by Dennis Crouch
DBN Holdings v. International Trade Commission (Fed. Cir. 2018)
In 2013, accused-infringer DeLorme signed a stipulated settlement with the ITC agreeing to stop importing products certain products accused of infringing U.S. Patent No. 7,991,380. Later that year, the ITC re-opened the action — finding that DeLorme violated the Consent Order and assessed a $6.2 million penalty. Subsequently, a district court found the asserted patent claims invalid. Those cases were appealed and the Federal Circuit and the court affirmed both: (1) agreeing that the patent was invalid, but that DeLorme was still liable for violating the Consent Order. DeLorme Publ’g Co. v. BriarTek, 622 Fed. App’x. 912 (Fed. Cir. 2015).
Following the Federal Circuit decision, DeLorme petitioned the ITC to rescind the civil penalty in light of the invalidity finding — based upon “changed conditions
in fact or law or in the public interest.” 19 C.F.R. § 210.76. However, the Commission refused act — finding the whole matter “res judicata” based upon the prior Federal Circuit decision.
Now on appeal, the Federal Circuit has sided with DeLorme — finding that the ITC improperly relied upon estoppel principles to refuse to reconsider its civil penalty.
Res judicata usually refers to the doctrine of claim preclusion, although it sometimes applies to both claim preclusion and issue preclusion (also known as collateral estoppel). Regardless, both of those doctrines require a prior determination in a separate lawsuit. Here, the ITC’s res judicata reference was based upon the prior Federal Circuit decision in this same case — that doesn’t work. The Federal Circuit explains here:
For either issue or claim preclusion to apply, a second, separate case must exist. Here, where we have a continuation of the same proceeding, Investigation Number 337-TA-854, neither issue nor claim preclusion apply.
The court went on to discuss the right doctrine to apply – law of the case. “[R]econsideration of matters already resolved ordinarily is referred to [as] law-of-the-case theory” or “direct estoppel.” Wright & Miller. However, that doctrine doesn’t apply here because neither the ITC nor the appellate court had previously decided the issue of “whether the Commission should rescind or modify the civil penalty in light of the district court’s grant of summary judgment of invalidity.” Thus, on remand, the ITC can consider this question.
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I’ll note here that the Commission’s confusion likely arose from the Federal Circuit’s statement in its prior decision that “the [ITC] penalty or sanction cannot be vacated by subsequent events such as invalidation of the claims.” Here, the court further explained that statement to mean that the parallel invalidation does not automatically cancel a prior-issued sanction. However, it does open the door to request reconsideration.