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Article: January 2015 ITC Litigation Update

January 01, 2015
Business Litigation Reports

The ITC as a Favorable Venue in Light of Increasing IPR Petitions and District Courts Propensities to Stay Pending IPR. Since its inception in September 2012, inter parties review (“IPR”) has become a powerful tool for delaying patent litigation in federal district courts. Lending credence to this notion is the fact that district courts grant nearly three out of every five motions for stay in view of a related IPR proceeding. With that understanding, petitioners have filed an incredible 2,100+ IPR petitions—with more than 1,250 of them coming in 2014 alone—and monthly filings continue to trend higher.

When determining whether or not to stay litigation in view of a related IPR proceeding, district courts generally consider the following three factors: (1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party. A review of how district courts have applied these factors, to date, shows that a quickly-filed IPR proceeding can be an effective tool in obtaining a stay of a district court litigation.

Patent litigation brought in the International Trade Commission (“ITC”) plays under an entirely different set of rules. In addition to the factors considered by a district court, the ITC considers three additional factors for deciding stay motions: (1) the stage of the PTO proceedings; (2) the efficient use of Commission resources; and (3) the availability of alternative remedies in federal court. Certain Microelectromechanical Systems (“MEMS Devices”) and Products Containing the Same, Inv. No. 337-TA-876, Order No. 6 at 3 (May 21, 2013). Given the tremendous pace at which ITC investigations proceed (typically 9-10 months to trial and 16 months to final resolution), an IPR proceeding instituted after an ITC investigation would almost certainly be insufficient to justify a stay of the investigation, considering that the IPR proceeding itself may take up to 18 months to complete. Further, unlike federal courts, the ITC cannot award damages and thus cannot remedy a complainant for past damages incurred during a stay. The stay would in effect create a “dead period” in which a complainant would be powerless against alleged infringers in the ITC. As put nicely in MEMS Devices, “if it were possible to create such a lengthy dead zone, reexamination petitions would become part of every respondent’s tactical playbook in every single ITC investigation.” Id. at 8. Accordingly, under the ITC’s additional factors, it appears extremely difficult for a party in the ITC to win a motion to stay in view of a related IPR proceeding. Since the IPR’s inception in 2012, no such stays have been granted.

Knowing of the towering hurdle that they would need to overcome, respondents very rarely attempt to obtain stays in the ITC based on parallel IPR proceedings. In fact, no respondent has filed such a motion to stay in nearly 18 months. For this reason, if a complainant files in the ITC as opposed to district court, a respondent may have less motivation to file an IPR.

That said, the ITC is not without its downsides for potential complainants if the respondent does in fact file an IPR. For one, if an ITC investigation and parallel IPR proceeding begin at roughly the same time and no stay is issued, a financially strapped complainant may have a difficult time litigating and financing both actions. Moreover, the complainant would have to be especially mindful of the positions and evidence that it takes in each of the actions so that they are not inconsistent. Also, because of the speed at which ITC investigations progress, it is unlikely that the IPR proceeding would march quickly enough to generate a ruling before the ITC investigation holds an evidentiary hearing. In other words, the complainant would likely be unable to benefit from any preclusive effect that a finding of patent validity by the IPR may have. Another downside for a potential complainant is that to win at the ITC, the complainant would need to be able to establish a domestic industry. As a result of this requirement, foreign companies with little to no presence in the United States other than importing and selling its products may be automatically barred from winning at the ITC.

So whether a party asserting patent infringement should initially file in district court or in the ITC heavily depends on that party’s specific circumstances. For those who can stomach a potential year-long-plus delay to
final resolution in return for a lower annual cost, filing first in district court may be the correct move. But for virtually guaranteed speedy resolution, the ITC is the way to go.