United States: Federal Circuit Stay Order Demonstrates Value Of Redesign As Defense In ITC Actions

The Federal Circuit has determined to partially stay an ITC exclusion order as it pertains to products redesigned after the remedial orders issued. We have previously posted about Certain Network Devices, Related Software and Components Thereof (II); Inv. No. 337-TA-745 and the ITC's refusal to stay its remedial orders after the Patent Trial and Appeal Board found the asserted patents unpatentable in an IPR proceeding. Respondent Arista has had better luck in the Federal Circuit obtaining a stay of the remedial orders for its redesigned products.

Background

On December 19, 2014, Complainant Cisco filed a complaint alleging infringement by Arista of six patents, including U.S. Patent Nos. 6,377,577 and 7,224,668, and the Commission instituted the 945 investigation on January 27, 2015. After a trial, the presiding ALJ issued an ID on December 9, 2016, finding a violation of Section 337 due to Arista's infringement of the '577 and '668 patents. The Commission completed its review of the ID on May 4, 2017, and issued its final determination that Arista violated Section 337 by infringing the asserted claims of the '577 patent and the '668 patent. As a remedy, the Commission issued a limited exclusion order barring Arista's infringing switches from importation, and a cease and desist preventing Arista from engaging in specified domestic activities with respect to its infringing switches.

Shortly after the Commission's final determination and issuance of the remedial orders, the Patent Trial and Appeal Board issued final written decisions finding the asserted claims of the '577 and '668 patents unpatentable. In view of the PTAB's findings, Arista filed an emergency petition asking the ITC to rescind or suspend the remedial orders. The Commission denied Arista's request, concluding that the PTAB's final written determinations did not constitute changed circumstances warranting rescission of the LEO or CDO.

Arista then filed an emergency motion at the Federal Circuit seeking a stay of the Commission's remedial orders. On September 22, 2017, the Federal Circuit denied the motion with respect to the products adjudicated as infringing by the ITC. However, the Federal Circuit stayed the ITC's orders with respect to products that were redesigned by Arista in an attempt to avoid the claims of the asserted patents:

Arista's motion to stay the ITC's Limited Exclusion Order and the ITC's Cease and Desist Order and for an interim stay of the orders pending resolution of its motion is denied, subject to the condition that the product redesign on which Cisco relies to deny irreparable harm must be permitted to enter the country, without being blocked by the Commission order under review in this case, unless and until Commission proceedings are initiated and completed to produce an enforceable determination that such a redesign is barred by the order here under review or by a new or amended order. Any such determination may itself be reviewed, if challenged, in this court.

The Federal Circuit appears to base its decision on Complainant Cisco's argument in response to the motion to stay that Arista is not irreparably harmed because it has redesigned around the patents.

In response to the Federal Circuit's order, on September 27, 2017, Cisco filed a petition at the ITC to modify the remedial orders to cover the redesigned products.

Takeaway

The Federal Circuit's order highlights the value of redesigning accused products to avoid patent claims as a defense in ITC investigations. Ordinarily, it is best for a respondent to develop and introduce potential product redesigns early in the underlying investigation. By asking the ITC to consider the redesigned products in the underlying investigation, respondents can avoid having to defend their redesigned products in a later enforcement proceeding, and preclude sanctions in the event that the redesign still infringes. Here, Arista was able to obtain a rare stay at the Federal Circuit based on its redesign, but it remains unclear whether the CAFC would have ruled the way it did if Cisco had not relied on the redesigned products to rebut irreparable harm to Arista. Eventually, Cisco may be successful in excluding Arista's redesigned product from importation. But for now, despite the ITC's remedial orders, Arista can continue to import at least some of its products.

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