Nonparty Patent Invalidity Challenges to a General Exclusion Order: Mayborn Group v. ITC
Time to read: 3 mins
Suppose you run a company that makes products exported to the United States. You learn that an American government agency—the U.S. International Trade Commission (ITC)—is investigating several of your competitors for infringing another company’s U.S. patents. Luckily, your company was not included in the investigation, so you can wait to see what happens before taking any action. Right?
Not so fast. A recent Federal Circuit Court of Appeals decision, Mayborn Group., Ltd. v. ITC, suggests this may be a risky strategy.1
Mayborn Group concerns ITC Investigation No. 337-TA-1092, in which the Commission issued a General Exclusion Order (GEO) against all self-anchoring beverage containers that infringe the complainants’ asserted patents. The investigation that led to that final determination named eight companies as respondents, but none litigated the issues of infringement or invalidity. The complainants withdrew their claims against several respondents. The rest of the named respondents either settled or defaulted.
Mayborn Group Ltd. and Mayborn USA, Inc. (collectively, “Mayborn”) were nonparty producers of self-anchoring beverage containers—the sort of products at issue in the ITC investigation. The complainants did not name Mayborn as a respondent and notified it of the investigation only during the closing stages, following the administrative law judge’s determinations regarding violation and remedy issues. After the Commission issued the GEO, the complainants notified Mayborn and its retail partners that Mayborn’s products infringed the asserted patent claim and violated the order. The complainants also informed Mayborn that they were working with U.S. Customs & Border Protection to enforce the GEO and identify persons evading or violating it.
This begat a response. Mayborn petitioned the Commission to rescind its GEO under Section 337(k)(1), which allows for rescission or modification of an order if “the conditions which led to such exclusion from entry or order no longer exist.”2 Mayborn argued that it satisfied this requirement because it had discovered prior art rendering the asserted patent claim invalid. The Commission denied Mayborn’s petition without addressing the invalidity argument. It concluded that Mayborn’s validity challenge was not a changed circumstance warranting rescission.
Mayborn appealed to the Federal Circuit. The appellate court concluded: (i) Mayborn had standing to appeal the Commission’s denial of its rescission petition because it met the Constitutional standing requirements for judicial review of an agency decision based on potential enforcement of the GEO3; but (2) the Commission correctly denied the petition because invalidity challenges cannot provide a basis to rescind or modify Commission orders under section 337(k)(1). The court reasoned that section 337 authorizes the Commission to adjudicate invalidity only as a defense during an investigation or enforcement proceeding, and a petition for rescission is neither4. The court further explained that “subsection (k)(1) does not permit an end-run around this rule” because a petitioner’s invalidity challenge is not a “changed condition.”5 The Federal Circuit also rejected Mayborn’s argument that the public interest in patent validity supported the petition because there was no identified change in public interest conditions6. Finally, the court distinguished situations in which the Commission rescinds exclusion orders following final invalidity or unpatentability judgments or decisions, respectively, because “Mayborn’s wish to present an invalidity challenge” would not change the asserted patent’s legal status7.
So what should a company in Mayborn’s position do when it learns of a pending ITC investigation into the type of products that it sells? The company could attempt to challenge the underlying patent’s validity through a post-grant proceeding at the Patent Office or a declaratory judgment action in federal district court (although for the latter, standing might be an issue). Perhaps the better play, however, is to move to intervene in the ITC investigation. This would give the company a shot to litigate not only invalidity but also other disputed issues before an exclusion order issues.
July 20, 2020
1 No. 2019-2077 (Fed. Cir. July 16, 2020) (slip op.).
2 19 U.S.C. § 1337(k)(1).
3 Mayborn Grp., No. 2019-2077, slip. op. at 5–7.
4 Id. at 8–9.
5 Id. at 9.
6 See id. at 10.
7 Id. at 10–11.