Invalid patent and civil penalties for importing an infringing product. DBN HOLDING v. ITC

Invalid patent and civil penalties for importing an infringing product. DBN HOLDING v. ITC

A patent is a set of exclusive right granted to the inventor of an invention.  To be granted a patent in the United States, an inventor must file a patent application with the United States Patent and Trademark Office.  The United States Patent and Trademark Office reviews patent applications to make sure that the invention meets all the requirements to be granted a patent.  If a patent is granted, the owner of the patent is granted the exclusive right to make, use, sell, and import the invention in the United States.  If someone other than the patent owner attempts to exercise one of these exclusive rights that can be considered patent infringement.  A patent owner can file a lawsuit to stop patent infringement with an injunction and to get monetary damages for patent infringement which has already occurred.

Another option that a patent owner can exercise to enforce its patent rights is the United States International Trade Commission.  The International Trade Commission is an independent, quasijudicial Federal agency with broad investigative responsibilities on matters of trade.  One of the functions of the International Trade Commission is to adjudicate cases involving imports that allegedly infringe intellectual property rights, such as patents.

A patent owner that believes their patent is being infringed by an imported product can file a complaint requesting a Section 337 investigation with the U.S. International Trade Commission.  Once a Section 337 investigation is instituted, it is assigned to an administrative law judge.  The judge will conduct a hearing which is similar to a hearing in a federal court.  On finding a violation of Section 337, the International Trade Commission may issue an exclusion order prohibiting importation of the involved products or cease and desist orders or both.  If the International Trade Commission’s order is violated it has the authority to bring a civil action seeking a civil penalty.

The question then becomes, what happens when a civil penalty is imposed based on a patent which is invalid?

DBN HOLDING, INC. v. INTERNATIONAL TRADE COMMISSION, 2017-2128 (C.A.F.C. 2018) is a case which deals with this issue.  The plaintiff in this case is a company which was accused of importing products which infringed on a patent.  In September 2012 the International Trade Commission instituted a Section 337 investigation, the investigation stopped in April 2013 when the plaintiff executed a consent order.  But the plaintiff did not stop importing the products.  In May 2013, the International Trade Commission instituted an enforcement proceeding and assessed a civil penalty of $6.2 million.

Shortly after institution of the May enforcement proceeding, the plaintiff filed an action in federal district court to invalidate the patent.  The district court found that the patent asserted in the enforcement proceeding and subject to the Consent Order was invalid. The district court’s invalidity judgment was issued after the International Trade Commission had assessed the civil penalty in the enforcement proceeding.   The plaintiff appealed the International Trade Commission’s civil penalty to the Court of Appeals for the Federal Circuit on the basis that the patent was invalid.

The International Trade Commission argued that it could not rescind the civil penalty because the issue was res judicata.  Res Judicata is a matter that has been adjudicated by a competent court and may not be pursued further by the same parties.  The Federal Circuit held that res judicata does not bar the International Trade Commission from determining whether to modify or rescind the civil penalty in light of the invalidity of the patent.  The Federal Circuit remanded the case to the  International Trade Commission to reconsider whether civil penalties should be imposed in light of the invalidity of the patent.

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