Goodwin Insights October 04, 2019

Most Impactful ALJ Decisions

Judge Lord Finds Violation Based on Three Asserted Patents; Respondents Failed to Prove Its Obviousness, Inventorship and Ownership Defenses

In the Matter of CERTAIN MICROFLUIDIC SYSTEMS AND COMPONENTS THEREOF AND PRODUCTS CONTAINING SAME, Inv. No. 337-TA-1100, Initial Determination (July 12, 2019)

Before: ALJ Lord

Practice Tips and Insights:

This case included a lot of arguments from both parties.  It is unclear whether it affected the outcome, but it is a reminder that the ALJs often caution against raising too many arguments so that there is sufficient trial time allotted to your strongest claims or defenses.

Holding and Status:

In her final initial determination, ALJ Lord found a violation of section 337 by reason of infringement of certain claims of three of the four asserted patents related to sample preparation methods in the analysis of biological materials.  The initial determination finds that Respondent failed to prove invalidity of the asserted claims and failed to prove its defenses related to improper inventorship and ownership of the asserted patents.

Case Background:

The 1100 Investigation is based on a complaint filed by 1OX Genomics, Inc. ("l0X") against Bio-Rad Laboratories, Inc. ("Bio-Rad") alleging infringement of certain claims of U.S. Patent No. 9,644,204 ("the '204 Patent"), U.S. Patent No. 9,689,024 ("the '024 Patent"), U.S. Patent No. 9,695,468 ("the '468 Patent"), and U.S. Patent No. 9,856,530 ("the '530 Patent"). The patents relate generally to sample preparation methods using microcapsules in the analysis of biological materials, such as sequencing nucleic acids.   The products at issue are microfluidic cartridges, droplet generation instruments, and assays used in single-cell sequencing.

Bio-Rad asserted standard defenses of non-infringement, invalidity, and no domestic industry.  It also asserted that one of its scientists was improperly omitted as a co-inventor on the asserted patents.  Bio-Rad also claimed ownership in the asserted patents because the inventions claimed in those patents "built off of the fundamental work” that the named inventors and others did when they were working together at BioRad and a predecessor company called Quanta/Life.

Notable Disputed Issues and Related Points of Law: 

Infringement and DOE:  

The Initial determination finds that 10X proved direct, induced and contributory infringement of several asserted claims of the 024 Patent, and the ‘468 Patent and direct and induced infringement of several asserted claims of the ‘530 Patent.  With regard to the ‘204 patent, the ALJ found that the accused products do not literally infringe the asserted claims because they do not have the claimed stimulus "selected from the group consisting of a change in pH, a change in ion concentration, reduction of disulfide bonds, and combinations thereof." The ALJ found that the recited stimuli form a "Markush group" and that the group is limited to (1) one of the recited stimuli or (2) a combination of the recited stimuli.  It does not encompass a combination of a recited stimulus and an unrecited stimulus. 

The ALJ also found that 10X was estopped from relying on DOE to satisfy this limitation due to some narrowing amendments made during prosecution.  The ALJ, citing Festo Corp. v. Shoketsu Kinzoku Kogyo Kabuskiki Co., Ltd., 344 F.3d 1359, 1369-70 (Fed. Cir. 2003), found that the applicants' narrowing amendment triggers the presumption that 1OX is estopped from relying on the DOE to show that accused products satisfy the stimulus limitation. She also rejected l0X’s attempt to rebut the presumption by arguing that the narrowing amendment was merely tangential to the alleged equivalent. 

Obviousness (motivation to combine):  Respondents put forth numerous obviousness combinations against all of the asserted patents.  For each, ALJ Lord also found that the respondents’ burden for motivation and a reasonable likelihood of success was not met.  For example, Judge Lord found that for certain combinations, Bio-Rad’s expert had offered only conclusory opinions regarding the motivations of one of ordinary skill in the art to combine the references and failed to cite any evidence indicating a need or desire to implement a particular microfluidic process in place of the one disclosed in the primary reference that was missing that claim element.  Accordingly, Bio-Rad failed to carry its burden to show obviousness.

Inventorship:  Two of the named inventors of the asserted patents were former employees of Respondent Bio-Rad and a predecessor company called Quanta/Life.  The two named inventors resigned from Bio-Rad in April 2012 and founded 10X three months later.  The first provisional application for the asserted patents was filed in August 2012.  Bio-Rad asserted that a third scientist at Bio-Rad, Dr. Nicholas Heredia, was improperly omitted as a co-inventor on the asserted patents.  Bio-Rad asserted that the named inventors built off of the fundamental solution that Dr. Heredia helped them come up with when they were working together. ALJ Lord noted that "'[t]he inventors as named in an issued patent are presumed to be correct" and that proof of joint inventorship requires clear and convincing evidence.  She then found that Bio-Rad (1) did not provide sufficient evidence to establish that Dr. Heredia collaborated with others to develop the technology in the asserted patents, (2) did not provide “clear and convincing evidence that Dr. Heredia's conception contributed at all, much less in a qualitative way, to the invention claimed in the asserted patents” and (3) did not show sufficient evidence of a significant contribution by Dr. Heredia.  The ALJ also found that “Dr. Heredia' s testimony at hearing had evolved significantly from the testimony he gave at his deposition” and that his “credibility suffers as a result.” 

Ownership: Bio-Rad also claimed ownership of each of the asserted patents based on the assertion that the idea embodied in the asserted patents was conceived by the named inventors during the period in which they were employed by Quanta/Life and Bio-Rad.  The ALJ found that this claim arises out of the named inventors employment contract which should be construed under state law (here, the law of California). Although lOX conceded that Bio-RAd owns many ideas conceived by the named inventors, it argued that it does not own the idea for the specific arrangement of elements claimed in the asserted patents and that Bio-Rad did not provide sufficient evidence to show that that idea was conceived during the period of employment.  ALJ Lord agreed, finding that the applicable employment contracts contained no provision governing future inventions that are based on or developed from work clone during employment. To the contrary, she found that the plain, unambiguous contract language pertains only to ideas actually conceived during the employment period.  Because Bio-Rad failed to present any direct evidence that the actual inventive idea embodied in the asserted patents was first conceived at Quanta/Life or Bio-Rad, as required by the contracts, ALJ Lord rejected its ownership defense.

Entering Into Overbroad Stipulations Streamlined Issues to Be Heard at the Evidentiary Hearing, but Lessened the Burden of Complainant in Having to Prove Infringement and Satisfaction of the Domestic Industry

In the Matter of CERTAIN BLOOD CHOLESTEROL TESTING STRIPS AND ASSOCIATED SYSTEMS CONTAINING THE SAME, Inv. No. 337-TA-1116, Initial Determination (June 4, 2019)

Before:  ALJ Cheney

Practice Tips and Insights:

The parties entered into two sets of stipulations.  For example, the parties stipulated that use of the accused products according to the instructions provided with them satisfied certain limitations of the claims and that any infringement determination would also govern for domestic industry purposes.  Given the ALJ’s heavy reliance on these stipulations in reaching his determination, it may be advisable to avoid stipulations with respect to infringement and domestic industry when those issues are challenged.  In this case, these stipulations were essentially tied to each other and ultimately made the complainant’s job easier—the complainant was not tasked with the burden of proving infringement as to certain claim elements.

Holding and Status:

The ALJ determined that a violation of Section 337 had occurred with respect to two of the asserted patents.  Both sides have submitted Petitions for Commission Review.  The Commission has determined to review the final ID in part: (1) whether respondent’s use of the accused products in the U.S. constitutes a violation of 19 U.S.C. 1337(a)(1)(B)(i); (2) the final ID’s construction of “reacting HDL…without precipitating said one or more non-selected analytes” in one of the asserted patents, as well as related findings on infringement, the domestic industry, and invalidity; and (3) the final ID’s finding that all of the asserted claims of one of the asserted patents are not shown to be invalid for a lack of enablement.  The Commission also requested briefing on issues related to infringement, claim construction, and enablement.  Both sides have submitted briefs in response to the Commission’s determination to review the final ID in part.

Case Background:

The 1116 Investigation is based on alleged patent infringement of three patents related to blood cholesterol testing strip systems.  During the investigation, the ALJ granted an unopposed motion by the complainant for summary determination that it has satisfied the economic prong of the domestic industry requirement.  The issues for the evidentiary hearing were streamlined:  the complainant filed several unopposed motions for termination of the investigation with respect to multiple claims and the parties entered into two sets of stipulations.

Notable Disputed Issues and Related Points of Law:

Level of ordinary skill in the art in construing claim terms:  The ALJ noted that although minor differences in the level of skill were proposed through the parties’ experts, there was no argument presented that the understanding of any claim term (the parties contended that eight claim terms required construction) turned on the level of skill of the artisan interpreting the term.  The ALJ found the dispute about the appropriate level skill moot. 

Noninfringement (flawed evidence):  Although some claim climitations were stipulated to as being infringing, others were challenged.  The respondent, through their expert, played a time-lapse video to show that the accused devices permit substantial migration of the fluid.  ALJ Cheney watched the video and did not observe substantial lateral migration of the sample fluid.  According to ALJ Cheney, the video showed flow of the fluid vertically downward in the test sack.  It is unclear why respondent played this time-lapse video if it clearly showed the absence of lateral migration of fluid.  Additionally, another flaw in respondent’s evidence was the testing involved atypical fluid sample sizes that the ALJ did not find probative of the question of whether a person following instructions for normal use of the accused product would infringe the claims.

Obviousness (motivation to combine):  The ALJ identified several problems with respondent’s motivation to combine argument.  First, respondent did not address the scope and content of a reference in the combination and instead, focused only on certain teachings.  The ALJ, citing to Federal Circuit precendent, noted that it was improper for respondent “to pick and choose from any one reference.”  Second, respondent did not explain why a skilled artisan would combine two of the reference in light of the fact that these references provided somewhat conflicting teachings.  Moreover, the ALJ noted that the “record contains no answer” as to the motivation to combine.

Validity (enablement):  Respondent argued that certain of the asserted claims are not enabled because the specification “offers no proof that separation actually occurs without precipitation, or guidance on how to achieve that result…”  The ALJ did not find respondent’s argument persuasive.  In reaching his determination that respondent had failed to prove by clear and convincing evidence that the claims are invalid for lack of enablement, the ALJ found more persuasive complainant’s lab testing to show no undue experimentation and took into consideration that the claimed invention has been implemented by both parties, which further suggests the claims are enabled.

In Action Against Defaulted or Non-Appearing Parties, GEOs and Cease-and-Desist Orders on Some, But Not All, Claims

In the Matter of CERTAIN EARPIECE DEVICES AND COMPONENTS THEREOF, Inv. No. 337-TA-1121, Initial Determination (Jun. 28, 2019)

Before: ALJ Shaw

Practice Tips and Insights:

After settling other claims, Complainant Bose Corporation (“Bose”) sought relief against eight defaulting or non-appearing parties in the form of General Exclusion Orders (“GEO”) and cease and desist orders.  The ALJ found that a GEO was appropriate as to five of the six asserted patents, and that cease-and-desist orders should issue against the five domestic respondents, but not against the three foreign respondents.  Complainants should consider seeking GEOs in cases involving multiple defaulting or non-appearing respondents.  However, complainants should not presume that the ITC will automatically grant requested relief (whether in the form of a GEO or more limited order) against a defaulted party—complainants must still offer “substantial, reliable, and probative evidence” against defaulted parties.  

Holding and Status:

All six patents, and all but one asserted claim, were found to be infringed.  Although no petitions for review were filed, on August 20, 2019, the Commission gave notice of its intent to review the ALJ’s decision.

Case Background:

Fourteen entities were named respondents in a Section 337 investigation into infringement of Bose’s “StayHear® Patents.”  These patents generally claim earbuds with particular structures allowing them to remain stably and comfortably in a user’s ear.  The respondents were generally small entities which sold earbuds or related products alleged to infringe the StayHear® Patents.  The respondents used shippers such as FedEx to ship their products directly to consumers in the United States.  Six respondents settled, and the remaining eight failed to appear.  Bose moved for entry of default as to five of the remaining respondents prior to moving for summary determination.  On summary determination, the ALJ found infringement of all but one of the asserted claims and ordered relief against each of the remaining respondents.. 

Notable Disputed Issues and Related Points of Law: 

GEO Necessary to Prevent Circumvention of Limited Exclusion Order (“LEO”):  The Commission may grant a GEO (which is effective even as to non-parties) when necessary to prevent circumvention of an LEO.  Bose established that a GEO was necessary on this ground due to the difficulty of obtaining information about the entities selling the infringing devices.  Many of the companies used false or non-existent addresses, and some respondents were difficult to serve due to misleading or inaccurate addresses on their websites or seller profiles.  Bose showed that the companies were able to use foreign factories to manufacture their products, making the ultimate source of the infringing goods unknown or difficult to identify.  Because of this ready availability of manufacturing capacity, and the ease of changing corporate names or structures, it would be easy for the respondents to evade LEOs.  As further evidence of the insufficiency of an LEO, the ALJ cited the respondents’ practice of selling small quantities of infringing products in generic  packaging with little or no description of the seller.

E-commerce and GEOs:  The ability of the infringing companies to conduct their business with minimal infrastructure appeared to weigh on the ALJ’s decision.  Some respondents conducted their business anonymously, or under multiple names, through larger e-commerce websites such as Amazon.  Bose also presented evidence that certain sellers had taken down their Amazon seller pages upon the filing of Bose’s complaint, only to continue selling infringing products under a different name.  The companies often made use of Amazon’s “Fulfillment By Amazon” program, which allows sellers to store their goods in an Amazon warehouse and then to have Amazon handle packing, shipping, and customer service.

GEOs and Defaulting Parties:  That a party defaults or otherwise declines to participate in an investigation is evidence the party would not abide by the terms of an LEO.

GEOs and Profit Margins: Where the infringing goods can be sold for a high profit (e.g., because the infringer need not recoup the cost of research and development), that provides a financial incentive to parties and non-parties to circumvent LEOs.

Indirect Infringement: The ALJ found that Bose failed to offer substantial, reliable, and probative evidence that certain defaulted or non-appearing parties indirectly infringed a claim reciting an “earphone comprising . . . an acoustic driver that converts applied audio signals to acoustic energy.”  337-TA-1121 at 50-51.  Defaulted party Misodiko marketed an “Earhooks” product which lacked an acoustic driver; Bose unsuccessfully argued that the Earhooks product indirectly infringed because it was meant to be combined with Apple Airpods, a device which does contain an acoustic driver. 

Cease-and-Desist Orders Against Defaulting Parties:  Issuance of a cease-and-desist order is typically predicated upon the existence of commercially significant inventories of infringing goods in the United States.  In the case of defaulting U.S. respondents, the Commission will typically presume that they have commercially significant inventories in the US.  But, the same presumption does not apply for defaulting foreign parties.    Here, Bose failed to show the defaulting or non-appearing foreign respondents possessed commercially significant inventories in the US, and the ALJ therefore found Bose was not entitled to cease-and-desist orders against those foreign respondents.

Validity:  Where no party challenges the validity of an asserted patent (e.g., because all parties have defaulted), the ALJ will not consider questions of validity sua sponte.

No Violation After Finding Design Patent Invalid For Lacking Written Description and Finding No Infringement, Including on the Grounds of Prosecution History Estoppel

In the Matter of CERTAIN CONVERTIBLE SOFAS AND COMPONENTS THEREOF, Inv. No. 337-TA-1122, Initial Determination (July 12, 2019)

Before: ALJ Cheney

Practice Tips and Insights:

Complainant asserted a sole design patent against respondent. Respondent was found not to infringe the design patent under the ordinary observer test applied to design patents and under the doctrine of prosecution history estoppel. The patent was also found invalid for lack of written description. As a result, there was no violation.  This case illustrates the challenges of asserting design patent infringement allegations. While the doctrine of prosecution history estoppel and the test for sufficiency of the written description are the same for design and utility patents, applying those principles may be tricky in a design patent context because drawings define the scope of protection in a design patent. Changing the lines of or cancelling design patent drawings during prosecution can change the scope of a claim and invalidate the patent for lack of written description or bar an infringement claim under the doctrine of prosecution history. It is advisable for both complainants and respondents to closely analyze the prosecution history of design patents early on to identify these issues.

Holding and Status:

Judge Cheney determined that there was no section 337 violation, after finding that the asserted design patent was invalid for lacking written description and that the respondent did not infringe the sole claim of the design patent, including on the grounds of prosecution history estoppel.

Case Background:

The 1122 Investigation was based on alleged patent infringement of one design patent (D716,576) related to an ornamental design for a sofa with an adjustable table.  The claim included nine figures.  A representative figure is shown below:

 337 Q3 2019

An exemplary photograph of accused products is shown below:

337 Q3 2019

The named respondent asserted standard defenses of non-infringement, invalidity, and no domestic industry. 

Notable Disputed Issues and Related Points of Law: 

Infringement:  Judge Cheney concluded that the complainant failed to meet its burden to prove infringement.  To show infringement of a design patent, the patentee must show that the accused product practices a design that is “substantially the same” as the patented design according to an “ordinary observer.”  Applying this standard, Judge Cheney undertook a thorough analysis, comparing various features (e.g., arm lengths, seat cushion shapes, end profiles, leg shapes, seat edge, and many other differences) of the claimed and patented designs.  Considering the design as a whole, including functional elements, which are excluded from the scope of the design claims, Judge Cheney found that the accused designs were not “substantially the same” as the claimed design. 

Non-credible witness testimony:  The complainant offered statements from its employees and a design expert that ordinary observers would likely confuse the two designs (the patented and the claimed designs).  Judge Cheney gave little weight to these statements because they appeared to be “interested persons.”  Judge Cheney noted that the complainant did not provide reliable evidence such as expert market analysis or a quantitative study of consumer confusion.  Judge Cheney also rejected other hearsay and anecdotal evidence of customer confusion as unreliable.

Prosecution History Estoppel:  Judge Cheney also concluded that the complainant was barred from asserting an infringement claim against respondent’s designs with soft top arms under the doctrine of prosecution history estoppel.  Application of the doctrine is based on a three-prong test: (1) whether there was a surrender of claim scope; (2) whether the surrender was for reasons of patentability; and (3) whether the accused design is within the scope of the surrender. Cancelling design drawings from a design patent claim during prosecution could result in prosecution history estoppel. Respondent argued that because the inventor amended their original design patent claim to eliminate sofa designs with soft top arms and left only figures showing sofas with arm caps, the complainant surrendered any claim to a sofa design with soft top arms.  Judge Cheney agreed. With respect to the first prong, because the inventors’ claim as originally filed included a soft design with soft top arms, but the issued claim did not, Judge Cheney found there was surrender of claim scope.  Judge Cheney also found that the amendments to the design patent claim was made to secure the patent, satisfying the second prong. The applicants cancelled the drawings in response to an office action rejecting the drawings on statutory grounds (Section 112). Finally, in Judge Cheney’s view, the third prong was satisfied because the accused sofas with soft tops arms were within the scope of the subject matter the inventor surrendered.

Written Description Requirement (Section 112):  Judge Cheney found that the respondent had met its burden to show that the patent is invalid for lack of written description.  In design patents, the drawings provide the written description of the invention. For a design patent claim comprising line drawings, the claimed ornamental features are depicted in full black lines (i.e., solid lines). Broken and dotted lines are generally not part of the claimed design.

The respondent argued that the design patent was invalid under Section 112 because the issued claim included new matter not present in the original application. Specifically, the respondent argued that certain solid lines appearing in issued Figures 6 through 9 were added during prosecution and included ornamental elements not apparent to one of skill in the art from the originally filed application. Analyzing the prosecution history in detail, which included 40 figures, Judge Cheney agreed.  In reaching this conclusion, Judge Cheney rejected the complainant’s argument that new matter case law applies under Section 112 only to prevent an applicant from relying on an earlier priority date, not to support a finding of invalidity.  Judge Cheney also disagreed with the complainant that new matter added to a patent claim during prosecution amounted to no more than a “procedural lapse” that has no effect on validity. Citing In re Owens, 710 F.3d 1362 (Fed. Cir. 2013) as the controlling case, which was notably absent in the complainant’s brief, Judge Cheney explained how adding lines to an existing design changes the scope of a design patent claim. In Judge Cheney’s view, while written description questions are highly fact-specific, Owens shows “how strict the written description rule can be with design patents.”  Judge Cheney was not persuaded by the complainant’s arguments that the figures filed with the original patent application provided written description support for the issued claim.  Nor was Judge Cheney persuaded by complainant’s “litigation-inspired explanations,” characterizing the inventor and expert testimony offered by the complainant as “a summary conclusion,” and noting “the record contradicts [their] conclusion.”

Portions of Expert Report Struck Because Respondent Failed to Include Invalidity Grounds in Responses to Contention Interrogatories in Violation of Ground Rule 4.4.3

In the Matter of CERTAIN CARBURETORS AND PRODUCTS CONTAINING SUCH CARBURETORS, Inv. No. 337-TA-1123, Order No. 69 Granting Complainant Walbro, LLC’s Confidential Motion to Strike Certain Portions of Amazon.com Inc.’s Opening Expert Report of James H. Lee Regarding Invalidity (July 24, 2019)

Before: ALJ Bullock

Practice Tips and Insights:

Parties should be cautious to assert each and every invalidity position or combination they may later wish to rely on in their responses to contention interrogatories because ALJs may refuse to allow a party to rely on an invalidity position that either: (1) asserts a patent alone renders an asserted claim obvious if interrogatory responses only relied on said patent in combination with others, or (2) asserts a combination of prior patents invalidates an asserted claim, where the specific combination was not alleged in contention interrogatory responses.

Holding and Status:

The Respondent’s expert could not espouse invalidity opinions in expert report that were not specifically asserted as an invalidity combination in their responses to contention interrogatories.

Case Background:

The complaint alleges violations of 337 of the Tariff Act of 1930 based on the importation into and sale in the United States of certain carburetors and products containing such carburetors, allegedly infringing patents asserted by Complainant Walbro, LLC. The Respondents in this case are: Ruixing Carburetor Manufacturing Co., Ltd., Zhejiang; Huayi Carburetor Factory; Tillotson; Fujian Hualong Carburetor Co., Ltd.; Fuding Guangda General Machinery Co., Ltd.; Wuyi Henghain Tools Co., Ltd.; Fuding Youyi Trade Co., Ltd.; Amaxon.com, Inc.; Amerisun Inc.; Ardisam, Inc.; Buffalo Corporation; Cabela’s Incorporated; Champion Power Equipment, Inc.; Feldmann Eng. & Mfg. Co., Inc.; FNA Group, Inc. FNA Group, Inc.; Frictionless World, LLC; Generac Power Systems, Inc.; Husqvarna Professional Products, Inc.; Imperial Industrial Supply Co.; KMART Corporation; Lowe’s Companies, Inc.; Mat Industries, LLC; Menards, Inc.; MTD Products Inc.; North American Tool Industries; Northern Tool & Equipment Co., Inc.; QV Tools LLC; Sears, Roebuck and Co.; Target Corporation; Techtronics Industries   Co. Ltd. Of Hong King d/b/a/ Techtronic Industries Power Equipment; The Home Depot, Inc.; Thunderbay Products; Tool Tuff Direct LLC; Tractor Supply Company; Walmart Inc.

The instant order grants Complainant’s motion to strike certain portions of Respondent Amazon.com Inc’s export report regarding invalidity.

Notable Disputed Issues and Related Points of Law: 

Disclosing Invalidity Positions (Asserting the Patent Alone): It violated Ground Rule 4.4.3 for Respondent’s expert report regarding invalidity to assert that a specific patent alone rendered an asserted patent obvious where Respondent’s answers to contention interrogatories disclosed that specific patent rendered the asserted patent obvious only in combination with other references, never alone. As a result, ALJ Bullock granted Complainant’s motion to strike the portions of the expert report that espoused invalidity positions based on patents alone that were only disclosed in combination with other references.

Disclosing Invalidity Positions (Asserting Specific Combinations): Similarly, it violated Ground Rule 4.4.3 for Respondent’s expert report to assert a specific combination of two patents rendered an asserted patent invalid when Respondent’s responses to contention interrogatories asserted invalidity based on the patent at issue in combination with other references. ALJ Bullock “requires parties to specifically assert an invalidity combination in their responses to contention interrogatories in order to pursue the combination at a later time.” Accordingly, ALJ Bullock also struck the portions of Respondent’s expert report espousing invalidity positions based on specific combinations not previously asserted.

Timing of Motion: Respondent Amazon, Inc. argued that Walbro had waited too long to file its motion and that the motion should be denied because Walbro’s expert had the opportunity to address the invalidity arguments. ALJ Bullock summarily dismissed these arguments. 

Petitioner Failed to Satisfy Economic Prong of the Domestic Industry Requirement for Failure to Show Significant or Substantial Labor or Capital Investments

In the Matter of CERTAIN CARBURETORS AND PRODUCTS CONTAINING SUCH CARBURETORS, Inv. No. 337-TA-1123, Order No. 77 Initial Determination Granting Respondents’ Motion for Summary Determination (Aug. 12, 2019)

Before: ALJ Bullock

Practice Tips and Insights:

This opinion underscores the importance of contextualizing the investments made to meet the economic prong of the domestic industry requirements.  Seemingly high values for investments in labor and capital are not in themselves sufficient to show significant or substantial investments; all figures are contextualized by domestic and worldwide revenue.  Further, courts may not find the need to proceed to the calculations for a domestic industry analysis if the matter may be disposed of through the economic prong analysis alone.

Holding and Status:

The Petitioner failed to satisfy the economic prong of the domestic industry requirement. The procedural schedule was stayed pending review of the Initial Determination.

Case Background:

The complaint alleges violations of section 337 of the Tariff Act of 1930 based on importation into the United States of certain carburetors and products containing such carburetors, allegedly infringing patents asserted by Complainant Walbro, LLC (“Walbro”).  The Respondents in this case are Amazon.com, Inc., Cabela's LLC, Lowe's Companies, Inc., Menard, Inc., Techtronic Industries Co. Ltd., The Home Depot, Inc., Thunderbay Products, Tractor Supply Company, Walmart, Inc., and Zhejiang Ruixing Carburetor Manufacturing Co., Ltd. (collectively, "Respondents").

Notable Disputed Issues and Related Points of Law: 

Necessity of Reaching Domestic Industry Analysis: As an initial issue, the ALJ noted the Respondents disputed the Petitioner’s domestic industry analysis (including faulty calculations of sales, employees, relevant equipment/facilities, and nexus to the asserted patents) but for summary determination purposes the ALJ assumed these calculations were correct and proceeded to the domestic industry investment requirements.

Economic Prong – Quantitative Analysis: The ALJ rejected the argument that the Petitioner’s domestic investments were large in absolute terms, explaining that the context remains essential and that larger companies are expected to invest larger dollar amounts to be deemed “significant” or “substantial.” While the opinion redacted the figures, U.S. investments compared to U.S. sales appeared to be less than 5% of all sales of carburetor products, and Petitioner pointed to no authority finding this to be substantial or significant. While domestic investments in labor and capital for one of the patents compared to US sales reached thresholds the Commission had previously found significant, the US sales were minimal compared to worldwide sales, which rendered the domestic investments negligible.

Economic Prong – Qualitative Analysis: The ALJ pointed out that the Federal Circuit has held that qualitative factors cannot overcome a quantitative data that indicated insufficient investment and employment.

ALJ McNamara Recommends General Exclusion Order for Infringing Wall Socket Cover Plates Sold Online

In the Matter of CERTAIN POWERED COVER PLATES, Inv. No. 337-TA-1124, Initial Determination (Aug. 12, 2019)

Before: ALJ McNamara

Practice Tips and Insights:

ALJ McNamara’s initial determination in the 1124 investigation is another recent example of an ITC complainant successfully making its case for a general exclusion order for infringing products sold in online marketplaces such as Alibaba, Amazon, eBay, and Jet.  The ITC continues to be a significant forum for IP holders facing the proverbial whack-a-mole problem—i.e. numerous and often unidentifiable entities importing infringing products into the United States.  Complainants seeking a general exclusion order to combat the whack-a-mole problem continue to have success when they can present extensive evidence of a widespread violation, the difficulty of identifying the source of infringing products, and the ease with which new entities could become infringers to circumvent any limited exclusion order.

Holding and Status:

ALJ McNamara found that two participating respondents and four defaulting respondents violated section 337 by infringing various claims of the asserted patents.  The ALJ recommended that a general exclusion order and cease and desist orders issue. The two participating respondents have petitioned for Commission review.

Case Background:

The 1124 Investigation is based on complaint filed by SnapRays, LLC d/b/a/ SnapPower (SnapPower) for alleged infringement of three utility patents and one design patent, all related to powered electrical outlet cover plates.  Two named respondents, Shenzhen Vistek Technology Co. (Vistek) and Enstant Technology Co., Ltd. (Enstant), participated in the evidentiary hearing.  Eleven other named respondents either defaulted, were terminated because of settlement, or were unserved.

Vistek and Enstant stipulated to importation and the ALJ ruled on summary determination that the defaulting respondents also satisfied the importation requirement. The ALJ further ruled on summary determination that Vistek, Enstant, and the defaulting respondents infringed, and that SnapPower satisfied the technical prong for domestic industry.

Vistek and Enstant argued that the asserted claims were invalid and that SnapPower failed to satisfy the economic prong for domestic industry.

Notable Disputed Issues and Related Points of Law: 

Prior art:  Enstant and Vistek argued that the claims asserted against them were invalid over a combination of references including a U.S. provisional patent application.  The ALJ found that Enstant and Vistek failed to establish that the provisional application was prior art under 35 U.S.C. 102(e).  Applying established Federal Circuit law, the ALJ held that a provisional application cannot be prior art unless it “provides written description support pursuant to 35 U.S.C. § l12 for the claims of an issued U.S. patent that claims priority to that provisional.”  ALJ McNamara found that Enstant and Vistek failed to present expert testimony or other evidence that the provisional application supported claims of an issued patent that claimed priority to the provisional.  Moreover, Enstant’s and Vistek’s expert underscored the failure of proof by admitting he had not even read the claims of the issued patent.

Motivation to Combine:  The ALJ also found that Enstant and Vistek failed to establish that there would be any reason to combine their selected prior art references.  Enstant’s and Vistek’s expert testified that a person of ordinary skill would have been motivated to combine the prior art references to incorporate additional safety features into a cover plate.  ALJ McNamara reasoned, however, that “‘safety’ . . . is a generic concept, and not a specific rationale or motivation” to combine.  ALJ McNamara also faulted respondents’ expert for applying impermissible hindsight to form his opinion, because he provided no reason why a person of skill would have identified the prior art references other than that counsel had selected them.

Economic prong of domestic industry:  ALJ McNamara found that SnapPower satisfied the economic prong of the domestic industry requirement, including by making “significant investment in plant and equipment.”  As evidence of its investment, SnapPower submitted all of its expenditures on U.S. facilities, equipment, tools, and software.  Enstant and Vistek argued that SnapPower failed to differentiate between its departments in its analysis, thereby including expenditures for departments such as sales and marketing that should not count toward domestic industry.  ALJ McNamara concluded, however, that because SnapPower was a startup and evidence showed its employees wore multiple hats, sometimes assisting with tasks like product assembly and product testing, all SnapPower’s plant and equipment expenditures indeed counted toward domestic industry.

Scope of exclusion order:  ALJ McNamara recommended the Commission enter a general exclusion order at least for the defaulting respondents, if not also for Enstant and Vistek.  SnapPower successfully showed a widespread violation of its patents, submitting evidence of infringing products it found on Alibaba, Amazon, eBay, Jet, and other online marketplaces.  SnapPower also submitted evidence that certain manufacturers, including unserved respondents, were the source of infringing products for various downstream entities including Enstant, Vistek, and other defaulting respondents. Additionally, SnapPower’s evidence showed that multiple sellers “brazenly copied” its marketing materials which included images of SnapPower’s founders, their homes, and even one of a SnapPower investor’s daughter.

ALJ McNamara also found that SnapPower established the difficulty of identifying the source of infringing products.  SnapPower submitted evidence that it hired a contractor to scrape internet listings and the scraping generated 2,918 listings of products that “directly copied SnapPower’s products.”  Moreover, SnapPower’s evidence showed that it purchased and analyzed more than 100 infringing products from marketplace websites.  The products SnapPower ordered would frequently have multiple company names associated with them, making it impossible for SnapPower to determine the true origin.

ALJ McNamara further found that SnapPower established that circumvention of any exclusion order would occur unless a general exclusion order issued, concluding that SnapPower “made a virtually unassailable argument” that additional infringers would enter the market should a remedy be limited to a limited exclusion order.  SnapPower’s evidence showed that entities selling infringing products online could easily create new virtual seller accounts in the marketplace and that manufacturers hide behind various distributors so they can continue to sell products even if one or more distributors are stopped.  The evidence also showed that it would be easy to enter the market as either a reseller or even a manufacturer, because barriers to entry for manufacturing were so low, requiring only a minimal amount of injection molding equipment.

Expert Testimony Struck Where Expert Offers Opinions Outside the Scope of His Expertise

In the Matter of CERTAIN BEVERAGE DISPENSING SYSTEMS AND COMPONENTS THEREOF, Inv. No. 337-TA-1130, Order No. 22 Denying Respondents’ Motion to Strike Testimony No. 1130-016, Granting Respondent’s Motion to Strike Testimony No. 1130-017 (Aug. 26, 2019)

Before: ALJ McNamara

Practice Tips and Insights:

The expert in this case was allowed to testify on matters within the scope of his expert report, where the report even briefly described expertise relevant to the challenged testimony.  However, where expert sought to testify on European patent law, an area he claimed expertise in based on very limited experiences, the motion to strike was granted. Litigants should take care to ensure that relevant experience is included in their export’s reports on any issue they may later seek to opine on, and refrain from offering expert testimony on the basis of events tangential to expert’s main focus or based on experiences remote in time.  Additionally, litigants should be mindful that if they fail to object to an expert being accepted, the ALJ may later take the lack of objection into consideration when ruling on motions to strike.

Holding and Status:

Complainants’ expert on patent prosecution had some of his trial testimony stricken, while other challenged testimony was not stricken.  The Respondent’s Motion to Strike testimony as outside the scope of expert’s report was denied where challenged testimony was encompassed within expert’s competence and Respondent’s Motion to Strike testimony as outside the scope of expert’s expertise was granted where expert offered testimony outside the scope of the expertise for which he was accepted by the ALJ. Additionally, orders issued during the oral hearing were granted in a portion of the order partially redacted.

Case Background:

The complaint alleges violations of section 337 of the Tariff Act of 1930 based on importation into the United States of certain beverage dispensing systems and components thereof, allegedly infringing patents asserted by Complainants Heineken International B.V., Heineken Supply Chain B.V., and Heineken USA.  The Respondents are Anheuser-Busch InBev S.A., InBev Belgium N.V., and Anheuser-Busch, LLC.

Notable Disputed Issues and Related Points of Law: 

Motion to Strike (Outside Scope of Expert’s Report): The challenged testimony of Complainants’ expert regarding post-grant proceedings was permissibly within the scope of expert’s report, where expert was admitted as an expert “in practice and procedure at the USPTO.” In reaching this conclusion, the ALJ considered that the expert’s report included a description of the expert’s expertise, even if cursory, as including post-grant proceedings. Moreover, the ALJ considered that following a brief voir dire when Complainants’ counsel offered the expert as an expert “in practice and procedure at the USPTO,” Respondent’s counsel failed to object. Additionally, the ALJ was unpersuaded that the expert was impermissibly relying on “personal” rather than “professional” experience with post-grant proceedings. ALJ McNamara remarked that seems “apparent that any expert acquires expertise as a result of professional, personal experience.

Motion to Strike (Outside Scope of Expertise – European Patent Proceedings): Respondent’s motion to strike certain portions of the expert’s testimony related to European patent proceedings was granted. Importantly, the expert was not offered as an expert on this topic; rather he was proffered only as an expert in practice and procedure at the USPTO.  Complainant’s sought to support the challenged testimony, by relying on the expert’s prior experiences including: (1) personally attending a trial in Europe applying European patentability standard to a U.K. patent which occurred over 20 years ago, and (2) work coordinating with foreign patent counsel when U.S. clients wanted to obtain patents in Europe.  Because the expert was not a European patent attorney, nor an agent of one, and because his experience on the subject was so limited, the ALJ granted Respondent’s motion to strike the testimony concerning the European Patent Office and differences between U.S. and European patent examination proceedings.

Motion to Strike (Outside Scope of Expertise – Claim Scope): Similarly, Respondent’s motion to strike certain testimony concerning claim scope and technical claim differences was granted. In reaching this decision, the ALJ rejected Complainant’s arguments that the testimony was permissible as the expert relied on facts in file histories which were in evidence, and because the expert relied on the expertise of another technical expert. Because the expert was not proffered as a technical expert, nor qualified to be one, he could not rely on contested facts in evidence, or the expertise of another individual to offer opinions outside the scope of his personal expertise.

Allegations of Inequitable Conduct Stricken for Failure to Sufficiently Plead Materiality, Knowledge, and Intent by Only Citing a Large Number of References Disclosed to Examiner and Failure to Disclose a Single Reference

In the Matter of CERTAIN CARTRIDGES FOR ELECTRONIC NICOTINE DELIVERY SYSTEMS AND COMPONENTS THEREOF, Inv. No. 337-TA-1141, Order No. 36 Granting-In-Part and Denying-in-Part Respondents’ Motions for Leave to File Amended Answers and Affirmative Defenses; Striking Affirmative Defenses of Inequitable Conduct (Aug. 1, 2019)

Before: ALJ Lord

Practice Tips and Insights:

Respondents alleging inequitable conduct must be mindful of the requirements to plead with particularity, and address all elements of the inequitable conduct standard, and courts are not likely to tolerate inference upon inference to meet the pleading requirements.

Holding and Status:

The Complainant did not oppose the amendment of the answers and affirmative defenses outside of affirmative defense of inequitable conduct, so leave to amend was granted, but the affirmative defense of inequitable conduct was stricken for failure to sufficiently plead.

Case Background:

The complaint alleges violations of section 337 of the Tariff Act of 1930 based on importation into the United States of certain cartridges for electronic nicotine delivery systems and components thereof, allegedly infringing patents asserted by Complainant Juul Labs Inc. The Respondents involved in this order are Vapor 4 Life Holdings, Inc., Vaportronix, LLC, and Twist Vapor Franchising, LLC.

Notable Disputed Issues and Related Points of Law: 

Pleading Materiality for Inequitable Conduct: While the Respondents pleaded that the patentee had interfered with the examination of the patents at issue by disclosing a large number of reference (4,000 references including an estimated 2,000 prior art references), Judge Lord pointed out that Respondents had not alleged that the patents would not have issued but for the conduct of Juul’s attorney. While Respondents alleged one reference was withheld from the examiner, the examiner ultimately did review this reference, so that reference could not have been material to patentability. Judge Lord rejected the “but for” allegations raised in Respondents’ reply briefs based on prior art references not included in their amended complaints, which Judge Lord found untimely and at any rate could not surmount the failure to allege knowledge and intent.  Judge Lord also clarified that she was not aware of any precedent establishing a bad faith inference based on the disclosure of a large number of references.

Pleading Knowledge and Intent for Inequitable Conduct: The Respondents’ allegations of intent were based solely on Juul’s attorney’s knowledge of the USPTO patent prosecution guidelines and his knowledge of other patent applications by the author of the allegedly withheld reference. Respondents pointed to pleadings in another case, Certain Microfluidic Systems and Components Thereof and Products Containing Same that included allegations of failure to disclose a prior art reference with the same inventors as other prior art disclosed during prosecution, but Judge Lord pointed out those pleadings were stricken for failure to create a reasonable inference of knowledge of other prior art. And Respondents had not cited any authority for inferring specific intent simply from disclosure of a large number of prior art references.

Renewed Leave to Apply For a Subpoena Denied Because the Danger of Improper Disclosure of CBI Outweighs the Potential Value of the Discovery Sought and the Potential Prejudice to Respondents

In the Matter of CERTAIN INTEGRATED CIRCUITS AND PRODUCTS CONTAINING THE SAME, Inv. No. 337-TA-1148, Order No. 25: Denying Renewed Motion For Leave To Apply For A Aubpoena (Aug. 8, 2019)

Before: ALJ Elliot

Practice Tips and Insights:

Litigants who seek discovery of CBI covered by protective orders from other investigations must clearly obtain the consent of all suppliers of CBI from the other investigation. 

Holding and Status:

In light of the potential danger of improper disclosure of CBI from an earlier investigation, renewed motion for leave for a subpoena was denied. 

Case Background:

The respondents sought CBI information, including certain hearing transcripts and briefs from a prior investigation. The ALJ denied the request noting the respondents’ failure to show why the protective order from the earlier investigation did not bar the Commission from producing the requested information.  Regardless, the ALJ invited a renewed motion, so long as the respondents satisfactorily address the conflict between the production of the information at issue and the governing protective order. 

Notable Disputed Issues and Related Points of Law: 

Overcoming the reach of a protective order to gain discovery of CBI: In their renewed motion to obtain CBI documents from a prior investigation, the respondents contended that they had received consents from the various parties to the earlier investigation sufficient to “resolve any concern over the production of third-party CBI that might be present in the requested material.” The ALJ disagreed for two reasons.  First, the ALJ stated that it was necessary for the respondents to clarify how they received consents from all necessary parties to the earlier investigation.  But the renewed motion failed to do so.  The ALJ found the respondents’ showing that they had identified the universe of all suppliers of CBI to be “conclusory.”  Second, the ALJ was convinced by the Staff’s opposition, detailing that at least two of the CBI suppliers from the earlier case had in fact not provided the requisite consent.   Importantly, the respondents admitted that as to one of the CBI suppliers, the Pantech parties, the respondents had not obtained any such consent.  Instead, the respondents moving papers stated that “as noted below … the requested material do not contain Pantech CBI.”  But the ALJ was “unable to find in Respondents’ filings where this important fact is ‘noted.’”

In the end, although the prior testimony sought by the respondents had the potential of being admissible as impeachment evidence, and denial of the discovery had the potential to prejudice the respondents, these “speculative” concerns “must be balanced against the clear and distinct likelihood that even a minor slip-up in disclosure of CBI will also undermine the integrity of … all Commission investigations.”

ALJ Orders Party to Un-redact Names in Technical Documents, Rejecting Argument That the Redactions Were Necessary to Comply with European and Korean Privacy Laws

In the Matter of CERTAIN PHOTOVOLTAIC CELLS AND PRODUCTS CONTAINING SAME, Inv. No. 337-TA-1151, Order No. 11 Granting Motion to Compel (Jul. 10, 2019)

Before: ALJ McNamara

Practice Tips and Insights:

The Complainant in this case cannot redact names of certain individuals in its document production because that information is relevant for the Respondent to prepare for depositions and to determine whom else it should seek to depose.  The Protective Order, agreed upon by both parties, addressed foreign data privacy laws, but did not allow for the redaction of personal information.  Litigants, especially foreign litigants, should review privacy laws from all possibly implicated countries and address concerns regarding compliance with those foreign privacy laws preemptively in the Protective Order.  Additionally, litigants should be mindful about relying upon foreign privacy laws to withhold relevant discovery in an investigation.

Holding and Status:

The Complainant must reproduce unredacted copies of all documents that contain redacted names.

Case Background:

The Complainant, Hanwha, filed a complaint against LONGi, claiming LONGi violated Section 337 by importing certain solar cells that allegedly infringe Hanwha’s patents.  In response to discovery requests directed to Hanwha’s alleged domestic industry (“DI”) products, Hanwha produced technical documents from South Korea and Europe, which redacted names of, inter alia,  authors of publications about solar cell design, authors/presenters of internal presentations about the DI products, and persons in charge of testing the DI products.  Hanwha argued that the redactions were necessary to comply with the European General Data Protection Regulation “GPDR” and South Korea’s Personal Information Protection Act “PIPA,” both of which have strict requirements concerning the release of personal information.  LONGi moved to compel Hanwha to reproduce the technical documents removing the redactions of certain names.  The instant order grants the motion to compel.

Notable Disputed Issues and Related Points of Law: 

Protective Order Did Not Allow Redactions: Both parties agreed to resolve purported requirements of foreign data privacy laws by amending the Protective Order (“PO”) to include personal information subject to privacy laws of “Korea, Singapore, the European Union, Malaysia, China, and California” explicitly within the definition of confidential business information.  Under the PO, relevant personal information could therefore not be redacted.  Indeed, Hanwha, during negotiations of the PO, withdrew its proposal—“All Personal Data not strictly necessary in relation to the Investigation may be permanently redacted by the producing party prior to production of the redacted document.”—that would have allowed such redactions.  Consequently, the ALJ held it was improper for Hanwha to impede discovery by redacting the names.

Complainant Cannot File in the ITC and Then Refuse to Abide by the ITC Rules and U.S. Laws: ALJ McNamara emphasized that because Hanwha chose to bring this action in the ITC to avail itself of the ITC’s potential remedies, it must have had knowledge of the scope of the ITC’s jurisdiction.  Therefore, it was particularly egregious for Hanwha, as the Complainant, to then rely up on foreign privacy laws as a basis for not producing relevant information about its alleged DI products. 

The Foreign Privacy Laws of Europe and Korea Do Not Prevent the Requested Disclosure: With regard to Europe’s GPDR, ALJ McNamara noted that it includes an expression provision that allowed disclosure if it “is necessary for the establishment, exercise or defence of legal claims.”  In fact, Hanwha’s expert admitted that such disclosure was allowed in the context of litigation proceedings.  With regard to South Korea’s PIPA, ALJ McNamara noted that it also includes a provision that allowed disclosure “when other laws contains specific provisions allowing for such use or transfer.”  ALJ McNamara rejected Hanwha’s argument that the phrase “other laws” is restricted to only other South Korean domestic law, giving “little, if any weight” to Hanwha’s “expert” declaration and questioning “why he should be regarded as an ‘expert.’”

The Principle of Comity Supports Disclosure: Even if the foreign privacy laws prevented the requested disclosure, the principle of comity weighs in favor of requiring Hanwha to disclose the requested names in the investigation.  In cases where a party refuses to disclose information based upon a foreign blocking statute, U.S. courts typically apply a balancing test using the five Aerospatiale factors, which are: (1) the importance of the documents to the investigation or litigation; (2) the specificity of the request; (3) the physical place of origin of information; (4) the availability of alternate means of finding the information; and (5) the impact of noncompliance on the interests of the United States versus the impact of compliance on the interests of the foreign state.  Here, all factors weigh in favor of LONGi’s motion to compel except possibly the third factor, which “may” be in favor of Hanwha; however, because those documents relate to Hanwha’s alleged DI products, those documents can be considered domestic regardless of origin, so even the third factor weighs against Hanwha.  Moreover, at least one district court (Northern District of California) recently determined, after performing an international comity analysis under Aerospatiale, that personal information should be produced despite the privacy requirements of the GPDR and PIPA—the same foreign laws at issue in this case.  

Complainants Must Identify Asserted Trade Secrets With Sufficient Particularity   

In the Matter of CERTAIN BONE CEMENTS, COMPONENTS THEREOF AND PRODUCTS CONTAINING THE SAME, Inv. No. 337-TA-1153, Order No. 23 Granting-In-Part Motion to Compel (Aug. 14, 2019)

Before: ALJ Elliot

Practice Tips and Insights:

Claimants, in their identification of trade secrets filing, recited ninety-four detailed items, but the ALJ held that some of recited trade secrets were not identified with sufficient particularity.  Litigants should not embed additional trade secrets in footnotes, but instead should incorporate all asserted trade secrets in the body of the trade secret identification.  Additionally, litigants should only identify trade secrets that are relevant, non-duplicative, and pertain to the accused products.  Moreover, Litigants should be mindful of identifying as trade secrets entire documents written in a foreign language.

Holding and Status:

Complainant must file a revised identification of trade secrets to correct the noted issues.

Case Background:

Complainants Heraeus assert misappropriation of trade secrets by Respondents Zimmer Biomet for two accused Zimmer Biomet bone cement products based on or derived from a particular Heraeus product, PALACOS.  In their Final Identification of All Trade Secret Allegations, Complainants asserted four broad categories of trade secrets covering specifications, recipes, and raw materials, and ninety-four detailed items.

The instant order grants-in-part a motion to compel to identify the asserted trade secrets with more particularity.

Notable Disputed Issues and Related Points of Law: 

Embedding Trade Secrets in Footnotes is Improper: A number of the trade secrets improperly included “additional trade secret specifications” embedded in footnotes, creating ambiguity on the complete set of asserted trade secrets.  Therefore, the ALJ ordered that all additional trade secrets located in the footnotes must be enumerated in the body of the trade secret identification.

Identification of “Compilations” is Proper: The ALJ rejected Respondents’ objection to Complainants’ use of “compilations,” which are confidential combinations of individually public facts, because such “compilations” are protectable as trade secrets.

Trade Secrets Must Be Relevant, Non-Duplicative, and Pertain to the Accused Products: The ALJ held that some of the identified trade secrets were overbroad for three reasons.  First, the identified specifications were over forty pages long and whose relevance was not clear.  Second, the identified specifications included other already identified trade secrets, so they were duplicative.  Third, some of the specifications did not pertain to PALACOS, the bone cement that forms the basis of the accused misappropriation, but to other bone cements not implicated in the investigation. 

Incorporation by Reference is Not Preferred:  Although not raised by Respondents or Staff, the ALJ was troubled by the identification of entire documents in German as trade secrets.  The better practice, as noted by the ALJ, is to identify a trade secret wholly in English using plain language.