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The ITC End-Around District Court Stays Pending Patent Reexamination
The greatest season of the year, is neither winter, spring, summer or fall, it is football season. Despite the fact that my Eagles are looking hapless these days, and my fantasy football teams are already in the toilet (thanks a lot Larry Fitzgerald), still the NFL season is always exciting. Teams once left for dead rise again, Hail Mary’s are answered (unless Jason Avant is involved, curse his name) and last second strategies rule the day.
What does all of this have to do with patent law?….nothing really, patent law is nowhere near as exciting. Yet, every once in awhile a new strategy appears that changes the game. Much like the NFL, patent practice is a “copycat league,” so, very likely coming to a patent litigation near you….the “ITC end-around.”
For those not familiar with the football end-around, this play, as diagrammed above is an exercise in misdirection. With a very aggressive defense going one way, an offensive team fakes into the direction of the defense, only to toss the ball to a player running around the defense in the opposite direction. A form of this tactic was recently executed by Motiva in their dispute with Nintendo.
As the folks at the ITC blog detailed, Motiva originlly filed suit against Nintendo for infringement of U.S. Patent 7,292,151 in the U.S. District Court for the Eastern District of Texas. On December 17, 2009, the Federal Circuit issued a writ of mandamus transferring the case to the Western District of Washington. The case was docketed in the Western District of Washington on March 3, 2010. Shortly thereafter, Nintendo filed a request with the U.S. Patent and Trademark Office (“PTO”) for inter partes reexamination of the ‘151 patent. Pursuant to Nintendo’s request, the PTO ordered inter partes reexamination of the ‘151 patent on June 4, 2010. On June 11, 2010, the district court issued an order staying the case pending reexamination of the ‘151 patent. As most readers here recognize, this is the famed Texas two-step.
With Nintendo’s aggressive defense in their face, Motiva used a bit of misdirection and ran all the way to the ITC on Monday. (certain video game systems and controllers)
In the ITC action, a second patent, 7,492,268 was added that is not yet subject to patent reexamination. The ‘268 is a a direct continuation of the ‘151 Patent. For some reason, Nintendo did not seek reexamination of this patent (a strange trend discussed previously that I expect will now end). Currently, the ongoing reexamination of the ‘151 Patent has not advanced beyond the first action (95/000,540).
Motiva, a non-practicing entity of sorts, appears to be trying to take advantage of the relatively lower standard for domestic industry discussed at length in certain coaxial cable connectors. This investigation found that the domestic industry prong could be satisfied by licensing and litigation activities. Although the ALJ ultimately decided to vacate the finding of domestic industry based on specific facts of coaxial, the door is clearly open. Since the tightening of the injunction standards in Ebay, patent litigants have flocked to the ITC in pursuit of an exclusion order. While non-practicing entities are more interested in money damages, the leverage of such a remedy can be used for extortion purposes with great efficacy.
To date, the ITC mandate to expeditiously adjudicate 337 actions has led to relatively few stays pending reexamination. In some cases, stays have been entered and later reversed by the full Commission. (See Tessera Decision here). Thus, Nintendo will be hard pressed to stop the battle this time. Surely, the gamesmanship will not be lost on the ALJ should the matter be pursued. However, with one patent free of reexamination and inter partes reexamination proceedings/appeal likely to last long beyond the ITC investigation, securing another stay seems like a long shot. A further factor working in favor of the continued investigation is that inter partes estoppel of 35 U.S.C. § 315(c) does not even apply in the ITC. Thus, simplification of issues seems all the more speculative.
With injunctions harder to come by, and courts staying litigations upon the mere filing of a patent reexamination (at least in districts like NDCA and WDWA), you can expect patent trolls to begin flocking to the ITC….. just like everyone else.
As to surprise ["dopelganger?"] continuations in general, this is a fairly common patent litigation tactic pioneered years ago by Joe Re and others that still catches some people not looking for it by surprise. Namely, keep a continuation pending so that any prior art found by defendants sued on a parent or grandparent patent can be cited and white-washed and/or claim-distinguished in the continuation. Then assert the continuation. [Without the limitations of a reissue, and more immune to reexamination.]
Since the ‘268 Patent issued a year prior to the stay, and before the ‘151 reexamination was filed, I’d be surprised if Nintendo just missed it. Seems some think that if patents share a commons specification that a single reexamiantion is enough to satisfy a judge.
You do make a good point. Pending continuations greatly benefit any assertion campaign.
Pursuant to the Warner Bros. case, I know that the ITC’s justification for its lower domestic industry standard is based on its position that Congress intended to encourage industry, innovation, and economic advancement. There seems to be a conflict with the courts, however, in that district courts are now limiting NPEs’ potential damage awards in patent litigation to equivalent licensing fees, and otherwise issuing non-NPE-friendly rulings. It will be interesting to see which side wins this fight.