ITC Issues Opinion Clarifying Licensing-Based Domestic Industry Requirements Under Section 337 In Certain Multimedia Display And Navigation Devices And Systems (337-TA-694)
Further to our June 27, 2011 post, on July 22, 2011, the International Trade Commission (the “Commission”) issued the public version of its opinion affirming, on modified grounds, ALJ Carl C. Charneski’s December 16, 2010 Initial Determination (“ID”) finding no violation of Section 337 in Certain Multimedia Display and Navigation Devices and Systems, Components Thereof, and Products Containing Same (Inv. No. 337-TA-694). In particular, the Commission reversed ALJ Charneski’s finding that Garmin’s products do not infringe the asserted claims of the ‘951 patent, reversed his finding that the asserted claims of the ‘592 patent are not invalid under the written description requirement, and reversed his finding that Pioneer has established a licensing-based domestic industry for the ‘951 and ‘592 patents.
By way of background, the Complainants in this investigation are Pioneer Corporation and Pioneer Electronics (USA) Inc. (collectively, “Pioneer”) and the Respondents are Garmin International, Inc. and Garmin Corporation (collectively, “Garmin”). In the ID, ALJ Charneski determined that (i) Garmin’s accused products do not infringe the asserted claims of U.S. Patent Nos. 5,424,951 (the ‘951 patent), and 6,122,592 (the ‘592 patent), (ii) Garmin did not show by clear and convincing evidence that any claim of the ‘592 patent is invalid due to obviousness or lack of written description, and (iii) Pioneer satisfied the domestic industry requirement with respect to the asserted patents. See our February 11, 2011 post for more details.
On February 23, 2011, the Commission determined to review the ID in part and to request that the parties prepare written submissions responding to various questions concerning the issues under review. The Commission also requested briefing on remedy, the public interest, and bonding. See our February 28, 2011 post for more details.
The Commission determined that Complainants seeking to satisfy the domestic industry requirements by their investments in patent licensing must show under section 337(a)(3)(C) that (i) the investment exploits the asserted patent, (ii) the investment relates to “licensing,” and (iii) any alleged investment is domestic, i.e., it must occur in the United States.
Since Pioneer’s asserted licensing activities relate to its patent portfolio that includes patents other than those asserted in this Investigation, the Commission also determined it must examine the “strength of the nexus between the activity and licensing the asserted patent in the United States.” In assessing such a nexus, the Commission determined that a complainant should provide “evidence showing that its licensing activities are particularly focused on the asserted patent among the group of patents in the portfolio or through other evidence that demonstrates the relative importance or value of the asserted patent within the portfolio.” The Commission further determined that an important consideration is whether an asserted patent covers the product or service of a potential licensee. The Commission also identified the following considerations: (1) the number of patents in the portfolio, (2) the relative value contributed by the asserted patent to the portfolio, (3) the prominence of the asserted patent in licensing discussions, negotiations and any resulting license agreement, and (4) the scope of technology covered by the portfolio compared to the scope of the asserted patent. The Commission also determined that an asserted patent within a portfolio might stand out and help strengthen the required nexus if the asserted patent (1) was discussed during the licensing negotiation process, (2) has been successfully litigated before by complainant, (3) relates to a technology industry standard, (4) is a base patent or a pioneering patent, (5) is infringed or practiced in the United States, or (6) the market recognizes its value in some other way. The Commission further determined that the nexus could be strengthened if the portfolio patents and the asserted patents therein “fit together congruently” covering a specific technology, as opposed to being patents that “cover a wide variety of technologies bearing only a limited relationship to one another.”
The Commission determined that since activities must be shown to relate to licensing, certain activities that might serve multiple purposes should be specifically shown to relate to licensing. As an example, the Commission explained that analyzing a company’s product for infringement might relate to licensing, but it might also relate to litigation and seeking injunctive relief.
After considering the three above-mentioned variables for investment in (i) the asserted patent, (ii) “licensing,” and (iii) the United States, the Commission determined that it further considers whether such investment is substantial. The Commission held that it adopts a “flexible approach,” whereby a relatively weak showing in the above three variables might still show that investment is substantial by “demonstrating that its activities and/or expenses are of a large magnitude,” which in turn may depend on the size of the industry and the size of the complainant. The Commission determined that other factors relevant to determining a “substantial investment” include (1) the existence of other types of “exploitation” of the asserted patent such as research, development, or engineering, (2) the existence of license-related ancillary activities such as ensuring compliance with license agreements and providing training or technical support to its licensees, (3) whether complainant’s licensing activities are continuing, and (4) whether complainant’s licensing activities are those that are referenced favorably in the legislative history of section 337(a)(3)(C).
In applying the above standards to Pioneer’s activities, the Commission determined that with respect to its in-house activities, Pioneer properly relied upon the licensing activities of its related entity Discovision Associates, which conducted patent analysis, reverse engineering, testing, and similar activities, and which in Pioneer’s circumstance constituted licensing activities. However, the Commission determined that Pioneer’s in-house activities were directed toward its entire navigation portfolio, and not the asserted ‘951 and ‘592 patents, which were merely covered, but not expressly identified in certain licenses it had negotiated. In view of the large number of patents in Pioneer’s portfolio, the broad technical scope of the portfolio, the absence of evidence showing how the asserted patents fit together with the other patents in the portfolio, and at least one of the licenses concerning only a small percentage of portfolio patents that are U.S. patents, the Commission determined this demonstrated a weak connection between Pioneer’s in-house activities and the asserted patents.
With respect to the activities of Pioneer’s outside counsel, the Commission first determined there is no presumption that outside counsel activities are less related to licensing than their in-house counterparts. Given that outside counsel’s redacted invoices related to the analysis of certain products and the ‘951 and ‘592 patents, the Commission found a “relatively strong” nexus between the activities of outside counsel and the asserted patents. However, even though there was evidence to support that outside counsel’s activities were generally related to licensing (because Pioneer approached various entities about licensing patents prior to engaging in litigation), certain redacted entries suggested these activities were not solely related to licensing, and therefore the amount of outside attorneys fees could not be relied upon in their entirety.
As to whether Pioneer’s licensing activities constituted “substantial investment,” the Commission determined that Pioneer was a large international company with significant resources, and the relevant market includes many participants encompassing vehicle-based navigation devices, handheld portable navigation devices, and smartphones with navigation capabilities. Although Pioneer provided evidence of royalty payments, the Commission determined this can be circumstantial evidence of substantial investment, but does not constitute investment itself. Additionally, the Commissioned determined that Pioneer’s activities, “on the whole, reflect a revenue-driven licensing model targeting existing production rather than the industry-creating, production-driven licensing activity that Congress meant to encourage,” and although the statute requires all licensing activities to be considered, the Commission gave “Pioneer’s revenue-driven licensing activities less weight.” The Commission concluded that “Pioneer’s activities relate only minimally to licensing the asserted patents in the United States,” and Pioneer’s activities were “too limited in light of its resources and the relevant market to be a ‘substantial’ investment under section 337(a)(3)(C).” Therefore, the Commission reversed ALJ Charneski’s finding that a domestic industry exists.
‘951 Patent – Infringement
According to the Opinion, ALJ Charneski interpreted the following term from claim 1 of the ‘951 patent, “second memory means for storing the read display pattern data and position coordinate data corresponding to all of said display pattern data and said position coordinate data from said first memory means,” as requiring “read display pattern data” stored on the second memory that cannot be different information than the “read display pattern data” read from the first memory. Based on this construction, ALJ Charneski found that Garmin’s products did not infringe claims 1 and 2 of the ‘951 patent because they lacked “second memory means.”
The Commission determined that ALJ Charneski misconstrued the above “memory means” limitation, because the plain meaning of the term “corresponding” within this limitation does not require the first and second memories to be the same. Instead, the Commission determined “corresponding” means “relating to,” as suggested by Pioneer. Based on this revised construction, the Commission found that Garmin’s products literally met the “second memory means” limitation, and therefore infringed claims 1 and 2 of the ‘951 patent.
‘592 Patent – Written Description
According to the Opinion, ALJ Charneski found the ‘592 patent not invalid for lack of written support regarding claims directed to displaying one or more categories, in view of the specification “disclosing display locations in one, two, or all of the available categories.” However, the Commission determined that as of the invention date claimed by Pioneer, the ‘592 inventor had not invented the “map display system” of claim 1 because this subject matter is not disclosed in the original specification filed on February 11, 1993, or the detailed description of the issued ‘592 patent. More specifically, the Commission determined that the ‘592 patent nowhere disclosed a single category for display, and the improvement of the ‘592 patent was to easily display locations from different categories nearest to a point-of-interest. Additionally, the Commission determined the ‘592 patent offered no written support for a “selector device” that allows any type of category selection, and that the entire invention disclosure contradicts the “selector device” language of claim 1 because the disclosure “focuses on displaying all locations regardless of category.”
For at least the above reasons, the Commission affirmed, on modified grounds, ALJ Charneski’s determination that Pioneer failed to prove that Garmin violated Section 337.