ITC Monthly Wrap-Up: January 2022


What Justifies a Delay in Issuing Remedies at the ITC?

The Commission issued five final determinations this month. In the 1191, 1204, 1213, 1216, and 1218 investigations, the Commission found that the respondents violated section 337. The Commission also instituted nine new investigations in January 2022. This month's ITC wrap-up focuses on delays to remedial orders.

In two opinions from January, the Commission considered requests to delay the operation of its remedies denying one request and granting the other. See Certain Tobacco Heating Articles & Components Thereof, Inv. No. 337-TA-1199, Comm'n Op. (Jan. 20, 2022); Certain Chemical Mechanical Planarization Slurries & Components Thereof, Inv. No. 337-TA-1204, Comm'n Op. (Jan. 6, 2022). Both opinions considered arguments that the United States market lacked suitable non-infringing products to replace the excluded products. Although the Commission declined to delay relief in Tobacco Heating Articles, unique considerations for the semiconductor industry influenced how the Commission weighed the public interest factors and ultimately delayed relief in Planarization Slurries.

Tobacco Heating Articles Overview: In the first opinion, the Commission denied a motion to stay a limited exclusion order (LEO) and cease and desist order (CDO) pending appeal at the Federal Circuit. Certain Tobacco Heating Articles & Components Thereof, Inv. No. 337-TA-1199, Comm'n Op. (Jan. 20, 2022). In this investigation, Complainant RJ Reynolds alleged that Respondent Philip Morris infringed three of Reynolds's patents covering a non-combustible cigarette. In September 2021, the Commission found a violation of Section 337 based on infringement of two asserted patents. See id. at 2. After a detailed public interest analysis, the Commission determined that the statutory public interest factors, 19 U.S.C. § 1337(d)(1), did not preclude issuance of a LEO and CDO. See id.

In December 2021, Philip Morris filed an appeal with the Federal Circuit, which is still pending, seeking reversal of the Commission's final determination. See Philip Morris Products S.A., et al. v. Int'l Trade Comm'n, Case No. 22-1227. Within a few days of filing the appeal, Philip Morris also asked the Commission to stay the remedial orders pending appeal. See Tobacco Heating Articles, Respondents' Motion to Stay Limited Exclusion Order and Cease and Desist Orders Pending Appeal (filed Dec. 3, 2021). Additionally, Philip Morris escalated its stay request to the Federal Circuit by filing an emergency motion to stay with the Court. The Court quickly denied the emergency request, and it later denied Philip Morris's motion for stay. See Philip Morris, Case No. 22-1227, ECF No. 6 (Dec. 6, 2021) (motion); Order, ECF No. 12 (Dec. 8, 2021) (denying emergency request); Order, ECF No. 28 (Jan. 25, 2022) (denying motion).

The Administrative Procedure Act provides the Commission with the authority to delay the effective date of an issued remedy. See 5 U.S.C. § 705. The Commission uses a modified version of the Standard Havens factors to assess whether to stay a remedy pending appeal. See Comm'n Op. at 3-4 (citing Standard Havens Products, Inc. v. Gencor Industries, Inc., 897 F.2d 511, 512 (Fed. Cir. 1990)). The four Standard Havens factors are: (1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether the issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies. Id. The Commission's modification is that the movant need not demonstrate a likelihood of success on appeal; rather, the Commission considers whether it has "ruled on an admittedly difficult legal question." Id. The Commission uses the "admittedly difficult legal question" factor because it "has recognized the futility of establishing a likelihood-of-success [on appeal] given that it would be difficult to ask an agency to find that its own decision is likely to be overturned on appeal." Id.

As an initial matter, the Commission determined that Philip Morris's motion did not raise any admittedly difficult legal questions because Philip Morris did not argue this point and because the patent issues were straightforward. See Comm'n Op. at 5. The Commission then turned to Philip Morris's arguments. Philip Morris had argued that a stay was warranted based on (1) the Commission's failure to consult with the Department of Health and Human Services as statutorily mandated under Section 337; (2) the Commission's error in determining domestic industry; and (3) the Commission's error in determining infringement and validity. Id. The Commission found Philip Morris's arguments waived, not persuasive, speculative, and unsupported. See id. at 5-14. In relation to Standard Havens, the Commission generally found that Philip Morris failed to show it would be irreparably harmed due to its alleged lost revenue, that Reynolds would be harmed by a stay, and that the public interest associated with staying or providing immediate relief warranted providing immediate relief. See id. at 14-17. In addressing the public interest, the Commission noted that "[w]hether viewed within the context of the [statutory] public interest factors of section 337, or the public interest more generally for the equitable relief Philip Morris now seeks, the Commission finds that Philip Morris has failed to show that the public interest supports a stay." Id. at 16. Thus, the Commission found that staying its orders was not in the public interest.

Planarization Slurries Overview: By comparison, in Planarization Slurries, the Commission found that delaying the enforcement of its orders by one year via a transition period available only to current customers was in the public interest. In Planarization Slurries, both Complainant CMC and Respondent DuPont sold slurries that are used in manufacturing semiconductor chips. Comm'n Op. at 7. The Commission found a violation based on patent infringement and then considered whether entering remedial orders would be in the public interest given the ongoing semiconductor shortage. Id. at 21-54.

DuPont argued that the Commission should delay enforcement of its orders by one year so that its customers, namely Intel, could transition to a non-infringing alternative. Intel separately argued that a transition period was needed so that it could avoid the severe effects associated with an abrupt disruption to its slurry supply.

CMC opposed the transition period and argued that the semiconductor shortage is unrelated to the issues from the investigation. CMC identified other causes of the semiconductor chip shortage, such as travel and transport restrictions, geographical concentration of semiconductor manufacturers in Taiwan and China, and an unpredictable demand for automobiles during the pandemic. CMC also argued that it and other manufacturers could replace any excluded slurry product.

The Commission ultimately rejected CMC's arguments. In assessing the statutory public interest factors, the Commission first noted that the parties did not develop the record with respect to public health and welfare and thus found this factor neutral. Comm'n Op. at 44. The Commission then found the second public interest factor, competitive conditions in the United States economy, would be adversely effected by an immediately effective exclusion order. Id. at 48-50. In particular, the Commission found that excluding a specific slurry could exacerbate the semiconductor shortage and that allowing a one-year transition period would avoid this negative effect. Id. at 48-49. For the third public interest factor, production of like or directly competitive articles in the U.S., the Commission found this factor neutral because the record lacked evidence on this point. Id. at 50-51. For the final public interest factor, U.S. consumers, the Commission found that U.S. consumers would be affected negatively by the potential disruption an immediate exclusion order would bring. Id. at 51-52.

Further, presumably to tailor the remedy further, the Commission also required anyone who wished to obtain the excluded slurry to be "actively using the infringing . . . slurry in ongoing semiconductor fabrication development in order to obtain an exemption from the remedial orders during the one-year delay period." Id. at 53.

Observations: Tobacco Heating Articles and Planarization Slurries serve as recent examples of the challenges respondents face in obtaining an exception here, a delay—to the Commission's remedial orders. Additionally, although the investigations contained different facts, the nature of the products at issue and the downstream effects remedial orders would have on third parties appear to have carried the day in Planarization Slurries and thus could be key considerations for similarly situated respondents.