The en banc re-hearing focused on two main issues:

• Whether an agreement between developers of a new standard to license a patent to be used only under the standard (thus foreclosing the creation of a competing standard) should be held anti-competitive without addressing the relevant market for the standards or proving injury to competition as a result of the agreement; and
• Whether such an agreement, even if found to be anti-competitive, can be a proper basis for a patent misuse defense preventing enforcement of other patents used to practice the standard.

While it is difficult to predict how the CAFC will rule in Princo, in order to determine whether the license agreement is anti-competitive on its face, the court will likely consider the possible effects of such an agreement.

One possible anti-competitive effect that could result from an agreement of this type relates to what would happen if a particular standard, which is the subject of such an agreement, fails.  For instance, it may be the case that two standards are in direct competition.  There may be patents that are considered essential to both standards.   If one of the standards was to fail due to widespread adoption of the competing standard, and an agreement such as the one at issue in Princo is in place, developers of the failed standard would be left with a number of essential patents that may be unavailable for inclusion in a pool linked to the surviving standard.  As a result, the pro-competitive advantage provided by the pooling of essential patents would have been impeded.  In contrast, if an agreement between developers of a new standard to license a patent to be used only under the standard was found to be anti-competitive on its face, such agreements would be disfavored, and the resultant problems would be avoided.

In addition, it is possible that a ruling that is consistent with the FTC’s amicus brief may result.  The FTC’s amicus brief takes the position that an agreement not to license a patent except for uses complying with a particular standard should be justified only when done ex ante (i.e., before the standard is finalized), and only when reasonably necessary to further pro-competitive technical collaboration.

Whatever the outcome, the CAFC ruling in the Princo case could have significant effects in the area of patent pools and standards.  A ruling is expected soon.

OUII can trace its origins back to the Trade Act of 1974 (the “Trade Act”), which instituted significant changes in the procedures for Section 337 actions.  Prior to the passage of the Trade Act, the provisions of the Administrative Procedure Act (“APA”) did not apply to Section 337 actions, and there was therefore very limited participation by the private parties after institution of an investigation — the Commission investigated complaints directly.  This changed drastically after the enactment of the Trade Act.  The private parties suddenly had substantial new rights to participate directly in Section 337 proceedings.  The problem, however, was that now the Commission could not directly communicate with the private parties ex parte because it was serving as an administrative fact-finder.  To remedy this situation, OUII (originally known as the Unfair Import Investigations Division or “UIID”) was created so as to represent the public interest in the proceeding and help the Commission reach a correct and fully informed determination.

OUII plays a number of critical roles in Section 337 investigations, beginning even before a complaint is filed.  Complainants typically consult with OUII before filing in order to ensure the technical sufficiency of the draft complaint and to improve the likelihood of having the Commission institute an investigation based on the complaint.  During the 30-day period following the filing of the complaint, OUII consults with the Complainant and proposed Respondents and then makes a recommendation to the Commission on whether to institute an investigation.

Once the Commission institutes an investigation, OUII’s primary role is to aid in the creation of a complete record in order to support the public’s interest in a correct and fully-informed decision by the Commission.  To this end, OUII can propound written discovery and participate in depositions just like the private parties.  OUII independently briefs the issues relevant to the public interest and will generally take a position on most of the critical legal issues in the investigation.

After an ALJ issues an Initial Determination, OUII remains an independent third party to the investigation and participates in briefing during review by the Commission.  If the Commission’s Final Determination is appealed to the Federal Circuit, however, it is the job of the Office of the General Counsel to represent the Commission on appeal.  OUII continues to play a role in the enforcement of the Commission’s determination, and participates in any formal enforcement proceedings.

Further information about the event can be found here.

In addition to making a timely request, a Respondent also must show that the claims in the district court action involve the same issues before the ITC.  This similarity of issues requirement has been interpreted by some district courts to require that the patents asserted in both forums be identical.  By way of example, in Saxon Innovations, LLC v. Palm, Inc., 2009 U.S. Dist. LEXIS 105928 (E.D. Tx. Nov. 4, 2009), the plaintiff Saxon accused Palm of infringing its ‘873 patent.  Saxon had also asserted its ‘873 patent in a parallel ITC investigation.  Although Palm was a respondent in that parallel ITC investigation, Saxon did not assert its ‘873 patent against Palm in that forum.  The district court denied Palm’s request to stay the district court action against it finding that “[t]he claims against Palm in this case and the claims against Palm in the ITC investigation are not ‘identical parallel claims.’”  In explaining its ruling, the court noted the fact that the ITC will not consider Palm’s alleged infringement of the ‘873 patent nor will it consider Palm’s invalidity theories of the ‘873 patent, if any.  Similarly, in Micron Tech., Inc. v. Mosel Vitelic Corp., 1999 U.S. Dist. LEXIS 4792 (D. Id. Mar. 31, 1999), the district court denied the defendants’ request to stay under § 1659(a) a consolidated action in its entirety where only four of eleven patent infringement claims were asserted in the ITC.  The district court rejected the defendants’ assertions that the seven patent infringement claims not before the ITC were so related to the four patent infringement claims before the ITC that they implicated substantially similar legal and factual issues, including the fact that the plaintiff alleged the same products infringed all eleven patents.  Although the district court refused to stay the action with respect to the seven patent infringement claims not before the ITC, the court granted the defendants’ motion to stay the remaining four patent infringement claims until such time as the resolution of the ITC action became final.

Other district courts have determined that although § 1659 may not be applicable, it can use its discretionary authority to stay any non-identical patent infringement claims.  For example, in SanDisk Corp. v. Phison Elec. Corp., 538 F.Supp.2d 1060 (W.D. Wis. 2008), the district court stayed, under its inherent power, a separate action involving non-identical patent infringement claims filed by the plaintiff against the same defendants/respondents.  In staying the separate action, the court noted that the patents shared the same prosecution history and specification of one of the patents asserted in the plaintiff’s other district court action that was stayed under § 1659.  Similarly, in Formfactor, Inc. v. Micronics Japan Co., Ltd., 2008 U.S. Dist. LEXIS 131114 (N.D. Cal. Feb. 11, 2008), in addition to staying two patent infringement claims under § 1659, the district court stayed, under its inherent power, two non-identical patent infringement claims.  The court noted that the four asserted patents shared at least two common inventors.  In staying the entire action, the district court cited the potential duplication of discovery that would occur if the two remaining claims were not stayed and stated that “the similarity of the patents in subject matter [was] sufficient to warrant staying the matter . . . in order to gain the additional knowledge of the ITC proceedings and  . . . to benefit from litigating the four patents in this action together.”

In the event that a district court ultimately determines to stay a civil action under 28 U.S.C. § 1659(a), the civil action is stayed “until the determination of the Commission becomes final.”  This statutory language has been interpreted by the Federal Circuit to mean that “§ 1659 requires that the stay of district court proceedings continue until the Commission proceedings are no longer subject to judicial review.”  In re Princo Corp., 478 F.3d 1345, 1355 (Fed. Cir. 2007).

Temporary relief may be granted, under Section 337, to a party to “the same extent as preliminary injunctions and temporary restraining orders may be granted under the Federal Rules of Civil Procedure.”  19 U.S.C. § 1337(e)(3).  In order to obtain temporary relief, a party must show (1) reasonable likelihood of success on the merits, (2) irreparable harm caused if relief is not granted, (3) balance of hardships tipping in the requesting party’s favor, and (4) the public interest does not preclude issuance of relief.  Reasonable likelihood of success on the merits, in Section 337 cases, includes demonstration that a valid and enforceable intellectual property right has been infringed and that a domestic industry exists, or is in the process of being established, that practices the asserted intellectual property right.

If a party wishes to file for temporary relief, in most cases, the complainant must do so at the time of the complaint. 19 C.F.R. § 210.52.  In certain circumstances, however, a motion for temporary relief may be filed after the complaint, but before the institution of an investigation.  19 C.F.R. § 210.53.  This requires a party to prove that extraordinary circumstances, warranting temporary relief, exist and that the party was not aware, and with due diligence would not have been aware, of those circumstances at the time the complaint was filed.  Id.

Regardless of whether the motion is filed with the complaint or afterward, it must be accompanied by (1) a memorandum of points and authorities in support of the motion; (2) affidavits of persons with knowledge of the facts alleged; (3) all documentary information and other evidence intended to be submitted in support of the motion; (4) a detailed statement of facts bearing on whether the complainant should be required to post a bond; and if so required, (5) the appropriate amount of that bond.  19 C.F.R. § 210.52.

Once a proper motion for temporary relief has been made, the opposing party has 10 days after the service of the motion to file a response. 19 C.F.R. § 210.59.  In the response, the opposing party will attempt to show that the complainant lacks a reasonable likelihood of success on the merits, that no irreparable harm will be caused if relief is not granted, that the balance of hardships tips in the opposing party’s favor, and that the public interest precludes issuance of relief.  Like the motion for temporary relief, the response should also include a memorandum of points and authorities; affidavits, where possible; and address the complainant’s bond assertions. Id.

After the complaint, the motion for temporary relief, and the response have been filed, the Commission will determine whether to institute an investigation.  This determination must be made within 35 days of the filing of the complaint and motion for temporary relief.  19 C.F.R. § 210.10.  If an investigation is instituted, the motion for temporary relief is provisionally accepted and forwarded to an ALJ who will make an initial determination (“ID”) as to whether there has been a violation of Section 337 and whether temporary relief is appropriate.  The ALJ then has 70 days after the institution of the investigation to issue the ID.  19 C.F.R. § 210.58.  Like other Section 337 proceedings, the ALJ may deem the temporary relief portion of the investigation “more complicated,” thus extending the deadline for the ID to 120 days from the institution of the investigation.  Id.  By way of example, and as indicated in our December 23 post, ALJ Rogers designated the investigation “more complicated” in Certain Silicon Microphone Packages.

After the ALJ issues an ID on the issue of temporary relief, the Commission has 20 days (30 days in “more complicated” cases) in which to modify or vacate the ID.  19 U.S.C. § 1337(e)(2).  Within that 20 day (or 30 day) period, the parties have the opportunity to submit commentary on any perceived errors in the ID.  If the Commission chooses to award temporary relief, they may do so either in the form of a temporary exclusion order or a temporary cease and desist order.

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.

If the licensing or settlement agreements contain confidential information, such information can be removed from the public versions of these documents.  Indeed, if fewer than all parties settle the investigation, the settling parties might be able to maintain the confidentiality of the financial settlement terms from the non-settling parties.  See, e.g., Certain Machine Vision Software, Inv. No. 337-TA-680, Order 18 (October 29, 2009) (finding that the policy of encouraging settlement through maintaining financial terms secret trumps non-settling parties’ alleged need of such information for remedy issues).  However, keeping financial settlement terms from non-settling parties is not uniformly followed in all cases.  See, e.g., Certain Zero-Mercury-Added Alkaline Batteries, Inv. No. 337-TA-493, Order 35 (October 30, 2003) (while redacted financial information would be kept from non-settling respondents, ALJ denied complainant’s request to keep such information from outside counsel of non-settling respondents, because existing protective order was sufficient).

According to the Commission Rules, the Administrative Law Judge (“ALJ”) is directed to consider and make appropriate findings regarding the effect of the proposed settlement on the public health and welfare, competitive conditions in the U.S., the production of like or directly competitive articles in the U.S., and U.S. consumers.  See Commission Rule 210.50(b)(2).  Although the ALJ may conduct a hearing on these public interest factors, the ALJ’s findings on this issue are normally made solely on the information submitted by the parties.  If the ALJ grants the motion to terminate the investigation based upon settlement, the ALJ then certifies to the full Commission the motion papers and agreements, with an initial determination terminating the proceeding for the affected parties.  Again, if confidential information is contained within the initial determination, agreements, and motion papers, then confidential and public versions of these papers are forwarded to the Commission.

Under Commission Rule 210.42(e), notice of the initial determination based on settlement is provided to the U.S. Department of Health and Human Services, the U.S. Department of Justice, the Federal Trade Commission, the U.S. Customs Service, and any other departments or agencies that the Commission deems appropriate.  These institutions are permitted ten days after service of the notice to provide comments regarding the initial determination.

The Commission then has an opportunity to review the settlement agreements along with any other comments provided by the parties, Commission Investigative Attorney, ALJ, and any agencies or departments.  The Commission can then take action as it sees fit, or more commonly, it will decide not to review the initial determination, in which case it will issue a notice to the public and the parties of its decision, and the investigation will terminate as to the affected parties.

Under Section 337, an appeal of an adverse Commission determination must be made “in accordance with chapter 7 of title 5.”  19 U.S.C.  § 1337(c).  Chapter 7 of title 5, in turn, only provides for appellate actions “against the United States, the [federal] agency by its official title, or the appropriate officer.”  5 U.S.C. § 703.  Accordingly, appeals of adverse determinations at the ITC in connection with Section 337 actions cannot be brought against the other party to the investigation directly; rather, they must be brought against the ITC.

Further, only parties who are “adversely affected” by a final determination of the ITC have standing to appeal to the Federal Circuit.  19 U.S.C. § 1337(c).  This statutory “adversely affected” language has been interpreted narrowly, in that only the ultimate outcome of the investigation is taken into account.  Surface Tech., Inc. v. U.S. Int’l Trade Comm’n, 780 F.2d 29, 30 (Fed. Cir.  1985); Krupp Int’l, Inc. v. U.S. Int’l Trade Comm’n, 626 F.2d 844, 846 (CCPA 1980).  This means that, e.g., respondents cannot appeal a determination that section 337 has not been violated.  See Krupp, 626 F.2d at 846; Surface Tech., 780 F.2d at 30; Tanabe Seiyaku Co., Ltd. v. U.S. Int’l Trade Comm’n, 1995 U.S. App. LEXIS 40961, at *2 (Fed. Cir. 1995).

However, in order to mitigate this harsh rule, the Federal Circuit has repeatedly held that if the losing party appeals the Commission’s decision, then the prevailing party has the right to intervene and raise any available arguments in support of the Commission’s final determination.  See, e.g., Krupp, 626 F.2d at 846 (allowing respondent to intervene in complainant’s appeal in order to, inter alia, challenge the Commission’s findings related to four patents, even though the Commission had found no violation of Section 337, due to non-infringement for one of the patents and invalidity for the other three); see also Rule 15(d) of the Federal Rules of Appellate Procedure (providing further information regarding the required substance and timing for a motion to intervene at the Federal Circuit).  Thus, as a practical matter, the prevailing party can argue against unfavorable Commission findings on appeal, as long as the losing party appeals the overall final determination first.

If the Commission finds a violation of Section 337, then it is authorized to issue two types of remedial orders:  exclusion orders and cease and desist orders.  19 U.S.C. § 1337(d)-(f).  An award of money damages is not available as a remedy in the ITC.  The available remedies in the ITC are therefore prospective in nature.  The defense of laches in patent cases, on the other hand, is retrospective in nature:  if the defendant proves by a preponderance of the evidence that the patentee delayed filing suit for an unreasonable length of time from when it new or should have known of the claim against the defendant, and that the defendant suffered either economic or evidentiary prejudice as a result of the delay, then the patentee is barred from recovering pre-filing monetary damages.  Thus, “laches as it pertains to patent-based cases does not, as a matter of law, work to curtail the type of prospective relief sought in 337 cases.”  Certain Personal Watercraft and Components Thereof, Inv. No. 337-TA-452, Order No. 54 at 2, Initial Determination (Sept. 19, 2007) (citing Certain EPROM, EEPROM, Flash Memory and Flash Microcontroller Semiconductor Devices and Products Containing Same, Inv. No. 337-TA-395, Comm’n Op., Suppl. Views of Chairman Bragg at 11, n.65 (July 9, 1998)).

It should be noted that while “ordinary” laches is not an available as a defense, respondents in the ITC may assert prosecution laches.  See Certain Data Storage Systems and Components Thereof, Inv. No. 337-TA-471, Order No. 42 (Jan. 4, 2003).  The two-prong test for prosecution laches requires (1) an unreasonable and inexcusable delay by the patentee in prosecuting the patent, and (2) material prejudice to the defendant attributable to the delay.  If prosecution laches applies, then the patent is rendered unenforceable.  Thus, unlike a laches defense to limit damages, a prosecution laches defense is not retrospective and will impact the type of prospective relief sought by patentees in the ITC.

Under Commission Rule 210.79, any person may request an advisory opinion from the Commission to determine whether a proposed course of action or conduct would violate a Commission order.  The party requesting the advisory opinion must establish standing by showing that the proposed course of action is not hypothetical, that it has a compelling business need for the advice, and that the request was made as fully and as accurately as possible.  The Commission also takes into consideration whether an advisory opinion would facilitate the enforcement of Section 337, would be in the public interest, and would benefit consumers and competitive conditions in the United States.  Although the Commission’s rules do not require that an Administrative Law Judge (“ALJ”) issue an advisory opinion within a certain timeframe, the Commission can require that an ALJ set an abbreviated procedural schedule.  Typically, the Commission requires that the ALJ issue an initial advisory opinion within nine months of the publication date of the Commission’s Notice of Advisory Opinion Proceedings.  See, e.g., Certain Lens-Fitted Film Packages, Inv. No. 337-TA-406, Notice of Formal Enforcement and Advisory Opinion Proceedings and Accompanying Order (July 31, 2001) (9-months after notice publication).  Advisory Opinion proceedings are not subject to the requirements of the Administrative Procedures Act and thus the ALJ has discretion concerning the course of the advisory opinion proceeding, including taking evidence beyond what is already in the record, whether or not to hold an evidentiary hearing, and the scheduling for the proceeding.  Further, an advisory opinion by the Commission is not appealable as it does not represent a final determination.

Alternatively, persons who desire clarification about whether a redesigned product is covered by an exclusion order may request a ruling under 19 C.F.R. § 177 by sending a written request to U.S. Customs.  Requests are normally processed by U.S. Customs in the order received and as quickly as possible, usually within two to six months.  If U.S. Customs finds that the redesigned product falls outside the scope of the exclusion order, it will issue a ruling to that effect and permit the articles to enter the United States.  On the other hand, in the event that U.S. Customs denies entry of a redesigned product in light of an existing exclusion order, U.S. Customs will issue a ruling.  Such a ruling is subject to a right to appeal to the U.S. Court of International Trade (“CIT”).  Appeals from final decisions of the CIT may be taken to the U.S. Court of Appeals for the Federal Circuit and, ultimately, to the Supreme Court of the United States.