Goodwin Insights May 06, 2019

Goodwin Insights

Like many other governmental bodies, the International Trade Commission (ITC or Commission) had a slow start in 2019, due to the government shutdown; no new complaints, no motions, no hearings, no activity whatsoever. Indeed, during government shutdowns, non-essential ITC employees are legally prohibited from engaging in any work, including even checking email. Notably, before the 2018-19 government shutdown kicked off, neither the Commission nor many of the ALJs provided much specific guidance. Thus, during the shutdown, private litigants carried on with litigation and discovery activity as best they could.

Then, on January 28, the Commission re-opened for business. There were trials to reschedule and nearly all investigations needed new procedural schedules. Some of the congestion and confusion is still being sorted through, but, for the most part, business is back to normal.

Since opening, there have been a number of potential trends bubbling to the surface. For one, there has been an uptick in life sciences based complaints. Historically, we have not seen many life sciences companies taking advantage of the ITC. It is unclear whether that is changing, but it is certainly a potential trend  to watch.  Of the eleven new ITC complaints filed in Q1, four involved life sciences subject matter. That far exceeds historical averages—between 2013 and 2018, less than ten percent of the about 300 new complaints were in the life sciences space. It will be interesting to see whether this is a trend or a fad.

Additionally, there appears to be a growing ITC appeal for NPEs, particularly those with U.S.-based licensees. Judge McNamara recently confirmed in an Initial Determination (Order No. 13 in the 1025 Investigation) that non-practicing entities can rely on the domestic activities of their licensees to satisfy both prongs of the domestic industry requirement. The Commission decided not to review Judge McNamara’s ruling. It is not clear whether NPEs were newly enticed to the ITC by this ruling, but there has been a growing number of complaints brought by licensing entities. Indeed, this year we have already seen two new complaints filed by entities who are relying on their licensees to show a domestic industry. Like with life sciences, this is not a trend yet, but it is certainly an interesting development to watch.

100-day proceedings continue to be rare, but respondents appear to be increasingly enticed by the early disposition option. Of the new investigations filed in 2019, two have included requests for 100-day proceedings. In the 1146 Investigation the respondents argued that the complainant’s domestic investments fail to meet the bar. Respondents requested an early determination on the economic prong and the Commission granted it. The 1146 Investigation is set for an early evidentiary hearing on whether the complainants have satisfied the economic prong.  In the 1147 Investigation, the respondents requested a 100-day proceeding on patent invalidity and inequitable conduct. The Commission instituted the investigation without an early evidentiary hearing on the invalidity and unenforceability issues.

Public interest observers were anxious to see how the Commission would handle Judge Pender’s ID and RD in the 1065 Investigation (Qualcomm v. Apple). In his ID, Judge Pender found that Apple violated Section 337 by importing iPhones utilizing Intel processors that infringed one of Qualcomm’s asserted patent claims. Judge Pender also determined, however, that an exclusion order would violate the public interest because it would allegedly hinder technology development for 5G applications. Thus, Judge Pender recommended that no exclusion order should issue.

This was a fairly unique application of the public interest factors and many were interested in how the Commission would respond. The anticipation was short-lived, however. The Commission determined that the allegedly infringed claim was invalid and, therefore, there was no underlying violation. The Commission’s notice is public, but its supporting opinion is not. It is likely, however, that the Commissioners determined that the public interest analysis is now moot, but time will tell. Interestingly, on the morning of the Commission’s opinion overturning Apple’s purported violation in the 1065 case, Judge McNamara submitted a public notice announcing that she had separately found a violation by Apple and was recommending an exclusion order. That ID is not yet public and the Commission has not yet indicated whether it will review the ID. The interplay between the PTAB and the Commission continues to be interesting as well. At the end of March, in the 1058 Investigation, the Commission issued its public notice recommending an exclusion order based on infringement of multiple patents. As part of that notice, the Commission noted that it will be suspending the enforcement orders with respect to an asserted patent that was subject to a PTAB final determination of invalidity. The Commission has not laid out a bright line rule for suspending enforcement orders, but it has now twice suspended enforcement orders where final PTAB decisions only affect a portion of the enforcement order. It made a similar finding in the 939 Investigation. In that case, a PTAB decision invalidated a subset of the patent claims subject to an exclusion order and the Commission suspended the order with respect to the invalidated claims. On the other hand, in the 645 Investigation, where there was complete overlap between an exclusion order and PTAB final invalidity findings, the Commission did not suspend the enforcement order. Although the Commission laid out some distinguishing factors, the test, if any, is still not clear. The Commission’s opinion in the 1058 Investigation will not be public until next month and it will be interesting to see whether the Commission elaborates on the factors they are considering when determining whether to suspend enforcement orders.

Lastly, on April 1, there was an announcement of a new ALJ. David S. Johanson, Chairman of the ITC announced that Judge Cameron Elliot has been selected as the new AJL. Judge Elliot has a bachelor’s degree in physics and applied physics from Yale. He previously served as an ALJ with the U.S. Securities and Exchange Commission and the Social Security Administration and was formerly in private practice.