Accused Infringer’s Penalties for Violating Consent Order Remain – Despite Patent being Later Found Invalid

by Dennis Crouch

DBN Holdings (DeLorme) v. Worldwide Trade Fee (Fed. Cir. 2022)

This case is a little bit complicated procedurally &#8212 the essential facts are in this article:

1. BriarTek&#8217s introduced an ITC action from DeLorme (now DBN) asserting U.S. Patent No. 7,991,380 masking &#8220two-way international satellite communication equipment.&#8221  DBN settled that dispute and agreed to end importing the accused solutions.
2. But, DBN in fact ongoing to import lined items and the ITC assessed a civil penalty of $6.2 million for violation of the consent decree.
3. Just after getting billed with the penalty, DBN filed an action in Federal Courtroom seeking a declaration that the patent statements were invalid.  DBN gained the case and the invalidity was affirmed on appeal.  At the time the patent was invalidated, the consent decree (by its terms) no for a longer period barred DBN from importing merchandise.  However, DBN also required to escape from the $6.2 million high-quality for its pre-invalidation violations.
4. The ITC refused to relieve DBN from payment of the fantastic &#8212 obtaining it &#8220res judicata&#8221 based mostly upon a prior affirmance of the fantastic by the Federal Circuit.  Again on appeal in 2018, the Federal circuit vacated that judgment &#8212 keeping rather that the ITC possessed authority to rescind or modify the civil penalty in mild of the invalidity of the pertinent patent statements.
5. Back again on remand, the ITC preserved the penalty &#8212 obtaining that the ex submit invalidation did not cost-free DBN from penalties involved with its undesirable faith violation of the consent orders and disrespect to the ITC.  This previous choice is what is on appeal now, and the Federal Circuit has affirmed.

The Federal Circuit explains:

By getting into the consent buy, DBN agreed to discontinue any violation of Segment 337. The ITC, in transform, terminated the investigation as essential. From a contractual point of view, the breach of this guarantee gives the ITC a unique ground for imposing a civil penalty. DBN agreed to the terms of the consent buy, and all those conditions “unambiguously point out[] that the invalidation trigger—like the expiration and unenforceability triggers—applies only prospectively.” Experienced the consent buy been written in retrospective conditions, DBN may possibly have a stronger argument that the invalidation of the asserted promises renders the consent get null and void, or that modification is necessary. But beneath the apparent terms of the consent buy, DBN remained most likely liable for any violations up to the time of invalidation.

Slip Op. Judge Reyna&#8217s feeling presents a rough roadmap for accused infringers coming into into consent decrees &#8212 endeavor to negotiate retrospective phrases concerning invalidity. This would glimpse like one thing along these strains: &#8220Defendant agrees to no more time import or market any products and solutions infringing the asserted statements . . . . If the patent is later on found invalid, Defendant will no extended be sure by the consent decree and the court will reconsider any prior adverse judgments towards Defendant in gentle of the new invalidation.&#8221

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The prospective/retrospective considerations below point toward a philosophical concern of regardless of whether an invalidity conclusion is need to be witnessed as an motion cancelling a patent or alternatively is basically revealing that the patent has usually been invalid.  The consent buy in this scenario agreement specifically states that DBN gained&#8217t import products and solutions &#8220that infringe claims 1, 2, 5, 10–12, and 34 of the ’380 Patent.&#8221  A single argument in this article is that the correct interpretation of &#8220infringe&#8221 assumes patent validity.  Once we figured out that the patent is invalid, doesn&#8217t that indicate that it was constantly invalid?

When a patent is uncovered invalid, we know that it never need to have issued.

— Dennis Crouch (@patentlyo) March 4, 2022