ITC 337 Quarterly Insider Q1 2019

Like many other governmental bodies, the International Trade Commission (ITC or Commission) had a slow start in 2019, due to the government shutdown; no new complaints, no motions, no hearings, no activity whatsoever. Indeed, during government shutdowns, non-essential ITC employees are legally prohibited from engaging in any work, including even checking email. Notably, before the 2018-19 government shutdown kicked off, neither the Commission nor many of the ALJs provided much specific guidance. Thus, during the shutdown, private litigants carried on with litigation and discovery activity as best they could.

Then, on January 28, the Commission re-opened for business. There were trials to reschedule and nearly all investigations needed new procedural schedules. Some of the congestion and confusion is still being sorted through, but, for the most part, business is back to normal.

Since opening, there have been a number of potential trends bubbling to the surface. For one, there has been an uptick in life sciences based complaints. Historically, we have not seen many life sciences companies taking advantage of the ITC. It is unclear whether that is changing, but it is certainly a potential trend  to watch.  Of the eleven new ITC complaints filed in Q1, four involved life sciences subject matter. That far exceeds historical averages—between 2013 and 2018, less than ten percent of the about 300 new complaints were in the life sciences space. It will be interesting to see whether this is a trend or a fad.

Additionally, there appears to be a growing ITC appeal for NPEs, particularly those with U.S.-based licensees. Judge McNamara recently confirmed in an Initial Determination (Order No. 13 in the 1025 Investigation) that non-practicing entities can rely on the domestic activities of their licensees to satisfy both prongs of the domestic industry requirement. The Commission decided not to review Judge McNamara’s ruling. It is not clear whether NPEs were newly enticed to the ITC by this ruling, but there has been a growing number of complaints brought by licensing entities. Indeed, this year we have already seen two new complaints filed by entities who are relying on their licensees to show a domestic industry. Like with life sciences, this is not a trend yet, but it is certainly an interesting development to watch.

100-day proceedings continue to be rare, but respondents appear to be increasingly enticed by the early disposition option. Of the new investigations filed in 2019, two have included requests for 100-day proceedings. In the 1146 Investigation the respondents argued that the complainant’s domestic investments fail to meet the bar. Respondents requested an early determination on the economic prong and the Commission granted it. The 1146 Investigation is set for an early evidentiary hearing on whether the complainants have satisfied the economic prong.  In the 1147 Investigation, the respondents requested a 100-day proceeding on patent invalidity and inequitable conduct. The Commission instituted the investigation without an early evidentiary hearing on the invalidity and unenforceability issues.

Public interest observers were anxious to see how the Commission would handle Judge Pender’s ID and RD in the 1065 Investigation (Qualcomm v. Apple). In his ID, Judge Pender found that Apple violated Section 337 by importing iPhones utilizing Intel processors that infringed one of Qualcomm’s asserted patent claims. Judge Pender also determined, however, that an exclusion order would violate the public interest because it would allegedly hinder technology development for 5G applications. Thus, Judge Pender recommended that no exclusion order should issue.

This was a fairly unique application of the public interest factors and many were interested in how the Commission would respond. The anticipation was short-lived, however. The Commission determined that the allegedly infringed claim was invalid and, therefore, there was no underlying violation. The Commission’s notice is public, but its supporting opinion is not. It is likely, however, that the Commissioners determined that the public interest analysis is now moot, but time will tell. Interestingly, on the morning of the Commission’s opinion overturning Apple’s purported violation in the 1065 case, Judge McNamara submitted a public notice announcing that she had separately found a violation by Apple and was recommending an exclusion order. That ID is not yet public and the Commission has not yet indicated whether it will review the ID. The interplay between the PTAB and the Commission continues to be interesting as well. At the end of March, in the 1058 Investigation, the Commission issued its public notice recommending an exclusion order based on infringement of multiple patents. As part of that notice, the Commission noted that it will be suspending the enforcement orders with respect to an asserted patent that was subject to a PTAB final determination of invalidity. The Commission has not laid out a bright line rule for suspending enforcement orders, but it has now twice suspended enforcement orders where final PTAB decisions only affect a portion of the enforcement order. It made a similar finding in the 939 Investigation. In that case, a PTAB decision invalidated a subset of the patent claims subject to an exclusion order and the Commission suspended the order with respect to the invalidated claims. On the other hand, in the 645 Investigation, where there was complete overlap between an exclusion order and PTAB final invalidity findings, the Commission did not suspend the enforcement order. Although the Commission laid out some distinguishing factors, the test, if any, is still not clear. The Commission’s opinion in the 1058 Investigation will not be public until next month and it will be interesting to see whether the Commission elaborates on the factors they are considering when determining whether to suspend enforcement orders.

Lastly, on April 1, there was an announcement of a new ALJ. David S. Johanson, Chairman of the ITC announced that Judge Cameron Elliot has been selected as the new AJL. Judge Elliot has a bachelor’s degree in physics and applied physics from Yale. He previously served as an ALJ with the U.S. Securities and Exchange Commission and the Social Security Administration and was formerly in private practice.

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

In the Matter of CERTAIN DENTAL CERAMICS, PRODUCTS THEREOF, AND METHODS OF MAKING SAME, Inv. No. 337-TA-1050, Commission Opinion (Feb. 11, 2019)

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

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 will find any method that is not addressed to have been abandoned. Finally, the Commission will 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 found no violation of Section 337 as to the ’894 Patent’s annealing claims.

Case Background:

The Complainant, Ivoclar, filed a complaint against GC Corporation of Tokyo, Japan and its US subsidiary, claiming GC violated Section 337 by importing certain dental ceramic products that allegedly infringed four Ivoclar patents. The claims related to two of the patents were withdrawn and the case proceeded with regard to the ‘836 and ‘894 patents. The claims of the ’894 patent were divided into “the ’894 annealing claims,” and “the ’894 flexure strength claims.” The ID found, inter alia, that Complainant failed to demonstrate infringement of the claims of the ’836 patent and that the’894 flexure strength claims are invalid as indefinite under 35 U.S.C. § 112. The ID further found that Complainant failed to demonstrate infringement and failed to meet the technical prong of the domestic industry requirement as to the ’894 annealing claims. The ID also found that some, but not all, of the ’894 annealing claims are invalid in view of certain prior art.

The Commission determined not to review the ID with respect to the ’836 patent and the ’894 flexure strength claims, thereby terminating the investigation as to those claims.  The Commission determined to review the ID’s findings as to the ’894 annealing claims and solicited further briefing from the parties. 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:

Proof Necessary to Show Infringement: The asserted claims required three heating steps: (1) a melting step between 1200-1600°C; (2) an annealing step between 300-600° C for between 15 minutes to 8 hours and (3) at least one heat treatment step between 400-1100° C.  The dispute over infringement stemmed from the fact that there is overlap in the temperature ranges for the annealing and heat treatment steps (i.e. 400-600° C). The ID found that the annealing step is a separate step from the heat treatment step. That construction was not challenged and the Commission thus found that Complainant waived any challenge to the construction.

In its attempt to prove infringement, Complainant relied on two charts that purported to demonstrate the heating parameters for the accused processes, one from 2015 and one from 2017.  The Commission’s notice of review sought briefing on whether the “methods” (plural) demonstrate the “annealing” step. In its briefing to the Commission, however, Complainant only addressed the 2017 process and, therefore, the Commission found Complainant had abandoned any infringement argument concerning the 2015 process.

With regard to the 2017 process, the Commission found Complainant’s evidence insufficient because it relied on the same step in the manufacturing process (the same temperature profile) to show both the annealing and heat treatment steps were practiced. The Commission affirmed the ID’s finding that Complainant’s reliance on the same single step to show the process practices both limitations failed to demonstrate infringement.  The Commission further found that Complainant’s expert’s testimony attributing a portion of the heat treatment to the annealing step and a portion to heat treatment step was conclusory and not supported by any additional testing modeling or text and treatise support.  Although the Commission was careful to point out that it “does not impose a requirement that an expert’s conclusion of infringement be corroborated, the expert’s conclusion based on “knowledge and experience” was not enough.

Complainant Bound By Patent’s Description of the Prior Art: The Commission also affirmed the ID’s finding that certain claims of the ‘894 patent were anticipated by the Barrett reference and, in particular, on the ’894 patent’s own characterization of Barrett which the ALJ found was an admission. The Commission found “the public notice function of a patent entitles the public to take as true statements in a patent’s disclosure, including characterizations of the prior art.”  The Commission stated, however, that Complainant “may have more appropriately relied on non-enablement as a potential basis for collateral attack upon that admission.” Although the Commission found that Complainant failed to demonstrate non-enablement, it indicated that a sufficient non-enablement showing may be sufficient to attack an admission in the patent’s specification.

Violation Based on One Asserted Patent, But Parent Domestic Retailer Not Involved In Importation

In the Matter of CERTAIN LED LIGHTING DEVICES, LED POWER SUPPLIES, AND COMPONENTS THEREOF, Inv. No. 337-TA-1081, Initial Determination (Dec. 19, 2018)

Before: ALJ Lord

Practice Tips and Insights:

A select number of Lowe’s entities were named respondents in this investigation—the parent and one subsidiary. The complaint did not name the Lowe’s subsidiary that sells most accused products in the U.S. As a result, there was no violation even for products that are imported and were found to infringe valid and asserted patents. Complainants should be cautious to name the right corporate entities in their complaints and to quickly amend their complaints if there appears to be a break in the importation chain. Do not take importation for granted.

Holding and Status:

Two of three asserted patents were found to be infringed. None of the three asserted patents were found invalid. There was a violation for one asserted patent, but not the other infringed patent because there was not a showing of importation by a named respondent. Both sides have submitted Petitions for Commission Review.

Case Background:

The 1081 Investigation is based on alleged patent infringement of three patents related to LED lighting devices.  The named respondents asserted standard defenses of non-infringement, invalidity, and no domestic industry.

Additionally, certain Lowe’s entities were named as respondents—Lowe’s Companies, Inc. (LCI) and LG Sourcing, Inc. (LGS). The Lowe’s entities admitted that certain accused products were imported by LGS. However, many accused products were sold by LCI’s other subsidiary, Lowe’s Home Centers (LHC), who was not a named respondent. LCI argued that it was not an importer and it did not “act in concert” with its subsidiaries and, therefore, the importation requirement was not met for any Lowe’s accused products not imported by LGS.

The importation requirement was effectively undisputed for the other named respondents, Feit and Satco.

Notable Disputed Issues and Related Point of Law:

Importation: For the Lowe’s entities, the parent company, LCI, was accused of “acting in concert” with an unnamed subsidiary to import and sell after importation certain accused products. The complainant relied on the Commission’s holding in the 849 Investigation, Certain Rubber Resins and Process for Manufacturing Same to argue that parent companies can be held in violation if they act in concert with importing and/or selling subsidiaries.  Additionally, the complainant argued that the nine factor test from Milgo Elec. Corp. v. United Bus. Commc’ns, Inc., 623 F.2d 645 (10th Cir. 1980) to argue that the U.S. subsidiary was a mere instrumentality of the parent LCI.

Judge Lord found that the complainant failed to meet its burden in showing that the parent acted in concert with the subsidiary or that the subsidiary was a mere instrumentality. Thus, ALJ Lord would not pierce the corporate veil and the importation requirement was not met for the parent company.

Obviousness (motivation to combine): Respondents put forth numerous obviousness combinations against all three asserted patents. For each, ALJ Lord found that the respondents failed to explain away incompatibilities between combined references. ALJ Lord also found that the respondents’ burden for motivation and a reasonable likelihood of success was not met.  As Judge Lord explained: “A general motivation in the lighting industry towards the use of LEDs is not sufficient to explain why a person of ordinary skill in the art would make the specific modifications” respondents were proposing. It is critical that obviousness arguments are supported by more than conclusory statements and motivations.

Domestic Industry (economic prong): A meaningful portion of the complainants’ domestic industry investment was based on a facility that was closing down after the date of complaint. Although post-filing activity is not usually material to the domestic industry inquiry, ALJ Lord found that the plant closing rendered the complainants’ post-filing expenditures and plans to be relevant to her determination. Nevertheless, complainants were able to satisfy the domestic industry requirement with another plant that was not closing.

Non-credible witness testimony: One of complainants’ experts admitted at trial that “he knowingly gave misleading testimony at his April deposition.” As a result, all of his testimony was afforded zero weight and credibility Additionally, other expert opinions that relied on his testimony were equally discredited.

Scope of exclusion order: The respondents argued that the exclusion order should be limited to accused products and accused products only. ALJ Lord was not persuaded by this argument and found that long-standing Commission precedent supports issuing exclusion orders that are commensurate with the scope of the notice of investigation. “Respondents have identified no aspect of section 337’s proscription against violating American intellectual property rights, or of the remedies that may be invoked under the statute, that impinges on any Constitutional protection. The Commission’s traditional remedies for violation comport with the letter of section 337 and the statutory purpose.

ALJ Lord Found That a Prototype of a Machine Incorporating the Features of an Asserted Patent Satisfies the Domestic Industry Even if it Was Not For Sale At The Time of the Complaint

In the Matter of Certain ROAD CONSTRUCTION MACHINES AND COMPONENTS AND COMPONENTS THEREOF, Inv. No. 337-TA-1088, Initial Determination (Feb. 14, 2019)

Before: ALJ Lord

Practice Tips and Insights:

Lack of availability of a product for sale at the time a complaint is filed may not alone be enough to attack the domestic industry requirements. Also, successful complainants seeking a bond during the presidential review must keep in mind that they bear the burden of establishing the appropriate bond amount and must develop the data necessary for such calculation, such as the difference in sales prices between the patented domestic product and the infringing product or evidence of reasonable royalty.

Holding:

ALJ Lord determined a violation of Section 337, in the importation, the sale for importation, and/or the sale within the United States after importation of certain road construction machines and components thereof with respect to one asserted claim.

Case Background:

The Commission instituted this investigation in response to a complaint filed by Caterpillar, Inc., alleging violations of section 337 by Wirtgen GmbH, et al., through infringement of certain claims of U.S. Patent No. 7,140,693 ("the ’693 patent"); U.S. Patent No. 9,045,871 ("the ’871 patent"); and U.S. Patent No. 7,641,419 ("the ’419 patent"). The '871 patent was terminated from the investigation after its asserted claims were found to be invalid under 35 U.S.C. § 101.  Order No. 18 (May 24, 2018). The ’419 patent was terminated after Caterpillar withdrew its allegations with respect to that patent. Order No. 26 (July 5, 2018). Thus, the hearing focused on the ’693 patent.

The technology at issue relates to road milling machines used to remove asphalt and concrete on roads prior to resurfacing efforts.  Provision of a textured surface using milling machines helps with the adherence of a new layer of pavement.

Notable Disputed Issues and Related Points of Law:

Domestic Industry: The record evidence established that the alleged domestic industry products were manufactured by Caterpillar’s affiliate in Italy. Design and development of the product occurred in Caterpillar's facilities at two sites in Minnesota, while software development for the product took place in Peoria, Illinois. Further, four prototype machines were shipped to U.S. customers. Caterpillar contended that customers’ use of the prototypes allowed it to validate its design. Some customers subsequently purchased machines based on the original design. Wirtgen argued, among other things, that Caterpillar could not satisfy the economic prong because the domestic industry product relied upon by Caterpillar did not qualify as an "article" under section 337(a)(3) because it was not sold or available for sale at the time the complaint was filed. Wirtgen thus argued that Caterpillar must therefore establish that it was "in the process of' establishing a domestic industry on the date the complaint was filed.  ALJ Lord disagreed, stating that under the statute, the "article" requirement applies to both an industry in existence and an industry in the process of being established. 19 U.S.C. § 1337(a)(2). Under the Commission’s recent precedent, the ALJ noted, in the context of an industry in the process of being established “the article requirement can be satisfied by an item that is not in the stream of commerce, and may not ever be placed in the stream of commerce.” Citing, Certain Non-Volatile Memory Devices and Prods. Containing the Same ("Non-Volatile Memory Devices"), Inv. No. 337-TA-1046, Comm'n Op. at 41. The ALJ stated that “Wirtgen has not explained why an article would have to be commercialized in order to demonstrate the existence of a domestic industry. In section 337(a)(2), there is only one instance of the word "articles" in reference to a domestic industry that "exists or is in the process of being established." Thus the ALJ rejected the notion that the term "articles protected by the patent" means one thing under the "in the process of being established" clause and something different under the "exists" clause of section 337(a)(2). ALJ Lord concluded that the prototype of an article for sale because it was “a complete machine incorporating the features of the patent and, at the time the complaint was filed, it was being tested by consumers in the real world.” The ALJ added that there is similarly no requirement that articles must be commercialized to satisfy the technical prong. The prototype machine here was not a "hypothetical device," and was in existence and in the market at the time the complaint was filed. To the extent that it was protected by the patent at issue, it satisfied both the economic and technical prong of the domestic industry requirement.

Bonding:

Under 19 U.S.C. 13370)(3), imported articles otherwise subject to remedial orders may continue to be imported under bond during the statutory period of Presidential review. But it remains the complainants’ burden to establish the need for a bond and its amount. Here, the ALJ rejected Caterpillar’s requested bond because it failed to carry its burden to support the requested bond.

Construction of Certain Limitations as “Means-Plus-Function” Doomed Alleged Infringement and Domestic Industry

In the Matter of CERTAIN PORTABLE GAMING CONSOLE SYSTEMS WITH ATTACHABLE HANDHELD CONTROLLERS AND COMPONENTS THEREOF, Inv. No. 337-TA-1111, Order No. 21, Initial Determination (Feb. 14, 2019)

Before: ALJ Shaw

Practice Tips and Insights:

Practitioners should be vigilant when nonce terms are used in claim limitations. Expert testimony is unlikely to outweigh the weight of intrinsic evidence when looking for a structural disclosure of a claimed function. 

Holding:

The ALJ granted the unopposed summary determination motion that there was no violation of Section 337. Under the ALJ’s claim construction, complainant agreed that there was no infringement and that certain claims were rendered invalid, and thus defeating domestic industry.

Case Background:

The Investigation was based upon Gamevice Inc.’s allegations of patent infringement by Nintendo. The two asserted patents generally relate to gaming consoles. As part of its Markman Order, the ALJ found the claim limitations “fastening mechanisms,” “retention member,” “fastening mechanism,” and “a pair of modules” to be means-plus-function terms under 35 U.S.C. 112 (f). Regarding “fastening mechanism” (singular and plural), the ALJ went on to conclude that one of the patents lacked the requisite structural disclosure in its specification to support the claimed function, while the other asserted patent disclosed “a soft draw latch” as the corresponding structure. As to the other two terms, complainant conceded that there would be no infringement given the specific corresponding structure under the ALJ’s claim construction.

Notable Disputed Issues and Related Points of Law:

Claim Construction: The Initial Determination turned entirely on claim construction, and specifically the ALJ’s conclusion that the relevant limitations were all mean-plus-function terms. Although the limitations at issue did not contain the presumptive “means” antecedent, the ALJ nevertheless found the terms were functional in nature. Quoting the Federal Circuit, the ALJ explained that “when making the assessment of whether the limitation in question is a means-plus-function term subject to the strictures of § 112, para. 6, [Federal Circuit] cases have emphasized that the essential inquiry is not merely the presence or absence of the word ‘means’ but whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure.”

Having determined that the limitations at issue were means-plus-function terms, the ALJ looked at the intrinsic evidence to identify any corresponding structure for the claimed functions. The ALJ noted that expert opinions on the issue must be “viewed with caution” as instructed by the Federal Circuit.

100-Day Proceeding Finds that Claims are Not Contractually Barred and Investigation Will Proceed

In the Matter of CERTAIN MOTORIZED VEHICLES AND COMPONENTS THEREOF, Inv. No. 337-TA-1132, Order No. 18, Initial Determination in 100-day Proceeding (Dec. 21, 2018)

Before: Chief Judge Bullock

Practice Tips and Insights:

100-day proceedings appear to be getting more traction at the Commission. Respondents should consider a targeted request to the Commission if there is a straight-forward case dispositive issue that can be adjudicated within a 100-day proceeding. In this case, the 100-day proceeding did not dispose of the case because, as Judge Bullock concluded the contract at issue was not ambiguous and the claims were not barred.

Holding and Status:

Asserted unfair competition claims are not contractually barred and investigation will proceed.  The Commission determined it will not review Judge Bullocks 100-day ID.  A new procedural schedule has been issued and the case is proceeding on a full track.

Case Background:

The Commission placed the 1132 Investigation into a 100-day proceeding for the limited purpose of determining “whether the complainant is contractually barred from enforcing its intellectual property against the named respondents.”

The 1132 Investigation stems from FCA’s complaint that Mahindra & Mahindra Ltd. (M&M) is importing automobiles with front grille designs that infringe FCA’s trade dress and trademarks. FCA and M&M are parties to a 2009 Agreement wherein FCA consented “to the use and incorporation of the grille design shown in Exhibit A.” Exhibit A to the 2009 Agreement shows a picture of one particular grille design. M&M argued that the 1132 Investigation was contractually impermissible based on this agreement.

Notable Disputed Issues and Related Points of Law:

Contract Interpretation: The accused automobiles include a grille design that is somewhat different than what was pictured in the contract Exhibit A because, according to the complaint????, the accused designs have “significant differences in (1) overall shape, (2) proportions, and (3) design details.” Nevertheless, M&M and the OUII Staff argued that the accused grille design was adapted or inspired from the grille shown in the 2009 Agreement and, therefore, covered by the agreement. Chief Judge Bullock disagreed.

Judge Bullock interpreted the 2009 Agreement under Michigan law, which provides that, if an agreement is clear, then it is interpreted according to its plain sense and meaning; but if it is ambiguous, testimony may be taken to explain ambiguities. Judge Bullock heard testimonial evidence that confirmed his understanding, but ruled that the agreement and pictures are not ambiguous. Judge Bullock also clarified that the agreement’s language—“the use and incorporation of the grille design shown in Exhibit A”—includes no hedge language that could be interpreted to expand the agreement to cover non-pictured grille designs, even if they were adapted or inspired from the illustrated grille.

There were no substantive CAFC decisions during Q1.

David S. Johanson, Chairman of the Commission, announced on April 1, 2019 that Judge Cameron Elliot would join the USITC as an Administrative Law Judge.

ALJ Elliot previously served as an ALJ with the U.S. Securities and Exchange Commission in Washington, DC, and the Social Security Administration in New York, NY, and Newark, NJ. Prior to those services, he was an attorney at Darby & Darby, a New York intellectual property specialty firm.

He has also served as a U.S. Attorney for the Eastern District of New York in Brooklyn, NY, and the Southern District of Florida in Miami. He began his legal career as a judicial law clerk for U.S. District Judge Edward Reed in Reno, NV.

ALJ Elliot enlisted in the U.S. Navy in 1986 as a seaman, entered the Naval Nuclear Propulsion Program after graduating from college, and served as an engineering officer on two submarines. He left active duty in 1992 and served in the Navy Reserve until 1993.

ALJ Elliot holds a juris doctor degree from Harvard Law School and a bachelor’s degree in physics and applied physics, magna cum laude, from Yale College.

The Quarterly Numbers

Below are statistics related to filings and rulings out of the ITC in the first quarter. Generally speaking, complaint filings were down more than they have been in any quarter for the last two-plus years.

Event	Amount
New Institutions	7 (1142-1148)
ALJ Initial Determinations	4 (1088, 1091, 1093, 1106)
Holdings of No Violation in ID	2 (1091, 1106)
Holdings of Violation in ID	2 (1088, 1093)
Commission Opinions (reviewing IDs)	2 (1058, 1065)
Holdings of No Violation by Commission	1 (1065)
Holdings of Violation by Commission	1 (1058)
Exclusion Orders	2 (1057, 1058)

 

 

 

 

 

 

 

 

Instituted Investigations

The Merits by ID

Commission Review

Comparative Success Rates—current through previous quarter