United States: Defaulting At The ITC Poses Significant Risks

Last Updated: November 9 2016
Article by Jones Day's ITC Team

Certain Beverage Brewing Capsules, Components Thereof, And Products Containing the Same, Inv. 337-TA-929, is a cautionary tale of the risks of defaulting at the ITC. Eko Brands, LLC defaulted in the ITC's original investigation. The Commission later concluded that Eko infringed two claims that depended from independent claims found to lack written description support. Separately, a district court found that Eko did not infringe the asserted claims. It is unclear whether Eko will succeed in fending off an enforcement proceeding filed against it relating to its activities since the Commission's remedial orders were issued.

The Default

Adrian Rivera and Adrian Rivera Maynez Enterprises ("ARM") filed a section 337 complaint against a number of respondents, including Eko, alleging that their coffee pods infringed independent claims 5 and 18 and dependent claims 8 and 19 of U.S. Patent No. 8,720,320. Eko never responded to the Complaint, and Judge Essex issued an Initial Determination that Eko was in default. Order No. 19 (Apr. 22, 2015). The Commission did not review this determination. See Notice Not to Review (May 18, 2015).

The Claims and the Commission's Decision

Since then, the claims of the '320 patent have fared poorly. The investigation proceeded against the other respondents—although ARM dropped claims 8 and 19 from the proceeding as to the non-defaulting respondents. Claims 5 and 18 both require "a container . . . adapted to hold brewing material." The Commission found that there was no written description support for this limitation, and it therefore invalidated these claims. Commission Opinion at 34 (Apr. 6, 2016). Notably, because claims 8 and 19 were still asserted against Eko, and no invalidity evidence was presented at the hearing with respect to those claims, the Commission declared: "We do not find that claims 8 and 19 are invalid, and presume that ARM's allegations in its complaint against [Eko] are true." Id. at 83. The decision that claims 5 and 18 are invalid is presently on appeal at the Federal Circuit. No. 16-01841.

Separately, Eko brought a declaratory judgment action in district court. The district court ruled that Eko's products did not infringe any of the claims of the '320 patent. Eko Brands, Inc. v. Adrian Rivera Maynez Enters., Inc., No. C15-522RSL, 2016 WL 4399597 (W.D. Wash. Aug. 17, 2016).

The Enforcement Proceeding

ARM filed an enforcement complaint alleging that Eko has violated the remedial orders issued against it. In response, Eko now owned by Espresso Supply, Inc., requested that the ITC rescind its remedial orders based on the Commission's own finding that claims 5 and 18 were invalid and the district court's finding that Eko did not infringe. Eko raised two arguments: first, that it no longer infringed the '320 patent based on changed circumstances, raising the affirmative defenses of invalidity and non-infringement, and, second, that the original exclusion order should be modified because "applying it prospectively is no longer equitable." Fed. R. Civ. P. 60(b)(5) (applied to the ITC by 19 U.S.C. § 1337(k)(2)(B)(ii)).

Judge Essex granted ARM's motion to strike Eko's invalidity and non-infringement affirmative defenses based on res judicata. Order No. 30 (Sept. 19, 2016). However, Judge Essex has yet to address whether Rule 60 relief is available to Eko. Whether modification or rescission of the remedial orders is appropriate—where claims 5 and 18 were invalidated but the similar claims 8 and 19 were not analyzed, and where a district court has found no infringement—remains to be seen.

Takeaway

Although some respondents may believe that defaulting at the ITC is an inexpensive way to avoid litigating a Section 337 investigation, this case demonstrates that there can be risks in choosing that strategy. Had Eko not defaulted, it appears likely that the Commission would not have issued remedial orders and Eko would not be in this predicament. Jones Day will continue to monitor this interesting case as it unfolds.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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