Patent Invalidity Does Not Derail ITC Civil Penalty Order

Importer must pay for conduct that violated ITC consent order occurring prior to patent invalidity

The Federal Circuit affirmed the U.S. International Trade Commission’s (ITC) decision to decline to modify a civil penalty order after another court invalidated the patent underlying the civil penalty order.

DBN Holding, Inc. and BDN LLC entered into a consent order to end an ITC investigation. As part of the consent order, DBN agreed not to import products that infringed BriarTek’s patent. DBN, apparently believing BriarTek’s patent to be invalid, imported the infringing products anyway. The ITC found a violation of the consent order, and assessed a “massive civil penalty.”

The patent was later found invalid by the District Court for the Eastern District of Virginia, and DBN asked the ITC to modify its civil penalty order in light of the patent invalidation. Eventually, the ITC considered the request on the merits, and denied modification of the civil penalty order.

The Federal Circuit, under an abuse of discretion standard, upheld the ITC finding that the ITC properly weighed the EPROM factors for granting a civil penalty order:

(1) the good or bad faith of the respondent, (2) the injury to complainant, (3) respondent’s ability to pay, (4) the extent to which respondent has benefited from its violations, (5) the need to vindicate the authority of the Commission, and (6) the public interest.

and assessment of the Ninestar factors for determining a respondent's good or bad faith:

(1) had a reasonable basis to believe that the violating product was not within the scope of the Commission’s order, (2) requested an advisory opinion or clarification from the Commission, (3) provided any opinion of counsel indicating that it obtained legal advice before engaging in the acts underlying the charge of violation, (4) decided which products were subject to the order based on the decisions of management and technical personnel, without legal advice, and (5) satisfied its reporting requirements under the relevant Commission order.

DBN asked for a good faith belief of patent invalidity to be added to the factors for determining good and bad faith, but the Federal Circuit did not see a reason to depart from the Ninestar factors. 

Apart from the usual caution to avoid violating ITC orders, given this ruling, respondents possessing a good faith belief in patent invalidity should be wary of entering into a consent order of the type at issue here in order to end an ITC investigation.