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Patent Eligibility at the International Trade Commission: Could the Interim Initial Determination Provide a Strategic Approach for Respondents?

A new procedural tool at the International Trade Commission could be a gamechanger for respondents arguing patent ineligibility as a defense to patent infringement claims. The new procedure, called the Interim Initial Determination (“Interim ID”) gives Administrative Law Judges (“ALJs”) the option to conduct proceedings—a sort of mini trial—on certain issues prior to the main evidentiary hearing in unfair import investigations. Patent eligibility is one of the many issues that ALJs can decide under the new program. I believe that patent eligibility is a strategic issue for respondents to raise because patent eligibility jurisprudence is, frankly, a mess, and the mere prospect of an eligibility challenge could prompt an advantageous settlement.

How has Patent Eligibility Gotten so Muddled?

Congress, for its part, clearly defined patent eligibility. Under the text of 35 U.S.C. § 101, any “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” is patent eligible. But judge-made law created three exceptions: laws of nature, natural phenomena, and abstract ideas. Courts have struggled to define the bounds of the abstract idea exception in the computer age. In 2014, the Supreme Court attempted to clarify this standard in Alice Corp. v. CLS Bank Int’l, establishing a two-part test for eligibility. Under Alice, courts first ask if the patent claim is directed to one of the three exceptions. If so, then courts ask whether something in the claim transforms it into an eligible application of an ineligible concept.

Courts have had difficulty applying the Alice test in a consistent way as illustrated by two recent Federal Circuit cases. In December 2020, the defendants in American Axle & Manufacturing, Inc. v. Neapco Holdings LLC petitioned for writ of certiorari from the Supreme Court after a 6-6 standoff at the Federal Circuit over patent eligibility for an automobile drive shaft design. Judge Moore of the Federal Circuit, in her concurrence to American Axle, aptly put it, saying “What we have here is worse than a circuit split—it is a court bitterly divided.” In June 2021, the Federal Circuit held in Yu v. Apple that a patent that recited image sensors and lenses in a digital camera was directed to an abstract idea. The Yu decision highlighted the divide on the Federal Circuit bench and confirmed that American Axle was not an anomaly.

American Axle and Yu have led to confusing decisions at the ITC. In 2016, ALJ McNamara found a patent involving an LED light fixture patent eligible. In August 2021, ALJ Cheney found the same patent ineligible citing American Axle and Yu.[1] The Commission affirmed ALJ Cheney’s decision, again citing Yu and referencing a procedural irregularity to avoid having to directly overturn the 2016 eligibility determination.[2] While this level of uncertainty is challenging for all parties, it may provide a fast track to victory for some respondents at the ITC by allowing respondents to argue eligibility at the Interim ID stage and, if successful, significantly limit litigation costs.

Section 337 Proceedings and the Interim ID

The ITC is a forum for companies with a significant investment in domestic industries to raise unfair import claims under 19 U.S.C. § 1337 (“§ 337 proceedings”). The most common proceeding involves the importation of goods that are accused of infringing U.S. patents. Similar to patent infringement suits in District Courts, Federal Circuit precedent controls. Successful complainants before the ITC, unlike most defendants in District Courts, may obtain an exclusion order enforceable by Customs and Border Patrol. The ITC endeavors to render a final decision sixteen months after the investigation begins—an attractive benefit over District Court litigation that could take three years or more. The Interim ID procedure allows for even faster adjudication of major issues.

The ITC announced the Interim ID pilot program in May 2021, which allows ALJs at the ITC to hold evidentiary hearings and receive briefing on one or more significant issues prior to the main evidentiary hearing in a § 337 proceeding. The announcement says that “Such issues may include, but are not limited to, infringement, patent invalidity, patent eligibility, standing, or satisfaction of the domestic industry requirement.” Litigants have requested the Interim ID procedure at least three times, but an ALJ had yet to invoke it until January 25, 2022 when ALJ Cheney invoked it sua sponte on the domestic industry requirement. This first Interim ID proceeding is scheduled for April 20, 2022, in investigations 337-TA-1291 and 337-TA-1292.

The Interim ID program has advantages over existing procedures: First, unlike the 100-day proceeding, issues raised under the Interim ID proceeding do not have to be case dispositive. Second, unlike summary determination motions that can only be decided if there are no disputed issues of material fact, Interim ID proceedings provide the ALJs with a mechanism to resolve disputed facts and, thus, resolve the ultimate issue. But since there have yet to be any completed Interim ID proceedings, much of this remains unknown and untested.

Because of the uncertainty surrounding patent eligibility and limited need for factual development, I believe Interim ID proceedings present a strategic way for respondents to resolve patent claims rapidly and reduce litigation expenses. As of this writing, no litigants before the ITC have raised patent eligibility issues in an Interim ID.

Patent eligibility jurisprudence can’t stay this way forever; respondents should leverage it now using the Interim ID

Patent eligibility issues are a good fit for the Interim ID—for now. First, they generally do not require extensive discovery.[3] Second, an Interim ID could help the parties reach a settlement because a complainant might not want to accept the risk of invalidating its patent at such an early stage. Third, it provides ALJs a mechanism to quickly resolve a difficult issue, and, if it leads to a settlement, could clear the investigation off their docket. However, the uncertain caselaw surrounding patent eligibility prompts the question of if or when the Supreme Court might intervene. Although it remains unclear how the Interim ID program will play out, I believe the opportunity is ripe for patent eligibility to become the issue du jour for the Interim ID program.

[1] Compare Certain Light Emitting Diode Products and Components Thereof, Inv. No. 337-Inv-947, Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Bond at 280-81 (July 29, 2016) (unreviewed, Comm’n Notice (Feb. 10, 2017)) (upholding the ’819 patent), with Certain Light-Emitting Diode Products, Fixtures, and Components Thereof, 337-Inv-1213, Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Bond at 23, 59 (Aug. 17, 2021) (finding the ’819 patent directed to ineligible subject matter).

[2] Certain Light-Emitting Diode Products, Fixtures, and Components Thereof, 337-Inv-1213, Comm’n Op. at 4-5 (Jan. 14, 2022).

[3] Prior to Berkheimer v. HP Inc., courts considered patent eligibility to be strictly a matter of law. Berkheimer modified that rule, holding that some eligibility issues involve genuine issues of material fact making eligibility inappropriate for summary judgment. 881 F.3d 1360, 1367 (Fed. Cir. 2018).

Kevin X. Kuhn

Solicitations Editor, Georgetown Law Technology Review; Georgetown Law, J.D. expected 2022; University of South Carolina, M.S. 2015; U.S. Coast Guard Academy, B.S. 2008.