District Court Declines Barnes & Noble’s Request To Apply Kessler Doctrine To ITC Non-Infringement Decision – On May 31, 2015, United States Magistrate Judge Paul Grewal of the U.S. District Court for the Northern District of California issued a Report And Recommendation Denying Motion For Judgment On The Pleadings declining to apply claim and issue preclusion to an ITC determination of non-infringement in Technology Properties v. Barnes & Noble, Case No. 3:12-cv-03863-VC (see prior coverage). Beginning his decision by noting that “the International Trade Commission is as important a forum for resolving patent matters as any federal district court,” Judge Grewal stated that there are, however, several key differences. One difference is that “[u]nlike with an earlier district court judgment, Congress has mandated that an earlier ITC determination ‘cannot have preclusive effect’ in a later district court case under the doctrines of claim and issue preclusion.” Judge Grewal denied Barnes & Noble’s request to apply “the long-dormant preclusion principle known as the Kessler doctrine,” where in 1907 the Supreme Court held that an earlier judgment of non-infringement by a court of competent jurisdiction precludes a later claim in district court even where the first finding would not be the basis for res judicata or collateral estoppel. Noting that the Federal Circuit in Brain Life v. Elekta,746 F.3d 1045, 1056 (Fed. Cir. 2014), affirmed that Kessler v. Eldred, 205 U.S. 285, 289 (1907), “remains the law of the land,” Judge Grewal clarified that no court has considered whether the Kessler doctrine bars a later district court claim based on an earlier determination by the ITC. “Presented with this issue of first impression,” Judge Grewal found that “no matter its renewed lease on life, the Kessler doctrine does not apply to the ITC’s earlier finding that B&N does not infringe the patent in question.” Judge Grewal cited Senate Report No. 1298 in which Congress stressed that “it seems clear that any disposition of a Commission action by a Federal Court should not have a res judicata or collateral estoppel effect in cases before such courts,” and Federal Circuit precedent holding that “the ITC’s prior decision cannot have claim preclusive effect in the district court.” Judge Grewal distinguished the recent Supreme Court decision in B&B Hardware v. Hargis Indus., 135 S. Ct. 1293, 1298-99 (2015) by noting the fact that “Congress was clear that the ITC could not bind district courts with unappealed findings.” Judge Grewal stated that, although the recent Supreme Court decision held that a final decision by the Trademark Trial and Appeal Board could collaterally estop a district court, “the Court went to great lengths to emphasize that deference to any agency’s finding depends on Congress not having said anything to suggest otherwise.” Judge Grewal therefore recommended that B&N’s motion for judgment on the pleadings be denied. A Magistrate’s recommendation on a dispositive matter is, upon motion, subject to de novo review in the Northern District of California. This Update will monitor whether Judge Grewal’s recommendation is subject to de novo review.
Commission Affirms Judge Lord’s Initial Determination Finding No Violation For Lack Of Standing In 897 Investigation – On April 27, 2015, Judge Lord issued an ID (Order No. 135) in Certain Optical Disc Drives, Components Thereof, And Products, Inv. No. 337-TA-897 finding that Complainants lack standing to assert the “Kadlec Patents.” A Public Version of the ID issued on June 5. The Commission issued a Notice on June 9 to review the ID and affirmed the ID with modified reasoning terminating the investigation in its entirety. A Commission Opinion will issue shortly. On October 20, 2014, ALJ Lord had issued a first ID (Order No. 113) terminating the investigation based on Optical Devices lack of standing to assert the “Wild Patents” and the Kadlec Patents. On December 4, 2014, the Commission determined to review Order No. 113, in part, and issued an Opinion affirming, with modified reasoning, that Optical Devices lacked standing to assert the Wild Patents, and that it would prejudice Respondents to allow Optical Devices to join other necessary parties. The Commission vacated the finding that Optical Devices lacked standing to assert the Kadlec patents and remanded for further proceeding. On remand Judge Lord found that Optical Devices does not hold all substantial rights to the Kadlec Patents, and therefore, lacks standing to maintain an action for infringement without joinder of other necessary parties. This Update will monitor any review by the Commission or issuance of the Commission’s Opinion terminating the investigation.
Commission Issues Final Determination In 887 Investigation; Finds Violation Of Section 337 Based On Patent Infringement And Theft Of Trade Secrets – On May 6, 2015, the Commission issued an Opinion in Certain Crawler Cranes And Components Thereof, Inv. No. 337-TA-887. Complainant, Manitowoc Cranes, LLC (“Manitowoc”), alleged a violation of Section 337 based on both patent infringement and trade secret theft by respondents Sany Heavy Industry Co., Ltd. and Sany America, Inc. (collectively, “Sany”). In its Opinion, the Commission found that Sany had infringed one of Manitowoc’s patents and had misappropriated Manitowac’s trade secrets relating to: (i) an unfilled market need for certain types of cranes and Manitowoc’s plan to fill that need; (ii) Manitowoc’s detailed embodiment of a crane incorporating its Variable Counterweight Technology; (iii) Manitowoc’s decision that its Variable Counterweight Technology was desirable for use in wind power applications; (iv) Manitowoc’s detailed cost and pricing information; and (v) Manitowoc’s manufacturing processes and procedures. The Commission also found that the importation requirement had been met based on a contract for sale for a model SCC8500 crane, including the UltraLift package, between Sany Heavy Industry Co., Ltd. and Sany America, Inc., even though the UltraLift package had never been manufactured or imported into the United States. The Commission further found that the domestic industry-technical prong had been met with respect to Manitowoc’s patent-based claims. In an earlier Initial Determination, the Administrative Law Judge found that Manitowoc established the existence of a domestic industry-economic prong and, with respect to the trade secret theft allegations, injury to the domestic industry. The Commission determined not to review this ID. The Commission issued a limited exclusion order for respondents’ patent infringement violations, but did not issue a cease and desist order. The Commission issued a limited exclusion order and cease and desist order of 10 years for the trade secret misappropriation, which was equal to “length of time it would have taken the respondent to develop the complainant’s trade secrets.” The Commission also required a bond of 100 percent of the entered value of the respondents’ cranes during the Presidential Review period.
