Federal Circuit Issues Opinion on ITC Domestic Industry Requirements for NPE Licensing under 19 U.S.C. § 1337(a)(3)(C)

InterDigital Communications, LLC v. International Trade Commission, 2010-1093 (Fed. Cir. Jan. 10, 2013)

On January 10, 2013, the Federal Circuit denied Nokia’s request for en banc and panel rehearing on the issue of whether InterDigital’s patent licensing activities satisfied the domestic industry requirement of Section 337 of the Tariff Act of 1930, 19 U.S.C. §§ 1337.

Background

In Certain 3G Mobile Handsets and Components, USITC Inv. No. 337-TA-613, InterDigital filed a complaint against Nokia for infringement of three patents directed to wireless cellular telephone CDMA technology. InterDigital, a non-practicing entity, was granted a summary determination that its licensing activities satisfied the domestic industry requirement under 337(a)(3)(C). However, the ITC did not find a violation because it determined that the ’966 patent and the ’847 patent were not infringed. InterDigital filed an appeal of the Commission’s determination of no violation with the Federal Circuit. On appeal, Nokia raised the issue of domestic industry. The Federal Circuit reversed and remanded to the ITC, rejecting Nokia’s argument that InterDigital’s licensing activities failed to meet the domestic industry requirement. Nokia requested a panel rehearing and rehearing en banc. Both petitions were denied, but the three-judge panel issued an opinion as well as a dissent from Judge Newman.

Discussion

Nokia argued that Section 337(a)(3)(C) requires InterDigital to establish that its licensing is more closely tethered to “the articles protected by the patent” than InterDigital had shown.

Section 337 provides that:

(a)(3) ... an industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned--

(A) significant investment in plant and equipment;

(B) significant employment of labor or capital; or

(C) substantial investment in its exploitation, including engineering, research and development, or licensing.

19 U.S.C. §§  1337(a)(3). The Court construed Section 337(a)(3)(C) to be parallel to the requirements of Sections 337(a)(3)(A) and 337(a)(3)(B). The Court determined that, while licensing activities referred to in Section 337(a)(3)(C) must “exist with respect to articles protected by the patent,” nothing more stringent was required by the statute. Specifically, responding to a lengthy dissent from Judge Newman, the Court held that “it is not necessary that a party that has made a substantial investment in exploitation through either engineering, research and development, or licensing manufacture the product that is protected by the patent, and it is not necessary that any other domestic party manufacture the protected article. As long as the patent covers the article that is the subject of the exclusion proceeding, and as long as the party seeking relief can show that it has a sufficiently substantial investment in the exploitation of the intellectual property to satisfy the domestic industry requirement of the statute, that party is entitled to seek relief under section 337.” The Court confirmed that the articles protected by the patent need not be manufactured in the United States or produced by licensees. There must merely be a sufficiently substantial domestic licensing industry involving licensing of the patented technology in the United States.

Here, InterDigital’s investment in licensing activities met the substantiality requirement because InterDigital had invested approximately $7.6 million in salaries and benefits for employees engaged in licensing activities and had received almost $1 billion in revenues from portfolio licenses (including the patents-in-suit).

Potential Implications

Because this opinion makes it clear that licensing entities can satisfy the ITC’s domestic industry requirement without showing anything more than a substantial investment in licensing activities covering the articles subject to the ITC investigation, this opens the door to more non-practicing entities using the ITC as a forum to enforce their patent rights.

Respondents in recent cases brought by licensing entities have successfully challenged domestic industry based on the insubstantiality of the licensing entities’ investments in licensing. In other cases, respondents have challenged domestic industry on the basis that the licensing activities relied upon did not have a sufficient “nexus” to the asserted patents. This decision should have no impact on such challenges.