By Eric Schweibenz
On June 22, 2010, the ITC issued a notice and opinion affirming ALJ Theodore R. Essex’s initial determination (“ID”) in Certain Hybrid Electric Vehicles and Components Thereof (Inv. No. 337-TA-688).

By way of background, this investigation follows litigation between Complainant Paice LLC (“Paice”) and Respondents Toyota Motor Corp., Toyota Motor North America, and Toyota Motor Sales, USA, Inc. (collectively, “Toyota”) in the U.S. District Court for the Eastern District of Texas in which certain Toyota hybrid vehicles were found to infringe U.S. Patent No. 5,343,970 (the ‘970 patent).  On April 2, 2010, the ITC reversed the ALJ’s summary determination that the doctrine of claim preclusion prevented Toyota from arguing noninfringement, invalidity or unenforceabilty of the asserted patent claims.  See our April 6, 2010 post for more details.  The April 2 opinion took no position, however, on the application of the doctrine of issue preclusion.  Subsequently, on remand from the ITC, ALJ Essex issued an Initial Determination (“ID”) granting Paice’s motion to bar, on the basis of issue preclusion, relitigation of the validity of the ‘970 patent.

The Opinion noted that the parties did not dispute that Paice made out a prima facie case for issue preclusion, or that ALJ Essex had correctly recited the law.  The parties disputed, rather, whether an exception to the issue preclusion doctrine was applicable.  Namely, whether an intervening change in the law, the decision in KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007), warranted the retrial of issues previously adjudged.  Both ALJ Essex and the ITC agreed that it did not.

In the Opinion, the ITC noted several reasons for the inapplicability of the exception.  In addition to the grounds cited in ALJ Essex’s ID, the ITC indicated that even if KSR constituted a change in the law for purposes of providing an exception to issue preclusion, Toyota did not raise any genuine issues of material fact in opposition of Paice’s motion, thus Toyota did not satisfy its burden to support an exception to issue preclusion.  Specifically, Toyota relied only on an erroneous jury instruction.  The ITC stated that a “mere error in a jury instruction, while enough in some cases to warrant a new trial on direct review, cannot suffice to enable collateral review of a final judgment.”  The Opinion provided that the jury instruction in question did not require an express motivation to combine and that the Supreme Court in KSR recognized that many pre-KSR decisions, with likely the same instruction as in Paice v. Toyota, applied the obviousness test correctly.

The Opinion also stated that Toyota knew or should have known to challenge the obviousness determination directly in its district court litigation, instead of collaterally in the ITC.  The ITC observed that numerous prominent briefs had been submitted to the Supreme Court urging the reversal of KSR preceding Toyota’s Rule 59 deadline.  According to the Opinion, under these circumstances, where a party has chosen not to preserve or pursue an appealable matter, it is unreasonable to argue that there has been manifest inequity.