Goodwin Insights October 04, 2019

Most Impactful Commission Decisions

Commission Modifies ALJ’s Claim Construction and Consequently Reverses Findings of Patent Validity and Infringement

In the Matter of CERTAIN ELECTRICAL CONNECTORS, COMPONENTS THEREOF, AND PRODUCTS CONTAINING THE SAME, Inv. No. 337-TA-1043, Commission Opinion (Feb. 11, 2019)

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

Practice Tips and Insights:

In advancing claim construction arguments before the Commission, as elsewhere, it is important to tie the construction to intrinsic evidence (the claims, the specification, and the prosecution history) rather than relying on expert testimony. Expert testimony which has the effect of reading limitations into the claims which are not disclosed in the specification may be particularly disfavored.

Holding and Status:

The Commission found no violation of Section 337 because the accused products were non-infringing and the asserted claims were invalid as anticipated.

Case Background:

Complainant J.S.T. Corporation (“JST”) alleged violations of Section 337 by the importation and sale of electrical connectors alleged to infringe the asserted patent. The asserted patent covered a “tine plate” (i.e., a nonconductive protective covering for the tines of an electrical connector) which had a particular number of holes in it and was meant to prevent problems related to thermal expansion of tine plates which were known in the prior art. The Commission construed the claims to require that the tine plate have elongated holes on the edges, reversing the ALJ’s construction allowing non-elongated holes to come between the edges of the tine plate and the elongated holes. Consequently, it reversed the ALJ’s finding of infringement, because the accused products had non-elongated holes on the edges. The Commission also found that the patent was anticipated, again reversing the ALJ.

Notable Disputed Issues and Related Points of Law:

Claim Construction: The only asserted independent claim required that the tine plate “include first holes that each respectively have an elongated hole shape” and that “the first holes are provided in end regions of the tine plate proximate to two opposite ends of the tine plate in the longitudinal direction . . . .” The Commission had previously construed “proximate to two ends” to mean “adjacent to the two opposite ends of the tine plate in the substantially longitudinal direction.” On remand, the ALJ held that this construction did not require that “the first (elongated) holes must be next to the ends of the tine plate, with no other holes in between them and the ends.” The Commission reversed because the specification (1) emphasized the importance of placing the elongated holes on the edges of the tine plate in order to maximize reduction in thermal cracking without compromising the strength of the plate; (2) explained that temperature variation (and thus the threat of thermal cracking) was greatest at the longitudinal ends; (3) described “the present invention” as having holes at the longitudinal ends; and (4) disclosed three embodiments with elongated holes at the longitudinal ends. The Commission also found that, during prosecution, the applicant traversed a rejection for anticipation by arguing that the invention’s elongated holes, when placed along the longitudinal edges of the tine plate, prevented thermal cracking without weakening the tine plate.

Claim Construction/Expert Testimony: Complainant argued that a POSA would understand the term “contact leg” to exclude “grounding legs,” presenting expert testimony that contact legs form a connective path between two components, whereas grounding legs do not create such connective paths. The Commission rejected this argument because the specification repeatedly referred to contact legs without drawing this distinction, and did not disclose grounding legs as a separate feature. Complainant’s expert testimony was unsupported by any language in the patent or prosecution history, and would have the effect of reading multiple limitations into the claims: “it [would add] signal-path, metallic-shield, and male-and-female-connector requirements that the specification does not disclose or even suggest.” Op. at 44.

Clear and Convincing Evidence: The Commission rejected as “unreasonable” the Complainant’s argument that “a respondent must ‘guarantee’ that the evidence is ‘free of errors and defects’ to be clear and convincing.” Op. at 39.

Commission Modifies Claim Construction, Rejecting Parties’ Proposed Constructions

In the Matter of CERTAIN SEMICONDUCTOR DEVICES AND CONSUMER AUDIOVISUAL PRODUCTS CONTAINING THE SAME, Inv. No. 337-TA-1047, Commission Opinion (Sep. 11, 2019)

Before: Commission Opinion (ID issued by ALJ Shaw)

Practice Tips and Insights:

The Commission may be willing to modify an ID’s claim construction and instead of adopting either of the parties’ proposed constructions, provide its own construction. The Commission may also be willing to evaluate evidence of infringement, invalidity, and technical domestic industry presented during the hearing in view of a new claim construction, rather than remanding. A party bearing the burden of proof on an issue should anticipate that the Commission may modify a questionable claim construction and either develop the evidentiary record accordingly or seek remand to the ALJ following Commission review.

Holding and Status:

The Commission found no violation of Section 337.

Case Background:

Broadcom filed a complaint alleging a violation of Section 337 by Sigma Designs, Inc., Vizio, Inc., and various other respondents based on infringement of five of its utility patents. At the time of the hearing, all respondents other than Sigma and Vizio had been terminated from the investigation and Broadcom had withdrawn its complaint as to two of its patents. At issue at the hearing was whether Sigma violated Section 337 by importing or selling system-on-a-chip (“SoC”) products and whether Vizio violated Section 337 by importing or selling downstream products incorporating Sigma’s SoCs.

Following the hearing, ALJ Shaw issued a final initial determination finding no violation of Section 337 by either Sigma or Vizio. ALJ Shaw concluded that Broadcom did not meet its burden to show infringement of any of the asserted claims of its three patents: the ’844 patent, the ’104 patent, and the ’059 patent. ALJ Shaw additionally concluded that Broadcom failed to satisfy the technical prong of the domestic industry requirement for the ’104 patent and that the ’844 patent was invalid as anticipated.

The Commission determined to review the ID in part, including with respect to certain constructions of terms from the ’844 and ’104 patents. The Commission determined not to review ALJ Shaw’s finding of no violation with respect to the ’059 patent.

Notable Disputed Issues and Related Points of Law:

Claim Construction: The Commission modified a construction of a term in the ’844 patent—“a processor adapted to control a decoding process”—and adopted a middle-ground between the term’s plain and ordinary meaning urged by Broadcom and a narrow construction urged by respondents. Notably, ALJ Shaw’s ground rules do not provide for a discrete claim construction proceeding, leaving the parties to seek constructions at the hearing phase. Based on the arguments submitted at the hearing phase, the ID sided with respondents, construing the disputed term narrowly to mean “a core decoder processor designed to orchestrate coding for each pipeline stage.”

On review, the Commission found the ID’s construction unsupported, as the ID relied primarily on a passage of the specification describing how the claimed invention “typically” works. The Commission, however, declined to limit the claims according to how the invention “typically” works. The Commission also rejected Broadcom’s proposed plain and ordinary meaning, finding that it would ensnare disclaimed prior art.

Agreeing with neither Broadcom nor the respondents, the Commission provided its own construction of the term: “a core processor adapted to control a decoding process according to a processing pipeline.” The Commission relied in significant part on repetitive and consistent references in the specification to a “core processor” and “pipeline” when describing the the claimed decoding process of the invention.

Infringement: Applying its modified construction, the Commission found that Broadcom failed to prove the accused products satisfied the limitation “a processor adapted to control a decoding process.” The Commission noted that in its initial pre-hearing brief, Broadcom argued that the accused products control was a “single-stage decoding pipeline.” The Commission, however, found that a pipeline requires multiple stages and the accused single-stage process therefore could not be a pipeline and could not satisfy the claim limitation. Broadcom’s argument had essentially precluded it from proving infringement under the Commission’s modified construction.

Invalidity: The Commission further found that the respondents satisfied their burden to prove the asserted claims of the ’844 patent were anticipated. At issue on review was whether the anticipating reference disclosed the limitation “adapted to perform a decoding function on a digital media stream.” The Commission did not find Broadcom’s expert’s testimony persuasive. Broadcom’s expert argued that the prior art’s disclosure of parsing data into video and audio components was not “a decoding process” as the term was used in the ’844 patent. But Broadcom’s expert did not testify that a person of ordinary skill would understand “a decoding process” to exclude parsing. The Commission declined to afford the expert’s testimony significant weight, concluding it amounted to an untimely attempt to construe the term.

Commission Issues Limited Exclusion Order And Cease And Desist Orders

In the Matter of CERTAIN ROAD MILLING MACHINES AND COMPONENTS THEREOF, Inv. No. 337-TA-1067, Commission Opinion (August 7, 2019)

Before: Commission Opinion (ID issued by Judge Shaw)

Practice Tips and Insights:

Shifting production of infringing products to the United States will not avoid the issuance of a limited exclusion order due to the possibility that the respondent may resume importation at a later date. Further, the Commission appeared to indicate a party seeking to avoid a cease and desist order needs to show no commercially significant inventory at any time during fact discovery. Indeed, one Commissioner indicated that a CDO should issue upon a showing of some inventory and that there is no need to show that it is commercially significant.

Holding and Status:

The Commission issued a limited exclusion order and cease and desist orders that extended to all present and future infringing products. The Commission further provided a limited exception for service and repair of previously sold products to minimize harm to third parties.

Case Background:

The Commission found that Caterpillar violated Section 337 based upon its importation of three products that infringed two of Wirtgen’s patents. Accordingly, the Commission turned to the issue of what, if any, remedy was appropriate.

Notable Disputed Issues and Related Points of Law:

Appropriate scope of exclusion order and cease and desist order: Caterpillar argued that neither a limited exclusion order nor a cease and desist order were appropriate because by the end of the investigation it had no meaningful inventory of imported goods and it had shifted manufacture to the United States. Caterpillar also argued that Wirtgen failed to establish which affiliate held title to the inventory earlier in the investigation. Wirtgen argued that having shown importation and a commercially significant inventory during the investigation, both an exclusion order and cease and desist order were appropriate. The Commission held that both an exclusion order and a cease and desist order were appropriate because Caterpillar had imported infringing products and had maintained a commercially significant inventory of those products during the investigation. One commissioner indicated that a cease and desist order was appropriate based upon the existence of any inventory and that there should be no need to prove that the inventory was commercially significant. Regarding the exclusion order, the Commission reasoned that simply because Caterpillar had shifted the location of production during the investigation, there would be nothing to prevent Caterpillar from shifting production back overseas after the conclusion of the investigation in the absence of an exclusion order. Moreover, the existence of other non-adjudicated products did not justify limiting the exclusion order to products found to infringe. Instead, the Commission found that a certification provision should be available to allow Caterpillar to certify when it imported noninfringing products. Further, to minimize the impact of the issued remedy upon third parties, the Commission included an exemption for service and repair of previously sold products. However, the Commission declined to issue an exception for components or for product already in transit.

Commission Finds Evidence of Domestic Industry Insufficient and Thus, No Violation of Section 337 Despite Finding Some Patent Claims Infringed

In the Matter of CERTAIN THERMOPLASTIC-ENCAPSULATED ELECTRIC MOTORS, COMPONENTS THEREOF, AND PRODUCTS AND VEHICLES CONTAINING SAME ii, Inv. No. 337-TA-1073, Commission Opinion (Aug. 12, 2019)

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

Practice Tips and Insights:

To prove a section 337 violation, a Complainant must demonstrate the existence of a domestic industry as of the time the complaint is filed, and cannot rely on post-filing evidence of domestic industry absent a showing that a “significant and unusual development” later occurred. Complainant’s evidence of only 70 production samples that did not practice the asserted patents failed to meet this standard, and Complaint failed to meet the standard through use of alleged “explosive growth projections.”

Holding and Status:

The Commission found no violation of Section 337 as to asserted U.S. Patent Nos. 7,683,509 and 7,928,348.

Case Background:

The Complainant, Intellectual Ventures II LLC (“IVII”), filed a complaint against a number of automobile makers and suppliers including Aisin Seiki Co., Ltd. of Aichi, Japan (“Aisin”); Bayerische Motoren Werke AG of Munich, Germany (“BMW”); Denso Corporation of Aichi, Japan (“Denso”); Honda Motor Co., Ltd. of Tokyo, Japan (“Honda”); Mitsuba Corporation of Gunma, Japan (“Mitsuba”); Nidec Corporation of Kyoto, Japan (“Nidec”); and Toyota Motor Corporation of Aichi Prefecture, Japan (“Toyota”), claiming that they violated Section 337 by importing certain electric motors encapsulated in thermoplastic material that allegedly infringed a number of IVII patents. The Commission previously terminated the investigation with respect to respondents BMW, Denso, Mitsuba and Nidec, as well as with respect to three of the asserted patents. The remaining respondents were Aisin, Honda and Toyota, alleged to infringe U.S. Patent Nos. 7,683,509 and 7,928,348.

The asserted patents relate to thermoplastic encapsulation of electric motors. Both patents are directed to electromagnetic devices with heat exchange mechanisms, and in particular, motors and other devices that are cooled by a fluid coolant and encapsulated by injection-molded thermoplastic. The devices can be used in various products, such as hybrid electric vehicles.

After construing the claims following a separate claims construction hearing, the ALJ conducted an evidentiary hearing and in his ID found no violation of section 337 with respect to the ’509 or ’348 patents. Infringement was found regarding claims 14 and 15 of the ’509 patent, but the ID found that IVII failed to satisfy the domestic industry requirement as to both patents. In addition, the ID found no infringement of claims 24-27 of the ’348 patent.

After the parties filed petitions for review, respondents notified the Commission that the Patent Trial and Appeal Board (“PTAB”) issued four final written decisions finding that every claim asserted against respondents is unpatentable in light of the prior art.

The Commission affirmed and adopted the ID’s findings that IVII failed to demonstrate that a domestic industry exists or is in the process of being established. In particular, IVII failed to establish that articles practice the asserted patent claims or that its investments and activities with respect to the articles were sufficient to meet the domestic industry requirement. Having reached a decision on domestic industry, the Commission declined to address infringement and invalidity.

Notable Disputed Issues and Related Points of Law:

Proof Necessary to Show Domestic Industry: The Commission first noted that the domestic industry requirement is set forth by statute, citing 19 U.S.C. § 1337(a)(2)-(3). Next, the Commission observed that the relevant date to determine domestic industry is the filing date of the complaint, citing Motiva, LLC v. ITC, 716 F.3d 596, 601 n.6 (Fed. Cir. 2013) and Certain Video Game Systems and Controllers, Inv. No. 337-TA-743, Comm’n Op. at 5 (Jan. 20, 2012), aff’d sub nom. Motiva. The Commission explained that it “will consider post-complaint evidence regarding domestic industry only in very specific circumstances,” giving as an example “when a significant and unusual development has occurred after the complaint has been filed.” Certain Collapsible Sockets for Mobile Electronic Devices and Components Thereof, Inv. No. 337-TA-1056, Comm’n Op. at 15 n.10 (July 9, 2018).

Complainant Failed to Prove Domestic Industry: IVII failed, however, to present pre-filing evidence of domestic industry, and failed to persuade the Commission that post-filing developments were of sufficient substantiality to meet the “significant and unusual developments” test. The Commission found that IVII could not rely on its licensee’s investments because IVII “did not demonstrate that those [products] practice the asserted patents.” Furthermore, IVII failed to demonstrate that the “small number of products produced,” assuming arguendo they practiced the patents, constituted a significant and unusual development.

IVII sought to overcome these shortcomings by resort to asserted “explosive growth” projections. The Commission rejected this approach, pointing to the fact that IVII could identify only 70 units, provided as samples to “a handful of Indian, African, and Chinese utilities.” The Commission concluded that IVII “has not established that whatever actual sales there may have been, if any, are more than de minimus.”

The CommissIon concluded also that the sample pumps relied on to support the domestic industry requirement did not, at the time of the complaint, practice the claimed inventions. In particular, the Commission found that the sample products lacked a key claim element, the “monolithic body of injection molded thermoplastic material substantially encapsulating the at least one conductor” recited by the claims.

Commission Finds Conclusory Expert Testimony Insufficient to Establish Representativeness and Means-Plus-Function Limitations “Sharply” Limited to Structure Disclosed in Specification

In the Matter of CERTAIN LED LIGHTING DEVICES, LED POWER SUPPLIES, AND COMPONENTS THEREOF, Inv. No. 337-TA-1081, Commission Opinion (July 23, 2019)

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

Practice Tips and Insights:

To prove representativeness at the Commission, Complainant cannot rely on conclusory testimony of its expert that the represented products are “essentially the same” or “similar” in structure or function to the representative products. Further, the Commission found that to meet a means-plus-function limitation, the structure of the accused product must be identical to that disclosed in the patent. Finally, the Commission found that conclusory and unsupported expert testimony is insufficient to establish infringement.

Notably, this is an example of a case where the Commission found no violation for respondents that went through trial, but instituted a remedy against a defaulting respondent.

Holding and Status:

The Commission found no violation of Section 337 as to any asserted claims except as to the defaulting Respondent.

Case Background:

The Complainants, Philips Lighting North America and Philips Lighting Holding B.V., filed a complaint against Respondents Feit Electric Company, Inc. and Feit Electric Company, Inc. (China) (collectively “Feit”); Lowe’s Companies, Inc. and L G Sourcing, Inc. (collectively, “Lowes”); MSi Lighting, Inc.; Satco Products, Inc.; Topaz Lighting Corp.; Wangs Alliance Corporation d/b/a WAC Lighting Co. and WAC Lighting (Shanghai) Co. Ltd. (collectively, “WAC”) claiming Respondents violated Section 337 by importing certain LED lighting devices, power supplies, and components thereof that allegedly infringed five Philips patents. MSi was found to be in default for failure to respond. The investigation was terminated as to Topaz and WAC after they entered into settlement agreements with Complainants. The claims related to two of the patents were withdrawn and the case proceeded with regard to the ’399 and ’559 patents as to all Respondents and the ’554 patent as to Lowe’s. The ALJ issued a summary determination that Complainants’ eW Cove Powercore device satisfied the technical prong of the domestic industry requirement as to the ’554 patent. The ID found, inter alia, that Complainants failed to demonstrate infringement of any asserted claim of the ’559 patent and that Complainants had also failed to demonstrate that Lowe’s imported or sold any product that infringed the ’554 patent. The ID further found no infringement for asserted claims 34 and 35 of the ’399 patent, but did find a violation of section 337 with respect to other asserted claims of the ’399 patent. The ID also found that no claim was shown to be invalid.

The Commission determined not to review the ID with respect to the finding of no violation of section 337 with respect to the ’559 and ’554 patents. The Commission determined to review the ID’s findings as to: 1) the ’399 “controller” and “adjustment circuit” limitations; 2) whether products are representative of other products with respect to infringement findings for claims 17-19 of the ’339 patent and claims 6 and 12 of the ’559 patent; and 3) the findings on the economic prong of the domestic industry requirement. The Commission solicited further briefing from the parties as to the first issue and also solicited briefing from the parties and members of the public on remedy, the public interest, and bonding.

Notable Disputed Issues and Related Points of Law:

Proof Necessary to Establish Product Representativeness: Complainants asserted the ’399 patent against 239 accused products and the ’559 patent against 42 accused products. In order to establish infringement, Complainants analyzed 12 representative products for the ’399 patent and eight for the ’559 patent, arguing that the same infringement analysis should apply to the remaining accused products for each patent. The Final ID found that Complainants satisfied their burden to show that the infringement analysis for the representative products also applied to the represented products as to and claims 17-19 of the ’399 patent and the asserted claims of the ’559 patent, despite no finding of infringement as to the ’559 patent.

In its attempt to establish representativeness for the ’399 patent, Complainants relied on expert testimony that the represented products “contained the same kinds of infringing components and exhibited the same infringing behaviors as the representative products.” The Commission reversed the Final ID’s finding of representativeness, characterizing the expert testimony as “conclusory and insufficient to establish representativeness.” The Commission criticized the expert’s correlation charts, which merely compiled “model numbers and exhibit numbers for circuit diagrams into a chart” as insufficient and noted that the correlation charts actually weighed against a finding of representativeness by demonstrating the differences in components between the products.

Similarly for the ’559 patent, Complainants relied on expert testimony which the Commission deemed conclusory and insufficient to establish representativeness.The expert cited no evidence in support of his conclusion that all of the accused products operated in a similar manner and also failed to demonstrate that all of the accused products shared the same structures and functionality, but merely made conclusory statements that the accused products were similar or used similar functionality.

Requirement for Meeting Means Plus Function Limitations: The Commission also reversed the ALJ’s finding that Complainants had shown infringement of the “controller” limitation in claims 7 and 8 and the “adjustment circuit” limitation in claims 17-19 of the ’399 patent. The ALJ found that “controller” limitations in claims 7 and 8 of the ’399 patent are means-plus-function terms and determined that the structure was disclosed in Figures 5 and 7 of the specification. The Commission found that Complainants failed to establish that the accused products had an identical or equivalent structure to that disclosed in the specification. In fact, the evidence established that the components of certain accused products were connected in a different manner than that disclosed and, therefore, could not have an identical structure, as required under 112 ¶ 6. The Commission also found that Complainants failed to establish that the structure performs the four functions recited in the claim. As to the “adjustment circuit” limitation in claims 17-19, Complainants relied exclusively on expert testimony, which the Commission characterized as “unexplained lists of components, unsupported conclusions, and irrelevant testimony.”

As to whether Complainants satisfied the economic prong of the domestic industry requirement, the Commission took no position because Complainants failed to prove infringement. As to the defaulting respondent MSi, the Commission presumed, as required by section 337(g)(1), that the allegations against the defaulting respondent are true, including as to the economic prong of the domestic industry requirement.

Commission Finds One Claim of One Patent Valid and Infringed After Finding the Other Claims Invalid as Obviousness And the Second Patent Invalid for Claiming Unpatentable Subject Matter

In the Matter of CERTAIN ROAD CONSTRUCTION MACHINES AND COMPONENTS THEREOF, Inv. No. 337-TA-1088, Commission Opinion (July 15, 2019)

Before: Commission Opinion (ID issued by Judge Lord)

Practice Tips and Insights:

The Commission, like other forums, continues to struggle with the proper framework for analyzing whether a patent claims unpatentable subject matter as shown by the split decision whether Caterpillar’s ’871 patent was invalid under section 101. Are claims directed to an automated paving machine claiming abstract ideas because they are directed to the conventional automation of generic equipment or is the validity of such claims better suited to an obviousness analysis? Given fundamental disagreements being voiced in multiple forums, the only safe course is to pursue both theories, particularly given the willingness of certain forums to still hear section 101 challenges earlier than other invalidity challenges.

The Commission’s finding that Claim 19 of the ’693 patent was not obvious depended upon the narrow interpretation of the claim limitation “a retracted position relative to said frame” and the finding that respondents had failed to show a motivation to combine or an reasonable expectation of success in combing the prior art in question. The claim construction was based primarily upon the specification and file history while the finding regarding motivation was based upon shortcomings found in respondents’ technical expert.

Holding and Status:

The Commission found the Wirtgen respondents violated section 337 based upon infringement of claim 19 of U.S. Patent No. 7,140,693 owned by Caterpillar, but that the other asserted claims were invalid as obviousness. The Commission also found U.S. Patent No. 9,045,871 was invalid for being directed to ineligible subject matter.

Case Background:

The 1088 investigation was based upon a complaint filed by Caterpillar alleging that Wirtgen violated Section 337 based upon the importation and sale of multiple paving machines that allegedly infringed three Caterpillar patents. During the investigation, Caterpillar withdrew the ’419 patent and the ALJ granted summary determination that the asserted claims of the ’871 patent were invalid under Section 101. A hearing was held regarding the allegations based on the ’693 patent and the ALJ issued a final initial determination that all of the asserted claims of the ’693 patent were obvious, except claim 19, which the ALJ found Wirtgen infringed.

Notable Disputed Issues and Related Points of Law:

Whether claims directed to the automation of a paving machine violate section 101: Wirtgen moved for summary determination that the claims of the ’871 patent were invalid as directed to ineligible subject matter because they were directed to an abstract idea in that they pertained to an automated paving machine and the supposed point of novelty pertained to the conventional idea of automating a generic paving machine. Caterpillar countered that the claims pertained to a concrete paving machine that had automated features. The majority found that the ’871 patent impermissibly claimed a generic paving machine that was automated using generic electronics used in a conventional manner. The majority opinion found that the abstract idea Commissioner Schmidtlein dissented, noting that the claims pertained to a concrete device with specific features.

To what degree must the specification and file history limit the claim to justify a narrow interpretation of the claim language: Caterpillar argued that both the description in the specification and the statements made in the prosecution history made clear that the “retracted” language of the limitation indicated that wheels being in a retracted position relative to the frame meant that the wheels must be within the frame. In this regard, Caterpillar pointed to language from the specification that indicated that the paving machine could pave flush with a wall when the wheels were in a retracted position. Similarly, Caterpillar pointed to arguments in the file history that distinguished prior art with wheels parallel to the frame rather than inside the frame. While Wirtgen pointed to arguments in the file history regarding prior art, the Commission found that those arguments did not pertain to the limitation in question and therefore adopted Caterpillar’s construction. Based on this interpretation, the Commission found that Wirtgen’s primary reference failed to disclose this limitation.

What evidence is needed to show a motivation to combine and a reasonable expectation of success: In asserted that claim 19 was obvious in view of the prior art, Wirtgen asserted a combination of three references and presented the testimony of its technical expert that one would be motivated to combine the teaching of one reference regarding the retractability of the rear wheels with the teachings of the other prior art. Caterpillar, however, pointed out that the reference in question did not teach retractability of the front wheels and that the teaching of nonretractable front wheels taught away the combination in question. The Commission sided with Caterpillar, finding that Wirtgen’s expert’s testimony was impermissibly conclusory and failed to address the contrary testimony that the reference taught away and failed to explain how one would have a reasonable expectation of success in combining the references.

Commission Issues a General Exclusion Order With Respect to Products Covered By The Asserted Patent

In the Matter of CERTAIN self-anchoring beverage containers, Inv. No. 337-TA-1092, Commission Opinion (July 24, 2019)

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

Practice Tips and Insights:

This Investigation started with a complaint identifying eight respondents but eventually continued with only two respondents who defaulted. The Commission nonetheless issued a general exclusion order (GEO). The takeaway from this case is that even when there are only a few remaining defaulting respondents, Complainants should consider requesting a GEO, if they are able to build a compelling case with evidence and arguments to show likely circumvention of a limited exclusion order, a widespread pattern of violation, and difficulty in identifying the source of infringing products. While a limited exclusion order may be the remedy of choice in most cases, the Commission could issue a GEO under appropriate circumstances.

Holding and Status:

The Commission issued a general exclusion order and set bond of 100 percent of the entered value of infringing articles imported during the period of Presidential review.

Case Background:

The 1092 Investigation was based on alleged infringement of a patent related to an improved beverage container that resisted tipping and thus helped prevent the resulting spillage. The Complainants initially filed a complaint against eight respondents. Out of the eight respondents, six were terminated, and the remaining two – an Ukrainian and a Chinese company – were found to be in default. As a result, arguments and evidence regarding infringement and domestic industry were largely undisputed.

The ALJ issued an ID, granting Complainants’ motion for summary determination. The ALJ found the importation requirement to be satisfied as to each defaulting respondent, found that the accused products of each defaulting respondent infringe the asserted patent, and found that the Complainants satisfied the domestic industry requirement. The ALJ recommended issuance of a general exclusion order.

The Commission determined to review in part the ID granting summary determination of a section 337 violation. Specifically, the Commission determined to review: (1) the ID’s findings on infringement to correct typographical errors and to strike a sentence; (2) the ID’s findings on importation, and on review, affirmed, on modified grounds, the ID’s finding on importation as to one of the defaulting respondents and took no position as to the second defaulting respondent; and (3) the ID’s findings on the economic prong of the domestic industry, and on review, affirmed the ID’s finding of the existence of a domestic industry under subsection 337(a)(3)(B), which relates to significant employment of labor or capital, and took no position on whether a domestic industry exists under subsections 337(a)(3)(A), which relates to significant investment in plant and equipment, or 337(a)(3)(C), which relates to substantial investment in its exploitation including engineering, research and development, or licensing. Accordingly, the Commission found a violation of section 337 as to one defaulting respondent, but not as to the second defaulting respondent. The Commission requested briefing on the issues of remedy, the public interest, and bonding. After considering the record, the Commission ultimately determined to issue a general exclusion order.

Notable Issues and Related Points of Law:

Economic Prong of the Domestic Industry: The Commission found the record evidence supporting the ID’s findings on the amounts of investments in employment of labor and capital allocated to the asserted patent, which is needed to establish the economic prong of the domestic industry under subsection 337(a)(3)(B). While noting that the ID did not detail its reasoning on why such amounts were significant, after reviewing the record, the Commission nonetheless found the relevant investments to be significant. The ID noted the Complainants’ investment of approximately $10,000 a month in rent for a local plant and around $200,000 in equipment. The ID also included a summary table of Complainants’ investments in the design, development, finishing, and customer support of the relevant products, all of which occurred at the local facility. Given this facility was also used for distribution and sales of other products, the ID’s summary table allocated 70 percent of the rent and equipment to the practice of the asserted patent based on percentage of sales of products covered by the asserted patent. The only activity done overseas was the plastic molding. The evidence indicated that the value added in the United States was at least 60 percent. The evidence also showed that the amount of investments in labor and capital was about 9 percent of the annual sales of the domestic industry product, which ranged about 5-6 million dollars annually. The ID also found that the Complainants had invested an additional $5,200 in certain 3D-printing equipment dedicated solely to products covered by the asserted patent. The ID’s summary table included $350,000 identified as R&D salaries, of which 70 percent was allocated to practice the asserted patent.

General Exclusion Order: The Commission concluded that the evidence supported the IDs findings that a general exclusion order was necessary to prevent circumvention of a limited exclusion order. The record evidence showed the following: site visits to the addresses for certain respondents revealed no evidence of the companies at the listed addresses, and the accused products were shipped into the country under false and misleading labels, i.e., basically anonymous sales through online portals. There was also evidence of widespread pattern of violation and the difficulty of identifying the source of the infringing products. The ID found that in addition to the defaulting respondents, numerous other sources of infringing self-anchoring beverage containers were available for purchase online. As to the difficulty of identifying the source of the infringing products, the ID noted evidence showing that the products were often sold under different names and anonymously through online portals.

Public Interest: The Commission found that the statutory public interest factors do not preclude issuance of a general exclusion order. The record showed no evidence that the products at issue, self-anchoring beverage containers for consumers to avoid spilling liquids, raise public health and welfare concerns. Other types of competing beverage containers were available, and there was evidence in the record showing that Complainants were in the process of expanding their production facilities. Further, the record indicated that consumers would benefit from the removal of confusing counterfeit products from the marketplace.

Bonding: The Commission determined to set the bond during the period of Presidential review at 100 percent of the entered value of the infringing products. Ordinarily, the Commission sets the bond during the period of Presidential review based on the price differential between the domestic and the infringing products or based on a reasonable royalty. But the Commission found that the defaulting respondents’ failure to appear and participate in the investigation prevented the Commission from determining a price differential or a reasonable royalty.