Ebay Factors Irrelevant to ITC Exclusion Orders

Parallel Patent Reexaminations Given Little Weight at ITC

As detailed in past posts, an ongoing patent reexamination may help defendants stave off an injunction in district court. For example, in Flexiteek v. Plasteak,  (S.D. Fla. 2010) (Cohn, J.), the district court opted to stay the enforcement (order here) of the permanent injunction based upon the status of the related patent reexamination. At the ITC however, patent reexaminations are viewed as a routine occurrence.

As explored in the ITC action initiated by Tessera Inc., In the Matter of Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same, Inv. No. 337-TA-605, 2008 WL 2223426 (Int’l Trade Comm’n May 27, 2008), it is next to impossible to stay an ITC proceeding pending an ongoing patent reexamination. This is due to the ITC’s statutory mandate to conclude investigations within a strict time frame.

Having lost the battle to stay the case, the remaining Tessera defendants cited the existence of the ongoing patent reexamination as a basis to avoid an exclusion order. The defendants asserted, that the public interest analysis required by 19 U.S.C. § 1337 (d)(1) was akin to the factors enumerated in eBay Inc. v. Mer-cExchange, L.L.C., 547 U.S. 388 (2006). In arguing for the Ebay factors, the defendants emphasized that money damages may be more appropriate for a “licensor” such as Tessera and that there would be no irreparable harm.

Yesterday, the CAFC contrasted the principles of equity applied in district courts to the statutorily mandated exclusion order of the ITC in Spansion v. ITC, and affirmed the ITC’s treatment of the ongoing patent reexaminations as largely irrelevant.

In explaining the inapplicability of the Ebay factors to the ITC’s calculus, the CAFC summarized:

As contrasted with the remedial scheme established by Congress for proceedings before the Commission, the statutory remedies available in proceedings before the district courts are quite different. In addition to the remedy of damages under 35 U.S.C. § 284, Congress gave district courts the discretion to grant injunctive relief and in doing so made explicit that such discretion is to be exercised “in accordance with the principles of equity . . . on such terms as the court deems reasonable.” 35 U.S.C. § 283. In eBay, the Supreme Court explained that Section 283 did not endorse or establish a categorical grant of injunctive relief following a determination of infringement. Rather, the decision whether to grant or deny injunctive relief under Section 283 depends on traditional principles of equity, applying the four-part test for permanent injunctive relief in patent disputes no less than in other cases governed by such standards. See eBay, 547 U.S. at 391 (discussing the four-factor test for injunctive relief).

Given the different statutory underpinnings for relief before the Commission in Section 337 actions and before the district courts in suits for patent infringement, this court holds that eBay does not apply to Commission remedy determinations under Section 337. The Commission is not required to apply the traditional four-factor test for injunctive relief used by district courts when deciding whether to issue the equitable remedy of a permanent injunction. Unlike the equitable concerns at issue in eBay, the Commission’s issuance of an exclusion order is based on the statutory criteria set forth in Section 337. Spansion’s argument that the term “public welfare” is so “broad and inclusive” that Congress must have intended it to include the traditional equitable principles reflected in the eBay standard is unpersuasive when viewed in the context of Section 337.

Clearly, the surge in popularity of the ITC is due in part, to the ability to more readily secure injuctive style relief post-Ebay relative to that of the district courts. However, the dim view of patent reexamination at the ITC may also lead to an increase in ITC actions. Indeed, defendants already under a stay pending patent reexamination in a district court have effectively created an end-around the stalled case via the ITC.  For those defendants most suscpetible to patent reexamination complications (i.e., trolls) that are also capable of satisfying the domestic industry requirement, the ITC may soon rank right up ther with Marshall Texas (perhaps outrank should the venue transfer trends continue). While an exclusion order is not $$$…it is as good as gold for settlement purposes, especailly as compared to a stayed district court litigation.