by Dennis Crouch
We have seen lots of ITC action recently. In the new Koki v. ITC decision, the Federal Circuit found that the accused infringer Koki lacked Constitutional standing to bring the appeal based upon a binding promise not to sue submitted by the patentee Kyocera.
As I discuss at the end of this post, although Koki is the nominal loser, the company substantially advanced its position on appeal because Kyocera was forced to declare (and then clarify) its promise in order to obtain dismissal.
- Koki Holdings America Ltd. v. International Trade Commission, No. 22-2006, (August 28, 2024) (nonprecedential) 22-2006.OPINION.8-28-2024_2375118
- U.S. Patent No 8,387,718
The International Trade Commission (ITC) is an independent, quasi-judicial federal agency with the power to investigate unfair trade practices, including patent infringement by imported goods. Under Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337), the ITC can issue exclusion orders barring the importation of infringing products and cease-and-desist orders against named importers and other persons engaged in unfair acts.
Kyocera filed a complaint with the ITC alleging that Koki was violating Section 337 by importing gas spring nailer products that infringed five Kyocera patents. The ITC instituted an investigation and, in March 2020, found a violation based on infringement of one patent. The Commission issued both an exclusion order and a cease-and-desist order against Koki.
Both parties appealed the determination to the Federal Circuit. While that appeal was pending, Koki sought a ruling that its redesigned products did not infringe. U.S. Customs and Border Protection found the redesigned products non-infringing in June 2020, a decision later confirmed by the ITC in a modification proceeding.
In January 2022, the Federal Circuit vacated and remanded the ITC’s March 2020 determination, citing erroneous claim constructions and an abuse of discretion in admitting certain expert testimony Kyocera Senco Indus. Tools Inc. v. Int’l Trade Comm’n, 22 F.4th 1369 (Fed. Cir. 2022)).
On remand, Kyocera moved to terminate the investigation by withdrawing its complaint. Smelling blood, Koki opposed the termination, arguing that the ITC should continue proceedings and make findings of non-infringement based on the existing record. The ITC granted Kyocera’s motion to terminate, leading to Koki’s appeal.
The appeal here might be loosely thought of questioning dismissal on two different levels:
- Before the ITC: The issue actually appealed is whether ITC abused its authority by terminating the investigation without determining whether there was a violation of Section 337.
- Before the CAFC: Before reaching the merits of an appeal, the Federal Circuit must also consider whether the appellant has standing to appeal the issue.
As discussed in prior posts, the question of appellate standing is a threshold matter that must be considered before reaching the underlying merits of the appeal. Here, the court concluded that Koki lacked standing–thus ending the appeal.
Appellate Standing Requirements: Article III of the U.S. Constitution describes the judiciary branch and also limits its power to actual cases and controversies (thus creating the basis of the Constitutional standing requirement). The ITC is not an Article III court but rather a quasi-judicial Federal agency. As such Article III standing is not Constitutionally required to participate in ITC actions. But, standing becomes crucial when seeking review of an agency’s final action in federal court.
To establish Article III standing, an appellant must demonstrate at least:
1. An injury in fact;
2. That is fairly traceable to the challenged conduct; and
3. That is likely to be redressed by a favorable judicial decision.
The injury in fact must be “concrete and particularized” and “actual or imminent, not conjectural or hypothetical” See Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) and Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).
Koki’s Argument for Standing: Koki argued that it suffered an injury in fact when the ITC terminated the investigation without reaching a determination on whether Koki violated Section 337. The crux of Koki’s argument was that such a determination would have had preclusive effect in future ITC investigations. Without this preclusive effect, Koki contended, Kyocera could potentially seek, and the ITC could institute, a second investigation based on the same allegations.
It is not clear that these harms would be sufficient to confer standing, but the Federal Circuit did not need to reach that issue — holding instead that the patentee had provided a clear and unequivocal covenant not to renew the ITC litigation and thus rendered the potential harm moot.
The court pointed to an email exchange between the parties in which Kyocera expressly stated it would not bring another ITC action on either the original products accused in the investigation or the modified tools subject to the modification proceeding.
Kyocera characterized this representation as a covenant not to sue, reiterating it in subsequent communications and in its intervenor brief. At oral argument, Koki raised concerns about the scope of this covenant, particularly whether it covered only prior shipments or also ongoing and future shipments of the original products. Kyocera clarified further at oral arguments that its covenant covered any new shipments of products with the original product design, reserving only the right to enforce its patents against future products different from the original design. “Kyocera is not now or ever going to bring an action in the ITC again on either the original products accused or the modified tools that were subject to the modification proceeding.” Under questions from the judges the patentee explained that the covenant also includes new but identical products: “Absolutely, Your Honor, 100%.”
Based upon these statements and clarifications, the Federal Circuit found Kyocera’s covenant not to sue to be clear and unequivocal, and therefore extinguished the controversy between the parties. See Already, LLC v. Nike, Inc., 568 U.S. 85 (2013) (trademark holder’s covenant not to sue defeated declaratory judgment jurisdiction).
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Win by Losing: Although Koki nominally lost this appeal due to lack of standing, the process of pursuing the appeal arguably resulted in a significant victory for the company. By challenging the ITC’s termination and raising concerns about potential future litigation, Koki effectively forced Kyocera’s hand, so that they eventually provided a clear and substantial covenant not to sue. This covenant, clarified and strengthened during oral arguments, extends beyond the specific products at issue in the original investigation to include any identical future products. In essence, Koki’s persistence in the appeals process secured for itself a broad shield against future ITC actions by Kyocera.
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Amol A. Parikh of McDermott Will & Emery argued for the appellant Koki Holdings, joined on the brief by Paul Devinsky, Alexander Ott, and Jay Reiziss.
Benjamin Richards of the Office of the General Counsel, United States International Trade Commission, argued for the appellee International Trade Commission, joined on the brief by Dominic Bianchi, Wayne Herrington, Panyin Hughes, Houda Morad, and Sidney Rosenzweig.
Daniel Shulman of Vedder Price argued for the intervenor Kyocera, joined on the brief by John . Burke and Robert Rigg.
The case was heard by Chief Judge Moore (who wrote the opinion), Judge Cunningham, and District Judge Mazzant (sitting by designation from the United States District Court for the Eastern District of Texas).
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On the same day as the Koki Holdings decision, the Federal Circuit issued a nonprecedential order in Seasons 4 Inc. v. Special Happy, Ltd., No. 24-2013 (August 30, 2024), that also touched on issues of mootness and standing. Special Happy had appealed a district court order allowing service via email (under the collateral order doctrine), but while the appeal was pending Seasons 4 filed a notice of voluntary dismissal under Rule 41(a)(1)(A)(i). That rule permits a plaintiff to unilaterally dismiss an action so long as the opposing party had not yet served “either an answer or a motion for summary judgment.” The case was dismissed, but Special Happy asked for a stay of the appeal – noting that Seasons 4 had refiled the lawsuit and the defendant expected a repeat of the same service-by-email debate.
The Federal Circuit dismissed the appeal as moot, rejecting Special Happy’s argument of a special case where bad acts are being repeated but evading review. The court emphasized that even if resolving the issue might prevent similar cases in the future, an appeal becomes moot when “deciding it would have no effect within the confines of the case itself.” Following the Supreme Court’s practice in Munsingwear, the Federal Circuit vacated the district court’s order due to mootness not attributable to the appellant’s actions. Seasons 4 Inc.’s asserted patents here cover water-resistant outdoor decorative light strings. U.S. Patent Nos. 11,015,798 and 11,454,385.
24-2013.ORDER.8-30-2024_2377016
The first case above sounds interesting for your contract law classes. A contract made by informal email exchanges and clarified by required attorney answers to judges questions?