By: Yury Kalish and Vishal Khatri – The Federal Circuit recently vacated part of its decision from three months ago, which held that “the Commission’s trademark decisions, like its patent decisions, do not have preclusive effect.” We reported on that decision here. This issue arose because the ITC did not explicitly consider Swagway’s motion for partial termination based on a proposed consent decree in which Swagway agreed to stipulate that its use of the SWAGWAY designation infringed Segway’s trademark. Instead, the ALJ issued a Final Initial Determination (ID) after an evidentiary hearing finding infringement by Swagway. In a footnote within the ID, the ALJ indicated that “[a]ny pending motion that has not been adjudicated is denied, unless other-wise noted.”
On appeal, Swagway explained that they preferred the consent order stipulating to infringement over the Commission’s order with the same finding because the Commission’s order may have a preclusive effect on the ongoing parallel district court litigation, effectively preventing Swagway from avoiding liability (and therefore damages) in the district court.
The court devoted Part III of its May 9, 2019 decision to the discussion of the preclusion issue, holding that there is “no reason to differentiate between the effect of the Commission’s patent-based decisions and the Commission’s decisions regarding trademarks,” and concluding that “the Commission’s trademark decisions, like its patent decisions, do not have preclusive effect.”
On June 10, 2019, the Complainants in the underlying ITC investigation intervened in the appeal to file a combined petition for rehearing or rehearing en banc. They noted several reasons to differentiate between the effect of the Commission’s patent-based decisions and decisions regarding trademarks. First, they pointed to the Supreme Court’s decision in B&B Hardware that a trademark adjudication by an administrative agency should be given preclusive effect. B&B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (2015). Second, they explained that the First, Second, and Fourth Circuits have all reached the conclusion that the Commission’s decisions in Section 337 cases regarding non-patent rights do have preclusive effect. Finally, they argued that while there is evidence that Congress did not intend decisions of the Commission on patent issues to have preclusive effect, there is no such evidence regarding the Commission’s decisions in non-patent cases, and that there is a strong policy in favor of giving preclusive effect to administrative adjudications unless there is clear Congressional intent to the contrary.
Upon review, the court withdrew its earlier opinion. In their modified August 14, 2019 opinion, the court explained that it “vacate[d] Part III of our original decision on the issue of the preclusive effect of the Commission’s trademark decisions under 19 U.S.C. § 1337.” In its new opinion, the court did not reach the preclusion issue.
The Federal Circuit vacated its earlier holding that ITC’s trademark decisions on the merits do not have preclusive effect for district courts. While the court did not explicitly reach the issue in their revised opinion, their willingness to vacate the earlier opinion suggests the intervenors’ arguments in favor of preclusive effect may be persuasive. Respondents at the ITC should be mindful of this issue and should consider whether a consent decree provides a safer option for avoiding preclusion in the district court.
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