Sony and recommended that an exclusion order be issued. This is important because it is the first time the ITC has issued an exclusion order on standard-essential patents (SEPs), and may be the first time any U.S. tribunal has issued exclusionary or injunctive relief on patents which were declared standard essential. In the opinion, which should become public in a few weeks, ALJ Shaw, who presided over the case, is expected to address a number of key issues relating to the assertion of SEPs in general, and at the ITC specifically. In this case many of Sony’s affirmative defenses relate to the alleged essentiality of the asserted patents and the Administrative Law Judge was asked to answer a number of questions relating to SEPs generally and the ability to enforce them at the ITC.
In a first of its kind decision with important ramifications for patentees, the U.S. International Trade Commission (“ITC”) denied a petition to suspend or temporarily rescind remedial orders issued in Investigation No. 337-TA-945 pending appeal of the Patent Trial and Appeal Board’s (“PTAB”) separate finding that the patent claims at issue are invalid. The ITC has therefore decided to continue to exclude products it found to be infringing certain patents, regardless of the PTAB invalidating the very patents the exclusion order is based upon in separate IPR proceedings. While this decision aiding patentees may surprise some, it is consistent with the ITC’s practices regarding stays and of giving little deference to IPR proceedings.
On May 17, 2017, the International Trade Commission (ITC) reversed an ALJ’s ruling and found a violation of Section 337 in Certain Air Mattress Systems, Components Thereof and Methods of using the Same (“Certain Air Mattress Systems”), Inv. No. 337-TA-971, due to the importation of certain air mattresses, and components of air mattresses, by the named respondents. The public version of the Commission opinion has been released and provides future ITC litigants with guidance regarding the proper allocation of expenses for domestic industry purposes, and how the Commission views certain types of products for public interest consideration.
The Patent Trial and Appeal Board (“PTAB”) issued Final Written Decisions regarding Cisco’s U.S. Patent Nos. 6,377,577 (the “’577 Patent”) and 7,023,853 (the “’853 Patent”) on May 25, 2017 and U.S. Patent No. 7,224,668 (the “’668 Patent”) on June 1, 2017. The PTAB found the ’577 and ’668 Patents invalid but upheld the validity of the ’853 Patent. The Inter Partes Review (“IPR”) proceedings were brought by Arista Networks in retaliation to Cisco’s accusations of infringement brought in multiple venues, including at the U.S. International Trade Commission (“ITC”), which had just a few weeks earlier upheld the validity of these very same patents and determined that Arista infringed the ’577 and ’668 Patents, and issued exclusion and cease and desist orders accordingly. Since the IPR decisions issued Arista has filed a petition asking the ITC to suspend its limited exclusion order regarding the ’577 Patent based on the PTAB’s decision and is expected to file a similar request with respect to the ’668 Patent. On the other side, Cisco plans to appeal the PTAB’s decisions to the Federal Circuit. The uncertainty created by these inconsistent outcomes is an issue for patent owners, and it will be interesting to see how these cases are resolved. In addition, this case shows that even though the ITC does not stay its investigations for IPRs, IPRs may still impact ITC proceedings.
Trade secret theft is a growing threat to American businesses. One obstacle to addressing misappropriation through a lawsuit can be a lack of direct evidence of theft. For example, if an employee leaves his company to work for a competitor and, some months later, the competitor comes out with a product similar to that of the original employer with features previously unique to the original product, it might be inferred that the employee improperly took trade secret information to the competition. A decision in the U.S. International Trade Commission (ITC) this past summer suggests that these facts, without more compelling evidence, may be insufficient to support a finding of trade secret misappropriation. The decision is an important reminder to all trade secret owners to develop a comprehensive trade secret management plan that tracks a company’s trade secrets and who has access to them so that theft can be documented and used in judicial actions, if necessary.
In August 2015, the ITC instituted an investigation based on allegations by Jawbone that Fitbit misappropriated 154 Jawbone trade secrets through the recruitment of a former Jawbone employee. The trade secrets at issue generally relate to the manufacturing and testing of Jawbone wrist worn activity monitors that track a user’s activity and the number of calories the user has expended.
On October 19, 2016, the ITC instituted Investigation No. 1025, based on a complaint filed on May 26, 2016, by Silicon Genesis Corporation (SiGen), against Soitec, S.A. (Soitec). As part of the institution, the ITC ordered that the ALJ issue an early initial determination regarding whether SiGen “has satisfied the economic prong of the domestic industry requirement.” See 81 F.R. 73419 (Notice of Institution of Inv. No. 1025) (Oct. 25, 2016). This is now the fourth time the ITC has ordered the 100-Day program in an investigation, and in this case it appears that previous behavior by the complainant SiGen contributed to the order.
In a newly issued statement, the U.S. International Trade Commission once again made it clear that standard-essential patents may be asserted at the ITC and will be treated no differently than other patents asserted in a Section 337 investigation. Issues of standard essentiality will be addressed – under commission’s statutory obligation to assess an exclusion order’s impact on the public interest – only after it has been determined that a violation of the statute has occurred. Such issues, therefore, are not appropriate for resolution through the ITC’s Early Disposition Pilot Program.
Read more on the team’s insights into the SEPs at the ITC issue in this Law 360 article (republished with permission).