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Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in <a href="https://cafc.uscourts.gov/opinions-orders/20-2342.OPINION.3-1-2022_1915069.pdf"><em>DBN Holding, Inc. v. ITC</em>, No. 2020-2342 (Mar. 1, 2022)</a>, affirming the International Trade Commission’s (“ITC”) denial of a petition to rescind or modify a civil penalty imposed for violation of a consent order. The ITC had imposed that penalty for DBN’s violation of a consent order in which it agreed to refrain from unfair import practices based on alleged infringement of a patent asserted in an ITC investigation. DBN’s petition sought rescission or modification based on a final judgment of invalidity of that patent.

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This was the fourth appeal involving this case. In earlier appeals, the appellate court (1)&nbsp;affirmed a district court’s summary judgment invalidating the same patent claims asserted before the ITC; (2) affirmed the ITC’s civil penalties for DBN’s consent order violations predating that invalidity decision; and (3)&nbsp;reversed and remanded the ITC’s denial, based on res judicata, of DBN’s rescission/modification petition. On remand, the ITC denied DBN’s petition on the merits, noting that its rule regarding rescission/modification does not address civil penalties; distinguishing DBN’s cited cases; reaffirming that civil penalties were warranted under the applicable factors; and rejecting DBN’s public policy argument.

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On appeal, the Federal Circuit concluded that the ITC did not abuse its discretion by denying DBN’s petition. The Court dismissed DBN’s cited authority regarding the ITC’s rescission of a civil penalty due to a retroactive license. Analogizing consent orders to contracts, the Court explained that DBN promised to discontinue its trade practices in exchange for the ITC terminating the investigation and that the ITC could impose penalties for DBN’s breach of this promise. The Court disregarded other prior rescission/modification determinations as primarily concerning remedial orders, which the ITC rules expressly covered and which committed such determinations to the Commission’s discretion.

The Court affirmed the ITC’s reassessment of the civil penalty factors. The Court disagreed that DBN violated the order in good faith based on its belief in the asserted patent’s invalidity under the since-vacated <em>Commil USA v. Cisco Systems</em> decision, as that case pertained to induced infringement, not civil penalties. The Court observed that no evidence suggested the patent’s invalidation impacted DBN’s ability to pay the penalty and concluded that DBN benefited from its violations. Finally, regarding vindication of the ITC’s authority and the public interest, the Court concluded the ITC reasonably exercised its enforcement authority.

CAFC Confirms Judgment of Patent Invalidity Does Not Excuse Violations of ITC Consent Order

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