ITC Monthly Wrap-Up: March 2022

Authored by: Joshua Rosefelt

The ITC monthly wrap-up for March 2022 focuses on two Federal Circuit decisions that help explore two of the major differences between patent litigation in the International Trade Commission (ITC) and federal district court: (1) the form of relief (injunctive relief; not monetary damages), and (2) the domestic industry requirement per 19 U.S.C. § 1337 ("Section 1337"). Specifically, this month's wrap-up focuses on Federal Circuit opinions affirming the Commission's findings in two separate investigations—Certain Two-Way Global Satellite Communication Devices, Inv. No. 337-TA-854 ("854 Investigation") and Certain Infotainment Sys., Components Thereof, and Auto. Containing the Same, Inv. No. 337-TA-1119 ("1119 Investigation").

To start, even though the ITC typically grants injunctive relief rather than monetary awards, in the 854 Investigation, the Federal Circuit affirmed the ITC's remand determination not to modify or rescind a $6.2 million civil penalty imposed on DBN Holding Inc. for violations of a consent order. And in the 1119 Investigation, the Federal Circuit affirmed the ITC's determination that Broadcom failed to establish the existence of a domestic industry with respect to the patents-in-suit.

The 854 Investigation

The Federal Circuit affirmed the ITC's decision following the fourth appeal relating to the 854 Investigation. DBN Holding, Inc. v. Int'l Trade Comm'n, 26 F.4th 1363, 1366 (Fed. Cir. 2022). In 2015, the Federal Circuit issued two opinions—DBN I and DBN II. In DBN I, the court affirmed the Eastern District of Virginia's grant of summary judgment invalidating the patent claims at issue in the 854 Investigation. Id.; see DeLorme Publ'g Co. v. BriarTek IP,

Inc., 622 F. App'x 912, 913 (Fed. Cir. 2015) (non-precedential) ("DBN I"). In DBN II, the Federal Circuit held that (1) the ITC did not abuse its discretion in imposing on DBN a $6.2 million civil penalty for violating the consent order DBN signed to terminate the ITC investigation, and, importantly, that (2) the affirmance in DBN I of the district court's invalidation of the asserted claims did not negate—under the consent order's unambiguous terms DBN's pre-invalidation violations of the consent order. Id. at 1366-67; see DeLorme Publ'g Co. v. Int'l Trade Comm'n, 805 F.3d 1328, 1333-34 (Fed. Cir. 2015) ("DBN II").

ITC consent orders are agreements to cease the complained of conduct, e.g., the importation and sale of the allegedly infringing product, in exchange for the termination of the ITC investigation. Notably, consent orders "have attributes both of contracts and of judicial decrees." Id. at 1370. Although consent orders may be a practical tool to extract oneself from an ITC investigation, as the 854 Investigation illustrates, they are not without consequence and potentially significant civil penalty, i.e., monetary fines.

Following DBN I and DBN II, DBN petitioned the ITC under 19 C.F.R. § 210.76 seeking to rescind or modify the assessed civil penalty for violating the consent order. Id. at 1367. According to DBN, the civil penalty order should have been set aside or modified because the asserted claim was found by the district court to be invalid, later affirmed in DBN I. Id. The ITC denied the petition on res judicata grounds, DBN appealed for a third time, and the Federal Circuit remanded for the ITC to decide, in the first instance, whether to rescind or modify the civil penalty in light of the court's decision that the asserted claims are invalid. Id. On remand, the ITC denied DBN's petition again, giving way to the present appeal.

Addressing DBN's arguments, the Federal Circuit noted that DBN ignored the instruction provided in DBN II (and noted above) that "[c]onsent decrees and orders have attributes both of contracts and of judicial decrees." Id. at 1371.

By entering the consent order, DBN agreed to discontinue any violation of Section 337. The ITC, in turn, terminated the investigation as required. From a contractual perspective, the breach of this promise provides the ITC a distinct ground for imposing a civil penalty. DBN agreed to the terms of the consent order, and those terms "unambiguously indicate[ ] that the invalidation trigger—ike the expiration and unenforceability triggers—applies only prospectively." (citation omitted). Had the consent order been written in retrospective terms, DBN might have a stronger argument that the invalidation of the asserted claims renders the consent order null and void, or that modification is required. But under the clear terms of the consent order, DBN remained potentially liable for any violations up to the time of invalidation.

Id. Because the ITC's remand determination was based on a correct interpretation of law and DBN's underlying conduct in violation of the consent order was not in question or challenged, the Federal Circuit affirmed the ITC's determination. As a result, DBN is on the hook for $6.2 million in civil penalties. Entering the consent order, though appealing, opened the door to monetary fines in addition to the normal injunctive relief that litigants are used to seeing at the ITC.

The 1119 Investigation

Turning to the 1119 Investigation, Broadcom—an American designer, developer, and manufacturer of semiconductor and infrastructure software products failed to satisfy the ITC's domestic industry requirement. Despite its status as American company with a large domestic footprint, Broadcom failed to establish the domestic industry as required under Section 1337. Section 1337's domestic industry requirement has two prongs: (1) an economic prong and (2) a technical prong.

Here, Broadcom had no issue proving the economic prong as contemplated under Section 1337, but failed to satisfy the technical prong.[1] To satisfy the technical prong, the party complaining of infringement must establish that it practices at least one claim of the asserted patent. Broadcom failed to demonstrate that its system-on-a-chip ("SoC") satisfied the technical prong of the domestic industry requirement in Section 337 because the SoC did not include a "clock tree driver," a limitation of the asserted claims. Importantly, the ALJ found, and Broadcom did not dispute, that the SoC did not contain the "clock tree driver" required by the claims. Broadcom Corp. v. Int'l Trade Comm'n., No. 20-2008, slip op. at 14 (Fed. Cir. March 8, 2022) Because Broadcom did not challenge this finding, and instead introduced new theories that the Commission deemed waived, the Federal Circuit found the Commission's finding that Broadcom failed to satisfy the domestic industry requirement of Section 337 supported by substantial evidence. Id. at 16.

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Practice at the ITC requires a certain familiarity with the rules, policies, and procedures. These two cases illustrate some important differences between ITC practice and district court practice, including the penalties for violating consent orders, and the requirement of satisfying the technical prong of the domestic industry requirement—even for a company with a major American economic presence.

[1] To establish a violation of Section 337 a complainant must show both infringement and that an industry "relating to the articles protected by the patent . . . exists or is in the process of being established" in the United States. 19 U.S.C. § 1337(a)(2), (3).