On 14 August 2019, the Federal Circuit issued a modified opinion in Swagway, LLC, v. International Trade Commission, removing from its original opinion a declaration that ITC trademark decisions do not have preclusive effect.

The appeal arose from Segway’s 18 May 2018 ITC complaint against Swagway, where Segway alleged a violation of Section 337 based, in part, on alleged infringement of two SEGWAY trademarks. Swagway had proposed a consent order that would stipulate that Swagway would not sell or import SWAGWAY-branded products. The Commission disregarded the consent order motion, found that Swagway infringed the marks, and entered an exclusion order that prohibited importation of marked products. Swagway appealed the Commission’s failure to enter the proposed consent order as well as the infringement determination.

The Federal Circuit issued its original decision on 9 May 2019, affirming the Commission’s finding of infringement. With regard to the proposed consent order, Swagway argued that the difference between its proposed order and the Commission’s determination was that the proposed order would not have preclusive effect. In view of this, the Court reasoned that because the "Commission’s decisions pertaining to trademark infringement or validity are not entitled to preclusive effect in the district courts" anyway, Swagway’s procedural arguments need not be addressed. Segway petitioned for a rehearing, and argued that the Court had diverged from decades-old precedent from multiple courts. In particular, Segway pointed to a recent Supreme Court case B & B Hardware, Inc. v. Hargis Indus., Inc., where Trademark Trial and Appeal Board decisions were held to have preclusive effect because "[b]oth this Court’s cases and the Restatement make clear that issue preclusion is not limited to those situations in which the same issue is before two courts. Rather, where a single issue is before a court and an administrative agency, preclusion also often applies." Segway argued that the "First, Second, and Fourth Circuits also have all reached the . . . conclusion: that the Commission’s decisions in Section 337 cases regarding non-patent rights do have preclusive effect."

In view of Segway’s petition and arguments, the Federal Circuit withdrew its original opinion to issue this modified opinion. In it, the Court vacated its original decision "on the issue of the preclusive effect of the Commission’s trademark decisions under 19 U.S.C. § 1337." The Court also affirmed the Commission’s denial of Swagway’s consent order motion.

As a result, ITC orders in non-patent cases, such as trademark, copyright and trade secret cases, will likely continue to have preclusive effect in related district court litigation.

Should you have further queries, please do not hesitate to contact our contributing lawyers.

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