06
Nov
By Tom Fisher
Patents asserted in Section 337 investigations at the ITC are often times subject to concurrent reexamination proceedings at the U.S. Patent & Trademark Office (“USPTO”).  When this occurs, respondents will sometimes seek to stay the Section 337 investigation pending the outcome of the reexamination at the USPTO.  However, because of the unique remedies available at the ITC, the analysis of whether a stay pending the outcome of the reexamination is appropriate at the ITC plays out somewhat differently than it does in district court litigation.

In deciding whether to stay the Section 337 investigation pending the outcome of the reexamination is appropriate, the ITC typically considers the following five factors:  “(1) the state of discovery and the hearing date; (2) whether a stay will simplify the issues and hearing of the case; (3) the undue prejudice or clear tactical disadvantage to any party; (4) the stage of the PTO proceedings; and (5) the efficient use of Commission resources.”  Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same, Inv. No. 337-TA-605, Comm’n Op., 2008 ITC LEXIS 888, at *4 (May 27, 2008).

The first factor relates to how far the Section 337 investigation has progressed towards resolution.  Generally speaking, if discovery has just commenced and the hearing date is far in the future, the first factor weighs in favor of granting a stay.  See Certain Personal Computer/Consumer Electronic Convergent Devices, Components Thereof, and Products Containing Same, Inv. No. 337-TA-558, Comm’n Notice, 2006 ITC LEXIS 568, at *2-3 (Jul. 31, 2006).  Conversely, if discovery is complete and the hearing date is rapidly approaching, the first factor weighs against granting a stay.  Certain Semiconductor Chips, Inv. No. 337-TA-605, Comm’n Op., 2008 ITC LEXIS 888, at *6-8.

The second factor typically weighs in favor of granting a stay.  Awaiting the completion of concurrent reexamination proceedings has the potential to “simplify the issues and hearing of the case” because the reexamination can eliminate certain claims from consideration or even obviate the need for a hearing altogether.  Thus, even when a stay is ultimately denied, the ITC often finds that the second factor weighs in favor of granting a stay.  See, e.g., Certain Semiconductor Chips, Inv. No. 337-TA-605, Comm’n Op., 2008 ITC LEXIS 888, at *9-12.

The third factor is what truly differentiates the stay analysis in ITC investigations from the analysis in district court litigation.  Since the ITC cannot award monetary damages for past infringement -- but can only prospectively exclude infringing products from the United States -- any delay in the completion of the investigation negatively impacts the complainant because it means that any potential remedy will be in effect for a shorter period of time.  Once the asserted patents expire, any exclusion orders based on infringement of those patents also expire.  Thus, a stay of a Section 337 investigation effectively grants respondents a royalty-free license during the stay.  Certain Course Management Systems Software Products, Inv. No. 337-TA-677, Order No. 5, 2009 ITC LEXIS 1342, at *10-11 (Jul. 24, 2009).  Accordingly, in the ITC, the third factor of the stay analysis will likely weigh against granting a stay because there is a clear tactical disadvantage to the complainant.

The fourth factor is the mirror image of the first: the farther along the reexamination has progressed, the more likely a stay will be granted at the ITC pending the completion of the USPTO proceeding.  Thus, if the USPTO proceedings are still at an early stage, this factor weighs against granting a stay.  Certain Semiconductor Chips, Inv. No. 337-TA-605, Comm’n Op., 2008 ITC LEXIS 888, at *14-18.  Conversely, if the reexamination is nearly complete, this factor would weigh in favor of a stay.

The fifth factor is similar to the second, and tends to be analyzed in the same way by the ITC.  In other words, this factor typically weighs somewhat in favor of granting a stay because it would typically be a more efficient use of Commission resources to wait until the reexamination is completed, thereby potentially narrowing the issues to be considered at the ITC.  Certain Semiconductor Chips, Inv. No. 337-TA-605, Comm’n Op., 2008 ITC LEXIS 888, at *18-19.

In four relatively recent decisions involving whether or not to grant a stay of a Section 337 investigation pending the outcome of a concurrent reexamination at the USPTO, a stay was granted in one case but denied in three.  See Certain Personal Computer/Consumer Electronic Convergent Devices, Inv. No. 337-TA-558, Comm’n Notice (stay granted); Certain Semiconductor Chips, Inv. No. 337-TA-605, Comm’n Op. (stay denied); Certain Course Management Systems Software Products, Inv. No. 337-TA-677, Order No. 5 (stay denied); Certain Bassinet Products, Inv. No. 337-TA-597, Order No. 11, 2007 ITC LEXIS 995 (Sep. 10, 2007) (stay denied).  Additionally, in Certain Semiconductor Chips, Inv. No. 337-TA-605, respondent Freescale Semiconductor, Inc. sought a writ of mandamus from the Federal Circuit ordering the ITC to vacate its decision denying the requested stay, but its petition was denied.  In re Freescale Semiconductor, Inc., 2008 U.S. App. LEXIS 14739, at *4 (Fed. Cir. Jun. 25, 2008).

While it is difficult to draw any broad conclusions, it is clear that stays pending reexamination are not routinely granted at the ITC, most likely because of the statutorily mandated rapid pace of Section 337 investigations coupled with the consistent and unavoidable prejudice suffered by complainants from the lack of any retrospective remedies at the ITC.  Thus, unlike district court litigation, stays of Section 337 investigations pending concurrent reexaminations are more likely to be granted only when factors 1 and 4 weigh heavily in favor of a stay, i.e., where the ITC investigation is in its infancy but the reexamination has already progressed significantly towards resolution.

For a more comprehensive commentary on the benefits of patent reexamination and other post grant issues, please visit http://www.patentspostgrant.com.
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