Recently in ITC Category

Revenue-Driven Licensing Activities Fail to Satisfy Domestic Industry Requirement for ITC Action

August 7, 2014

The ALJ terminated the ITC investigation upon granting respondent's motion for summary judgment for lack of domestic industry, finding that the complainant's (a licensing entity) patent-related activities were solely revenue-driven rather than production driven. Optical Disc Drives, Components Thereof, and Products Containing the Same, 337-TA-897 (ITC July 30, 2014, Order) (Lord, ALJ). This distinction was key to the ALJ's ruling.
To satisfy the so-called "economic prong" of the domestic industry requirement under 19 U.S.C. § 1337(a)(3), a complainant must show that an industry in the United States exists with respect to the articles protected by the asserted patent in the form of:

(A) significant investment in plant and equipment;
(B) significant employment of labor or capital; or
(C) substantial investment in its exploitation, including engineering, research and development, or licensing.

The legal question at issue was "whether a licensing entity whose patent-related activities are purely revenue driven can choose to prove the existence of a domestic industry under subsections (A) and (B) of section 337(a)(3), avoiding the requirements of subsection (C)." The ALJ answered in the negative, holding that it would be contrary to the statute and case law to allow a purely revenue-driven licensing entity to avoid the requirements of subsections (A) and (B), by asserting a domestic industry under subsection (C).

The ALJ explained the well-established law that where licenses are directed to development or production using patented technology, a licensor can establish a domestic industry by showing the significant expenditures of its licensees under subsections (A) and (B). Citing Certain Variable Speed Wind Turbines and Components Thereof, Inv. No. 337-TA-376, Remand Comm'n Op., 1998 WL 35465896 (Feb. 2, 1998). However, in the absence of production-driven licensing, the case law under subsection (C) requires evidence of a revenue-driven licensing entity's own patent-related activities and expenditures. See, e.g., Certain Multimedia Display & Navigation Devices and Systems, Components Thereof & Prods. Containing the Same ("Certain Multimedia Display"), Inv. No. 337-TA-694, Corrected Comm'n Op. (Aug. 8, 2011).

The ALJ identified two lines of case authority that applied to complainant's establishment of the economic prong of domestic industry: Schaper Manufacturing Co. v. Int'l Trade Comm'n, 717 F.2d 1368 (Fed. Cir. 1983) and Certain Multimedia Display. The Schaper line of cases find domestic industry under subsections (A) and (B) where licensees engage in domestic activities under licenses that relate to development or production of patented articles, whereas Certain Multimedia Display construed subsection (C) to require an entity whose only relationship to the patent is revenue driven to prove substantial qualifying expenditures of its own to establish a domestic industry. See, e.g., Certain Multimedia Display, Corrected Comm'n Op. at 25 (finding no domestic industry based, in part, on the lack of "industry-creating, production-driven licensing activity that Congress meant to encourage").

On summary judgment, the ALJ found no issue of genuine fact relating to complainant Optical Devices' failure to satisfy this economic prong of domestic industry. In its complaint, Optical Devices relied exclusively on its agreements with various licensees, namely Sony Corporation, Sharp Corporation, and Sharp Electronics Corporation, to establish a domestic industry. The ALJ found that these licenses were not directed at "the development or production of patented goods," but rather, were focused on efforts to monetize patents by demanding that companies already manufacturing products enter into license agreements with Optical Devices. Such monetization activities have been classified by the ITC as "revenue-driven." Citing Certain Multimedia Display, Corrected Comm'n Op. at 25 n.20.

Having failed to present evidence of production-driven licensing activities pursuant to Schaper (i.e., production generated by its licensees by virtue of the licensing), the ALJ found that Optical Devices also failed to prove any expenditures of its own relating to the asserted patents pursuant to Certain Multimedia Display.

Accordingly, the ALJ held that the Investigation could not proceed.

Supreme Court's Indefiniteness Ruling Has Immediate Impact at ITC

June 16, 2014

After a hearing in an Investigation occurred between February 24 and March 7, 2014 and with the parties having submitted their opening post-hearing briefs on March 21, 2014 and their reply post-hearing briefs on March 28, 2014, the Administrative Law Judge determined that supplemental briefing was necessary after the Supreme Court's decision in Nautilus v. Biosig.

Noting that the final initial determination on violation in the Investigation was currently due to be issued no later than June 20, 2013, the Administrative Law Judge pointed out that "among the material issues involved in this investigation is whether certain claims of the asserted patents are indefinite under 35 U.S.0 § 112."

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Motion to Quash Deposition Subpoena for Complainant's CFO Denied by Administrative Law Judge Where CFO's Deposition Was Relevant to Domestic Industry Requirement

July 15, 2013

Complainant Neptun filed a motion to quash three notices of deposition served by several respondents, specifically Satco, Maxlite, and Litetronics. Neptun sought to quash the three separate notices of deposition directed to Marzenna Bobel, the CFO of Neptun. Satco opposed the motion, and cross-moved to compel Mrs. Bobel's deposition and the production of certain documents.

As explained by the administrative law judge, Neptun's chief financial officer, Mrs. Bobel supervises the data entry of Neptun's financial transactions into a QuickBooks database. Neptun produced various reports generated from this QuickBooks database in support of its domestic industry allegations in this investigation. Satco asserted that it was entitled to depose Mrs. Bobel because her testimony would be relevant to the domestic industry requirement.

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Administrative Law Judge at ITC Grants Motion for Leave to File Motions for Summary Determination Out of Time Because Complainant Did Not Provide Additional Support for Infringement Contentions in Expert Report

May 1, 2013

In this ITC proceeding, the Respondents filed a motion for leave to file motions for summary determination after the deadline for filing motions for summary determination set by the procedural schedule. Respondents asserted that good cause existed for granting the motion because it would efficiently resolve all of the issues in the Investigation and that Complainants infringement contentions indicated they would be relying on expert testimony to prove their infringement claims.

Respondents asserted that the expert report only provided conclusory assertions regarding infringement under the Respondents' and Staff's proposed construction of the claim terms. Respondents asserted that good cause existed to grant the motion based on their reliance and Complainants' expert's failure to address Respondents' and Staff's proposed constructions.

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Pre-Filing Investigation at ITC Protected from Discovery as Work Product and Work Product Privilege Was Not Waived

April 8, 2013

In this ITC investigation, Respondents Yantai Zhenghai Magnetic Material Co., Ltd., Anhui Earth-Panda Advance Magnetic Material Co., Ltd., and Ningbo Jinji Strong Magnetic Material Co., Ltd. (collectively, "Manufacturing Respondents") moved to compel discovery responses from Complainants Hitachi Metals, Ltd., and Hitachi Metals North Carolina, Ltd. (Collectively, "Hitachi Metals").

The motion was based on the Manufacturing Respondents argument that Hitachi was improperly asserting privilege regarding the pre-filing investigation conducted by Kroll Advisory Solutions.

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Canon Establishes Economic Prong of Domestic Industry Requirement on Summary Determination in ITC Proceeding

March 25, 2013

Complainants Canon, Inc., Canon U.S.A., Inc. and Canon Virginia, Inc. ("Canon") filed a motion for summary determination that Canon satisfied the economic prong of the domestic industry requirement for each of the patents in the investigation. Canon asserted that it satisfied "[t]he economic prong of the domestic industry requirement based on all three subsections of § 13379a)(3). Mem. At 1. Namely, Canon argues that its significant investment in plant and equipment, its significant employment of labor and capital, and its substantial investment in the exploitation of the asserted patents, including engineering and quality assurance activities, each independently meet the economic prong of the domestic industry requirement."

As explained by the administrative law judge, "[i]n patent-based proceedings under section 337, a complainant must establish that an industry "relating to the articles protected by the patent...exists or is in the process of being established" in the Untied States. 19 U.S.C. § 1337(a)(2). Under Commission precedent, this domestic industry requirement of Section 337 consists of a "technical prong" and an "economic prong." Certain Variable Speed Wind Turbines and Components Thereof, Inv. No. 337-TA-376, Comm'n Op. at 7 n.13 (Oct. 28, 1997) The "technical prong" of the domestic industry requirement is satisfied when the complainant's activities relate to an article protected by the patent. 19 U.S.C. § 1337(a)(2). The economic prong is satisfied by meeting any one of three criteria with regard to articles protected by each of the patents at issue: (A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in its exploitation, including engineering, research and development, or licensing. 19 U.S.C. § 1337(a)(3). Given that these criteria are in the disjunctive, satisfaction of any one of them will be sufficient to meet the domestic industry requirement."

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Plaintiff's Initiation of ITC Investigation Leads to Stay of District Court Case, including Stay of Patent not Involved in ITC Investigation

March 4, 2013

Avago Technologies ("Avago") filed a patent infringement action against IPtronics, Inc. ("IPtronics") asserting infringement of two U.S. Patents, patent nos. 5,359,447 (the '447 patent) and the 6,947,456 (the '456 patent) in the United States District Court for the Northern District of California. After a second amended complaint was filed, Avago filed a complaint at the International Trade Commission ("ITC") alleging infringement of the '456 patent, but did not allege infringement of the '447 patent. The ITC instituted an investigation naming IPtronics as a respondent.

As noted by the district court, "[w]hen parallel actions are proceeding before a district court and the International Trade Commission, 28 U.S.C. § 1659 requires the district court to stay 'Any claim that involves the same issues involved in the proceeding before the Commission' until the 'Determination of the Commission becomes final" upon request by 'a party to a civil action that is also a respondent in the proceedings before the [ITC].'"

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LSI Successfully Adds Accused Products to ITC Investigation Against Funai

January 7, 2013

Complainants LSI Corporation and Agere System LLC (collectively, "LSI" or "Complainants") filed a motion for leave to amend their amended complaint in order to clarify the scope of the accused products of Respondent Funai Electric Company ("Funai"). LSI sought to clarify that the scope of the accused products were not limited to Funai products that contain an integrated circuited component supplied by either Realtek or MediaTek.

In support of its motion, LSI argued that their would be no prejudice to Funai because LSI had consistently maintained that the scope of the accused products was not limited to Funai products incorporating solely MediaTek and Realtek components. Funai opposed the motion, asserting that LSI had not shown any new information that would justify the proposed amendment and that it would be prejudiced by the proposed amendments because LSI would be able to expand the scope of the accused Funai products at a late stage of the investigation.

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Respondent's Motion to Compel Based on Declaration from a Former Employee That Complainant's Counsel Were in Contact with Current Employees of Respondent Was Denied Where Complainant's Counsel Represented to ALJ That No Such Contact Had Occurred

December 17, 2012

Respondent ClearCorrect Pakistan (Private) Ltd. ("CCPL") moved to compel complainant Align Technology, Inc. ("Align") to produce documents and supplement responses to interrogatories. As explained by the Administrative Law Judge, "CCPL asserts that Align has provided incomplete responses to Document Request No. 9 and Interrogatory No. 13. CCPL says that Document Request No. 9 requires:

All documents reflecting communications occurring from January 1, 2010 and the present between Align (including its attorneys or anyone else acting on Align's behalf) and any of the following: . . . (3) any person currently or formerly employed by ClearCorrect Pakistan (Private) Ltd.

CCPL says that Interrogatory No. 13 requires:

For every communication from January 1, 2010 between Align (including its attorneys or anyone else acting on Align's behalf) and any person employed by ClearCorrect Pakistan (Private), Ltd. state: (1) every person participating in the communication, (2) the subject matter of the communication, (3) the date the communication occurred, and (4) whether any document or other recording medium captured the communication."

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Administrative Law Judge Limits Discovery of Electronically Stored Information in Proceeding before ITC by Limiting the Number of Custodians to 15

December 3, 2012

Complainant FlashPoint Technology, Inc. ("FlashPoint") initiated an ITC proceeding against HTC Corporation, among others. FlashPoint filed a motion for a protective order seeking to limit the discovery of electronically stored information. FlashPoint proposed a limit of 15 custodians collectively for respondents to select, which included an option to negotiate for additional custodians if there was a good faith basis to add additional custodians from FlashPoint.

HTC asserted that a limit on email discovery would severely prejudice its ability to prove its on sale bar and implied license defenses. As explained by the Administrative Law Judge, "HTC is pursuing an on-sale bar because it believes there is a relationship between the asserted patents and FlashPoint's invalidated U.S. Patent No. 6,163,816 ("the '816 patent"). The '816 patent was invalidated by an on-sale bar in ITC Investigation No. 337-TA-726 ("the 726 Investigation"). (Opp. At 5.) HTC further explains, "Flash Point is again claiming that HTC infringes patents arising from the FlashPoint project work conducted in the 1990s, and HTC is again raising the on-sale bar..." (Opp. At 6.) Thus it appears HTC's motivation for the on-sale bar is its suspicion that because the asserted patents and the invalidated '816 patent were related to the same project work, the asserted patents might also be subject to the on-sale bar. HTC also briefly explains the motivation for its implied license defense, namely that HTC is a customer of a licensee of FlashPoint's technology."

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Apple Settles with HTC: What Does It Mean for the Smartphone Wars?

November 12, 2012

Over the weekend, Apple and HTC settled all of the long running patent suits that both companies had filed against each other in multiple jurisdictions. Although few details of the settlement were released in the two sentence press release that included brief quotes from HTC and Apple, the companies did state the the they had reached a "global settlement" that included dismissal of all current lawsuits. The companies also specified that the license extends to current and future patents held by both parties for the next ten years. The remainder of the terms, including the financial terms, are confidential.

And so one of the earliest and longest patent battles over smartphones ended quietly. Although no monetary terms were disclosed, it is likely that HTC is paying a royalty to Apple in order to put an end to the litigation. The impact on HTC from the Apple lawsuits was significant, hurting both its stock price and its ability to timely ship product due to the exclusion order Apple obtained at the ITC. As a result of the settlement, HTC will now be able to focus on making and selling products instead of litigation. That can only be a positive for HTC.

But what about Apple?

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Administrative Law Judge Denies Request to Exclude Rebuttal Witness and States That the Request Did Not Merit a Motion that Expends the Resources of the ITC and the Parties

October 3, 2012

Complainant Knowles Electronics, LLC ("Knowles") initiated an investigation with the ITC against Analog Devices, Inc. Amkor Technology, Inc. and Avnet, Inc. (collectively, the Respondents) over silicon microphone packages. During the proceeding, Knowles submitted a rebuttal witness statement from Mr. Phillip Green. The Respondents moved to exclude the rebuttal statement alleging that Mr. Green's opinion of the commercial success of the asserted claims of the patents-in-suit and the commercial success of Knowles products was outside the scope of his expertise.

According to the Administrative Law Judge, "Respondents assert Mr. Green fails to provide any evidence to support the nexus between the asserted patents and the commercial success of the Knowles MEMS products and cannot do so because he is not qualified to opine on what features resulted in their commercial success."

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Google Attempts to Intervene at the ITC in an Investigation Initiated by Nokia against HTC

August 24, 2012

Google moved to intervene as a respondent in the investigation brought by Nokia against HTC. HTC supported Google's intervention and Nokia opposed it. Google asserted that it should be permitted to intervene as a respondent to defend its products and services and to protect its interest in the investigation. As part of this argument, Google asserted that its intervention would aid in the adjudication of the issues in five of the nine patents because the products or services accused of infringement are proprietary Android applications that are developed by Google and supplied by HTC.

In supporting Google's intervention, HTC asserted that Google is uniquely situated to provide information that is necessary for the efficient resolution of the investigation. In support of this position, HTC pointed out that Nokia's claim charts rely on features of Gmail, Google Calendar and other aspects of the Android operating system. HTC then claimed that Google's intervention would eliminate the need for complicated third party discovery regarding these features of Android.

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Administrative Law Judge at ITC Strikes Supplemental Expert Reports Filed without Permission

August 17, 2012

MyKey Technology Inc. initiated an ITC Investigation against several respondents, including Guidance Software, Digital Intelligence, Yec Co., Ltd.. and Cru Acquisitions. The parties served initial reports, rebuttal reports and supplemental reports in the Investigation. The procedural schedule only provided for initial expert reports and rebuttal expert reports. Nonetheless, the parties served supplemental expert reports and did not seek leave of the Administrative Law Judge before doing so.

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ITC Denies Summary Determination Motion Where Respondent Filed the Motion Two Hours Past the Filing Deadline

August 1, 2012

The Respondent, Pandigital, Inc. ("Pandigital") in this ITC investigation filed a motion for leave to file its motion for summary determination out of time. The proposed schedule in the matter required the filing of the summary determination motion by July 17, 2012. The deadline for filing documents with the ITC is 5:15 p.m. Eastern Time and Pandigial filed the summary determination motion on July 17th, but at 7:25 p.m. Eastern Time. Accordingly, the motion was considered filed on July 18, 2012, one day late.

Pandigital argued in its motion for leave to file out of time that the document was late because its counsel mistakenly believed that the filing deadline was 11:59 p.m. Eastern Time. As Pandigial's counsel acknowledged, the ITC Handbook on Filing Procedures states:

When the Commission has imposed a deadline on the filing of a document, the Secretary will consider the document timely filed electronically only if the user has "clicked" the "confirm" button on the final confirmation page for electronic submission by 5:15:59 p.m., eastern time, on the day that the document is due to be filed, and received e-mail notification of receipt.
(ITC Handbook on filing Procedures at Section F(1).)

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