By John Presper

On March 1, 2022, the Federal Circuit issued its opinion affirming the ITC’s remand determination not to rescind or modify a $6.2 million civil penalty imposed on DBN Holding, Inc. for violations of a consent order.

By way of background, the underlying investigation was instituted in 2012 based on a complaint filed by BriarTek IP, Inc. (“BriarTek”), a Virginia company that manufactures search-and-rescue tracking devices.  The investigation was terminated based on a consent order in which Respondents DeLorme Publishing Co., Inc. and DeLorme InReach, LLC—now known as DBN Holding, Inc. and BDN LLC (collectively, “DBN”)—agreed not to import or sell two-way global satellite communication devices, systems, or components thereof that infringe BriarTek’s U.S. Patent No. 7,991,380 (the ‘380 patent) after April 1, 2013.  On April 10, 2013, BriarTek filed an enforcement complaint alleging that DBN violated the consent order.  In the enforcement initial determination (“EID”), ALJ Dee Lord found that DBN violated the consent order with respect to its sale after importation of accused components of the InReach 1.5 device, and recommended a civil penalty of $637,500 ($12,500 per day for 51 days of violation).  On review, the Commission reversed-in-part and vacated-in-part the EID, and determined that the ALJ erred in finding no induced infringement (and thus no violation of the consent order) with respect to the accused InReach SE devices.  Regarding enforcement measures, the Commission held that a combined cost of the device and subscription should be considered, and that the evidence supported a finding of bad faith by DBN’s violation of the consent order.  Accordingly, the Commission determined to impose a civil penalty of $6,242,500 based on an amount of $27,500 a day over 227 days of violation.  See our July 9, 2014 post for more details regarding the Commission’s opinion.

In a parallel district court action, the U.S. District Court for the Eastern District of Virginia granted summary judgment invaliding the same asserted claims of the ’380 patent, and that ruling was affirmed on appeal.  DeLorme Publ’g Co. v. BriarTek IP, Inc., 622 F. App’x 912, 913 (Fed. Cir. 2015) (“DBN I”).  The Federal Circuit also held that the ITC did not abuse its discretion in imposing the $6.2 million civil penalty on DBN for violating the consent order, and that the affirmance in DBN I did not negate—under the consent order’s unambiguous terms—DBN’s pre-invalidation violations of the consent order.  DeLorme Publ’g Co. v. Int’l Trade Comm’n, 805 F.3d 1328, 1330 (Fed. Cir. 2015) (“DBN II”).  DBN then petitioned the ITC to rescind or modify the civil penalty on the grounds that the claims asserted in the underlying investigation were found invalid.  The ITC denied the petition under the doctrine of res judicata, interpreting DBN II to mean the Federal Circuit’s contemporaneous invalidity affirmance in DBN I had no effect on the civil penalty order.  DBN appealed that determination to the Federal Circuit, which held that DBN II did not divest the ITC of the authority to rescind or modify the civil penalty in light of the invalidity judgment.  DBN Holding, Inc. v. Int’l Trade Comm’n, 755 F. App’x 993, 997-98 (Fed. Cir. 2018) (“DBN III”).  The Federal Circuit thus remanded for the ITC to decide whether to rescind or modify the civil penalty in light of the court’s decision that the relevant patent claims are invalid.  On remand, the ITC again denied DBN’s petition, rejecting DBN’s argument that the ITC had rescinded civil penalty orders in similar cases, and concluding that the invalidation of the asserted claims did not change its original assessment of the EPROMs factors when imposing the penalty.

On appeal, DBN argued that the ITC’s denial of its petition to rescind or modify the civil penalty was an abuse of discretion, and relied in particular on Certain Neodymium-Iron-Boron Magnets, Magnet Alloys, and Articles Containing Same, Inv. No. 337-TA-372 (Oct. 20, 1999) (“Magnets”) in which the ITC rescinded a $1.6 million civil penalty involving the importation of infringing construction materials after the parties had signed a retroactive license agreement and filed a joint motion to vacate the fine (which the ITC granted given that the retroactive license authorized the action that was the subject of the penalty).  The court disagreed that Magnets governed, and found that the retroactive settlement in that case (which prohibited importation of the infringing articles “except under consent or license”) rendered the respondent’s prior actions non-infringing.  The court explained:   “Unlike in Magnets, the parties here did not reach any such retroactive settlement … or any other form of agreement or settlement addressing the consent order violations.  DBN does not explain how its violations of the consent order were authorized.  DBN points out that it is now impossible to seek a retroactive license because the asserted patent claims have been invalidated.  …  That point does not help DBN’s position because absent a retroactive settlement, we look to the consent order for such authorizations.  The fact remains that, unlike in Magnets, the actions leading to DBN’s violation of the consent order were never authorized by the ITC or the complainant in the underlying Section 337 investigation.”