Last Week in the Federal Circuit (February 28 - March 4): When Infringing An Invalid Patent Can Be Costly

The Federal Circuit kicked off a new week of oral arguments today. And this week it finishes its goodbyes to Judge O’Malley, who officially retires on Friday (March 11). Even so, the work must go on. Below we provide our usual weekly statistics and a detailed discussion of our case of the week—our highly subjective selection based on whatever case piqued our interest. 

Precedential opinions: 2

Non-precedential opinions: 6

Rule 36: 0

Longest pending case from argument: DBN Holding, Inc. v. ITC, No. 20-2342 (147 days)

Shortest (non-Rule 36) pending case from argument: Lowe v. Shieldmark, Inc., No. 21-2164 (24 days)

Case of the week: DBN Holding, Inc. v. ITC, No. 20-2342

Panel: Chief Judge Moore and Judges Newman and Reyna, with Judge Reyna writing the opinion

You should read these cases if: you have a matter involving a consent order before the ITC.

People often repeat the adage that an invalid patent cannot be infringed. But this week’s case of the week shows that, regardless of whether that adage is true, one can violate a consent order based on an invalid patent. And doing so can be costly.

The facts are these. DBN Holding confronted a common challenge—a patent litigation action in district court and an investigation based on the same underlying patent at the International Trade Commission. To avoid having to litigate simultaneously in both fora, DBN executed a consent order at the Commission. Among other things, the order provided that DBN would not import any two-way global satellite communication devices that infringe claims of the asserted patent “until the expiration, invalidation, and/or unenforceability” of the patent. The order also stated that it would become inapplicable to any claim “found or adjudicated invalid” in court, “provided that such finding or judgment has become final and non-reviewable.”

DBN eventually succeeded in proving the claims invalid in district court. But not before DBN imported satellite devices in violation of the consent order. The Commission slapped DBN with a substantial civil penalty for its violation. After the Federal Circuit affirmed the district court invalidity judgment, DBN filed a petition asking the Commission to rescind or modify the civil penalty.

On DBN’s appeal from the Commission’s denial of the petition, the Federal Circuit affirmed. The Federal Circuit explained that “consent decrees and orders have attributes both of contracts and of judicial decrees.” Viewed as a contract, DBN received the benefit of its bargain when the Commission terminated the original investigation. DBN was then obligated to uphold its end of the bargain—not to import satellite devices covered by the patent. Because the consent order spelled out that a court invalidation of the patent would apply only prospectively, “under the clear terms of the consent order, DBN remained potentially liable for any violations up to the time of invalidation.” The Court thus rejected DBN’s argument that its alleged infringing conduct could not support maintaining the civil penalty given the asserted claims’ later invalidation.

The Federal Circuit declined to decide whether, in fact, Commission regulations authorized the Commission to rescind or modify previous consent orders. Even assuming the Commission had such authority, the decision to rescind or modify would be “commit[ted] to the ITC’s discretion.” DBN failed to show the Commission abused that discretion. DBN argued that the Commission should have found its violation of the consent order to be in good faith because DBN believed the patent to be invalid when the violation occurred. But the Federal Circuit rejected that argument as “without a reasonable basis or legal authority.”