16
Apr
By Mike McCabe
On April 14, 2010, the International Trade Commission issued the public version of its Opinion vacating the October 13, 2009 final initial determination (“ID”) by ALJ E. James Gildea that a domestic industry exists under Section 337(a)(3)(C) in Certain Coaxial Cable Connectors and Components Thereof and Products Containing Same (Inv. No. 337-TA-650).  Additionally, the Commission affirmed in part, reversed in part, and remanded on a number of other issues included in the ID.

By way of background, the Complainant in this investigation is John Mezzalingua Associates, Inc. d/b/a PPC, Inc. (“PPC”) and the Respondents are Fu Ching Technical Industry Co. Ltd.,  Gem Electronics, Inc. (collectively, “Respondents”), Hanjiang Fei Yu Electronics Equipment Factory, Zhongguang Electronics, Yangzhou Zhongguang Electronics Co., Ltd., and Yangzhou Zhongguang Foreign Trade Co., Ltd. (collectively, the “Defaulting Respondents”).  The investigation was instituted on May 30, 2008.  On October 13, 2009, ALJ Gildea issued the ID, finding that no violation of Section 337 had occurred in connection with Respondents’ importation into the U.S., the sale for importation, or the sale within the U.S. after importation of certain coaxial cable connectors by reason of infringement of U.S. Patent No. 5,470,257 (the ‘257 patent).  The ID further found that the Defaulting Respondents were in violation of Section 337 for reasons of infringement of the ‘257 patent, U.S. Patent Nos. 6,558,194 (the ‘194 patent); D440,539 (the ‘539 patent); and D519,076 (the ‘076 patent).  See our November 10, 2009 post for more details.

On December 14, 2009, the Commission issued a notice determining to review the ID in part.  Specifically, the Commission determined to review “(1) the findings and conclusions relating to whether a violation of section 337 has occurred with respect to the ‘257 patent, including the issues of claim construction, infringement, validity, and domestic industry and (2) the ID’s finding that PPC has met the domestic industry requirement for the ‘539 patent.”  See our December 16, 2009 post for more details.

Infringement and Validity

In the Opinion, the Commission affirmed the ALJ’s conclusion that the Respondents did not infringe either of the asserted claims of the ‘257 patent.  The Commission agreed with the ALJ’s claim construction and the application of that construction to the Respondents’ accused products.

With respect to the Defaulting Respondents, the Commission likewise adopted the ALJ’s determination that their accused products did infringe the asserted claims of the ‘257 patent.  The Commission also affirmed the ALJ’s conclusion that the Respondents had failed to prove that the asserted claims of the ‘257 patent were invalid.

Domestic Industry

The ID had concluded that PPC’s product met the technical prong of the domestic industry requirement for the ‘257 patent.  The Commission reversed.  In its Opinion, the Commission concluded that the ALJ had incorrectly construed the claim term “engagement means.”  The Commission also found that PPC’s commercial product lacked an “engagement means” or anything substantially equivalent to an “engagement means” (as construed by the Commission).  Consequently, the Commission reversed the ALJ’s finding that PPC meets the domestic industry for the ‘257 patent, and concluded that none of the respondents had violated Section 337 with respect to the ‘257 patent.

The remaining issue was whether PPC had satisfied the domestic industry requirement with respect to the ‘539 design patent.  With respect to the technical prong, the ALJ found, and the Commission agreed, that this requirement was satisfied based upon PPC’s licensee’s sale of a product that practices the patent.

With respect to the economic prong, the ALJ had found that PPC satisfied this requirement as well based upon PPC’s “substantial investment in enforcement of the ‘539 design patent” and litigation expenses arising from such enforcement activities.  PPC relied solely upon its own expenses associated with litigation involving the ‘539 design patent, asserting that these expenses constituted a substantial investment in the exploitation of the ‘539 design patent through licensing under Section 337(a)(3)(C).

The Commission concluded that patent infringement litigation activities alone do not satisfy Section 337(a)(3)(C).  The Commission further noted, however, that such litigation activities could satisfy Section 337(a)(3)(C) if a complainant can (1) prove that these activities are related to licensing, (2) the activities pertain to the patent at issue, and (3) prove the associated costs for such activities.

In support of its decision, the Commission relied upon its construction of Section 337(a)(3)(C), which provides in relevant part that “an industry in the United States shall be considered to exist if there is in the United States . . . . substantial investments in . . . exploitation [of the patent], including engineering, research and development, or licensing.”  The Commission found that notably absent from the express language of the statute was any mention of “litigation” as a type of exploitation, and that litigation was merely “a small step beyond mere ownership.”  On the other hand, the Commission noted that licensing is clearly within the realm of “exploitation” under Section 337(a)(3)(C).

The Commission next addressed the question of whether litigation activities that are related to licensing may be considered “exploitation” within the meaning of Section 337(a)(3)(C).  The Commission concluded that it could.  Turning again to statutory history and construction, the Commission observed that “the plain language of the statute does not limit the type of licensing activities that the Commission can consider.”  To that end, the Commission found that, in assessing whether the domestic industry requirement has been met, “we will also consider licensing activities for which the sole purpose is to derive revenue from existing production.”  The Commission explained that in order to show a substantial investment in exploitation through licensing, a complainant must prove that:

  • each asserted activity is related to licensing; and

  • the licensing activities pertain to the particular patent(s) at issue.


Such licensing activities may include, by way of example, sending cease and desist letters; filing patent infringement litigation; conducting settlement negotiations; and negotiating, drafting and executing licenses.  A complainant must also clearly link each asserted activity to licensing efforts involving the asserted patent.  In addition, the investment in exploitation by licensing must be “substantial.”  This requires showing evidence of the costs incurred in connection with each asserted activity.

Turning to the facts involved in this investigation, the Commission found that PPC’s litigation activities and costs, including any relevant costs associated with settlement negotiations and the drafting and negotiating of licensing agreements, may be related to licensing if, for instance, the patentee and accused infringer were in licensing negotiations before suit was filed or while suit was ongoing; if the patentee made a concerted effort to license the patent; or if the patentee had an established licensing program.  Since the record was not fully developed on these points, the Commission ordered a remand for further proceedings.

Remedy

The Commission entered a general exclusion order against the Defaulting Respondents with respect to the ‘194 patent, citing evidence of a pattern of violation of Section 337 and difficulty in identifying the source of the infringing goods.  The Commission also entered a limited exclusion order with respect to the ‘076 patent.  The Commission also concluded that these exclusion orders were in the public interest.
Share