Wednesday, August 29, 2012

Parallel ITC Investigation and District Court Proceedings: Be Careful What You Ask For.


Since the Supreme Court’s decision in eBay made it more difficult to obtain injunctive relief in district court proceedings, patent owners have given more attention to the International Trade Commission ("ITC") and have used parallel district court litigation and ITC investigations to pursue both money damages and injunctive relief.  A recent initial determination terminating the ITC investigation In the Matter of Certain Video Displays, 337-TA-828, highlights a potential pitfall with this approach. 337-TA-828, Order No. 9, August 1, 2012. 

In Certain Video Displays, complainant Mondis sought an exclusion order from the ITC against certain TV’s and Video monitors.  The asserted patents were previously asserted successfully against the respondents in the ITC action in an earlier district court case, Mondis Technology Ltd. v. LG Electronics, Inc. et al., 07-CV-565 (E.D. Tex.).  In this district court action, a jury found that the defendants willfully infringed Mondis’ patents and awarded damages.  In a post-trial motion, Mondis sought equitable relief in the form of ongoing royalties but did not seek an injunction from the district court.  After motion practice, the district court ultimately ordered the defendants to pay on ongoing royalty to Mondis for continued sales of the accused products.  Respondents’ motion before J. Essex at the ITC argued that the payment of the court ordered ongoing royalty was effectively a license and that sales subject to that royalty were not an act of infringement.  Judge Essex agreed, stating that “the ALJ finds that the ongoing royalty order constitutes a license authorizing CMI to use the asserted patents’ claimed inventions for the products covered by that the [sic] ongoing royalty order.”  Order at 21.  

This result sends a cautionary message to plaintiff/complainants that are pursuing parallel proceedings.  If injunctive relief is an ultimate objective of patent enforcement, it may be beneficial to run with the ITC investigation ahead of the district court case.  (Since ITC actions are typically significantly faster than district court litigation, this generally occurs by default when the actions are filed simultaneously, as is often the case).  As J. Essex noted, “in this case, the order [of cases] does matter,” since the district court’s ongoing royalty order effectively stripped the ITC of jurisdiction.  Order at 20.   If, for strategic reasons, the district court case does proceed first, the nature of any post trial relief from the district court needs to be given significant consideration.  For example, the plaintiff may forego ongoing royalties entirely or it may be possible to fashion the scope of the ongoing royalty Order in a way that would not foreclose a subsequent ITC action and exclusion order.  For example, the plaintiff may seek a short “sunset” royalty that only allows the defendant to continue sales for a short period of time and then expires.  Alternatively, the plaintiff may seek a provision in the district court order that discontinues ongoing royalty payment obligations in the event an ITC action is initiated and during the pendency of any ITC action.  

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