In a recent notice to review an ALJ’s determination finding a violation of Section 337, the ITC has requested briefing on whether a laches defense is available in Section 337 investigations in view of the Federal Circuit’s recent decision in SCA Hygiene Prods v. First Quality Baby Prods., 807 F.3d 1311 (Fed. Cir. 2015) (en banc).  The ITC’s powers are injunctive only, and previous ITC decisions have held that laches could not bar such prospective relief under the rule in A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc).  However, the Federal Circuit held in SCA Hygiene that the Aukerman rule on laches and prospective relief could not stand in light of the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014).

The at-issue Section 337 investigation is Certain Network Devices, Related Software, and Components Thereof, Inv. No. 337-TA-944.  The investigation is a patent-based action filed in 2014 by Cisco Systems, Inc. against Arista Networks, Inc.  In a February 2, 2016 Initial Determination (“ID”), ALJ Shaw found a violation with respect to three of the five asserted patents.  While the ALJ found that laches may be an available defense in a Section 337 investigation, he found that “disturbing” ITC precedent was not “warranted under the circumstances of this investigation” and that Arista would not have prevailed on the defense “even if it were available.”  ID at 270-71.

In its petition for review, Arista argued that laches should be available as a defense under Section 337(c)’s proviso that “all legal and equitable defenses may be presented” and in view of the Federal Circuit’s SCA Hygiene decision.  Arista Petition at 47-48.  Cisco argued that the SCA Hygiene decision does not require any change in ITC practice because the SCA Hygiene court’s rationale for overruling the Aukerman rule was based on a case (eBay v. MercExchange, L.L.C., 547 U.S. 388 (2006)) that the Federal Circuit in Spansion, Inc. v. Int’l Trade Comm’n, 629 F.3d 1331, 1359 (Fed. Cir. 2010) held does not apply to Commission remedy determinations under Section 337.  According to Cisco, the Commission’s “statutory mandate to issue an exclusion order when it finds a violation of Section 337” unless contrary to the public health and welfare is completely different than “the eBay balancing analysis on which the SCA Hygiene decision was focused.”  Cisco Response to Petition at 44.  The ITC’s Office of Unfair Imports Investigations agrees that laches may be an available defense “under some circumstances” but states that those circumstances did not exist in this investigation.

In summary, and as the parties’ petitions already highlight, it appears that resolving the question of whether laches is an available defense in Section 337 investigations will require determining whether laches is an independent defense that falls with Section 337(c) or merely one of the array of factors that may be considered within the equity balancing required by eBay.  The parties’ opening briefs on review are due on April 26, with replies to be filed on May 5.