Finding IP Value

Swagway, LLC v. International Trade Commission: A Circuit Split in the Preclusive Effect of Non-Patent ITC Rulings

By Matt Williams and Bobby Whitmer, Wyatt Summer Associate


Historically, the U.S. Court of Appeals for the Federal Circuit(“Federal Circuit”) has held that International Trade Commission (“ITC”) rulings on patent infringement issues do not have a preclusive effect on future district court proceedings. The Federal Circuit, however, had not decided whether a trademark or other non-patent ruling by the ITC would fail to preclude later district court cases as well.  In an issue of first impression in the Federal Circuit, Swagway, LLC v. International Trade Commission and Segway, Inc., DEKA Products Limited Partnership, Ninebot (Tianjin) Technology Co., Ltd., held that, like a patent infringement ruling, a ruling by the ITC concerning trademark infringement will not have a preclusive effect on later district court cases. This holding effectively created a circuit split regarding the preclusive effect of ITC rulings between the Federal Circuit and the other Circuits that have addressed the issue.

Prior Proceedings

Segway, Inc. filed a complaint with the ITC in May of 2016 claiming that Swagway, LLC, had infringed six patents and two trademarks of Segway. In August of 2016, Segway filed an additional complaint, which was consolidated with the prior complaint and assigned to an administrative law judge (“ALJ”). (By the time the case reached the ALJ, only two patents and two trademarks remained at issue. The ALJ ruled that the accused products did not infringe on the asserted patents.) By 2017, in an attempt to resolve the trademark infringement claims, Swagway moved for partial termination of the investigation on the basis of a consent order stipulation not to sell or import SWAGWAY-branded goods in the United States. The ALJ subsequently denied the motion, and the ITC later reaffirmed that denial. The ITC also confirmed the ALJ’s ruling that Swagway infringed on both of Segway’s marks.

The Federal Circuit Case: Swagway v. ITC

On appeal, Swagway made two arguments: (1) The ITC erred in its decision finding that Swagway infringed the trademarks and (2) The ITC’s failure to enter the proposed consent order was incorrect. Regarding the first issue, Swagway reasoned, among other arguments, that the ITC accorded the wrong weight to the actual confusion factor of the DuPont factors and that a lack of actual confusion evidence should be more probative in cases such as this. The Federal Circuit, however, affirmed the ITC’s ruling, stating that lack of actual confusion evidence such as “consumer survey evidence is not required to show a likelihood of confusion,” and that, “We have also previously declined to infer that the lack of survey evidence indicates that such evidence would be harmful to the party alleging infringement.”

Swagway asked the Federal Circuit to reverse the ITC’s denial of its consent order motion. Although the consent order motion and the ITC’s ruling have practically the same effect, i.e. Swagway could not import or sell its goods in the United States under the SWAGWAY mark, Swagway contended that the difference between the motion and the ITC ruling was the preclusive effect the ITC’s final decision would have in a co-pending case in the U.S. District Court for the District of Delaware, which is stayed pending the resolution of the current case. In response to Swagway’s concern, the Federal Circuit stated that, “We have previously determined that ‘Congress did not intend decisions of the ITC on patent issues to have preclusive effect,’” and that, “We see no reason to differentiate between the effect of the Commission’s patent-based decisions and the Commission’s decisions regarding trademarks.”

Circuit Split Created by Swagway v. ITC

While the Federal Circuit has now held that ITC rulings in the non-patent context do not have a preclusive effect in later district court cases, this holding has created a circuit split because other circuits do not see eye-to-eye with the Federal Circuit on this issue. For example, in Union Manufacturing Co. v. Han Baek Trading Co., 763 F.2d 42 (2d Cir. 1985), the U.S. Court of Appeals for the Second Circuit held that ITC rulings do have a preclusive effect in the trademark context. Both the U.S. Court of Appeals for the Fourth Circuit in Baltimore Luggage Co. v. Samsonite Corp., 977 F.2d 571 (4th Cir. 1992) and the U.S. Court of Appeals for the First Circuit in Aunyx Corp. v. Canon U.S.A., Inc., 978 F.2d 3 (1st Cir.1992), held that ITC rulings had a preclusive effect in the antitrust context. Finally, the Eastern District of Wisconsin, a district court in the Seventh Circuit, held in Manitowoc Cranes LLC v. Sany America, Inc., 2017 WL 6327551 (E.D. Wis. Dec. 11, 2017) that ITC rulings have a preclusive effect in the trade secrets context. Ideally, the federal court system would have a uniform decision regarding the preclusive effect of an ITC ruling on non-patent issues. But until there is uniformity in the federal courts, litigants should be mindful of the position taken on the preclusive effect of ITC rulings by the various circuits in choosing where to litigate.

Matthew Williams
Matt Williams is a member of the Firm’s Intellectual Property Protection & Litigation Service Team.  He concentrates his practice in the area of intellectual property law including patent prosecution and enforcement, trademark prosecution and enforcement, trade secrets, copyrights, client counseling, transaction support, IP licensing, and IP litigation. Read More