ITC Spotlight – January 2023 Edition

ITC Intervenes in District Court Action To Preserve Its  Authority Over Section 337 Investigations

January 23, 2023 - On December 20, 2022, Judge Colm F. Connolly of the District of Delaware granted a motion filed by the U.S. International Trade Commission (“ITC”) to intervene in a litigation pending before him.¹ According to the ITC, the highly unusual step of intervening in a district court case was necessary to prevent the Plaintiffs and the district court from “impermissibly interfer[ing] with the Commission’s fulfillment of its statutory obligations."²

The litigation was filed by Synopsis, Inc. and Cadence Design Systems, Inc., suppliers of Electronic Design Automation software tools for use in the design and manufacture of semiconductor chips, against Bell Semiconductor LLC. In their complaint for declaratory judgment, the Plaintiffs contended that Bell was waging “a sprawling litigation campaign…against Plaintiffs’ customers,” having asserted, in a seven-month period, six patents in various combinations in 87 district court actions and three ITC investigations.³  (And Bell has filed nine additional district court cases since Plaintiffs’ filed their complaint.) Synopsis and Cadence themselves had not been sued by Bell in any of these actions and, as the Commission noted, had not sought to intervene in any of the ITC investigations.

What caught the ITC’s attention was Plaintiffs’ request for an injunction barring Bell from participating in the ITC cases it had filed. Specifically, Plaintiffs requested:

(n) A temporary restraining order, preliminary injunction, and permanent injunction against BSLLC, its officers, employees, agents, subsidiaries, affiliates, assigns, successors, and any person acting for or on their behalf, in active concert or participation with them or who receives actual notice of this Court’s order, ordering each of them to refrain from participation in and take all necessary actions to secure withdrawal of claims of patent infringement at the ITC in the 1340-Action and 3649-Action.⁴

Plaintiffs’ motion for preliminary injunction went even further, asking the district court to enjoin Bell from “initiating any new proceedings,” as well as “taking any further steps to advance any claims in the…U.S. International Trade Commission investigations.”⁵

As the ITC explained it, although directed on its face to Bell, this “unprecedented” relief “as a practical matter, …would substantially interfere with the Commission’s ability to conduct those investigations, as it would stunt the participation of the very party alleging a violation of section 337.”⁶The Commission argued that it is statutorily required to conduct its investigations when a complaint is filed, under 19 U.S.C. § 1337(b)(1) (“The Commission shall investigate any alleged violation of this section….”). Moreover, through 28 U.S.C. § 1659, the statute that gives respondents the right to request a stay of district court proceedings once an ITC investigation is underway, Congress has expressed its preference that ITC investigations should proceed ahead of or concurrently with district court actions.⁷Therefore, the ITC argued, enjoining Bell would interfere with the ITC executing its statutory mandate.

The Commission acknowledged that, under certain narrow circumstances, it could be enjoined by a district court, such as in cases involving arbitration agreements or forum selection clauses.⁸However, the Plaintiffs’ requested relief in this instance—in the absence of such contractual restrictions—was “untethered to precedent” and represented a potential “vast expansion of equitable relief.”⁹

The Commission previously successfully intervened and opposed a similar motion for injunction in 1985.¹⁰There, the district court grappled with the issue of whether it had the authority to enjoin the ITC, concluding that “the All Writs Act provides no basis upon which to exercise jurisdiction and the Court is left without power under these circumstances to directly enjoin, suspend or stay the ITC investigation.”¹¹ Ultimately, the court denied issuing an injunction on the grounds that “the existence of parallel litigation, without more, confers no right to injunctive relief.” Id. at 1144. Fifteen years later, the Commission confronted a similar situation and again successfully intervened and opposed a motion for preliminary injunction.¹² There, the district court accepted the Commission’s argument that “if this Court were to issue an injunction, the Court would be interfering with the ITC’s statutory mandate to investigate complaints brought under 19 U.S.C. § 1337 and would adversely impact the ITC’s ability to perform its statutory duties.”¹³

As the Commission noted, the Plaintiffs could have intervened in the ITC investigations and sought some relief for their customers there, for example by requesting a stay. However, as ITC practitioners know, the Commission is extremely reluctant to issue stays in its investigations and does not recognize any sort of “customer suit exception” that would prioritize the Plaintiffs’ over their customers. Therefore, the Plaintiffs’ strategy to seek injunctive relief was likely their best option for slowing the juggernaut of ITC investigations.

Now that the district court has permitted the Commission to intervene, we can expect the Commission to file an opposition to Plaintiffs’ motion for preliminary injunction. It will be interesting to see how much deference the court gives to the Commission’s arguments.