On Tuesday, May 8, 2018, the International Trade Commission (“ITC” or the “Commission”) published the final changes to its rules of practice and procedure. The Commission stated that the changes are intended to both modernize and simplify Commission practice as well as to increase the speed and efficiency of investigations. In total, the Commission provided eleven amendments/additions to its current rules of practice and procedure, which take effect beginning on June 7, 2018. Going forward, the new rules will apply only to those Section 337 investigations instituted after that date; any investigations currently pending or filed before June 7 will proceed under the current rules. Of these changes, several may have a lasting impact on practice in Section 337 investigations, while other changes are minor but still require practitioners to take note.
The U.S. Patent and Trademark Office announced a propose change to the standard for construing both unexpired and amended patent claims in Patent Trial and Appeal Board (PTAB) proceedings under the America Invents Act (“AIA”). The change would replace the current Broadest Reasonable Interpretation (“BRI”) standard with the standard articulated in Phillips v. AWH Corp. 415 F.3d 1303 (Fed. Cir. 2005) (en banc). This change would harmonize the claim construction standard applied in inter partes review, post-grant review, and covered business method patent proceedings before the PTAB with the one used by federal district courts and the International Trade Commission. The proposed amendment would also allow the PTAB to consider any prior claim construction determination concerning a term of the involved claim in a civil action, or an ITC proceeding, that is timely made of record in an AIA proceeding.
On April 18, 2018, the International Trade Commission (“Commission”) reversed an Administrative Law Judge’s (“ALJ”) finding that a litigation funding agreement destroyed standing for a complainant at the ITC. In Certain Audio Processing Hardware, Software, and Products Containing the Same, Inv. No. 337-TA-1026 (the “1026 investigation”), the ALJ issued an initial determination (“ID”) that found that Complainant Andrea did not have standing to assert the 6,363,345 (“the ’345 patent”) against Respondent Apple without joining litigation funder AND34, with which Andrea entered into a Revenue Sharing and Note Purchase Agreement (the “funding agreement”) to fund Andrea’s enforcement activities. But on review, the Commission concluded that the ALJ was wrong and reversed the portion of the ID that found that the funding agreement between Andrea and AND34 undermined standing.
Last month, following a jury verdict in federal district court in Delaware awarding Plaintiff Idenix Pharmaceuticals LLC $2.54 billion in damages—“the largest damages verdict ever returned in a patent [infringement] trial”—Chief Judge Leonard Stark denied Idenix’s motion for enhanced damages. Idenix Pharm. LLC v. Gilead Scis., Inc., No. 14-CV-00846, at *2, 15 (D. Del. Sept. 22, 2017). Chief Judge Stark determined that even though the jury concluded that Defendant Gilead Sciences, Inc. willfully infringed Idenix’s patent directed to novel treatments of the Hepatitis C Virus (“HCV”), the totality of the circumstances did not warrant the award of enhanced damages. He based the denial of the motion on the public health benefit of the accused products and on the amount of the jury award.
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.
Over the course of the past year, there have been two notable decisions issued by the Federal Circuit and the International Trade Commission that impact the scope and nature of the remedies available for the infringement of standard-essential patents (SEPs), and as a result, continue to shape the incentives of technology innovators to contribute their patented inventions to standards-setting bodies.
On December 3, 2015, the Federal Circuit issued its much-awaited decision in Commonwealth Scientific and Industrial Research Organization (CSIRO) v. Cisco Systems, Inc., providing meaningful guidance on a number of open questions pertaining to the calculation of damages for the infringement of SEPs. In Certain Industrial Control System Software, Systems Using Same, and Components Thereof, Inv. No. 337-TA-1020 (the 1020 Investigation), the Commission was asked to invoke the Early Disposition Pilot Program to direct the presiding Administrative Law Judge to determine whether the asserted patents are standard-essential and therefore subject to mandatory licensing obligations.
To read the additional details about these decisions and their impact, please click here.