Talkin' Trade: The Interplay Between the ITC and the PTAB

September 1, 2021
34:08 minutes

Ropes & Gray’s podcast series Talkin’ Trade explores the world of Section 337 unfair import investigations at the U.S. International Trade Commission. On this episode, IP attorneys Matt Rizzolo, Matt Shapiro, and Brendan McLaughlin are joined by special guest Scott McKeown, a leading PTAB litigator, to discuss the issues arising when a patent asserted in an ITC investigation also has its validity challenged at the PTAB—including whether and to what extent the respective agencies defer to each other’s decisions or schedules, and what considerations are important for litigants to keep in mind to get the optimal resolution.


Matt Rizzolo: Welcome back to Talkin' Trade, the podcast where we explore the ins and outs of Section 337 investigations at the U.S. International Trade Commission. I'm Matt Rizzolo, and with me today are fellow Ropes & Gray IP attorneys: Matt Shapiro and Brendan McLaughlin. Glad to have you guys here. So they say that Episode IV was the best of the Star Wars movies, so for today's episode four of Talkin' Trade, we'll try and live up to that. As we've discussed on previous episodes, the vast majority of ITC complaints concern allegations of patent infringement. And naturally, litigation over these disputes often concern patent validity because a violation of Section 337 occurs only if there's infringement of a valid patent. Now, this of course implicates one of the most important forums when it comes to patent validity: the Patent Trial & Appeal Board. So today, we're going to explore the interplay between these two administrative agencies: the ITC and the PTAB. But first, Brendan, what's new at the Commission?

Brendan McLaughlin: Thanks, Matt. In July, the Commission received four complaints, instituted four investigations, and released several initial determinations. In the Certain High-Density Fiber Optic Equipment case (Inv. No. 337-TA-1194), the Commission found a violation of Section 337 based on a complaint brought by Corning and issued a rare General Exclusion order prohibiting the importation of high-density fiber optic equipment and components thereof that infringe three Corning patents. Additionally, the Commission issued the public version of its opinion in which it once again revisited the scope of its authority under Section 337. It held that “articles that infringe” patents under Section 337(a)(1)(B) includes imported components used in combination with other components in the United States after importation to directly infringe a patent. This is unsurprising in view of the Federal Circuit decisions in Suprema, Comcast, and Commission precedent, as we previously discussed during our last episode. But notably, Chairman Kearns issued Additional Views in which he articulated a new framework in which to determine whether imported components violate Section 337. Under his framework, the Commission will consider:

  1. whether the article is a material part of the invention,
  2. whether it is especially designed and/or configured for use in an infringing manner,
  3. whether it is a staple article and the extent to which it has non-infringing uses, and
  4. the extent to which it is modified or combined with other articles after importation.

There remains an open question of how in-depth the full Commission will implement this framework as this was the view of only one of the Commissioners, but ITC litigants will certainly want to consider these factors moving forward.

In other news, on September 14-15, U.S. Customs’ new Exclusion Order Enforcement Branch will be holding a webinar to discuss various issues that ITC practitioners and litigants should be aware of surrounding the enforcement of exclusionary relief by Customs. You can register by going to and searching for “Section 337 Enforcement Seminar.”

Finally, as we previewed a couple months ago, the ITC recently launched a pilot program that allows for an early evidentiary hearing and discrete potentially case-dispositive issues. This past month has seen the first couple motions for entrance into the program. First, in the -1269 investigation, the non-defaulting respondents filed a motion for entrance into the early disposition program for an early hearing to determine whether the complainants can prove the existence of a domestic industry. Notably, respondents filed this motion less than a month after institution and before discovery even began. Briefing has been completed and the motion is still pending before ALJ McNamara. More recently, in the -1263 investigation, respondents filed a motion for entry into the early disposition program to decide whether claims of one of two asserted patents are unveiled as indefinite. So, unlike the request on the -1269 investigation, here an early ID would only resolve issues concerning one of the asserted patents. The motion is pending as well. Matt, do you have any thoughts on these motions for entry into the pilot program?

Matt Rizzolo: Yes, I think it'll be interesting to see how these two shake out because they can help define some of the early contours of this pilot program, and maybe we'll get some feedback on what issues the judges or Commission think are appropriate and what limits they might place on it. I'm sure we'll get some more requests, and I'm sure we’ll revisit these in a future episode. Actually, I'm somewhat surprised that we haven't seen more of these requests filed in the three or so months since the Commission started the pilot program. So anyway, thanks for the update, Brendan.

Let's turn to our main topic for this month's podcast, and it's what some have called the "patent death squad," but most of us know as the Patent Trial & Appeal Board. Over the past decade, the PTAB has really become a critical tool for those facing patent infringement allegations. A defendant can file a validity challenge at the PTAB and get an expedited ruling on invalidity in a forum with specialized technical expertise. As we know, district courts will often stay infringement actions pending PTAB review of a patent at issue in a particular case. But on the other hand, I often refer to the ITC as the patent owner's “antidote” to the PTAB. It's not uncommon for the ITC and the PTAB to both be used in the same dispute, and it's this interplay here that we're going to talk about today. And for that, who better to join us than Scott McKeown? Scott's litigated hundreds of cases before the PTAB, and has written his fair share on the interplay of issues between the two fora. Welcome to the podcast, Scott.

Scott McKeown: Thanks, Matt—thanks for having me. And just to keep with the Star Wars theme, I want to be Boba Fett, the hired gun, on this exchange.

Matt Rizzolo: We'll see what we can do. Scott, you and I often talk about the race to the finish between the ITC and the PTAB. Can you talk a little bit about the similarity and timelines between an ITC investigation and an inter partes review?

Scott McKeown: Sure. To your earlier point about the PTAB being branded the “death squad” early on, I think some of the discretionary denial practices that we're going to talk about today are in some ways, I would submit, a reaction to some of the criticisms out there in the public on what the agency is doing, but we'll get into that. But on the timelines in general, certainly a lot of similarities between the ITC and the PTAB, both being administrative agencies, both conducting administrative trials, and having judges with very specialized expertise. In the case of the PTAB, you have judges that are engineers and scientists, and certainly are well familiar with the patent laws. On the ITC side, obviously the interest there in protecting American industry and doing so in a manner that can provide a very strong outcome in terms of excluding products from being imported. So also, both of these agencies having a mandate for speed and both trying to solve the same problem, with the ITC being more focused on domestic industry, where the PTAB is just interested in resolving patent disputes in a manner and in a timeframe that is meaningful from a business perspective.

We built the PTAB trials on the back of the previous patent re-examination practices—the problem with that being they took too long. So, we're now trying to get these things done within a year of the institution. So, we're talking about an 18-month docket, so to speak, from the time you file your IPR petition. There's a preliminary proceeding back-and-forth from the patent owner on what the patent owner deems deficient with the challenge. Then the agency decides to institute. Then there's a 12-month paper trial that typically lasts about seven months or so, with five months or so on the back-end for the agency to arrive at its determination. And the ITC operating on a very similar timeline, maybe a bit more general, but roughly 18 months from the time an ITC complaint is filed up through the pre-hearing briefing all the way to the Commission's final determination. So, almost identical in length. That's where we get to the PTAB, taking a look at: What does it mean when the ITC is operating in parallel with the agency? And from a policy perspective, is that a good thing?

Matt Rizzolo: Yes, I think it's interesting that both an ITC investigation and IPR will start with what's essentially a petition. It's termed a “complaint” in the ITC, but you file this, and then there's a waiting period where the Commission will evaluate whether to institute the investigation or not. In the context of an ITC proceeding, it's extremely rare to have an ITC complaint denied institution, but that's not the case with the PTAB, right?

Scott McKeown: Right. Like I say, I think it gets back to politics a little bit—this practice of really looking at not only parallel ITC actions, but parallel litigation was something that only became prominent within the last couple years under the former director. Director Iancu certainly had an interest in making the agency more patentee friendly. So, this idea of discretionary denials really took hold then and has really grown by leaps and bounds since then. It operates on what are referred to as the Fintiv factors—“Fintiv” just being the name of the case that started the framework for this analysis. The analysis, in a nutshell, is just looking at what's going on in the courts, and what's going on at the ITC, and what is the overlap, and where does the agency—the PTAB—where does it fit into the equation and the patent system? Should the agency be conducting its own patentability trial in parallel with an ITC proceeding? So, the Fintiv factor is fleshing out when that answer is, "Yes, we should go forward," or, "No, we should not." And again, like I said, it's discretionary. It's interesting that the Patent Office has come up with this framework given that Congress has already set out a 12-month window whereby if you are in a litigation or an ITC action, you can come to the agency. So, Congress has thought about when would it be too late to come to the PTAB? And nevertheless, on top of that, the PTAB has built this new framework where in some cases, even within a couple months of a filing, the PTAB will still decide to deny that petition as conflicting with respect to the policy or the big level view of: Does it make sense to proceed with this action given that, for example, the ITC, or in some cases, the Texas courts or any other speedy jurisdiction, may be able to get to an answer before the agency?

Matt Rizzolo: You mentioned Fintiv, and obviously, that's something that you live and breathe every day. Some folks listening may not be fully aware of what Fintiv is, so Matt, could you give us a brief overview of the PTAB's Fintiv decision?

Matt Shapiro: Sure, Matt. To provide some further context here, and to set the landscape: Last year leading up to Fintiv, the Board generally did not exercise its discretion to deny IPR petitions due to a parallel ITC proceeding—this was in large part because the ITC isn't capable of actually invalidating a patent. But in May 2020, that landscape changed with this Board's Fintiv decision becoming precedential. Now, post-Fintiv, many patent owners have requested in their preliminary response, that the Board exercise its discretion to deny petitions where the patent is being asserted at the ITC. As a result, the Board has issued at least 45 institution decisions post-Fintiv, addressing whether to exercise its discretion to deny institution. And the statistics on these institution decisions are telling—in more than 75% of the decisions, the Board elected to exercise its discretion and deny institution. They did so on the basis of a parallel ITC proceeding. Under Fintiv, the Board considered six factors, which is what Scott was hinting at earlier, when deciding whether to exercise its discretion under Section 314(a).

  • The first is whether the court granted a stay or evidence exists that one may be granted if the proceeding is instituted.
  • Second, the Board will consider the proximity of the court's trial date to the Board's projected statutory deadline for a Final Written Decision.
  • Third, the Board will consider the investment in the parallel proceeding by the court and the parties.
  • Fourth, they'll consider the overlap between issues raised in the petition and in the parallel proceeding.
  • Fifth, the Board will consider whether an IPR petitioner and the defendant in the parallel proceeding are the same party.
  • And then sixth, they'll look at other circumstances that impact the Board's exercise of discretion, including the merits of the petition.

Matt Rizzolo: Those factors could vary a lot when you're talking about different district courts—Scott referenced really fast jurisdictions versus slow jurisdictions. When you're talking about the ITC, often many of these are applied extremely consistently. So, looking at factor one—a stay—we know the ITC really never stays an investigation. They've never stayed an investigation pending a parallel PTAB proceeding when that request for a stay has been opposed. There was one case where the parties jointly agreed, and that's sort of an outlier. But the short answer is: ITC is not the stay. And the second factor—trial date—as long as the ITC complaint and the petition are filed around the same time, you're going to have that ITC trial date within nine-ten months after the filing of the complaint, so that's going to be coming really quickly. So, that would typically favor exercising discretion to deny a petition. Then, Scott, what about some of the other ones here, like the investment in the parallel proceeding or overlap?

Scott McKeown: Sure. In my view, a lot of these end up standing or falling together. If you have a Fintiv issue, then by definition, the case can't be stayed because the PTAB wouldn't be looking at it otherwise, so you can almost discount that first factor. And to your point, Matt, if you're in the ITC, there won't be a stay. Maybe if you're in the district court, there might be an open question, but if the Board is considering the Fintiv factors, then obviously there is no stay, so that's not really a factor. So, factor two, I would submit, is really almost the whole ball of wax here—the question is: When is your trial date? And where is that in relation to when the PTAB would otherwise be finished? If you are around the same time, certainly before the PTAB, you've got a big problem. As you point out, Matt, if you don't see this ITC complaint coming and it pops-up, you're already behind the eight ball—you already have an 18-month schedule there that's up and going. Presumably, it's going to take you at a minimum, a month or two to get your IPRs together and on file—sometimes a lot longer if you have to do a prior art search, or you want to wait because you don't understand the tight corners on the infringement read, and you don't have a lot of information from your adversary, etc. So, it becomes a real problem, and that's why, as you alluded to earlier, Matt, in some ways this is the antidote to the PTAB.

I should mention that this Fintiv analysis, as applied to the ITC, wasn't always this way—in that, when the PTAB first started looking at these races, they concluded, "The ITC determination isn't preclusive. Therefore, we're not going to defer to it." And roughly a year, year-and-a-half ago, again when the last director was in charge, they decided to just change their mind, and so now they will assess an ITC case just like they would a district court case, so it really comes down to that trial date. As I mentioned, the factors falling in with that trial date—the overlap, you have to imagine that the best prior art in the ITC or in any other court will probably be again the best prior art that you're using at the PTAB, at least for patents and printed publications, so there will be overlap. You're probably arguing about the same claim construction issues, you may have the same expert—so again, not really factors that stand out if you're battling one of these as a petitioner, that you can make too much ground up on. We'll talk a little bit about if there is overlap with the patents and printed publications, and you're in the district court or you're in the ITC, and you've got system art or art that isn't patents and printed publications—you've got 112 arguments; you feel good about your non-infringement—you might be able to stipulate that should the Board go forward on your patents and printed publications, that you won't pursue them in the courts or in the ITC. That does move the needle somewhat, so I would say there's the second factor, and then there's the overlap where you, as a petitioner anyway, can make up a little bit of ground there.

Then finally, you've got the last factor, which is considering the merits, which again is another weird analysis where the Board in order to go forward with trial says, "We're going to go forward with trial if there's a reasonable likelihood of the petitioner prevailing." But then in the Fintiv analysis, they almost have to say, "You're really, really reasonably likely to prevail.” Or, “Even though we say time and time again that this decision to institute is only preliminary, we're not going to exercise our discretion here because your arguments just look super-duper good." So, it's a little strange. But just to sum it up, I think if you do have a conflicting trial date, certainly if it comes before the PTAB would get to its result, if you're a petitioner, if you don't have really strong grounds, you definitely need to stipulate to eliminate some of the overlap to try to convince the agency to move forward with your proceeding.

Matt Rizzolo: There's a handful of petitioners who have had success in the ITC, where they've dropped some of their invalidity arguments in the ITC in order to get that PTAB proceeding instituted, and despite the fact that a trial was coming right up. So, that is something that can be looked at moving forward. It’s interesting to me, given that any additional factors as part of the Fintiv analysis, given the ITC statutory mandate to finish things quickly—if you rigidly apply Fintiv, that the ITC can generally be a de facto bar to PTAB institution.

Scott McKeown: Also, I would just add on the question of patent policy and whether or not it makes sense for the ITC to move forward in view of the PTAB. It's interesting to note that as I mentioned earlier, the AIA trials, the PTAB trials that we have now were built on the foundation of patent re-examination. It used to be that those old re-examination statutes excluded the ITC and that they were limited to civil actions, and so it was argued that the estoppel from a re-examination wouldn't reach the ITC. But then, when we got AIA statutes, the ITC was specifically included. So, on the one hand, you've got this recognition from Congress that if the PTAB goes forward, there are estoppel benefits. They certainly were considering relationships to other proceedings when they drafted Section 315, which is titled, "Relation to other proceedings." And yet, you've got the agency deciding on an individual judge basis what makes sense and what doesn't in terms of which action should go forward. So, it's a little bit, I think you can argue, usurping the voice of Congress and giving it to the PTAB on the level of individual judges, and I think that's why you get very inconsistent decisions. While it seems as though the agency may be going one way at one time—for example, when they didn't see the ITC as a problem because there wasn't a preclusive effect—and then all of a sudden they changed their mind. And then you'll see a bunch of decisions that deny petitions because the ITC is ahead, and then you'll see another petition that says, "That's true, but this is a really, really, really strong petition." So, it's a little bit all over the place, and that's not what you want from your government. You want them to be predictable, and we should have some clear guidance here. To that end, there was a request to the Precedential Opinion Panel on this question of: Should the Fintiv factors be applied to the ITC this way? In other words, the ITC will almost always win the race, so you're almost, as Matt points out, creating this de facto rule. When Director Iancu left—we have an interim director right now—that request was denied, but I think it's something that may come up again when we get a new director that may be a little more amenable to some of these arguments. And of course, there's litigation pending on the practice of Fintiv, so this is a very quickly changing area.

Matt Rizzolo: Since you mentioned estoppel, I want to go there for a second because I think that's a really interesting issue. Under the AIA, a petitioner and IPR—when the IPR gets to Final Written Decision—that petitioner is then barred from asserting in, as you mentioned, district court or the ITC any invalidity argument that actually was raised or could have been raised in the IPR. So essentially, Congress said, "You need to pick your forum for these invalidity arguments." But when it comes to the ITC, there might be more than one respondent in a given ITC—and there often are more than one respondent in a ITC proceeding. Then there's also the question of the ITC Staff, the Office of Unfair Import Investigations, who might be participating. So, Matt, I know that the Commission has dealt with this a couple of times. Can you talk about that?

Matt Shapiro: Sure. One of the really interesting issues—an ITC-specific one—is the potential role of the ITC Staff, as you mentioned, Matt. After an ITC respondent may be estopped, what happens to the ITC Staff? As we've discussed in past episodes, the ITC is unique in that the ITC Staff can then participate in investigations as an additional party, and the Staff may have an expansive role. For example, the Staff can issue its own discovery and present its own arguments in the proceeding. Now, the ITC has addressed the issue of the Staff's role with respect to estoppel a couple of times. For example, in the -1058 investigation, the ALJ found that IPR estoppel does not apply to the ITC Staff because the ITC Staff simply isn't the petitioner. Therefore, the Staff was able to present the same invalidity arguments as those previously advanced by the IPR petitioner and the respondent in the investigation. That hasn't always been quite so clean in other investigations. For example, in the -1089 investigation, while the Staff was not technically estopped from presenting its invalidity argument, it effectively was because after the Final Written Decision issued, the ALJ struck all of respondents’ arguments from their pre-hearing brief as well as all witness testimony related to those arguments. This resulted in all of respondents’ arguments relating to invalidity being excluded from the hearing. And then, based on the stage of the proceeding in the investigation, the Staff was no longer able to submit its own evidence, so the ALJ effectively precluded Staff from presenting respondents’ invalidity arguments. Also, while we're on the topic, it's worth mentioning that ALJs have adopted what seems to be the majority view that IPR estoppel applies against not just the IPR loser, but also an IPR winner.

Matt Rizzolo: Yes, that's something that Scott and I have had a bunch of back-and-forth about in the past. There was an investigation a few years ago involving Paice and Ford over hybrid vehicles, where Paice asserted several patents that the PTAB had already found to be invalid prior to Paice even filing the ITC complaint. But despite those Final Written Decisions being out there, the ITC instituted the investigation, and the ALJ actually ruled that Ford could not advance certain invalidity arguments at the ITC, even though they had won on those very same arguments at the PTAB. So that, to many, seems like somewhat nonsensical results, and it goes back-and-forth. Scott, I don't know if you have any thoughts on that?

Scott McKeown: Yes, I would expect to see a legislative tweak there to preclude that kind of interpretation because it certainly doesn't make any sense in practice.

Matt Rizzolo: Another ITC-specific issue is the impact that the Final Written Decisions from the PTAB can have on remedial orders, and this comes into play with the close timing between the two forums. So, Brendan, can you talk about the situation where a petitioner prevails at the PTAB, but there's also a pending ITC investigation going on?

Brendan McLaughlin: Yes, as we've discussed throughout this episode, it's really a race between the ITC and the PTAB—it all depends on the timing. A respondent is more likely to be successful in suspending the enforcement of a remedial order if the Commission is still reviewing the ALJ's determination or if the Commission's determination hasn't yet issued. For example, in a couple of investigations, and most recently in -1133, the Commission suspended enforcement of remedial orders pending resolution of PTAB Final Written Decisions, which issued after the ALJ's initial determination, but before the Commission’s determination in issuance of remedial orders. So, the Commission held that the patents were not invalid, but given that the PTAB had come to the opposite conclusion, the Commission decided to let the appeal of the PTAB proceeding play out before enforcing exclusionary relief. But in -945, the Final Written Decision issued just days after the Commission’s determination. The petitioner/respondent filed a petition to suspend the remedial orders, citing changed circumstances, because the PTAB now said the patents were invalid. But the Commission denied the petition, noting that under the legislative scheme set up by Congress, the PTO would not issue a certificate cancelling those claims until after the Federal Circuit affirmed the PTAB's findings. The upshot is that the PTAB decisions will not change conditions of fact or law, warranting rescission of the remedial orders under Section 337(k).

Matt Rizzolo: I think you mentioned -1133, the Certain Unmanned Aerial Vehicles investigation, and that case is actually on appeal right now with the Federal Circuit. One of the issues on appeal is whether suspension of the remedial order pending appeal was something that was within Congress's authority. It's an interesting argument that's being made, so we'll have to see what happens there. Scott, I'm going to give you the last word here in light of all this. Do you have any general advice for petitioners who are either facing an ITC complaint, or have a hint that one might be filed against them soon?

Scott McKeown: Sure. I think you have to assume that the ITC is a threat now more so than it may have been years ago because of what we've been talking about here. Certainly the PTAB has chilled a lot of litigation around the country, and if you can go to a forum where you know that they are not staying, then that potential leverage and investment in PTAB proceedings, it only makes sense if you're willing to go the long haul. Very few companies are willing to risk exclusion orders. I think even for certain of larger non-practicing entities, we see them considering ITC, and even some practicing entities, larger licensing companies, we've seen a few of those go to the ITC in the last 12-18 months to get some licensees that were reluctant to resign-up for their program in line, so to speak. You really have to almost prepare before it happens—certainly the earlier you get your petitions on file, the better. So, if you think the ITC is a risk or something that may happen, you may have some of those IPRs in your back pocket waiting for that shoe to drop. Of course, there is some risk to doing that as well, given that the PTAB now applies the Phillips construction as well as the district courts, the ITC. It's not the game that it used to be under broadest reasonable interpretation where you could take a broad claim read and view the prior art, and then when you got into court and say, "I did that because the Patent Office is weird, and I had to do that." So, you really have to think long and hard about your claim construction. Earlier is better, but from the practical perspective, there's risk in going earlier, so it certainly cuts both ways. Once you are in a race and you are looking at this 314(a) briefing, certainly you need to get out in front of it in your petition—you want to address it head on. If you can, stipulate to drop some of the common issues, drop your patents and printed publications on the litigation side all together—that would certainly move the needle. But again, aside from getting your filing in as soon as possible, or arguing to the Board that you fall into that sixth factor of having a super-duper-duper really strong petition, you're relatively limited in terms of being a petitioner and trying to avoid it. All you can do is try to nibble away at some of the factors to make your case look like one of those cases where the Board decides that it's in the best interest for them to go forward.

Matt Rizzolo: With that, that's all the time that we have for this episode of Talkin' Trade. Thanks, everyone. As always, we appreciate feedback from our listeners. So, if there's a topic that you'd like to hear more about, or you have any ideas for ways we can improve this podcast, just let us know. You can find this and other Ropes & Gray podcasts on Apple podcastsSpotify, or Until next time, I'm Matt Rizzolo, and on behalf of Matt Shapiro and Brendan McLaughlin, thank you all for listening.

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