Whether a patent infringement action brought before the International Trade Commission (ITC) is considered to be "litigation" in the context of a governing law and venue clause contained in a patent licensing agreement.
Yes. The Federal Circuit has consistently treated patent infringement actions brought before the ITC as inter partes litigation.
Texas Instruments, Inc. ("TI") entered into a leasing agreement with Tessera, Inc. ("Tessera") allowing TI to incorporate some of Tessera's patented inventions into its products. The license agreement contained a governing law and venue clause stating that if the parties were not able to settle a dispute that arose out of the agreement, any ensuing litigation between the parties must occur in the State of California. A dispute as to the scope of the licensing agreement arose and the parties were not able to settle their differences out of court. Tessera notified TI of its intentions to terminate the licensing agreement and in response, TI filed an action for declaratory judgment of invalidity and non-infringement in the US District Court for the Central District of California. Tessera subsequently filed a complaint with the International Trade Commission (ITC), located in Washington D.C., alleging infringement under 19 U.S.C. § 337 of its US Patent No. 5,679,977 and US Patent No. 5,852,326 via the importation of certain products by TI and others. TI applied for a temporary restraining order (TRO) and an order for an expedited preliminary injunction to restrain Tessera from pursuing any actions before the ITC or any other entity located outside of the State of California. The California district court refused to grant either motion, holding that TI was unlikely to succeed on the merits of its claim as the patent infringement action before the ITC was not "litigation" as defined by California law and contemplated in the venue clause of the licensing agreement. The district court did not consider the other preliminary injunction factors TI would have needed to show to obtain an injunction, but instead held that failure on the likelihood of success factor was sufficient to deny the injunction. The district court additionally noted that granting a preliminary injunction would interfere with the ITC's statutory mandate to investigate claims of patent infringement under 19 U.S.C. § 337. TI appealed.
Upon review, the Federal Circuit found that the district court's decision to deny the preliminary injunction was based upon erroneous legal conclusions. The California district court defined "litigation" as a proceeding that takes place in a state or federal court. The district court therefore excluded ITC proceedings from being considered "litigation". The court held that both these parties, being well versed in patent law, understood that ITC proceedings are inter partes proceedings considered to be "litigation" by the Federal Circuit and by the ITC itself. ITC proceedings, therefore, fell within the definition of litigation used in the governing law and venue clause of the licensing agreement. The Federal Circuit also rejected the district court's assessment of the effect of Tessera's claim upon the ITC's investigation as TI was not attempting to enjoin the ITC from continuing its investigation, but rather attempting to stop Tessera from participating in the investigation.
The Federal Circuit thus reversed the district court's ruling and remanded for reconsideration of the other preliminary injunction factors.
In a dissent, Judge Lourie agreed with the definition of "litigation" adopted by the majority. However, Judge Lourie questioned the Court's conclusion that the parties intended to include ITC proceedings in the governing law and venue clause. The dissent argued that as sophisticated entities, TI and Tessera would have included ITC proceedings in the licensing agreement if they had so desired. In addition, Judge Lourie noted that the ongoing ITC investigation would be greatly impeded if Tessera was prevented from participating in the proceeding.
Prepared by the liibulletin-patent Editorial Board.