When a patent owner loses at the International Trade Commission (“ITC”), can it hire new counsel and try again in district court? That question will be answered in Gamevice, Inc. v. Nintendo Co., Ltd. et al, No. 3-18-cv-01942 (N.D. Cal.), where plaintiff Gamevice is asserting three patents against Nintendo despite losing on those same patents in two prior ITC proceedings.
In 2018, Gamevice filed an ITC complaint against Nintendo, alleging that the Nintendo Switch infringed two related Gamevice patents. Gamevice lost. The administrative law judge (ALJ”) entered an Initial Determination of No Violation. Gamevice appealed the ALJ’s claim constructions to the full Commission and the Federal Circuit, and lost at both levels. Subsequently, Gamevice filed a second ITC action asserting a newly-issued continuation patent. Despite the fact that this new patent was filed and prosecuted during the prior ITC proceeding specifically to overcome claim construction issues in that first proceeding, Gamevice lost again. The ALJ issued an Initial Determination finding no infringement and the ITC summarily adopted the ALJ’s Initial Determination as its Final Determination. Gamevice dismissed its appeal to the Federal Circuit before briefing began.
The litigation then moved to district court. Following resolution of the ITC proceedings and Federal Circuit appeals, Judge Seeborg ended the stay of the corresponding district court case between Gamevice and Nintendo. At this point, Gamevice hired a new law firm that proceeded to litigate the same three patents that Gamevice had already lost on at the ITC, raising the question of whether this is zealous advocacy or frivolous litigation.
Nintendo moved for Rule 11 sanctions. In the context of patent-infringement actions, an objectively reasonable inquiry under Rule 11 requires that an attorney (1) performs a nonfrivolous claim construction analysis, and (2) applies it as part of a reasonable infringement analysis. Q–Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1301–02 (Fed. Cir. 2004). While “[r]easonable minds can differ as to claim construction positions and losing constructions can nevertheless be nonfrivolous,” Raylon, LLC v. Complus Data Innovations, Inc., 700 F.3d 1361, 1368 (Fed. Cir. 2012), a claim construction position becomes frivolous—and so objectively unreasonable—when “no reasonable litigant could believe it would succeed.” iLor, LLC v. Google, Inc., 631 F.3d 1372, 1378 (Fed. Cir. 2011).
Nintendo argued that Gamevice is pursuing the same infringement theory that the ITC rejected twice and it has no objectively reasonable basis to do so. Nintendo relied heavily on Linex Technologies, Inc. v. Hewlett-Packard, No. C-13-159 CW, 2014 WL 4616847 (N.D. Cal. Sept. 15, 2014), in which another N.D. Cal. court imposed attorneys’ fees against the same law firm that now represents Gamevice for pursuing patent infringement claims despite prior unsuccessful proceedings before the ITC.
However, ITC decisions do not have preclusive effect on district courts. Texas Instruments Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1568-69 (Fed. Cir. 1996); see also Tandon Corp. v. United States Int’l Trade Comm’n, 831 F.2d 1017, 1019, 4 USPQ.2d 1283, 1285 (Fed. Cir. 1987) (“[O]ur appellate treatment of decisions of the Commission does not estop fresh consideration by other tribunals.”). Nonetheless, the Federal Circuit entered a Rule 36 summary affirmance of the ITC decision against Gamevice, and the Federal Circuit has stated that “[d]istrict courts are not free to ignore holdings of this court that bear on cases before them.” Texas Instruments, 90 F.3d at 1569.
Gamevice argued that it believes the district court proceeding will construe the claims differently based on a different factual record, with different experts, different arguments, and different case law support, emphasizing the ITC’s exclusion of arguments and evidence because it was raised too late in the proceeding. On the one hand, the claim construction at issue might be sensitive to factual disputes, as Gamevice argues, because it relates to whether “fastening mechanisms” should be construed as a Williamson-style means-plus-function term, or whether it invokes sufficient structure. On the other hand, the ITC record would still be admissible in district court, and Gamevice must overcome the clear admissions of its own expert on which the ITC based its claim construction.
Can Gamevice flip the script? That remains to be seen. Judge Seeborg declined to issue sanctions at this time, holding that “[g]ranting sanctions at this stage essentially requires the Court to evaluate the merits of the case prior to briefing and argument on claim construction.” Gamevice, Inc. v. Nintendo Co., Ltd. et al, No. 3-18-cv-01942, Dkt. 225 at 4 (N.D. Cal. May 18, 2022). “Such an inquiry is not an efficient use of the Court’s resources, and risks prematurely determining an outcome in the case.” Id. at 5. However, the Judge cautioned “that Gamevice has lost these same infringement claims before the ITC foreshadows that it will likely have a difficult path in succeeding on its claims.” Id. An ominous warning indeed.