ITC Upholds $6 Million Penalty for Consent Order Violations Based on Patent Claims Later Found Invalid

The International Trade Commission recently denied a request by an ITC respondent to rescind a $6 million penalty for violating a consent order based on patent claims later found invalid.

DeLorme, a company sued for allegedly infringing a patent on two-way global satellite communications, ultimately entered into an ITC consent order in April 2013. One month later, the ITC started an enforcement proceeding after the patent holder accused DeLorme of continuing to do things prohibited by the consent order. In March 2014, the ITC judge found that DeLorme had violated the consent order. On review, the ITC issued a civil penalty in the amount of $6,242,000 against DeLorme. DeLorme appealed to the Federal Circuit.

While the appeal was pending, a court in the Eastern District of Virginia found the relevant patent claims invalid. The Federal Circuit affirmed the finding of invalidity. On the same day, the Federal Circuit also affirmed the ITC’s civil penalty order against DeLorme. As part of its order, the Federal Circuit found that the affirmance of the invalidity judgment had no effect on the ITC’s final determination. DeLorme then petitioned the ITC to rescind its penalty based on the finding of invalidity. The ITC denied this petition based on res judicata. On appeal, the Federal Circuit reversed the ITC decision and directed the ITC to consider the petition finding that although there is no requirement that the civil penalty be rescinded because of the invalidity finding, the ITC should consider DeLorme’s petition to rescind the penalty regardless.

On July 31, 2020, the ITC denied DeLorme’s petition to modify the civil penalty. Subject to any appeal by DeLorme back to the Federal Circuit, DeLorme is now liable for approximately $6 million for infringing what are now invalid patent claims.

As with ITC cease and desist orders, ITC consent orders come with substantial penalties if there is a violation. Various companies have been subject to millions of dollars in penalties for violating such orders. The issue here is whether a company should be fined for violating an order when the patent claims on which it is based are later found invalid. So far, the answer is yes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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