Challenge at the CAFC to ITC Exclusion Order Based on Claims Rejected in Reexamination

Scott Daniels | June 2, 2010

Tessera’s ITC case involving computer chip packaging is of considerable commercial significance to the semiconductor industry.  But it also raises the fascinating legal question of whether the Commission should issue an exclusion order against infringing imported products where the patent claims have been rejected in copending reexamination proceedings.  Where the ITC finds violation of Section 337, the statute requires it to issue an exclusion order and/or a cease & desist order to protect the domestic industry, unless such relief would harm the public interest. Is the public interest harmed by the enforcement of patent claims currently under rejection at the PTO?

The ITC determined last year that certain imported chip packaging infringed Tessera’s U.S. Patent Nos. 6,433,419 and 5,852,326 and issued a limited exclusion against the Respondents’ future infringing imports and a cease and desist order against infringing products already in the United States.  Respondent Spansion has now challenged that determination at the CAFC, asserting inter alia that the ITC should not have issued these orders because they harm the public interest in view of the pending rejections of the ‘326 and ‘419 claims at the PTO.  In fact, the asserted claims of both patents have been finally rejected and are now on appeal at the Board.

Spansion argues compellingly in its brief that it is anomalous for the ITC to have found the patents valid over the prior art, based in part on the statutory presumption of validity, where the PTO’s most recent conclusion in the reexamination proceedings is that they are invalid:

the undeniable oddity of the ITC’s presuming patents to be valid – based on their issuance by a single examiner – after a panel of three experienced examiners determined them to be unpatentable should make the ITC particularly reticent about ordering injunctive relief, especially when the relief runs to the benefit of licensor who can be made whole by damages if the reexamination results are eventually overturned.

On the other hand, the ITC’s only remedies – exclusion orders and cease & desist orders – are prospective only.  A ruling by the CAFC that the ITC could not issue any relief until any pending reexamination is completed might effectively nullify the Commission’s remedial powers in view of the length of reexamination proceedings and subsequent appeals.

CAFC Judge Paul Michel may have answered that question in a decision issued last week involving an appeal of a District Court judgment, Dow Jones v. Abalise.  There, he commented in a footnote that an “ultimately final rejection of the claims by the PTO would fatally undermine the legal presumption of validity” of the patent, but such rejections had no effect because the “reexamination has not yet been completely resolved” (emphasis added).

We will report next week’s arguments.

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