On December 5, 2019, a judge in the Northern District of Texas denied a Rule 12(b)(6) motion to dismiss a patent infringement case, despite the Federal Circuit previously holding that the asserted patent claims were invalid as indefinite in a parallel ITC investigation.
Plaintiff Hyosung TNS, Inc. (“Plaintiff”) and Defendant Diebold Nixdorf, Inc. (“Defendant”) have been entangled in litigation for over four years. Defendant first accused Plaintiff in October 2015 of infringing Defendant’s ATM patents and filed complaints with the U.S. International Trade Commission (ITC) and in district court. In response, Plaintiff filed its own patent suits in district court and the ITC in February 2016 accusing Defendant of infringement.
In the ITC investigation brought by Plaintiff, the ITC found that Defendant had violated Section 337 of the Tariff Act by importing ATMs and ATM components that infringed Plaintiff’s patent number 8,523,235 (“the ’235 patent”). Accordingly, the ITC issued a limited exclusion order against Defendant in July 2017.
In 2018, however, the Federal Circuit reversed the ITC’s finding on appeal. The Federal Circuit concluded that the ’235 patent did not recite sufficient structure to render a means-plus-function term (“cheque standby unit”) definite. Consequently, the Federal Circuit found the contested patent claims invalid as indefinite.
The district court had stayed Plaintiff’s infringement suit during the ITC proceedings. Following the Federal Circuit’s decision, the district court lifted the stay, and Plaintiff filed an amended complaint alleging infringement of only the ’235 patent. Defendant then filed a motion to dismiss, arguing that the Federal Circuit’s decision invalidating the claims at issue warranted dismissal of the infringement suit. The district court denied the motion on the basis that Plaintiff had “adequately pled a claim for patent infringement and the validity of the ’235 patent [could not] be determined without resolution of disputed facts.” While the district court acknowledged that the Federal Circuit’s legal conclusions are binding, the court noted that there “may be evidence not presented on the ITC record considered by the Federal Circuit that could merit … a different conclusion regarding the validity of the ’235 patent.”
Practice Tip: Litigants involved in parallel district court and ITC proceedings should be aware that legal determinations (even those made by the Federal Circuit) on the invalidity of patents in the ITC proceeding may not have preclusive effects. In courts that decide to follow this opinion, Plaintiffs may be able to present infringement allegations and essentially re-argue validity, with new evidence, and defendants should be prepared to make another challenge.
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