By Eric Schweibenz
Further to our May 28 post, on June 15, 2010, ALJ E. James Gildea issued the public version of the Remand Initial Determination (“RID”) (dated May 27, 2010) in Certain Coaxial Cable Connectors and Components Thereof and Products Containing Same (Inv. No. 337-TA-650).

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, the “Active 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 his Initial Determination (“ID”) finding, inter alia, that the Defaulting Respondents were in violation of Section 337 by reason of infringement of U.S. Patent Nos. 5,470,257, 6,558,194, D519,076, and D440,539 (the ‘539 patent).  See our November 10, 2009 post for more details.

On December 14, 2009, the International Trade Commission (the “Commission”) issued a notice determining to review the ID in part.  On review, the Commission considered, inter alia, whether PPC had satisfied the domestic industry requirement with respect to the ‘539 patent.  On March 31, 2010, the Commission vacated ALJ Gildea’s finding that PPC had established a domestic industry with respect to the ‘539 patent and issued an order remanding the portion of the investigation relating to the ‘539 patent to ALJ Gildea for further proceedings.   In the Opinion accompanying the remand order, the Commission held that litigation costs taken alone are insufficient to satisfy the domestic industry requirement, but that litigation costs that are actually related to the licensing of the asserted patent(s) may be sufficient.  See our April 16, 2010 post for more details.

According to the RID, ALJ Gildea conducted a four-hour remand hearing on the domestic industry issue with respect to the ‘539 patent on April 27, 2010.  Only PPC and the Commission Investigative Staff (“OUII”) appeared at the remand hearing.  OUII argued that PPC had utterly failed to show a domestic industry with respect to the ‘539 patent.  In particular, OUII argued that there was not a single expenditure relevant to satisfying the requirement and further argued that, for policy reasons, expenses relating to the settlement of litigation should not be considered for purposes of satisfying the requirement.  PPC argued that OUII was ignoring the standards set forth in the Commission’s Opinion and that under the correct standards, PPC’s litigation activities were sufficiently tied to licensing so as to satisfy the domestic industry requirement.

In the RID, ALJ Gildea determined that no domestic industry exists with respect to the ‘539 patent and that therefore there has been no violation of Section 337 by the Defaulting Respondents in connection with any alleged infringement of the ‘539 patent.  While the public version of the RID is heavily redacted, it is apparent that a major factor in ALJ Gildea’s analysis was the fact that PPC had presented no evidence that it had sent any cease and desist correspondence or otherwise engaged in any definitive licensing efforts relating to the ‘539 patent prior to the initiation of its various patent infringement suits.  ALJ Gildea thus found that only certain expenses that PPC could show were directly related to licensing could be considered for purposes of satisfying the domestic industry requirement, and that it would be inappropriate to consider all of PPC’s litigation expenses in the domestic industry analysis.

However, ALJ Gildea rejected OUII’s strict view that no expenses relating to the settlement of the litigations could be used to satisfy the domestic industry requirement.  In particular, the ALJ found that expenses relating to settlement negotiations and expenses relating to the drafting and reviewing of settlement agreements could be considered as long as these negotiations and agreements actually provided for licensing of the ‘539 patent.  ALJ Gildea reviewed PPC’s accounting and found that $27,506.00 in such expenses should be considered in full and that another $14,858.75 should be considered in part in the domestic industry analysis.

Ultimately, ALJ Gildea found that PPC had received only one license for the ‘539 patent, and that only a portion of the license agreement in question actually related to the ‘539 patent.  Moreover, PPC had no established licensing program, let alone a licensing program that encompassed the ‘539 patent.  Finally, PPC had made no efforts to send cease and desist letters or engage in other licensing talks with any persons or entities other than those involved with the single ‘539 patent license.  Thus, while ALJ Gildea found that the issue was a “close one,” he determined that “PPC’s evidence does not demonstrate ‘substantial’ investment in exploitation of the ‘539 patent through its licensing efforts, and therefore does not support a finding of economic domestic industry with respect to the ‘539 patent.”  Accordingly, ALJ Gildea held that PPC had failed to establish a violation of Section 337 by the Defaulting Respondents with respect to the ‘539 patent.