An Ill Wind Blows Towards the ITC

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General Electric Company v. International Trade Commission, No. 2010–1223 (Fed. Cir. Feb. 29, 2012) (Chief Judge Rader and Judges Newman and Linn)

Disclosure: Although I had no part in the appeal to the Federal Circuit, I was part of the team representing Mitsubishi Heavy Industries before the International Trade Commission.

The ITC is supposed to be a fast way to litigate a patent infringement suit. This time, however, they may have been a bit too fast for the Federal Circuit’s taste, and the result is a major change in ITC practice.

An Air Battle

General Electric (GE) and Mitsubishi Heavy Industries (MHI) both manufacture wind turbines for generating electricity. The two companies have been locked in battle for several years now, with several lawsuits pending around the country.

This investigation by the ITC was the first shot fired. GE accused MHI’s wind turbines of infringing three GE patents. Although the Administrative Law Judge (ALJ) issued an Initial Determination that MHI infringed GE’s patents, GE had a domestic industry for each of the three patents, and that all three patents were not invalid, the Commission disagreed with many of the ALJ’s conclusions and found no violation.

The specific patent issues are fairly technical claim construction questions. You can read the opinion to learn about those.

Avoiding the Question

The interesting part of this opinion is the chiding that the court gave the ITC. The way the process works at the ITC is that the ALJ issues an Initial Determination and one or both sides ask the Commission to review it. The Commission then gives a notice of the issues it will review and asks for briefing on those issues. If the Commission doesn’t notice review of an issue, the ALJ’s determination is considered adopted.

What happens if the Commission notices review of an issue but then doesn’t decide it? According to the Commission’s interpretation of Beloit Corp. v. Valmet Oy, 742 F.2d 1421 (Fed. Cir. 1984), it’s as if there’s no decision on the issue at all, so there’s nothing to appeal. The ITC bar often refers to this as “Beloiting an issue.”

That’s what upset the court here. While the court was able to deal with two of the three patents completely, the Commission’s handling of the last one, the ’985 patent, was incomplete.

Unlike a district court suit, in order to find a violation at the ITC, the complainant has to prove not only patent infringement by the respondent, but also has to prove that the complainant is using the patent in a domestic industry. The Commission determined that GE had no domestic industry using the ’985 patent and stopped there. Although there were issues left regarding infringement, inequitable conduct, and invalidity, the Commission did not address any of them, on the grounds that once it found no domestic industry, it didn’t need to deal with the other issues.

That caused a problem, because the Federal Circuit reversed the Commission’s determination on the domestic industry issue. But it couldn’t do anything about the other issues, because the Commission hadn’t adopted the ALJ’s determination or made a decision for the court to review.

The court expressed some frustration with the Commission:

The consequences of this practice are illustrated in this case, for all contested issues concerning the ’985 patent were investigated by the Commission, tried to the ALJ, decided by Initial Determination, yet nearly all were held unavailable for judicial review. Thus we are obliged to remand to the Commission for undefined further proceedings, for which one may be confident only of further time and cost in the Commission and upon re-appeal to this court. (See the opinion at page 26.)

The court held that if the Commission doesn’t review an issue, noticed or not, the ALJ’s Initial Determination is considered adopted. There will be no more “unappealable” determinations.

A Verb No More

This is a big change. Beloiting issues has been standard practice at the ITC for decades. Not any more; the verb “to Beloit” is now obsolete.

After this, I suspect that the ITC bar may be directing some other verbs (and adjectives as well) towards the Federal Circuit. Still, it will be interesting to see how the Commission reacts. It may decide to review more issues, which would likely slow down the process of issuing a Final Determination. Or it may simply be more deferential to ALJs.

What effect do you think this will have on ITC investigations?

Photo credits: FranceHouseHunt and Vaxomatic

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