August 2012: ITC Litigation Update -- Federal Circuit Recants Criticism of Commission’s “No Position” Rule

by Quinn Emanuel Urquhart & Sullivan, LLP
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In an unusual turnabout, the Federal Circuit withdrew six pages of its precedential opinion in General Electric Co. v. International Trade Commission, 670 F.3d 1206 (Fed. Cir. Feb. 29, 2012), which had criticized the Commission’s practice of taking “no position” on fully-litigated issues. General Elec. Co. v. International Trade Comm’n, No. 2010-1223, 2012 WL 2626908 (Fed. Cir. July 6, 2012). The Court’s July 6 order granted the Commission’s petition for panel rehearing for the limited purpose of withdrawing Part III of its February 29 opinion and to make clear that the panel was not offering any decision as to the questions raised therein. In dissent, Judge Newman noted that the court’s decision to withdraw Part III “ratifies the Commission’s authority to negate the finality of [ ] final decisions, thereby forestalling judicial review and impeding expeditious resolution of ITC proceedings, as required by statute and as the Commission represents to the public.”

The court’s February 29 decision and subsequent dissenting opinion by Judge Newman highlight the tension between the Commission’s statutory charge to adjudicate section 337 investigations as expeditiously as practicable and its practice of allowing piecemeal and prolonged appeals. Pursuant to 19 U.S.C. § 1337(c), any person adversely affected by a final determination of the Commission may appeal such determination to the Federal Circuit. What constitutes a “final determination” subject to appeal, however, is defined by the Commission’s rules and governing precedent. Under Commission Rule 210.42, an unreviewed initial determination issued by an administrative law judge becomes a final determination and is automatically appealable. If the Commission chooses to review an initial determination, Commission Rule 210.45 permits the Commission to affirm, reverse, modify, set aside, or remand for further proceedings, in whole or in part. This rule also permits the Commission to take no position on specific issues or portions of the initial determination. Prior to its February 29 decision, in Beloit Corp. v. Valmet Oy and other cases, the Federal Circuit had consistently held that where the Commission takes no position on a particular issue, that issue is not appealable. See, e.g., Beloit Corp. v. Valmet Oy, 742 F.2d 1421 (Fed. Cir. 1984).

In the investigation underlying the Court’s decision in General Electric, the ALJ found a violation based on Mitsubishi’s infringement of General Electric’s ’039 and ’221 patents. Although he also found that Mitsubishi infringed General Electric’s ’985 patent, the ALJ concluded there was no violation as to that patent due to a lack of domestic industry. The Commission noticed review of all aspects of the initial determination except for the issue of importation and the ALJ’s finding on the intent element of inequitable conduct. On review, the Commission determined that the ’039 and ’221 patents were not invalid but were not infringed, and that the domestic industry requirement was not met for any of the three patents. The Commission took no position on any other issues.

General Electric appealed the Commission’s final determination to the Federal Circuit. The court held that issues related to the ’039 patent were moot in light of the patent’s expiration, affirmed the Commission’s finding of non-infringement as to the ’221 patent, and reversed the Commission’s determination of no domestic industry for the ’985 patent. Because the Commission had taken no position with respect to infringement and validity of the ’985 patent, however, the Federal Circuit remanded for further proceedings. In Part III of the opinion, the court criticized the Commission’s practice of taking no position on certain issues, stating that “[t]he consequences of this practice are illustrated in this case, for all contested issues concerning the ’985 patent were investigated by the Commission, tried to the ALJ, decided by Initial Determination, yet nearly all were held unavailable for judicial review.” General Elec., 670 F.3d at 1220. The court’s February 29 opinion also clarified that, going forward, fully-litigated issues would be appealable even where the Commission took no position on them pursuant to Commission Rule 210.45. The court distinguished its holding in Beloit as addressing only the situation where the party prevailing before the Commission sought judicial review of issues that the Commission had not reached, and as not addressing the situation at hand where the party losing before the Commission sought judicial review. The court further explained that the “legislative purpose of expedited ITC resolution of unfair competition issues requires attention, in accord with statute and regulation, that issues decided by initial determination and not substantively reviewed by the full Commission are deemed determinations of the Commission . . . and entitled to appeal . . . .” Id. at 1220–21.

The Commission petitioned for panel rehearing and rehearing en banc. The Federal Circuit granted the Commission’s petition for panel rehearing for the limited purpose of withdrawing Part III of the Court’s February 29 opinion. A revised opinion, with Part III removed, was issued on July 6. In a dissenting opinion accompanying the court’s order on rehearing, Judge Newman expressed her view that the court’s decision to withdraw Part III ratifies the Commission’s authority to negate the finality of its decisions, which will only result in further delay, cost, and burden to the parties, the Commission, and the Court, and is contrary to the purposes of section 337. General Elec., 2012 WL 2626908, at *1. She further noted that the Commission’s practice of taking no position on contested issues “is in conspicuous tension with the statutes, regulations, and with unambiguous precedent.” Id. at *3. Judge Newman concluded her dissent by urging that rather than “simply ratifying this aberrant procedure and accepting its consequences, at a minimum the court should take the case en banc and obtain input from the communities that Section 337 is designed to serve,” so as to resolve the lingering question whether judicial review is available for issues reviewed by the Commission, but upon which the Commission takes no position. Id. at *6.

It is unclear whether the Federal Circuit will use this case as a vehicle to reconcile the apparent incongruity between the statutory language of section 337, the Commission’s rules, and the court’s own precedent. Until it does, however, it appears that the Commission may continue to take no position on certain issues under review, and that those issues are not appealable to the Federal Circuit.

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