The Federal Circuit upheld the ITC Commission’s discretionary power not to issue sua sponte orders to show cause why a party has not committed sanctionable conduct under Commission Rules or to explain its reason for not issuing such an order in RealTek Semiconductor Corp. v. ITC, Appeal No. 23-1095 (March 18, 2025).
RealTek filed its motion for sanctions on October 2021 after petitioner DivX moved to terminate Investigation No. 337-TA-1222 as to Realtek in July 2021. RealTek alleged that DivX made “false and misleading representations regarding infringement” and used “Section 337 proceedings for harassment and other improper means.” Commission Opinion, Inv. No. 337-TA-1222 (Sep. 13, 2022). ALJ McNamara denied RealTek’s sanctions motion largely on procedural grounds finding that RealTek waited 7-12 motions after discovering the allegedly sanctionable conduct and thus failed to act promptly as required by Commission Rule 210.25(a)(1) (19 C.F.R § 210.25(a)(1)). See Inv. No. 337-TA-1222, Order No. 75.[1]
RealTek Semicondutor Corporation (“RealTek”) appealed the ITC Commission’s decision not to exercise its authority to enter an order sua sponte requiring petitioner DivX to show cause why it had not committed sanctionable conduct. RealTek requested a sua sponte order in its briefing, which the Commission did not address in its decision. RealTek argued at the Federal Circuit that the ITC Commission violated the Administrative Procedure Act (“APA”) by failing to enter a show cause order sua ponte. RealTek’s argument mainly relied on the fact that the Commission failed to provide its reasoning for not issuing a sua sponte order.
Commission Rule 210.4(d)(1)(ii) states that “On the administrative law judge’s or the Commission’s initiative. The administrative law judge or the Commission may enter an order sua sponte describing the specific conduct that appears to violate paragraph (c) of this section and directing an attorney, law firm, party, or proposed party to show cause why it has not violated paragraph (c) with respect thereto.” (emphasis in original).
The Federal Circuit and the Commission focused on the word “initiative” in Commission Rule 210.4(d)(1)(ii). The Commission argued, and the Federal Circuit agreed, that the Commission’s decision to issue sua sponte show cause orders was unreviewable because it qualified as an agency decision “committed to agency discretion by law.” Slip Op’n at 3 (citing 5 U.S.C. § 701(a)(2); Apple Inc. v. Vidal, 63 F.4th 1, 14 n.6 (Fed. Cir. 2023)). “To find otherwise would be a contradiction in terms, as it would mean a ‘sua sponte’ act under the Commission’s initiative could be demanded by a party or compelled by a court of review.” Slip Op’n at 4.
The Federal Circuit opinion leaves open the question whether a petitioner may avoid sanctions at the ITC by simply terminating the investigation as to the respondent alleging sanctionable conduct. The Federal Circuit decision included a footnote that it did not need to determine whether a “cause of action” existed and if RealTek had standing or jurisdiction to bring an appeal after the investigation was terminated against it.
Notably, in the parallel district court case, DivX, LLC v. Realtek Semiconductor Corp., C.A. No. 20-1202-JLH (D. Del.), RealTek argued that the district court case should be dismissed with prejudice as opposed to without prejudice as RealTek had spent millions of dollars in defending the co-pending ITC litigation. Id., D.I. 74 at 9. The court held that actions in a co-pending ITC litigation did not support dismissing the case with prejudice and noted that to the extent RealTek believed DivX acted improperly in the ITC case, RealTek could and was pursuing sanctions against DivX. Id., D.I. 78, at 3 (D. Del. Jun. 4, 2024).
The ALJ’s denial of RealTek’s sanction motion and the Commission’s denial of DivX’s sanction motion is a reminder to parties to promptly file a motion for sanctions at the ITC after learning of alleged sanctionable behavior. Parties must familiarize themselves with the Commission rules and cannot wait months to file their sanctions motion.
[1] Separately, petitioner DivX motioned the Commission for sanctions on June 16, 2022 on the basis that RealTek’s pursuit of sanctions qualified as harassment. The Commission denied DivX’s motion for sanctions finding that it did not file its sanction motion promptly after learning of RealTek’s alleged misconduct.
