CAFC Affirms Resolution to not Rescind ITC Basic Exclusion Order Based mostly on New Invalidity Arguments

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CAFC Affirms Decision to not Rescind ITC General Exclusion Order Based on New Invalidity Arguments

In Mayborn Group, Ltd. v. ITC, 19-2077 (July 16, 2020), the Court of Appeals for the Federal Circuit (CAFC) affirmed an U.S. International Trade Commission (ITC) decision denying a petition for rescission of a General Exclusion Order (GEO) based on new invalidity arguments presented by a party not involved in the underlying investigation. This decision confirms the importance of GEOs for patent owners and the limited options to contest a GEO available to companies not named as a respondent but whose products may be barred from entering the U.S. by a GEO.

General Exclusion Orders

In most ITC investigations brought under 19 U.S.C. § 1337 (Section 337), the remedy sought by a Complainant is a Limited Exclusion Order (LEO) preventing the named respondents from importing the accused products into the United States. When certain circumstances are present, however, a Complainant may seek a GEO to prohibit the importation into the United States of infringing products by any party, even parties not named as respondents in the investigation.

Background of the Case

In the underlying ITC investigation, Certain Self-Anchoring Beverage Containers, Inv. No. 337-TA-1092, Alfay Designs, Inc., Mighty Mug, Inc. and Harry Zimmerman (Complainants) filed a complaint against several companies, but not Mayborn Group, Ltd. The complaint alleged patent infringement and sought a GEO barring importation of infringing products by any party. Several of the named Respondents settled, others were found to be in default, and the ITC issued a GEO. Shortly before the ITC issued the GEO, the Complainants notified Mayborn of the investigation, but Mayborn took no action to intervene in the proceedings. After the GEO issued, the Complainants notified Mayborn that the GEO would be enforced against Mayborn’s products. Mayborn then petitioned the ITC to rescind the GEO under 19 U.S.C. § 1337(k)(1), which allows the ITC to rescind or modify an order if “the conditions which led to such exclusion from entry or order no longer exist,” on the basis of newly discovered invalidating prior art. The ITC denied Mayborn’s petition, holding that the mere discovery of allegedly invalidating prior art after the issuance of a GEO is not a “changed condition” under § 1337(k)(1). Mayborn appealed to the CAFC.

CAFC Decision

The CAFC affirmed, noting that the ITC “may only adjudicate patent validity when an invalidity defense is raised by a respondent in the course of an investigation or an enforcement proceeding.” The ITC, therefore, lacked the authority to adjudicate Mayborn’s invalidity challenge because Mayborn’s petition was not presented in the course of an investigation or enforcement proceeding. “(S)ubsection (k)(1) does not permit an end-run around this rule. . . . A petitioner’s invalidity challenge is not, on its face, a changed condition under § 1337(k)(1) and is thus not a proper basis for a petition to rescind or modify an exclusion order.” The CAFC also rejected Mayborn’s argument that the facts of this case are analogous to the ITC’s practice of lifting exclusion orders when a patent is found to be invalid or expires. In those situations, the fact that a patent is no longer in force is a “changed condition,” but in the present case there has been no adjudication of invalidity.

Takeaway

GEOs issued by the ITC are powerful remedies for patent owners seeking to exclude all infringing products from importation into the United States. This decision confirms that there are limited options to contest a GEO available to companies not named as a respondent but whose products may be barred from entering the U.S. by a GEO.

A company that only becomes aware of a GEO after the GEO issues faces a difficult challenge and has limited options for avoiding exclusion by U.S. Customs and Border Protection (CBP):

  • One option is to simply try to import the products and file a protest if the products are excluded from importation by CBP. CBP proceedings are ex parte, which streamlines the process, but CBP will only consider non-infringement arguments, not invalidity arguments, when deciding whether to allow products to enter the United States. A creative lawyer might be able to use the prior art to limit construction of the claims to avoid infringement, but CBP is typically hesitant to deviate from the record in the underlying investigation.
  • Another option is to challenge the validity of a patent, either by filing a petition of Inter Partes Review (IPR) at the PTAB or filing a Declaratory Judgement action in court, but either of these options likely will take a year or more, particularly if it involves an appeal. The ITC will consider a patent found to be invalid in either of these proceedings to be a “changed condition” such that the ITC would consider a petition for rescission, but by then the business impact of excluding the products at issue might be too great for most companies.

In view of these limited options, any company that becomes aware of an ITC investigation that could result in a GEO affecting its imported products should give serious consideration to intervening in the investigation. This will ensure that all of its arguments, including invalidity, are heard and given full consideration, both at the ITC and on any appeal.