Federal Circuit Makes ITC Comply With Its Own Rules

by Nossaman LLP

In an opinion dated July 18, 2014, in Align Technology, Inc. v. International Trade Commission (Fed. Cir. July 18, 2014, No. 2013-1240, -1363) 2014 U.S. App. Lexis 13717, the Federal Circuit vacated and remanded a decision of the United States International Trade Commission (ITC) for failure to follow its own rules of procedure. Align Technology had obtained a consent order before the ITC enjoining importation of certain dental devices by the infringing party.  Align Technology filed a second complaint with the ITC, asserting that the infringing party violated the consent order by offering for sale, or selling for importation, certain digital data sets used to manufacture the dental devices.  The ITC directed the ALJ to make a determination of whether the devices at issue were subject to the consent order.  The ALJ ordered briefing on the issue.  In response, the infringing party moved to terminate the enforcement proceeding, claiming that the devices at issue did not fall within the scope of the consent order.  The ALJ denied the motion and scheduled a trial.  The infringing party then sought ITC review of the ALJ’s order.  Over Align Technology’s objection that the order was not reviewable, the ITC undertook review and held that the digital data sets were not subject to the consent order because the order did not specifically address them.  Align Technology then appealed the ITC ruling to the Federal Circuit under 28 U.S.C. § 1295(a)(6) and 19 U.S.C. § 1337(c).

With regard to the ITC, the Commission possesses jurisdiction over patent-related matters concerning imports.  Section 1337 makes it unlawful to import into the United States articles that “infringe a valid and enforceable United States patent” or “that are made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable patent.”  U.S. patent holders may file a complaint with the ITC claiming a violation of section 1337.  The ITC will then conduct an investigation, including trial proceedings before an administrative law judge.  The ITC can then review an “initial determination” of the ALJ.  The Federal Circuit reviews decisions of the ITC under the Administrative Procedure Act and must set aside an ITC decision that is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”  (5. U.S.C. § 706(2)(A).)  The ITC conducts its proceedings in accord with its Rules of Practice and Procedure, 19 C.F.R. § 210.1, et seq.)  If the ITC finds infringement, it will exclude infringing articles from entry into the U.S.

In Align Technology, the Federal Circuit vacated the ITC’s decision.  Reviewing the ITC’s Rules of Practice and Procedure, the Circuit Court noted that only an ALJ’s “initial determination” is appealable to the ITC.  Rulings on motions “may not be appealed to the Commission prior to the administrative law judge’s issuance of an initial determination, unless the requirements of interlocutory review are satisfied.  (19 C.F.R. § 201.24.)  The rules exclude from an “initial determination” a denial of a motion for termination like the one the infringing party had made.  Reviewing the Rules of Practice and Procedure and prior ITC rulings, the Federal Circuit held that the order denying the motion for termination was not subject to immediate ITC review.  The court of appeals noted that the ITC had the authority under its rules to waive the limitation on reviewability of orders of ALJs for “good and sufficient reason.”  However, here the ITC “did not articulate below any reason, let alone ‘good and sufficient reason,’ to waive the regulation.  In fact, there is no evidence in the record that the Commission intended to invoke its waiver rule.”

As to the substantive issue as to whether the consent order included the digital data sets, for reasons of judicial efficiency, the Federal Circuit went on to rule that the data sets at issue were indeed subject to the consent order.  According to the ITC, for a consent order to cover digital data, the order must specifically reference electronic transmissions.  The court disagreed with the ITC on this issue, finding that there was no ITC precedent for such a requirement that would put the public on notice to the necessity for such and express provision.  The court vacated the ITC’s decision and remanded for further proceedings, consistent with the court’s opinion.

This case emphasizes (a) the need for correctly understanding the rules of the ITC and (b) the need to ensure that the ITC complies with its own rules.

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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