ITC 337 Quarterly Insider Q2 2019

The Commission instituted thirteen Section 337 investigations and received eleven new complaints in Q2 2019, as the Commission started to return to normal after the government shutdown in Q1. The majority of the investigations continue to be based on tech patents, but new investigations included both biotech investigations and investigations based on alleged unfair acts such as trade secret misappropriation and tortious interference with contractual relations. On the tech side, we are starting to see a number of investigations addressing 5G issues, including how 5G innovation may affect the public interest.  Particularly, Apple-Qualcomm rulings became public in the 1093 Investigation. The differences in the public interest analysis by ALJ McNamara in the 1093 Investigation compared to the earlier public interest analysis by ALJ Pender in the 1065 investigation were particularly interesting. Although these investigations did not have underlying disputes related to 5G, the impending rollout of 5G technology clearly played a major role in the public interest analysis.  These are undoubtedly only the first of many investigations that will pertain to 5G technology as it continues to be implemented in the United States.

In addition to a number of notable determinations relating to substantive patent law issues, the Commission and the ALJs also issued a number of important determinations relating to the ability to obtain a general exclusion order, the interplay between IPRs and the Commission, and the proper scope of enforcement and modification proceedings. Similarly,  ALJ Lord issued an initial determination relating to the duty to investigate factual allegations forming the basis for the alleged unfair acts, and ALJ Elliot issued an order finding waiver of the attorney-client privilege based on a party’s failure to change its privilege review procedures after finding that multiple privileged documents had inadvertently been produced.

Commission Reverses ID’s Finding of Nonobviousness, Modifies Construction of Claim Term, and Overturns Recommendation of Denial of Remedial Orders

In the Matter of CERTAIN MOBILE ELECTRONIC DEVICES AND RADIO FREQUENCY AND PROCESSING COMPONENTS THEREOF, Inv. No. 337-TA-1065, Commission Opinion (Apr. 5, 2019)

Before:  Commission Opinion (ID issued by ALJ Thomas Pender)

Practice Tips and Insights:

To rebut obviousness, Complainant should not adhere too strictly to the express teachings of the references without taking into consideration the more flexible approach of obviousness.  Additionally, claim constructions that naturally align with the ordinary meaning and are consistent with the specification may be considered by the Commission as the right construction.  Lastly, public interest concerns could be mooted by a Commission’s finding of invalidity.

Holding and Status:

The Commission found no violation of Section 337 as to the asserted patents.

Case Background:

The Complainant, Qualcomm Incorporated (“Qualcomm”), filed a complaint against Apple, Inc. (“Apple”), claiming Apple violated Section 337 by importing into the United States certain mobile electronic devices that allegedly infringe three Qualcomm patents: U.S. Patent Nos. 9,535,490 (“the ’490 patent”); 8,698,558 (“the ’558 patent”); and 8,633,936 (“the ’936 patent”).  The ID found infringement of claim 31 of the ’490 patent, but noninfringement of the ’558 and ’936 patents.  The ID additionally found that Qualcomm satisfied the technical prong of the domestic industry with respect to only the ’490 patent, and economic prong of the domestic industry with respect to all three patents.  The ID did not find any of the asserted claims invalid.  Thus, the ID concluded that Apple is violating Section 337.  Despite finding a violation of Section 337, the ID recommended that the Commission decline to issue any remedial orders due to public interest concerns, specifically competitive conditions in the United States and national security because exclusion would leave Qualcomm as the sole U.S. supplier for baseband processor chipsets. 

The Commission determined not to review the ID with respect to the ID’s finding of noninfringement of the ’558 patent and ’926 patent.  The Commission determined to modify ALJ Pender’s construction of the claim term “hold” in the ’490 patent, and reverse the ID’s finding that claim 31 of the ’490 patent is not invalid as obvious.  The Commission also solicited briefing from the parties, interested government agencies, and members of the public on remedy, the public interest, and bonding.

Notable Disputed Issues and Related Points of Law:

Obviousness is Not Limited to Express or Inherent Teachings of a Reference:  The ’490 patent is generally related to techniques for power saving in smart phones, tablets, and other mobile devices as well as larger networked systems.  Specifically, the ’490 patent teaches that power can be saved and battery life extended by aggregating transmissions of downlink and uplink data across a bus, which reduces the number of times the bus transitions between low and high power states.  To accomplish this, the ’490 patent teaches that a modem processor temporarily stores and accumulates downlink data on one side of the bus, while the application processor accumulates uplink data on the other side of the bus. 

The ID found that Apple failed to prove by clear and convincing evidence that claim 31 of the ’490 patent is invalid as obvious over a combination of two references: Heinrich in combination with Balasubramanian.  The ID reasoned that Heinrich in combination with Balasubramanian does not disclose certain limitations of claim 31, and a person skilled in the art would not have been motivated to combine these two references to produce the claimed invention. 

The Commission reversed the ID’s finding of obviousness and explained that Qualcomm, like the ID, erred by adhering too strictly to what Heinrich and Balasubramanian may expressly teach or disclose, and as a result, the ID and Qualcomm read these references too narrowly for obviousness purposes and missed the broader principles that a person of ordinary skill in the art would take from Heinrich and Balasubramanian.  The Commission highlighted Qualcomm’s and the ID’s shared error:

While it may be true that Heinrich and Balasubramanian do not expressly disclose a combined push/pull in the context of interprocessor communications, the Commission finds the ID erred once again in adhering too strictly to the express teachings of the references, without taking into consideration the more flexible approach of obviousness. (citations omitted)

Finding of Invalidity Can Render Moot Public Interest Concerns:  Because the Commission determined that claim 31 is invalid as obvious and adopted the ID’s finding of noninfringement of the ’558 patent and ’926 patent, the Commission concluded that Qualcomm had not shown a violation of Section 337.  The Commission overturned ALJ Pender’s recommendation that the Commission decline to issue any remedial orders due to public interest concerns.  The Commission concluded that no remedial orders are issued, rendering moot any issues of remedy, the public interest, or bonding. 

Natural Alignment with Ordinary Meaning Can Support Modification of Claim Term Construction:  The Commission determined to modify the construction of the claim term “hold” to mean “prevent data from traveling across the bus or to store, buffer, or accumulate data.”  Qualcomm argued that construing “hold” to mean “prevent…or store…” would make the term ambiguous because it could be read to mean the data did not need to be stored on one side of the bus until the appropriate triggering event.  Apple argued that regardless of whether “hold” is construed to mean “prevent” and/or “store,” it should be interpreted to mean the data must be stored internally in the processor.  The Commission rejected both the private parties’ arguments and found that its modified construction naturally aligns with the ordinary meaning of “hold,” is consistent with the specification, and is not ambiguous given that claim 31 expressly states that the processor and application process are each configured to “hold” certain data “until expiration of the modem timer.”

Commission Vacates, Remands ID’s Findings of Invalidity Under 35 U.S.C. § 112

In the Matter of CERTAIN RADIO FREQUENCY MICRO-NEEDLE DERMATOLOGICAL TREATMENT DEVICES AND COMPONENTS THEREOF, Inv. No. 337-TA-1112, Commission Opinion (Apr. 25, 2019)

Before: Commission Opinion (ID issued by ALJ Dee Lord)

Practice Tips and Insights:

The Commission’s decision principally points out errors in law in application of 35 U.S.C. § 112 and related caselaw, framing appeals to the Commission in these terms is crucial. Further, respondents must be vigilant to ensure claim construction and determinations of validity are performed individually.

Holding and Status:

The Commission vacated the ID’s finding of invalidity as to certain claims pursuant to withdrawal of those claims by the complainant, and remanded as to remaining claims to determine whether the term “control module” in claims 1, 4, 10, 11, and 15 of the ‘899 patent is a means-plus-function limitation.

Case Background:

Syneron Medical Ltd., Candela Corporation, and Massachusetts General Hospital (the Complainants”), claimed respondents including EndyMed Medical, Inc. and EndyMed Medical Ltd. (together, “EndyMed”) challenged in relevant part one of the asserted patents, U.S. Patent No. 9,510,899 (“the ‘899 patent”). EndyMed moved for a summary determination that claims 1, 2, 4, 9-11, 15, ad 20-21 are invalid as indefinite under 35 U.S.C. § 112 ¶¶ 2, 6. The Complainants subsequently withdrew claims 2, 9, 20, and 21 of the ‘899 patent.

The ID granted EndyMed's motion for summary determination that claims 1, 2, 4, 9-11, 15, 20, and 21 of the '899 patent are invalid pursuant to 35 U.S.C. 112 ¶¶ 2, 6. The ID found that "[e]ven if a person of ordinary skill in the art would have understood 'control module' to refer to a 'sufficiently definite structure,' that structure necessarily would be a prior art 'control module"' that "would not be sufficient structure capable of performing all of the functions claimed in the '899 patent."

The Commission vacated the ID as to the withdrawn claims. As to the remaining challenged claims, the Commission remanded to determine whether the term “control module” in claims 1, 4, 10, 11, and 15 of the ‘899 patent is a means-plus-function limitation.

Notable Disputed Issues and Related Points of Law:

While the ID had discounted the Complainants’ expert for an admission that the claim did not sufficiently describe the structure, for failure to show that the specification sufficiently distinguishes claim structures, and for failure to show how a person of ordinary skill would know how to configure a control module to perform the claims functions, the Commission summarily held that expert testimony was disputed and raised a genuine issue of material fact.

The Commission also rejected the ID’s application of Pressure Prods. Medical Supplies, Inc. v. Greatbatch Ltd., 599 F.3d 1308, 1317 (Fed. Cir. 2010), which held that “[s]imply mentioning prior art references in a patent does not suffice as a specification description to give the patentee outright claim to all of the structures disclosed in those references.”  The Commission found that Complainants were allowed to argue that the prior art references teach how a person of ordinary skill at the time of the filing of the application would have understood the structure described by the term “control module.”

The Commission further found the ALJ erred in considering the claimed functions for all nine claims simultaneously pursuant to 35 U.S.C. § 282(a); the claims must be construed and evaluated for invalidity separately.

Finally, the ALJ erred in applying Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1349 (Fed. Cir. 2015); while the ID considered Williamson to mean that the prior art must disclose a control module capable of performing all the claimed function, that decision requires only that the words of the claim be understood by a person of ordinary skill to describe a structure.

Commission Refuses to Rescind a General Exclusion Order

In the Matter of CERTAIN SELF-ANCHORING BEVERAGE CONTAINERS, Inv. No. 337-TA-1092, Commission Determination (May 17, 2019)

Notable Disputed Issues and Related Points of Law:

On May 17, 2019, the Commission denied a petition to rescind a general exclusion order (“GEO”) entered with respect to a finding of infringement of claim 1 of U.S. Patent No. 8,028,850. The petition was brought by Mayborn USA, Inc. and Mayborn Group Limited (“Mayborn”), who were not parties to the underlying investigation. Mayborn argued that newly discovered anticipatory prior art constituted a changed circumstance that justified rescission of the GEO. Complainants and the Office of Unfair Import Investigations (“OUII”) opposed.

Under 19 U.S.C. 1337(k)(1), a GEO may be rescinded for “changed conditions of fact or law, or the public interest.” Citing the “conditions” that led to the Commission’s issuance of the GEO, and finding that none had changed by virtue of Mayborn’s petition, the request was denied. Specifically, the Commission found the following conditions unchanged by the submitted prior art: (1) that by substantial, reliable, and probative evidence, respondent violated section 337; (2) that a GEO was necessary to prevent circumvention of a limited exclusion order; and (3) that there is a pattern of violation and that it is difficult to identify the source of the infringing products.

Significantly, no party had previously challenged the validity of the asserted claim. In past matters, the Commission has rescinded remedial orders where the presumption of patent validity was overcome by the changed circumstance of a tribunal’s finding of invalidity of that patent. The Commission pointed out that it has never found, however, and declined to find in this matter, that the alleged new discovery of prior art after issuance of a GEO constitutes a changed circumstance that warrants GEO rescission.

Violation Confirmed for Two of Three Asserted Patents

In the Matter of CERTAIN MAGNETIC TAPE CARTRIDGES AND COMPONENTS THEREOF, Inv. No. 337-TA-1058, Commission Opinion (April 10, 2019)

Before: Commission Opinion (ID issued by Administrative Law Judge Cheney)

Practice Tips and Insights:

Respondents who are raising invalidity defenses, especially those needing explanation such as written description, enablement, and obviousness, should assure that they build a factual record that includes elaboration on the reasons supporting their defenses. Conclusory statements and proposals are consistently rejected. The ITC continues to juggle with how a remedial order is affected if there are final PTAB decisions conflicting with the remedial order.

Holding and Status:

The Commission affirmed a violation with respect to two of three patents, but provided some supplemental and amended reasoning.

Case Background:

Three patents—the ’774, ’596, and ’501 patents—were disputed at a hearing before Judge Cheney in May 2018. The Final ID determined that there was a violation with respect to the ’774 and ’569 patents, but not with respect to the ’501 patent (on the grounds that its asserted claims are invalid). Thus, a limited exclusion order was recommended, as was a cease and desist order. The Commission reviewed various issues with respect to each patent and determined, as discussed below, that a limited exclusion order and cease and desist order for both the ’774 and ’569 patents was proper because they were valid, infringed, and the subject of a domestic industry. The Commission also confirmed that there was no violation for the ’501 patent.

Notable Disputed Issues and Related Points of Law:

Patent Law for the ’774 Patent: There were four patent law issues considered for the merits of the ’774 patent:  claim construction, enablement, written description, and anticipation. Each of these legal issues turned on facts solicited at trial, particularly with respect to those provided by testifying experts. For example, the Commission found that enablement was satisfied because Fujifilm’s (the respondents’) expert “analysis consists only of conclusory and wholly unsupported statements.” The same rang true for written description—Fujifilm’s expert offered “nothing more than a conclusory assertion.” With respect to anticipation, there was differing expert testimony and the Commission agreed Fujifilm did not meet its clear and convincing evidence burden.

Patent Law for the ’596 Patent: Issues specific to the ’596 patent included: claim construction, infringement, the technical prong of the domestic industry and invalidity. The commission confirmed there was induced infringement because Fujifilm had the requisite intent to cause infringement, particularly because Fujifilm has prior knowledge of other claims that it acknowledged were “very similar” to those asserted in the Investigation. On obviousness, the Commission analyzed whether a prior art reference outside the field of use for the asserted patent was analogous art. The Commission determined that although the art was afield, it was still analogous art because it was concerned with addressing the same problem. Nevertheless, the Commission held the claims were not obvious because there was not motivation to combine the references nor was there an expectation of success even if a combination was made.

Economic Prong Based on Licensee: The economic prong was based on Sony’s licensing agreement with IBM. The primary argument was whether IBM had authorization to practice the asserted patents such that its products could fall within the umbrella of the domestic industry requirement. The Commission analyzed an oral agreement between IBM and Sony, as well as a written agreement. The Commission determined that the agreements brought IBM’s products within the purview of the domestic industry requirement. Notably, the Commission extended the domestic industry analysis to products that did not alone practice the patents because the components that were protected “cannot be ‘exploited’ absent their use in conjunction with [those products].”

Remedy: There were four primary issues addressed related to remedial orders. The first three related to Fujifilm’s request for express exclusions in the remedial orders. All three were rejected by the Commission because they were found to be unnecessary. The fourth request was for a stay of the LEO with respect to two asserted claims subject to final written decisions of invalidity at the PTAB. The Commission found the facts analogous to Three Dimensional Cinema (Inv. No. 337-TA-927) and, therefore, suspended the remedial relief as it applied to one asserted claim. The remainder of the remedial order was left in place.

Commission Finds Evidence of Infringement Insufficient and Complainant Bound by Patent’s Description of the Prior Art

In the Matter of CERTAIN INDUSTRIAL AUTOMATION SYSTEMS AND COMPONENTS THEREOF INCLUDING CONTROL SYSTEMS, CONTROLLERS, VISUALIZATION HARDWARE, MOTION AND MOTOR CONTROL SYSTEMS, NETWORKING EQUIPMENT, SAFETY DEVICES, AND POWER SUPPLIES, Inv. No. 337-TA-1074, Commission Opinion (April 24, 2019)

Before: Commission Opinion

Practice Tips and Insights:

To prove infringement at the Commission, Complainant cannot rely on conclusory testimony of its expert based on the expert’s “knowledge and experience.” Further, if the Commission requests briefing on how the accused “methods” meet certain claim limitations, be sure to brief all of the accused methods or the Commission could find any method that is not addressed to have been abandoned. Finally, the Commission may find a patentee bound by statements in a patent’s disclosure, including characterizations of the prior art unless the patentee can rely on non-enablement as a potential basis for collateral attack on the admission.

Holding and Status:

The Commission issued a general exclusion order as to all respondents, a cease and desist order as to respondent Fractioni (Hongkong) Ltd., and set bond of 100 percent of the entered value of infringing articles imported during the period of Presidential review.

Case Background:

The Complainant, Rockwell Automation, filed a complaint against fifteen respondents, claiming violations Section 337 by importing certain industrial automation systems and components, products that allegedly infringed Rockwell’s registered trademarks and copyrights. Rockwell also asserted an unfair competition claim related to tortious interference with contract. The domestic industry products are industrial automation systems, all of which bear the asserted trademarks. The accused products are gray market Rockwell products not authorized for sale in the United States that differ materially from the domestic products (i.e., lack of warranty, recall notices, safety notices, quality control, etc.).

Nine of the respondents defaulted, five were terminated for failure of service, and one was terminated on the basis of a consent order. On October 23, 2018, the ALJ issued a FID finding a violation of Section 337 by the defaulted respondents as to the trademark claim, but no violation as to the copyright and tortious interference claims. The ALJ recommended that the Commission issue a GEO against all respondents, issue a CDO against respondent Fractioni, and set bond at 100 percent of the entered value of infringing products.

The Commission determined not to review the FID. The Commission solicited written submissions on remedy, the public interest, and bonding. The Commission received written submissions from Complainant and the Office of Unfair Import Investigations.

Notable Disputed Issues and Related Points of Law:

Standard for Entry of a General Exclusion Order: Entry of a GEO requires a finding that either: (1) a GEO is necessary to prevent circumvention of a limited exclusion order; or (2) there is a pattern of violation and it is difficult to identify the source of infringing products. The Commission found that a GEO was warranted in this case because of the ease with which a limited order could be circumvented. The Respondents were purchasing Rockwell products abroad and selling them in the United States, sometimes under different names. Because the Respondents did not manufacture any products, the barriers to entry were low. Furthermore, the Respondents were already using multiple entities with different names to sell products, further demonstrating the ease of circumvention of a limited order. The Commission also found a pattern of violation and difficulty identifying the source of the infringing products. Searches on eBay and Alibaba revealed tens of thousands of infringing product listings for products in “new” condition. The Commission also noted the difficulty in serving Respondents.

Standard for Issuing a Cease and Desist Order: A CDO may be issued in addition to an exclusion order. A CDO is typically ordered if the evidence establishes that the Respondent has substantial infringing inventory or operations in the U.S. that would make an exclusion order insufficient to remedy the infringement. The Commission issued a CDO against only one respondent, Fractioni, because this is the only Respondent for whom Rockwell had provided evidence of substantial domestic operations. For the other Respondents, Rockwell identified substantial domestic sales, but no evidence of domestic operations or inventories.

Public Interest Factors: The Commission found the public interest factors all weighed in favor of issuing the GEO and CDO. The Commission found no likely adverse effect on public health and welfare, as preventing unauthorized purchases would promote public safety; there was no evidence of any anticompetitive concerns; there was no evidence Rockwell could not meet market demand if an exclusion order issued; and the only adverse effect on U.S. consumers would be increased prices for authorized Rockwell products (as opposed to lower prices for unauthorized products).

Issuance of Bond: Bond should be sufficient to protect Complainant from injury and is typically either (1) the difference between the imported infringing product and the domestic product, or (2) a reasonable royalty. If pricing or royalty information cannot be ascertained, bond may be set at 100% of the value of the imported infringing product. Here, the Commission found it impracticable to determine the price differences as the prices of the products varied significantly, and there was no evidence of an appropriate comparable royalty and set bond at 100%.

The Commission Finds Sony in Violation of Section 337

In the Matter of CERTAIN magnetic data storage tapes and cartridges containing the same (II), Inv. No. 337-TA-1076, Commission Opinion (June 20, 2019)

Practice Tips and Insights:

Even confidential sales can create an on-sale bar in certain circumstances. But respondents must show the product sold was covered by the asserted patent.

Case Background:

The Commission had instituted this investigation based on a complaint filed by Fujifilm, alleging that Sony violated Section 337 by importing and selling certain magnetic data storage tapes and cartridges that allegedly infringed a number of asserted patent.  After the evidentiary hearing, the ALJ found that Sony violated Section 337 by way of infringing one or more valid claims of two of the asserted patents. But regarding the other two patents remaining in the investigation, the ALJ found that Sony did not infringe any valid asserted claims.

Of particular note, the ALJ had determined that one of the asserted patent claims was invalid as anticipated by Fujifilm’s sales of a prototype cartridge more than one year before the priority date of the patent.  The Commission reversed that finding as further detailed below.

Notable Disputed Issues and Related Points of Law:

As the ALJ had noted in the ID, an on-sale bar requires clear and convincing evidence that, before the asserted patent’s critical date, the claimed invention must have been: (1) the subject of a commercial sale; and (2) ready for patenting. The ALJ determined that prototype cartridges that Fujifilm had sold to IBM and Seagate, under a confidentiality agreement, constituted “commercial sales.”  Because the ALJ concluded that the prototypes sold to IBM and Seagate satisfied all the limitations of the claim at issue, the ALJ concluded that the sale invalidated the patent.

Specifically, the ID noted that Sony produced sufficient evidence that Fujifilm's prototype cartridges satisfied all of the limitations of the claim at issue. Sony had argued that Fujifilm manufactured the cartridges according to draft specifications in existence at that time, and then relied on its expert to identify where the elements of the claim could be found in those draft specifications. But there was one limitation absent from the product specification: whether the diameter of the engagement gear was relatively larger than that of the braking gear. For this limitation, Sony relied on a manufacturing drawing produced by Fujifilm and testimony by a Fujifilm engineer about the diameters of gears in products Fujifilm sent to its customers in 1999. The ID pointed to the same evidence to find that the claimed invention had been reduced to practice, and thus was ready for patenting.

Before the Commission, Fujifilm argued that the ID should be reversed because the alleged on-sale bar rests on two unproven assumptions about the “ready for patenting” prong triggering a bae: (1) that the confidential prototype cartridges that Fujifilm sold to IBM and Seagate conformed to the draft product specifications; and (2) that the prototypes met all the limitations of the asserted claim regardless of whether they conformed to the draft specifications.  Fujifilm further argued that the prototypes did not constitute "commercial sales" under Federal Circuit precedent, because: (i) they were not publicly offered for sale; (ii) neither IBM nor Seagate could resell them to third parties; (iii) Fujifilm provided the prototypes solely for "evaluation and testing" and "research and development"; (iv) their mechanical design was far from complete at the time of the exchange; and (v) they had "all the hallmarks of developmental, confidential, non-commercial transactions."

The Commission sided with Fujifilm and reversed based upon the “ready for patenting” requirement. “An on-sale bar” the Commission noted, “requires that the prior art must expressly or necessarily include every limitation of the contested claim…. If the evidence is insufficient to establish by clear and convincing evidence that even one of the claim limitations is present, then the claim is not invalid under this theory.”

By the time of the Investigation, the prototype cartridges no longer existed and therefore not part of the evidentiary record. As a result, the Commission found that Sony's argument was premised on an assumption that the prototype cartridges that Fujifilm sent to IBM and Seagate complied with the then-available draft specifications because that was allegedly the general practice in the industry at that time. But Sony's expert had not actually see the prototype cartridges, and admitted that he could not offer an opinion on the actual cartridges. In the end, the Commission concluded that the record evidence did not clearly and convincingly show that the samples Fujifilm sent to IBM or Seagate included all the limitations in the relevant patent claim. Specifically, “some of the prototypes that Fujifilm provided to IBM and Seagate were incomplete at the time they were transferred; their design was subject to change; some of the prototypes were based on specifications or drawings supplied by Seagate, not Fujifilm; and their specific attributes remain unclear.” Thus, the Commission reversed the invalidity finding based on the on-sale bar because Sony’s failure to prove, by clear and convincing evidence, that the prototypes sold to IBM and Seagate were ready for patenting at the time.

Commission Issues General Exclusion Order After All Ten Respondents Default

In the Matter of CERTAIN MOUNTING APPARATUSES FOR HOLDING PORTABLE ELECTRONIC DEVICES AND COMPONENTS THEREOF, Inv. No. 337-TA-1086, Commission Opinion (June 24, 2019)

Before: Commission Opinion (Remand ID issued by Chief Judge Bullock)

Practice Tips and Insights:

The Commission can be a powerful tool for remedying instances where infringing imports are making their way to consumers in unmarked packaging via wide-spanning internet sales and by way of companies whose corporate names seem to continually change.

Holding and Status:

In the underlying Investigation, the ALJ found all ten respondents in default. However, the ALJ made an initial ruling of no direct infringement that was overturned by the Commission on March 18, 2019 and certain issues were remanded back to the ALJ. On remand, the ALJ found a violation with respect to all respondents and recommended a General Exclusion Order. The Commission requested written submissions on remedy, public interest, and bonding and has now issued the recommended General Exclusion Order.

Notable Disputed Issues and Related Points of Law:

General Exclusion Order (Circumvention and Pattern of Violation): In finding that a General Exclusion Order (GEO) was warranted, the Commission stepped through its two prong analysis under Section 337(d)(2): (1) is a GEO necessary to prevent the circumvention of a Limited Exclusion Order and (2) is there a widespread pattern of violation. The Commission Opinion found that the Remand ID appropriately considered the complainant’s evidence on these points and therefore a GEO was warranted. The Commission listed a number of its own opinions that supported this conclusion.

The Commission also found that the public interest would not be adversely affected by a GEO because the complainant had capacity to meet market demands. Additionally, bond was set at 100% due to the lack of reliable pricing information, given the lack of discovery from the defaulting respondents.

Initial Determination Recommending a General Exclusion Order Related to a Complaint Naming Only Eight (Defaulting) Respondents

In the Matter of CERTAIN FULL-CAPTURE ARROW RESTS AND COMPONENTS THEREOF, Inv. No. 337-TA-1117, Initial Determination (March 19, 2019)

Before: Chief ALJ Charles E. Bullock

Practice Tips and Insights:

Complaint identified only eight named Respondents and could not identify all sources of accused products imported into the United States. Nevertheless, the ALJ agreed with Complainant’s, request for a general exclusion order (GEO) and recommended a GEO. Complainant produced evidence of several other sources of infringing products online, general state of counterfeiting in the industry at issue, and ways entities avoided detection, made easier by small size and interchangeability of the accused products. That all of the Respondents defaulted in responding to the complaint helped as well.  The takeaway from this case is that even when only a few respondents can be identified, Complainants should consider requesting a GEO, if they can muster sufficient evidence and make compelling arguments to show a widespread pattern of violation, likely evasion of a limited protection order, and difficulty in identifying the source of infringing products.

Holding and Status:

ALJ found violation of Section 337 as to the asserted patent and recommended as remedy a GEO encompassing the infringing products.

Case Background:

The 1117 Investigation is based on alleged infringement of a patent generally related to archery equipment, and more particularly, to an arrow rest.  All eight respondents – Chinese entities – were found in default for not responding to the complaint. As a result, arguments and evidence regarding infringement and domestic industry were largely undisputed.

Notable Issues and Related Points of Law:

General Exclusion Order: The complainant requested a GEO, contending that the eight named respondents were “just tip of a large and growing iceberg.” It argued that enforcement “is difficult, if not impossible, as manufacturers may simply provide their infringing products to resellers, who in turn import the products into the United States.” It further argued that these transactions “are difficult to identify because the selling and importing entities frequently hide their identities and the locations from which [the infringing] products ship.”

As evidence for widespread pattern of violation, the complainant including the following evidence:

• Numerous other sources of infringing arrow rests were available for purchase online, including over 100 China-based entities offering and selling infringing arrow vests for importation into the United States
• Search performed on Alibaba.com uncovered at least sixty potentially infringing products from various unidentified overseas sellers, which were available to U.S. customers.Majority of listings were for products from China and used fictitious seller names
• Current state of counterfeiting facing the archery and bowhunting industry, including:
  • Speech addressing manufacturing representatives at the annual Archery Trade Association (ATA) Trade Show by the Deputy Director of the National Intellectual Property Rights Coordination Center, who described counterfeiters as “skilled criminals whose imitations mimic authentic products and their packaging.”
  • Statement by former ATA CEO/President Jay McAninch that safety is the industry’s biggest concern: “When you have people drawing counterfeit bows to shoot counterfeit arrows and broadheads from treestands made from inferior metals, something is bound to give at the worst possible time. It not only puts people at risk, but it increases the chances of wounding losses when arrows don’t fly straight or broadheads break on impact.”
  • Counterfeit products are often shipped directly to homes or businesses as gifts, and “counterfeiters pay no federal excise taxes” as compared to legitimate manufacturers who pay “up to an 11 percent tax on the sale.”

Reviewing this evidence, ALJ Bullock agreed with complainant that there was a widespread pattern of violation, and identifying the source of the infringing products would be difficult, if not impossible. ALJ Bullock stressed that while the complainant has attempted to identify sources of infringing counterfeits, it is impossible to identify all sources given the anonymity with which counterfeiters conduct business through online retailers.

The Complainant also submitted evidence to show a limited exclusion order would likely be subject to immediate evasion, as follows, because many sales are made via the Internet making it difficult to gain information about the entities selling the infringing/counterfeit products:

• On two separate occasions, the complainant purchased an infringing product from an online seller and the product received was manufactured by an entity who was the subject of a prior investigation and whose products were excluded from importation into the United States by a limited exclusion order
• Defaulting Respondents and other entities renamed their companies, hid behind anonymous seller profiles, or sold to other companies who then imported their infringing products into the United States under a different name – all to avoid detection
• The small size and interchangeability of the accused products made it easy for foreign manufacturers and distributors to transfer product between sellers, thereby evading enforcement efforts
• Defaulting Respondents ignored proceedings, were found in default, suggesting that they would not abide by the terms of any limited exclusion order the Commission may impose.

Ultimately, ALJ Bullock found that a GEO is the appropriate remedy.

Claims of Privilege Waived for Subsequent Production Because Respondent Failed to Implement New Review Procedures After Issuing Claw Back Requests

In the Matter of CERTAIN HUMAN MILK OLIGOSACCHARIDES AND METHODS OF PRODUCING THE SAME, Inv. No. 337-TA-1120, Order No. 30 Granting Motion to Compel (Apr. 8, 2019)

Before: ALJ Elliot

Practice Tips and Insights:

The Respondent in this case waived any claims to work-product protection by failing to modify its review process after issuing claw backs for prior productions. Litigants who issue claw backs should review the content of their search strings and consider taking additional steps to protect privileged information before making subsequent productions. Additionally, litigants should be mindful that corrective measures they take after discovering they have inadvertently produced protected material (for example, by manually re-reviewing a production) may subsequently be used as evidence of what preventive measures it would have been reasonable for them to initially take.

Holding and Status:

The Respondent waived any existing work product protection because it failed to take reasonable steps to prevent disclosure.

Case Background:

The complaint alleges violations of section 337 of the Tariff Act of 1930 based on importation into the United States of certain human milk oligosaccharides and methods of producing the same, allegedly infringing patents asserted by Complainant Glycosyn LLC. The Respondent in this case is Jennewein Biotechnologie GmbH.

The instant order grants a motion to compel re-production of documents that Respondent clawed back on the basis of privilege.

Notable Disputed Issues and Related Points of Law:

Use of Search Strings to Review for Privilege (When to Modify): It was unreasonable for the Respondent not to modify the search string it used to review its documents for privilege after discovering that the search string allowed privileged documents to slip through in an earlier production. After it had to issue two claw backs, the Respondent was on notice that it needed to review subsequent productions more carefully. In light of the claw backs, ALJ Elliot found that it would have been reasonable to manually review the 1400 documents in a subsequent review. In reaching this conclusion, the ALJ noted that Respondent had previously been able to review 6000 documents by hand in a previous production, and ultimately reviewed the 1400 documents in the production at issue after discovering they contained privileged information.

Use of Search Strings to Review for Privilege (Substance of Search Strings): ALJ Elliot reviewed the content of the search strings Respondent used in its pre-production review for privilege and found it to be inadequate. Some of the terms the ALJ found should have been included are redacted, but appear to be the names of legal personnel.

Motions to Compel (Time to File): After its initial discovery of inadvertent production of privileged materials, the Respondent engaged in a rolling review of its production, issuing multiple claw-back requests over a period of several months. In light of the lengthy and on-going claw-back process, the ALJ held it was reasonable for the Complainant to “wait for the dust to settle” before challenging the claw backs in a motion to compel.

The Public Interest Does Not Overcome the Commission’s Interest in Excluding Infringing Products from the United States

In the Matter of CERTAIN MOBILE ELECTRONIC DEVICES AND RADIO FREQUENCY AND PROCESSING COMPONENTS THEREOF, Inv. No. 337-TA-1093, Analysis and Findings of Fact With Respect to the Public Interest, and Recommendation On Remedy and Bond (Dec. 19, 2018)

Before: ALJ McNamara

Practice Tips and Insights:

This case related to the now ended feud between Apple and Qualcomm. ALJ McNamara’s findings on the public interest were particularly notable because she reached a different conclusion on whether an exclusion order against iPhones incorporating Intel chipsets would adversely affect the public interest such that an exclusion order should not issue. ALJ McNamara gave less credence than Judge Pender to Intel’s testimony that it would exit the 5G marketplace if an exclusion order issued. Judge McNamara called Intel’s testimony about exiting the 5G market speculative because there were no tangible business plans or SEC filings supporting the position.  Judge Pender (in the 1065 Investigation) was convinced Intel would exit the 5G market.

Holding and Status:

ALJ McNamara found one of the Qualcomm’s non-standard essential patents to be valid and infringed. This ruling related to whether or not the public interest overcame the need for an exclusion order and she determined that recommending an exclusion order was warranted.

Notable Disputed Issues and Related Points of Law:

Of the four public interest factors, Judge McNamara determined that the competitive conditions in the U.S. economy was the only real factor that may weigh against issuing an exclusion order. Qualcomm defined the market for consideration as smartphones generally, whereas Apple defined the relevant marketplace as the market for premium baseband chipsets. Judge McNamara did not make a ruling as to which market was proper for consideration and, instead, determined that under both market definitions the Commission’s interest in protecting Qualcomm’s intellectual property rights was not overcome by the public interest concerns. The ALJ found that it was important that Intel could continue selling other chipsets, Apple and Intel could both continue selling handsets with Intel chips outside the U.S., and that 5G development does not depend upon Intel. She also found that Intel’s claims that it would exit the 5G market in view of an exclusion order were “speculative.”

Importantly, the recommended remedy did include carve-outs: “First, Apple should be permitted to service, that is repair and replace its iPhones in the United States. Second, the Commission should allow a carve out for iPhones and testing platforms used to test and develop 5G to test prototypes or design-arounds in the infringing Apple iPhones.” The carve-outs were proposed at least in part to promote the development of 5G technology.

ALJ Cheney Finds No Violation of Section 337 by the Respondents

In the Matter of CERTAIN subsea telecommunications systems and components thereof, Inv. No. 337-TA-1098, Initial Determination (April 26, 2019)

Before: ALJ Cheney

Practice Tips and Insights:

Complainant must conduct a thorough pre-suit investigation before pulling the 337 trigger.

Holding and Status:

The ALJ determined that there was no violation Section 337.

Case Background:

The Complainants (collectively “Xtera”) filed a complaint alleging violation of Section 337 based upon infringement of five patents. During the course of the investigation, the ALJ issued initial determinations terminating the investigation with respect to some of the asserted claims, and granting the respondents’ summary determination motion based on Xtera’s failure to satisfy the domestic industry with respect to certain other claims. Going into the evidentiary hearing, of the five patents that formed the basis for institution of the investigation, only two remained, U.S. Patent No. 7,860,403 ("the '403 patent") and U.S. Patent No. 8,351,798 ("the '798 Patent"). Complainant asserted infringement of 3 claims of the '798 patent. But as the ALJ found that, at the evidentiary hearing, Complainant failed to produce any evidence to show a violation of Section 337 based on infringement of those claims. Thus the post-hearing ID focused on the allegations regarding the ’403 patent.

The ’403 patent generally relates to optical data transmission in a wavelength division multiplex scheme. The stated objective of the patent is to improve spectral efficiency over traditional formats.

Notable Disputed Issues and Related Points of Law:

The Asserted Patent Was Found Invalid and Not Infringed. There were two claim construction issues of note. First, the Court took up Xtera’s argument that the preamble of one of the asserted claims was limiting. Importantly, the ALJ noted the untimeliness of the argument, observing that Xtera raised the argument “for the first time at the evidentiary hearing.” Although the ALJ never expressly excused the untimeliness, nevertheless he addressed the substantive issue, concluding that Xtera’s argument was not persuasive.  Specifically, the ALJ noted that the operative language in the preamble, “a transmitter for producing,” was not limiting because it merely described the intended use for an otherwise structurally complete invention.

The second claim construction issue related to a means plus function claim disclosing a “means for producing a periodic series of optical pulses defining a series of time slots, ….” The dispute here centered on the corresponding structure. Noting that Xtera’s argument was “not a model of clarity,” the ALJ regardless considered the argument and the proffered support. Ultimately, the ALJ rejected Xtera’s proposed corresponding structure as the argument relied heavily on expert testimony to compensate for the deficient disclosure for what Xtera advocated as the structure. “Expert testimony” the ALJ stated, “cannot ‘rewrite the patent’s specification’ to provide a link between a structure and a claimed function where the patentee did not clearly provide one.”

Regarding the accused products, the ALJ found that the complainant “never clearly identifie[d] the accused products.” To the extent there is a disagreement between the parties about what in fact constitutes the accused products, the ALJ stated that the burden remains on the Complainant to show what articles infringe the asserted patents. Here, because the ALJ found that Xtera ultimately failed to show any product infringes the ’403 patent, Xtera’s failure to clearly identify the accused products was rendered moot.  Specifically, the ALJ concluded that the accused products did not directly or indirectly infringe the ’043 patent. (With respect to the latter, the ALJ deemed the contention to be withdrawn because Xtera’s failure to address indirect infringement in the post-hearing briefs.) Similarly, because Xtera’s argument regarding the technical prong of the domestic industry was coextensive with the infringement allegations, the ALJ found that Xtera failed to satisfy the technical prong requirement. Finally, the ALJ found that the respondents had met their burden to prove, by clear and convincing evidence, that the ’403 patent was invalid as anticipated.

Investments in Articles Not Protected by the Asserted Patent Do Not Count for the Economic Prong of the Domestic Industry Requirement. With respect to the economic prong of the domestic industry requirement, Xtera relied upon one of its systems known as the NuWave Optima. Importantly, however, some versions of the NuWave Optima product allegedly practice the ’043 patent while others did not. Respondents argued that Xtera essentially “padded” its domestic industry numbers by counting investments in articles that are not protected by the ’403 patent. The “operative question” the ALJ stated, “is how much of Xtera’s investments in [its own systems] are attributable to its domestic industry in the patented technology.” The ALJ concluded that Xtera failed to “present evidence sufficient to answer that question in this investigation.”

Further, the ALJ rejected Xtera’s additional argument that in any event a qualitative analysis of Xtera’s investments should suffice. The ALJ rejected as misplaced, Xtera’s reliance on Lelo, Inc. v. ITC, 786 F.3d 879 (Fed. Cir. 2015). The holding of Lelo, the ALJ noted, “is that qualitative factors alone are insufficient to show ‘significant investment in plant and equipment’ and ‘significant employment of labor or capital’ under prongs (A) and (B) of the §337 domestic industry requirements.” Thus, the ALJ deemed Xtera’s domestic industry showing as “flawed” for combining investments in systems that do not practice the ’403 patent with those that allegedly do.

It is also significant to note that in “possible recognition” of its failure, as the ALJ put it, Xtera included a section in its post-hearing brief that allocated the investments in the two versions of the system. But the ALJ noted that such allocation did not appear in the nearly 1500 pages of Xtera’s prehearing brief. As such, the ALJ stated that he would “not credit an argument made for the first time after the close of the evidentiary hearing, when Respondents have no ability to seek expert economic analysis of the argument, or any ability to test the veracity of that argument through cross-examination of Xtera’s economic expert.” Nor did the ALJ find any evidentiary support for the untimely argument.  The ALJ, therefore, concluded that “even if Xtera’s last minute allocation argument had not been abandoned, [the ALJ] would nonetheless be compelled to find that Xtera’s proffered allocation lacked the support of substantial evidence.”

Accordingly, the ALJ concluded that Xtera failed to satisfy the economic prong of the domestic industry requirement.

Disavowal of Claim Scope in IPR Leads to Remedy Modification

In the Matter of CERTAIN access control systems AND COMPONENTS THEREOF, Inv. No. 337-TA-1016, Recommended Determination (April 22, 2019)

Before: Chief ALJ Bullock

Practice Tips and Insights:

Representations Made by a Patent Owner in an Inter Partes Review Can Operate as a Disavowal of Claim Scope for Proceedings Before the Commission. Patent owners enforcing their patent rights at the Commission should be mindful of taking positions in IPRs which could prejudice them before the Commission, even if the Commission has already issued remedial orders. On the flip side, respondents could carefully craft IPR challenges such that a complainant is put to choose between defending the validity of an asserted patent or maintaining a useful claim scope for assertion.

Holding and Status:

In a proceeding to modify a limited exclusion order and cease and desist order, Chief Administrative Law Judge Bullock recommended that the orders be modified to exclude Respondents’ redesigned wireless garage door openers from their scope. The CALJ held that Complainant’s positions taken in an IPR concerning the patent asserted at the Commission operated as a disavowal of wireless garage door openers from the scope of the claims.

Case Background:

In the 1016 Investigation, the Commission issued a limited exclusion order and cease and desist orders for certain access control systems, including garage door openers, covered by Complainant Chamberlain Group, Inc.’s (“CGI”) asserted patent. During the Commission proceedings, Respondents petitioned for inter partes review of CGI’s patent.

Following the Commission’s ruling, Respondents sought an administrative ruling from the Intellectual Property Rights Branch of the United States Customs and Boarder Protection that certain redesigned garage door openers were not covered by the remedial orders. The redesigned openers used a wireless connection between the keypad and head unit whereas the original openers had a hard-wired connection. The IPRB ruled that the redesigned openers were subject to the remedial orders, but on appeal of that decision, the Court of International Trade found that the redesigned openers do not infringe CGI’s patent and ordered a shipment of detained openers released.

Respondents subsequently petitioned the Commission to modify the remedial orders to exclude the redesigned wireless garage door openers. Respondents’ based their petition on “changed conditions of fact”: (1) that the redesigned garage door openers used a wireless connection between the keypad and head unit instead of a hard-wired connection; and (2) CGI made statements during the IPR, and subsequent to the Commission’s orders, to the effect that the asserted patent did not cover wireless connections.

Notable Issues and Related Points of Law:

Disavowal: In the modification proceeding before CALJ Bullock, the central claim limitation at issue was “said microcontroller of said motor drive unit being connected to the microcontroller of the wall console by means of a digital data bus.” (Emphasis added.) The portion “digital data bus” had previously been construed to mean “conductor or group of conductors which convey digital data.” In support of the modification request, Respondents argued that the limitation excluded the redesigned wireless openers, relying on intrinsic evidence, extrinsic evidence, CGI’s statements in the IPR, and the CIT’s ruling.

CALJ Bullock agreed with Respondents that CGI’s positions taken during the IPR operated as a disavowal of wireless garage door openers from the scope of the claims. Specifically, CGI contended in the IPR that Respondents’ prior art did not disclose the disputed limitation because it “need not include a physical connection at all and may consist of radio frequencies.” (Internal quotations omitted.) CALJ Bullock found that CGI’s argument was a representation that the claims required a “physical connection between the microcontroller of the ‘wall console’ and the microcontroller of the ‘motor drive unit.’” Accordingly, CGI effectively put the public on notice that its claims required a physical connection—a wire—between components.

As CGI’s IPR arguments amounted to a disavowal of wireless garage door openers from its claim scope, CALJ bullock did not reach the issues of intrinsic evidence, or extrinsic evidence, or judicial estoppel arising from the CIT proceeding.

Modification: CGI argued that Respondents’ noninfringement position, i.e. that the accused products lack the physical connection between the keypad and head unit required by the patent, had been rejected during the proceeding on violation and that determination was binding in the modification proceeding. CALJ Bullock found, however, that CGI’s remarks in the IPR proceeding “materially changed” the intrinsic record for the disputed claim limitation and justified revisiting its construction.

Judge Lord Grants Partial Summary Judgment of Failure to Satisfy the Technical Prong of the Domestic Industry Requirement

In the Matter of CERTAIN SOLID STATE STORAGE DRIVES, STACKED ELECTRONICS COMPONENTS, AND PRODUCTS CONTAINING SAME, Inv. No. 337-TA-1097

Before: Judge Lord

Practice Tips and Insights:

When responding to indefiniteness objections during prosecution of patents, use open-ended descriptions of the limitation rather than defining the term in question. Courts and other tribunalsfaced with definitional language in the specification, such as quotation marks and/or “is,” are likely to find that the patentee acted as her own lexicographer.

Holding and Status:

Judge Lord held that complainant had failed to show a genuine dispute that its E-Disk Altima product fails to practice any claim of the ’243 patent but had shown a genuine dispute regarding whether that product practices the ’103 patent. Judge Lord’s summary determination is subject to review by the Commission.

Case Background:

Complainant claimed a domestic industry based on its investments with respect to its

E-Disk Altima product and that the E-Disk Altima practices certain claims of asserted U.S. Patent Nos. 7,826,243 ("the '243 patent"), 8,093,103 ("the '103 patent"), and 6,529,416 ("the '416 patent"). Respondents moved for summary determination that complainant could not satisfy the technical prong of the domestic industry under their proposed construction of “passive port,” which they had previously presented at the Markman hearing held by Judge Lord. Respondents filed their motion for summary determination before Judge Lord had issued any order construing the claim term at issue.

Notable Disputed Issues and Related Points of Law:

Complainant Bound By Patent’s Definition of “Passive Port” in Claim Construction Dispute:

During the prosecution of the ’243 patent, the examiner rejected the pending claims as indefinite. In response, the applicant amended the specification to recite: “A connection between a passive ball on one surface of a SDRAM module and a passive pad on another surface of the same SDRAM module, such as the X1 passive ball and X1 passive pad connection in Figure 19, is named ‘passive port,’ such as passive ports 1909 illustrated in Figure 19.” The amendment to the specification further states: “Thus, ‘a connection between a passive ball on one surface of a SDRAM module and a passive pad on another surface of the same SDRAM module’ is a ‘passive port.’” That same amendment was made to the ’103 patent specification as well.

Judge Lord held that the language “is named ‘passive port’” indicated an intent to define that term as stated in the specification, particularly when combined with applicant’s statement in the amendment that patentees can be their own lexicographers. Accordingly, Judge Lord held that the patentee had provided an explicit definition used the language from the specification in defining the claim term “passive port.” In so holding, Judge Lord noted, but disagreed complainant’s arguments that such a construction would exclude certain embodiments and violate the doctrine of claim differentiation. First, Judge Lord noted that the embodiments excluded were not described as including “passive ports.” Second, she found that the dependent claim in question added more limitations than those included in the definition of “passive port” and that therefore the doctrine of claim differentiation did not apply.

Complainant Could Not Satisfy Technical Prong of Domestic Industry Requirement for at Least One of Two Patents Based on the Claim Construction of “Passive Port”

Based upon the definition of “passive port,” Judge Lord found that the ’103 patent domestic industry products did not meet that limitation. Specifically, Judge Lord reasoned that none of the components that could constitute a SDRAM module had both a passive ball on one surface and a passive pad on another surface, and therefore granted the motion for the ’103 patent. While complainant pointed to one component with such a configuration in its opposition to the motion for summary determination, Judge Lord found that it could not constitute the claimed SDRAM “memory module” having a “passive port” because complainant had already identified that module as the separately required “controller module” and the claim required both a controller module and memory module.

Regarding the ’243 patent, however, Judge Lord found that genuine issues of material fact remained regarding whether the complainant’s ’243 domestic industry product practiced that patent. Specifically, she found that because the ’243 claims did not include any requirement regarding ‘memory modules’ or ‘controller modules’ and that the claimed SDRAM module could be either a memory or controller module. Accordingly, Judge Lord found that triable issues remained as to whether Complainant’s product practiced the ’243 patent.

Motion for Judicial Notice Requesting Application of Doctrine of Estoppel Found Frivolous and Objectively Baseless and Warranting an Award of Sanctions Against Filer

In the Matter of CERTAIN INFOTAINMENT SYSTEMS, COMPONENTS THEREOF, AND AUTOMOBILES CONTAINING THE SAME, Inv. No. 337-TA-1119, Order No. 33 (May 23, 2019)

Before: ALJ Dee Lord

Practice Tips and Insights:

Motion for judicial notice seeking application of collateral estoppel to the facts and rulings made in a previous investigation is improper because collateral estoppel is not a fact and indisputable. Had Respondents made a diligent inquiry into the law of judicial notice, Respondents would have known that a motion for judicial notice in the manner they sought was fundamentally wrong and sanctions could have been avoided.

Holding and Status:

ALJ Lord awarded sanctions against Respondents’ counsel for violation of Commission Rule 210.4(c)(2) in the amount of costs incurred by Complainant Broadcom Corporation (“Broadcom”) in opposing Respondents’ motion for judicial notice and responding to Order No. 32.

Case Background:

ALJ Lord denied certain Respondents’ motion for judicial notice of facts established in Inv. No. 337-TA-1047 and ordered Respondents to show cause why they should not be sanctioned for violation of Commission Rule 210.4(c)(2). Respondents’ motion for judicial notice requested that collateral estoppel be applied to preclude Broadcom from “re-litigating” certain issues based on the findings from the 1047 Investigation.  The 1047 Investigation invalidated the remaining claims of the ’844 Patent.

ALJ Lord noted her reasoning set forth in Order No. 32 stating that “there is no legal support for the argument that collateral estoppel may be applied simply by taking judicial notice of a prior decision.” Order No. 33, at 3. “Respondents could have raised collateral estoppel in a motion for summary determination that the 1047 decision invalidates the remaining claims under the ’844 patent.” Id. at 10. It was fundamentally wrong for Respondents to argue for the application of collateral estoppel via judicial notice because those facts were established by the Commission in the 1047 Investigation and needed no request for judicial notice. See fn. 4, at 4 (“Commission decisions must be ‘noticed’ by administrative law judges in section 337 investigations even without a request.”) (citation omitted). Additionally, ALJ Lord found that Respondents were essentially seeking an advisory opinion “of uncertain breadth without establishing the legal or factual predicates for obtaining such relief.” Id. at 6.

Related Points of Law:

A Request for Judicial Notice is Not a Proper Vehicle for Legal Argument. ALJ Lord made this point clear in her order:

If all that Respondents were seeking was notice of the facts and legal rulings in the 1047 investigation, they would not have needed to file their motion. Respondents, however, were seeking more.They sought application of the legal doctrine of collateral estoppel to the facts and rulings made in the 1047 investigation. But collateral estoppel is not a fact. It is not indisputable. Collateral estoppel requires the application of legal reasoning to a set of facts.  It is an issue to be adjudicated, not one that can be judicially noticed.

Id. at 4 (internal citation omitted).

Sanctions May Be Warranted When There Is “Real” Prejudice to the Non-Moving Party. ALJ Lord awarded sanctions against Respondents because Broadcom was required to prepare three responsive briefs all due on the same day the parties exchanged exhibits and witness statements for their cases in chief as a result of Respondents waiting until the deadline to file their motion for judicial notice, and Complainant wasted litigation resources in responding to Respondents’ improper motion.

Motion in Limine to Exclude Allegedly Untimely Claim Constructions Denied Where Movant Did Not Also Seek to Exclude Underlying Non-Infringement Arguments as Untimely

In the Matter of CERTAIN INFOTAINMENT SYSTEMS, COMPONENTS THEREOF, AND AUTOMOBILES CONTAINING THE SAME, Inv. No. 337-TA-1119, Order No. 43 (May 30, 2019)

Before ALJ Dee Lord

Practice Tips and Insights:

When moving to exclude untimely proposed claim constructions, practitioners should also consider moving to exclude the underlying non-infringement arguments as untimely. Claim constructions and non-infringement arguments oftentimes, if not always, go hand-in-hand because each are part of the infringement analysis. Additionally, as investigations proceed past Markman proceedings, it is not unexpected that claim construction disputes arise as the parties gain a better understanding of the products at issue and the opposing party’s application of claim language. In other words, Markman deadlines do not necessarily preclude a party from raising additional terms that need to be construed as the investigation progresses.

Holding and Status:

ALJ Lord denied Broadcom’s motion in limine to exclude untimely proposed claim constructions. To avoid any potential prejudice against Broadcom, ALJ Lord allowed Broadcom to propose its own constructions for the newly identified terms and these constructions will be disclosed at the pre-hearing conference.

Case Background:

Broadcom filed its motion in limine to exclude Respondents’ proposed constructions for three terms identified after the Markman deadlines and first disclosed in Respondents’ pre-hearing briefs. These three terms relate to non-infringement arguments. Broadcom did not seek to also exclude the underlying non-infringement arguments as untimely. ALJ Lord reasoned that this non-infringement issue had not been adequately briefed by the parties because the pre-hearing briefs were filed after the deadline for motions in limine. Accordingly, ALJ Lord recommended that the parties address this issue in their post-hearing briefs

ALJ Bars Testimony of Rebuttal Expert Witness Statement Responding to New Testimony in Witness Statement

In the Matter of CERTAIN INFOTAINMENT SYSTEMS, COMPONENTS THEREOF, AND AUTOMOBILES CONTAINING THE SAME, Inv. No. 337-TA-1119, Order (May 29, 2019)

Before: ALJ Dee Lord

Practice Tips and Insights:

Any new opinions of an opposing expert in a report or deposition must be challenged directly by a motion to exclude; rebuttal opinions are insufficient to challenge new opinions and will be barred.

Holding and Status:

The ALJ granted Complainant Broadcom’s motion in limine and excluded certain testimony in Respondents’ expert’s witness statement.

Case Background:

Complainant Broadcom asserted several patents against Respondents regarding certain infotainment systems, component thereof, and automobiles, including U.S. Patent No. 7,437,583 ("the ‘583 patent").

Notable Disputed Issues and Related Points of Law:

Broadcom argued that Respondents’ expert’s rebuttal witness statement included a previously undisclosed noninfringement argument regarding the ‘583 patent. Respondents countered that the testimony at issue could not have been disclosed earlier because it responded to new infringement theories in Broadcom’s expert’s witness statement.  Noting its authority under Ground Rule 10.5.6 to limit expert testimony, the ALJ held that under Certain Recombinant Factor VIII Products, Inv. No. 337-TA-956, Order No. 33 at 3 (Mar. 9, 2016), Ground Rule 10.5.6 does not allow for supplementation of expert testimony solely to rebut opposing experts. The court found that even assuming that the testimony at issue was disclosed for the first time in Broadcom’s expert witness statement, the proper procedure would have been for Respondents to move to exclude that testimony.

ALJ Denies Third Party’s Motion to Quash a Subpoena

In the Matter of CERTAIN BONE CEMENTS, COMPONENTS THEREOF AND PRODUCTS CONTAINING THE SAME, Inv. No. 337-TA-1153, Order No. 14 (May 30, 2019)

Before: ALJ Elliot

Practice Tips and Insights:

Third party subpoenas tailored to issues relevant to the receiving party are likely to lead to discovery of that third party. Third parties seeking to quash subpoenas on the grounds that the requests are duplicative of information already in the litigating parties’ possession should provide concrete evidence to establish that there is truly overlap.

Holding and Status:

A subpoena third party moved to quash a subpoena on the grounds that the information sought was irrelevant, that it was unduly burdensome, and that the information sought was duplicative of evidence already in the litigating parties’ possession. The ALJ disagreed and denied the motion to quash.

Notable Disputed Issues and Related Points of Law:

Motion to Quash: The ALJ considered all three of the third parties’ disputes: (1) relevance, (2) burden, and (3) duplicity. For all three the ALJ found the third parties’ arguments unpersuasive. With respect to relevance, the ALJ noted that the allegations in the complaint particularly related to the third party and the subpoena was tailored to those issues. For burden, the ALJ understood the third party to be concerned about confidentiality provisions. On this point, the ALJ noted that the third party was adequately protected by the protective order. Lastly, the ALJ found the arguments related to duplicity to be speculative and, in any event, found that the subpoena was broad enough to cover evidence for which there was no plausible argument that it was already possessed by a litigating party.

Organisms Such as Bacteria May Be Protected by Trade Secrets Law

In the Matter of CERTAIN BOTULINUM TOXIN PRODUCTS, PROCESSES FOR MANUFACTURING OR RELATING TO SAME AND CERTAIN PRODUCTS CONTAINING SAME, Inv. No. 337-TA-1145, Order No. 7 (May 7, 2019)

Before: ALJ Shaw

Practice Tips and Insights:

Companies developing genetically modified organisms (GMOs) should be aware that organisms themselves may be protectable as trade secrets, provided that the other requirements of trade secret law are met. These considerations should be kept in mind when sharing samples of the GMOs.

The ITC’s determination of whether a GMO has been kept secret will look to the similarity between shared versions of that GMO and the GMO over which trade secret protection is claimed. Companies may wish to consider sharing only partially modified version of their GMOs, in order to maintain trade secret protection over the completely modified version of the GMO.

Holding and Status:

Respondent’s motion for summary determination was denied. Respondent argued (1) that theft of a bacterium could not constitute trade secret misappropriation and (2) that Complainant’s “Hall-A Hyper Strain” bacterium could not be considered secret because Complainant had shared the strain “among untold numbers of private, public and academic institutions.” Slip Op. at 2. The ALJ, citing Pioneer Hi-Bred Int’l v. Holden Foundation Seeds, 35 F.3d 1226 (8th Cir. 1994), held that tangible objects, including genetically engineered organisms, could be protected as trade secrets. Additionally, the ALJ held that the motion raised issues of material fact, because whether secrecy over the “subculture” of Hall-A Hyper Strain at issue could be protected as a trade secret dependend on how similar it was to versions of the strain that had been shared with third parties. The investigation is ongoing.

Case Background:

Complainants Medytox Inc.; Allergan plc; and Allergan, Inc. allege that respondent Daewoong Pharmaceuticals Co., Ltd., misappropriated their trade secrets by stealing a genetically modified bacterium.

Notable Disputed Issues and Related Points of Law:

Trade Secrets: Tangible things, including organisms and biological materials, may be protectable as trade secrets.

Trade Secrets (secrecy): How to determine whether a GMO has been kept sufficiently secret to be protected as a trade secret appears to be an unsettled area of law, but likely involves a fact-sensitive inquiry.

“Tsunami” of Identical Imported Products Justified a General Exclusion Order

In the Matter of CERTAIN LIGHTING DEVICES AND COMPONENTS THEREOF, Inv. No. 337-TA-1107, Initial Determination (May 16, 2019)

Before: ALJ McNamara

Practice Tips and Insights:

Evidence of Widespread, Expanding Internet Sales of Identical or Nearly Identical Products Can Merit a General Exclusion Order. Intellectual property owners seeking to enforce their rights against a large number of foreign counterfeiters should document the number of potentially infringing products, the number of foreign companies selling those products, and the growth of those numbers over time to submit as evidence in an ITC enforcement proceeding.

Holding and Status:

Four defaulting respondents were found to be in violation of Section 337. Based on evidence showing numerous companies selling identical or nearly identical products on the internet, the ALJ recommended that the Commission issue a general exclusion order and that bond be set at 100 percent of the value of the accused products.

Case Background:

The 1107 Investigation is based on Complainant Fraen Corporation’s (“Fraen”) complaint alleging infringement of two related patents for lighting systems and lenses. Fraen named ten respondents in its complaint, alleging that they import infringing lighting products.

Fraen moved to terminate the investigation as to six of the ten respondents based on settlement agreements. The remaining four respondents, Guangzhou Chaiyi Light Co., Ltd., Guangzhou Xuanyi Lighting Co., Ltd., Guangzhou Flystar Lighting Technology Co., Ltd., and Wuxi Changsheng Special Lighting Apparatus Factory (collectively, “defaulting respondents”) did not respond to Fraen’s complaint and did not respond to the ALJ’s order to show cause why they should not be held in default.

Fraen moved for summary determination that the defaulting respondents violated Section 337 and requested that the ALJ recommend issuance of a general exclusion order and a 100 percent bond.  The ALJ found that Fraen offered sufficient evidence of importation, infringement, and domestic industry and granted Fraen’s motion and recommended the requested relief.

Notable Issues and Related Points of Law:

General Exclusion Order: A general exclusion order was warranted because the evidence Fraen submitted with its motion for summary determination established (1) a pattern of violation, (2) the difficulty of identifying the source of infringing products, and (3) the necessity of a general exclusion order to prevent circumvention.

To show the pattern of violation, Fraen submitted an Alibaba.com search identifying 1,635 lighting products similar to Fraen’s domestic industry products. Fraen submitted additional Alibaba.com information from six months later identifying 17 companies selling products identical or virtually identical to the accused products. Those 17 companies had been on Alibaba.com for less than one year. Fraen also showed that over 100 companies overall were selling similar lighting products on Alibaba.com, many of which were located near Guangzhou, China.

With respect to the difficulty of identifying the sources of infringement, Fraen argued that it would be financially impossible to pay for a sample of all potentially infringing products and conduct an infringement analysis for each. Fraen’s expert analyzed three products in particular and opined that they infringed, and Fraen’s evidence showed that those products were offered for sale by over 100 Chinese companies.

The ALJ also agreed with Fraen that a general exclusion order would be necessary to prevent circumvention of a remedy because of the “tsunami” of “essentially unknown and often untraceable Chinese companies.” Fraen supported its contention with internet searches on sites like Alibaba.com and Amazon.com spread out over time showing that the number of identical products and the number of companies selling those products were growing.

Ultimately, the ALJ found that Fraen’s met the statutory criteria with ample evidence for a general exclusion order.

Bonding: Bond is ordinarily set at an average price differential between the Complainant's product and the infringing products or at a reasonable royalty. As the defaulting respondents were unavailable to participate in discovery as to pricing of the accused products and a large quantity of infringing lighting products were sold at highly variable prices, the ALJ recommended that the bond be set at 100 percent of the entered value for all infringing goods during the Presidential review period.

ID Finds Violation and Recommends Limited Exclusion Order

In the Matter of CERTAIN ELECTRICAL CONNECTORS, COMPONENTS THEREOF, ANDPRODUCTS CONTAINING THE SAME, Inv. No. 337-TA-1043, Initial Determination (April 12, 2019)

Before: ALJ Bullock

Practice Tips and Insights: Failing to allege specific knowledge that accused products were sold for importation by entities not directly involved in importation can result in no jurisdiction over those respondents. Corroborating evidence establishing the date of prior art sales is essential for successful arguments. Respondents should be mindful that witness testimony unsupported by actual sales documents is likely insufficient.

Holding and Status: The asserted patent was found to be infringed. There was a violation of the asserted patent by three of the respondents (Respondents Robert Bosch LLC., Robert Bosch, Sistemas Automatrices, S.A. de C.V., and Foxconn Interconnect Technology, Ltd.), but not by the remaining three respondents because complainants failed to establish importation as to those entities.

Case Background: The 337 Investigation is based on alleged infringement of one patent related to a tine plate, mounted on an electrical connector to line up the legs of contacts. The named respondents asserted standard defenses of non-infringement, invalidity, and no domestic industry.

Notable Disputed Issues and Related Points of Law:

Importation and Jurisdiction: Respondents argued that the ITC lacked jurisdiction over the accused products in their entirety because “undisputed evidence proves that the accused product is no longer imported, sold for importation, or sold after importation.” Judge Bullock rejected this argument, asserting that a “complainant need only prove importation of a single accused product to satisfy the importation element.” (citing Certain Purple Protective Gloves, Inv. No. 337-TA-500, Order No. 17 at 5 (Sept. 23, 2004) (unreviewed initial determination)).

There were also importation arguments with respect to certain respondents who allegedly did not have sufficient knowledge of importation. These arguments were successful. Judge Bullock found that the complainant failed to meet its burden in showing that a parent company had involvement or knowledge in the importation of the accused products. Additionally, ALJ Bullock found that complainant failed to meet its burden to show that two other associated respondents had specific knowledge regarding importation of the accused products to the US. Thus, the importation requirement was not satisfied for three respondents.

Prior Art Date Proof Standard: Respondents attempts to establish prior art based on two prior products highlights the importance of discovering and presenting adequate evidence to show the actual date of prior art sales.

First, respondents argued that a Tyco Tine Plate found within the Tyco Docking Station constitutes prior art. Respondents were able to prove the date of the prior art through concrete sales evidence including sales records from Dell showing a certain laptop was purchased and shipped within the US in 2003 and date stamps on the laptop and connector components showing dates from early 2003, Thus, ALJ Bullock found respondents established that the Tyco Docking Station Connection was sold in the US as early as March 2003 and was prior art. Although it was found to be prior art, Judge Bullock found that it was not invalidating prior art.

On the other hand, where respondents attempted to establish a prior sales date for a Tyco 121 Way Connector using only a technical drawing and testimony of the employee of a named respondent, without any documentary sales evidence, applying a “rule of reason analysis,” ALJ Bullock found that respondents had failed to meet their burden that the Tyco 121 Way Connector was prior art.

Infringement & Tech Prong: Respondents put forth numerous arguments regarding non-infringement and claim interpretation. However, ALJ Bullock agreed with complainant on each element, and thus, found the complainant met its burden in showing infringement. Respondents put forth several similar arguments related to the technical prong of the domestic industry, but the ALJ ultimately found that complainants’ product practiced the asserted patent.

Anticipation & Obviousness: Respondents argued that the asserted patent were invalid based on several prior patents, including Sasame ‘662, Chen ‘076 and Johhnescu ‘732. Judge Bullock found that each prior art patent failed to teach at least one element of the asserted claims, thus neither anticipation nor obviousness were viable.  Judge Bullock took special note that Chen ’076 was considered during prosecution.

Economic Prong: Complainant argued that expenditures related to parts purportedly integral to the domestic industry product should be considered in the domestic industry analysis. ALJ Bullock disagreed that the associated parts were integral, finding that the relevant domestic industry for a 337 case extends only to articles which come within the claims on the patents relied on. There was also a dispute over whether tooling equipment expenditures could be counted as part of the domestic industry. On this issue, the ALJ sided with the complainants. Although the purportedly integral components were not counted towards the domestic industry expenditures, the ALJ still found the economic prong was satisfied.

Remedy & Bond: Respondents argued that because they ceased manufacturing or importing the accused products an exclusion order was not necessary. ALJ Bullock found that ceasing importation does not moot the need for a remedy and recommended the issuance limited exclusion order to products that infringe the asserted patent. However, ALJ Bullock agreed with respondents that no bond be set as the complainant failed to calculate a price differential or a reasonable royalty.

Ruling on Cross SD Motions Clarifies When There Is Sale After Importation

In the Matter of CERTAIN DIGITAL VIDEO RECEIVERS AND RELATED HARDWARE AND SOFTWARE COMPONENTS, Inv. No. 337-TA-1103, Order No. 47 (June 3, 2019)

Before: ALJ McNamara

Practice Tips and Insights:

The forthcoming opinion from the Federal Circuit related to whether or not Comcast is an “importer” will be closely watched. The Federal Circuits ruling affects the ALJ’s ruling in this order. Additionally, this holding is a reminder that simple importation is not the only means by which complainants can exercise jurisdiction over accused products—sale for importation and sale after importation are also included.

Holding and Status:

In the on-going disputes between Comcast and Rovi, the 1103 Investigation included multiple summary determination motions and a summary determination ruling related to whether or not Comcast is an importer and whether or not Comcast sells the accused products after importation. As to the first issues, Judge Shaw and the Commission both previously found Comcast to be an importer. Judge McNamara agreed, but did note that the issue is currently under Federal Circuit review. ALJs before her had not reached a conclusion on whether Comcast sells after importation, but ALJ McNamara determined Comcast does sell after importation in this order.

Notable Disputed Issues and Related Points of Law:

Importation:Judge McNamara reached the same conclusion as Judge Shaw and the Commission on the issue of importation: Comcast is an importer. Like the rulings before hers, Judge McNamara relied on the Supreme Court’s 1945 ruling inHooven & Allison Co. v. Evattto determine that Comcast is the “efficient cause of the importation” and, therefore, meets the legal definition of an importer. Notably, Judge McNamara also acknowledged that the legal doctrine of issue preclusion further supports her ruling. Nevertheless, she did state that the Federal Circuit is currently reviewing the issue and what the Federal Circuit holds will affect her ruling.

Sale after importation:The operative question for sale after importation was whether Comcast actually “sells” set-top boxes, considering that they are usually under a rental agreement. Judge McNamara analyzed specific facts related to instances where set-top boxes are retained by Comcast customers and never returned to Comcast despite the termination of the customer-service provider relationship.  In those instances, the ALJ found that additional fees are paid to Comcast and a sale is effectuated. To reach this conclusion, Judge McNamara laid out the legal standard for a sale. To the extent the facts did not give rise to a voluntary sale, Judge McNamara alternatively found that the facts at least gave rise to a forced sale governed by the law of conversion—which she also found fell within the purview of Section 337.

“In this case, whether called a voluntary sale or a forced sale through conversion, it is evident that once a subscriber pays the charge for the unreturned Comcast equipment, the equipment in the possession of the subscriber belongs to the subscriber and Comcast ceases all interactions with the subscriber.” Thus, she concluded that, for unreturned set-top boxes, Comcast is engaged in sale after importation.

The Preclusive Effect of Commission Trademark Rulings Remains Unclear

Swagway, LLC v. Int’l Trade Comm’n, No. 2018-1672, 2019 WL 2049148 (Fed. Cir. May 9, 2019) (on appeal from Inv. Nos. 337-TA-1007 and 337-TA-1021

Before: Federal Circuit (Dyk, Mayer, Clevenger)

Practice Tips and Insights:

There Is a Circuit Split as to Whether Commission Determinations on Trademark Issues Have Preclusive Effect in District Courts. While the Federal Circuit held that such determinations are not entitled to preclusive effect, other circuits have reached the opposite conclusion. Parties litigating trademark issues concurrently before the Commission and in district court should consider whether the district court is subject to binding precedent concerning the preclusive effect of Commission trademark determinations.

Lack of Actual Confusion, on Its Own, May Not Weigh Against Likelihood of Confusion. A litigant defending against a trademark infringement claim should support an absence of actual confusion with evidence of “long-term, concurrent use [of the trademarked products and the accused products] in the same channels of trade.”

Holding and Status:

The Federal Circuit affirmed the Commission’s determination that the accused products infringed the asserted trademarks. The Federal Circuit further held that the Commission’s decisions pertaining to trademark infringement or validity are not entitled to preclusive effect in the district courts.

Case Background:

Segway Inc., DEKA Products Limited Partnership and Ninebot (Tianjin) Technology Co. Ltd. (collectively, “Segway”) initiated the 1007 and 1021 Investigations alleging infringement of six patents and two registered trademarks. At issue on appeal were the two trademarks Segway held for stylized and non-stylized versions of the “Segway” mark which covered “motorized, self-propelled, wheeled personal mobility de-vices, namely, wheelchairs, scooters, utility carts, and chariots.”

In its complaints, Segway alleged that self-balancing hoverboards marketed under the names “Swagway” and “Swagtron” infringed its marks. Following institution and consolidation of the investigations, Swagway moved for a partial termination as to the trademark infringement allegations on the basis of a consent order stipulation.  Swagway’s proposed consent order stipulated that it would not sell or import hoverboards bearing the “Swagway” designation.

ALJ Shaw subsequently issued an Initial Determination finding that Swagway’s use of the “Swagway” designation infringed the asserted marks, but its use of the “Swagtron” designation did not. In light of the Initial Determination, ALJ Shaw denied Swagway’s motion for partial termination, along with other pending motions not yet decided. The Commission affirmed the likelihood of confusion and trademark infringement determinations and declined to review the denial of Swagway’s consent order motion.

Notable Disputed Issues and Related Points of Law:

Likelihood of Confusion/Actual Confusion: ALJ Shaw’s determination of a likelihood of confusion was based on an analysis of six factors: (1) evidence of actual consumer confusion; (2) the degree of similarity in appearance and pronunciation between the marks; (3) the intent of the actor in adopting the designation; (4) the relation in use and manner of marketing between the products bearing the mark or designation; (5) the degree of care exercised by consumers of the marked or designated products; and (6) the strength of the mark. As to the actual confusion factor, ALJ Shaw found “overwhelming evidence” of actual confusion between the “Swagway” designation and the “Segway” marks.

The Commission modified the Initial Determination as to actual confusion, finding that evidence of actual confusion “d[id] not weigh in favor of likelihood of confusion,” because the incidents of actual confusion were relatively few compared to the overall volume of sales bearing the “Swagway” designation.  The Commission nonetheless found that the factors collectively weighed in favor of a likelihood of confusion.

On appeal, Swagway contended that the Commission weighed the absence of actual confusion incorrectly and that the absence of actual confusion was “especially probative” because the accused products and the marked products were sold concurrently over a substantial period of time. But the Federal Circuit rejected this argument, noting that Swagway made no showing that it had presented any evidence warranting a finding of “long-term, concurrent use in the same channels of trade.” Without such evidence, the Federal Circuit concluded that Swagway “failed to establish that the absence of actual confusion evidence should even weigh against, let alone strongly against, a likelihood-of-confusion finding.”

Preclusive Effect: Swagway also argued that the Commission erred procedurally by failing to consider its consent order motion. While both the proposed consent order and the Commission’s exclusion order would have essentially the same practical effect—precluding importation or sale of hoverboards bearing the “Swagway” designation—Swagway argued that the Commission’s order would have preclusive effect over a co-pending case in the United States District Court for the District of Delaware, whereas the consent order would not.  The Federal Circuit held that “the Commission’s trademark decisions, like its patent decisions, do not have preclusive effect,” effectively mooting Swagway’s argument.

The Federal Circuit’s holding is in conflict with decisions of the Second Circuit and Fourth Circuit which have each held that ITC determinations as to trademark claims are entitled to preclusive effect.  See Union Mfg. Co. v. Han Baek Trading Co., 763 F.2d 42 (2d Cir. 1985); Baltimore Luggage Co. v. Samsonite Corp., 977 F.2d 571 (4th Cir. 1992).

Commission Will Not Institute if Allegations Intrude on The Jurisdiction of the FDA

Amarin Pharma, Inc. v. Int’l Trade Comm’n, No. 2017-2563, 2019 WL ____ (Fed. Cir. May 1, 2019) (on appeal from Inv. Nos. 337-TA-3247)

Before: Federal Circuit (Prost, Wallach, Hughes)

Practice Tips and Insights:

Although it is possible to state a claim under the Lanham Act at the ITC for products that are regulated by the FTC, practitioners will need to draft the Complaint carefully. The Complaint cannot appear to be asking the ITC to make what would amount to a “preemptive determination” on how the FDA would interpret its own regulations .  If the Complaint can base the claim on a false statement concerning an issue that the FDA has already ruled on or gave guidance on, your claim might survive.

Holding and Status:

The Federal Circuit affirmed the Commission’s determination not to institute the investigation in this case. The Federal Circuit held that Amarin failed to state a cognizable claim under § 337 because the claim required that Amarin prove violations of the FDC. Because the FDCA provides the United States with “nearly exclusive enforcement authority”, the Court found Amarin’s claims are precluded by the FDCA. The Federal Circuit also found that it had jurisdiction to review a Commission decision denying institution.

Case Background:

Amarin filed a complaint alleging violations under § 337 by certain companies who were allegedly falsely labeling and deceptively advertising their imported synthetically produced omega-3 products. The Complaint alleged that these products were being marketed as “dietary supplements” when the products are actually “new drugs” as defined in the Food, Drug, and Cosmetic Act (“FDCA”) that required approval but had not actually been approved for sale or use in the United States.

Amarin claimed that the importation and sale of the articles is an unfair act or unfair method of competition under § 337 because it violates § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Amarin also alleged that importation of the articles violates § 337 “based upon the standards set forth in the FDCA.”

After the complaint was filed but before institution, the FDA submitted a letter urging the Commission not to institute an investigation because, according to the FDA, the FDCA precludes any claim that would “require[] the Commission to directly apply, enforce, or interpret the FDCA.” The Commission subsequently issued its decision declining to institute the investigation, reasoning that Amarin’s allegations are precluded by the FDCA.

Amarin appealed and argued that the Commission had a mandatory duty to institute an investigation because 19 U.S.C. § 1337(b)(1) imposes a non-discretionary duty on the Commission to institute an investigation when presented with a complaint under oath. Based on the “shall” language of that section (“The Commission shall investigate any alleged violation of this section on complaint under oath or upon its initiative.”) Amarin argued that the ITC was required to institute. Amarin also argued that it had stated a cognizable claim and relied heavily on the POM Wonderful LLC v. Coca-Cola Co., 573 U.S. 102 (2014) which held that the FDCA does not categorically preclude a Lanham Act claim based on a product (e.g., a label) that is regulated by the FDCA.

The intervenors argued that the Federal Circuit did not have jurisdiction to review the decision not to institute which they asserted was not a final determination under § 1295(a)(6) because a “final determination” at the ITC is one made “as a result of an investigation.” In other words, because no investigation was instituted, there could be no final determination.

Notable Disputed Issues and Related Points of Law:

Jurisdiction:

On the jurisdictional question, the Federal Circuit found that it had jurisdiction to review the Commission’s decision not to institute. Relying on Amgen Inc. v. ITC, 902 F.2d 1532 (Fed. Cir. 1990), the Court found that the Commission’s decision not to institute was “intrinsically a final determination, i.e., a de-termination on the merits.”

Is the ITC’s institution decision discretionary?

On the issue of whether the ITC was required to institute, the Federal Circuit recognized that § 1337(b) specifically contemplates certain scenarios in which the Commission need not institute an investigation. For example, § 1337(b)(3) states that the Commission “may institute” under specified circumstances). The Court also recognized that the Commission Rules, such as Rule 210.10, also contemplate non-institution.  Relying on those rules and the decision in Syntex Agribusiness, Inc. v. ITC, 659 F.2d 1038 (CCPA 1981), the Court found that the Commission may decline to institute an investigation where a complaint fails to state a cognizable claim under § 337.

Can a Lanham Act Claim at the ITC be based on a product label that is regulated by the FDCA?

On the issue of whether the complaint stated a cognizable claim, the Federal Circuit held that Amarin failed to state a cognizable claim under § 337 because the claim required that Amarin prove violations of the FDC. Because the FDA had not taken the position that the articles at issue do, indeed, violate the FDCA, and because the FDCA provides the United States with “nearly exclusive enforcement authority”, such claims are precluded by the FDCA.

The Court recognized that POM Wonderful held that the FDCA does not categorically preclude a Lanham Act claim based on a product (e.g., a label) that is regulated by the FDCA, but held that POM Wonderful did not open the door to Lanham Act claims that are based on proving FDCA violations. The Court distinguished that case, reasoning that the allegations underlying the Lanham Act claim in POM Wonderful did not require proving a violation of the FDCA itself.

The Federal Circuit was careful to note, however, that its holding was “limited” and that Amarin’s claims are precluded at least until the FDA has provided guidance as to whether the products at issue are dietary supplements.

Appeal Becomes Moot In Part Because a Subject Patent Expired

Hyosung TNS, Inc. v. Int’l Trade Comm’n, No. 2017-2563, 2019 WL ____ (Fed. Cir. June 17, 2019) (on appeal from Inv. Nos. 337-TA-972

Before: Federal Circuit (Dyk, Clevenger, O’Malley)

Practice Tips and Insights:

The Federal Circuit will likely dismiss an appeal as moot if the patent at issue expires before the appeal is heard.  In cases where the patent at issue expires before appellate review, the Court has and will likely dismiss the appeal from the ITC decision as moot. This is true even if there is co-pending civil litigation that could possibly be impacted by a decision on appeal. The Court’s ruling on that issue here was based at least in part on the fact that the ITC’s determination of patent infringement and validity do not have claim or issue preclusive effect even if affirmed by the Federal Circuit.

Past substantial expenditures can be used to satisfy the economic prong. When trying to establish the economic prong of the domestic industry requirement, it’s okay to submit and rely on older research and development expenses if you can also submit substantial evidence tying those older “substantial investments” to ongoing qualifying and meaningful expenditures exploiting the patented technology and show that there is a sufficient nexus between the earlier investment in research and the continuing expenditures.

Holding and Status:

The Federal Circuit affirmed the Commission’s determination that the accused products infringed one of the asserted patents and found that the portion of the appeal related to the second patent was moot because the patent had since expired.

Case Background:

Hyosung and Diebold are both in the market of manufacturing and selling ATMs. Diebold filed a Complaint with the International Trade Commission claiming that Hyosung was importing ATMs that infringed Diebold’s’616 and ’631 patents.  The ITC concluded that Hyosung’s accused products infringed both the ’616 and ’631 patents; that the asserted claims were not shown to be invalid; and that the domestic industry requirement was met for both patents.  The ITC entered a limited exclusion order and cease and desist orders against Hyosung.

The issue on appeal regarding the ‘616 Patent was weather the Federal Circuit should even reach Hyosung’s arguments that the ITC erred in its claim construction and infringement analysis because the appeal became moot upon the expiration of the ’616 patent.

With regard to the non-expired patent, Hyosung made two main arguments.  First, Hyosung argued that the ITC applied an erroneous legal analysis for motivation to combine and that the ITC should have found the asserted claims obvious in view of the two references put forth by Hyosung, along with the knowledge of a POSITA. The second argument, related to the economic prong of the domestic industry requirement and Hyosung’s argument that the ITC erred by considering investments that occurred five years or more before a complaint was filed.

Notable Disputed Issues and Related Points of Law:

The Appeal Became Moot upon Expiration of the ‘616 Patent: The Federal Circuit recognized in its opinion that, because the ’616 patent had expired, ITC’s limited exclusionary order and cease and desist orders as to that patent have no further prospective effect. Slip Opinion at 6, citing Tessera, Inc. v. Int’l Trade Comm’n, 646 F.3d 1357, 1371 (Fed. Cir. 2011) (citing Tex. Instruments Inc. v. U.S. Int’l Trade Comm’n, 851 F.2d 342, 344 (Fed. Cir. 1988)).

The Court then went on to reject Diebold’s argument that possible collateral consequences of a decision on the merits prevented the case from becoming moot. Although the Court recognized that a case may remain alive based on collateral consequences, any potential consequences would not save the case from being rendered moot because “the ITC’s determination of patent infringement and validity do not have claim or issue preclusive effect even if affirmed by our court.” Slip Opinion at 8, citing Bio-Tech. Gen. Corp. v. Genentech, Inc., 80 F.3d 1553, 1563–64 (Fed. Cir. 1996); Tex. Instruments Inc. v. Cypress Semicon-ductor Corp., 90 F.3d 1558, 1568–69 (Fed. Cir. 1996); Tan-don Corp. v. U.S. Int’l Trade Comm’n, 831 F.2d 1017, 1019 (Fed. Cir. 1987).

Prior Expenditures Can Be Relied On:  The Federal Circuit also found no error in the ITC’s acceptance of some five-year old expenses used to support domestic industry. The Court recognized that the ITC has previously held that “[p]ast expenditures may be considered to support a domestic industry claim so long as those investments pertain to the complainant’s industry with respect to the articles protected by the asserted [intellectual property] rights and the complainant is continuing to make qualifying investments at the time the complaint is filed.” Certain Television Sets, Television Re-ceivers, Television Tuners, & Components Thereof, Inv. No. 337-TA-910, 2015 WL 6755093, at *36 (Oct. 30, 2015). The Federal Circuit further found that, “There is nothing in the statutory language that supports Hyosung’s bright line rule for rejecting research expenditures that are made more than five years earlier.” Slip Opinion at 14. Although the Federal Circuit recognized “a past investment may have such an attenuated connection to the continued existence of a domestic industry as to be irrelevant” there was no legal error in the ITC’s conclusion that a past investment may be used to support a finding of domestic industry where there is a connection to ongoing service and assembly expenses. “Here, there is substantial evidence supporting the ITC’s finding that Diebold’s earlier substantial investment in research and development relating to the ’631 patent was relevant based on the ongoing qualifying and meaningful expenditures exploiting that technology, and that there was a sufficient nexus between the earlier investment in research and the continuing expenditures.” Slip Opinion at 15.

There were no major rule changes or other meaningful administrative shakeups at the ITC in the second quarter.

The Quarterly Numbers

Instituted Investigations

The Merits by ID

Commission Review

Comparative Success Rates—current through previous quarter