ITC Issues Opinion In Certain Electronic Imaging Devices (337-TA-726)

Further to our December 1, 2011 post, on March 26, 2012, the International Trade Commission (the “Commission”) issued its opinion reviewing-in-part and affirming the initial determination of no violation of Section 337 in Certain Electronic Imaging Devices (Inv. No. 337-TA-726).

By way of background, the Complainant in this investigation is Flashpoint Technology, Inc. (“Flashpoint”) and the remaining Respondents are HTC Corp. and HTC America, Inc. (collectively, “HTC”).  The asserted patents are U.S. Patent Nos. 6,262,769 (the ‘769 patent) and 6,163,816 (the ‘816 patent).  On July 28, 2011, former Chief ALJ Paul J. Luckern issued an Initial Determination (“ID”) finding no violation of Section 337 by HTC.  Specifically, ALJ Luckern determined, inter alia, that (i) Flashpoint failed to show that the asserted claims of the ‘769 and ‘816 patents are infringed, (ii) it has been established that the asserted claims of the ‘816 patent are invalid under 35 U.S.C. § 102(b) (on sale bar), (iii) it was not established that the asserted claims of the ‘769 and ‘816 patents are invalid in view of prior art, (iv) Flashpoint’s rights under the ‘816 and ‘769 patents were not exhausted with respect to HTC’s accused Windows Phone 7 (“WP7”) products, and (v) Flashpoint did not establish a domestic industry with respect to either of the ‘769 or ‘816 patents.  See our September 30, 2011 post for more details.

On September 26, 2011, the Commission issued a notice determining to review the ID in part.  In particular, the Commission determined to review (1) infringement of the asserted claims of the ‘769 patent by the accused HTC Android smartphones, (2) infringement of the asserted claims of the ‘769 patent by the accused HTC WP7 smartphones, (3) the technical prong of the domestic industry requirement for the ‘769 patent with respect to the licensed Motorola smartphones, (4) the technical prong of the domestic industry requirement for the ‘769 patent with respect to the licensed Apple smartphones, and (5) the enforceability of the asserted patents under the doctrines of implied license and exhaustion.  The Commission also determined to review and take no position on the validity of the asserted claims of the ‘816 patent under 35 U.S.C. §§ 102 and 103.  The Commission requested that the parties brief their positions on the issues under review with reference to the applicable law and the evidentiary record.  See our September 27, 2011 post for more details.

According to the opinion, after examining the record of the investigation, including the ID and the submissions of the parties, the Commission determined to affirm ALJ Luckern’s determination of no violation of Section 337 with respect to the ‘769 patent on the bases that (1) the accused HTC Android smartphones and the accused HTC WP7 smartphones do not infringe the ‘769 patent, and (2) HTC has established that it has an implied license to practice the ‘769 patent with respect to the accused WP7 smartphones.  The Commission further determined to take no position on the ALJ’s finding that HTC has not established the right to practice the ‘769 patent with respect to the accused WP7 smartphones under the defense of patent exhaustion.  The Commission also determined to take no position on the ALJ’s finding that Flashpoint has not met the technical prong of the domestic industry requirement for the ‘769 patent.

While the Commission ultimately affirmed ALJ Luckern’s determination that the accused Android smartphones do not infringe the ‘769 patent, it reversed ALJ Luckern’s subsidiary finding that these smartphones do not meet the limitations of “determining a first orientation associated with the image at capturing of the image” and “a first orientation determined at capturing of the image.”  Specifically, the Commission found that “the ALJ misapplied his claim construction of the ‘at capturing of the image’” language, and that the accused Android smartphones do in fact determine a first orientation “at capturing of the image” under ALJ Luckern’s construction of the term, i.e., “the time period following the determination by the image capture unit that an image is to be captured and before the completion of generating image data from the image sensor.”

Despite its reversal of ALJ Luckern’s findings with respect to these particular claim terms, the Commission affirmed ALJ Luckern’s ultimate determination of non-infringement because it found that the ALJ correctly determined that the accused Android smartphones do not meet the limitations of “storing the image, including storing the information relating to the first orientation associated with the image” and “determining whether the third orientation is different from the second orientation, the first orientation, or both.”  The Commission further found that, although ALJ Luckern’s infringement analysis did not reach the limitation of “rotating the image to be displayed in the third orientation,” the evidence did not show that the Android smartphones “rotate[] the image to be displayed, i.e., “store[] the image data in a buffer in one of two directions such that the orientation of the image is the same as the orientation of the image capture unit.”

With respect to the accused WP7 smartphones, Flashpoint had taken issue with ALJ Luckern’s finding that Flashpoint had failed to prove infringement due in part to “the unavailability of specific source code to support complainant’s allegations.”  On review, the Commission found that ALJ Luckern did not abuse his discretion in noting that Flashpoint did not cite to specific source code to support its infringement case.  In particular, the Commission found that the ALJ’s non-infringement determination with respect to the WP7 smartphones was not based solely on the lack of specific source code, but on his conclusion that Flashpoint had not made a sufficient showing of infringement by a preponderance of the evidence.  The Commission further found that ALJ Luckern had never stated that “printed copies” of the source code were necessary, as argued by Flashpoint.  Rather, ALJ Luckern merely noted the lack of “specific” source code—which could include both printed and electronic copies of the source code.  Thus, the fact that Microsoft Corporation (“Microsoft”) had only made available an electronic version of its source code during discovery and had not produced paper copies was not a valid explanation for Flashpoint’s failure to cite specific source code.

In any event, the Commission affirmed ALJ Luckern’s ultimate finding of non-infringement with respect to the accused WP7 smartphones.  The Commission found that there was insufficient evidence showing that these smartphones store “information relating to the first orientation” as required by the claims.  The Commission further found that there was insufficient evidence that the WP7 smartphones meet the limitations of “determining whether the third orientation is different from the second orientation, the first orientation, or both” and “rotating the image to be displayed in the third orientation.”  However, the Commission found that Flashpoint had shown by a preponderance of the evidence that the WP7 smartphones meet the limitations of “determining a first orientation associated with the image at capture of the image” and “an image associated with a first orientation determined at capturing of the image.”

As to HTC’s defense under the doctrine of implied license, the Commission found that Microsoft had acquired an express license to sell the WP7 software for uses that would otherwise infringe the ‘769 patent.  The Commission therefore found that since HTC had purchased the WP7 software from Microsoft, HTC had thereby obtained an implied license to use the WP7 software in a way that would otherwise infringe the ‘769 patent.  Accordingly, the Commission reversed ALJ Luckern’s finding that HTC had not established an implied license to practice the ‘769 patent with respect to the accused WP7 smartphones.

In light of the Commission’s finding in favor of HTC on the implied license defense, the Commission determined to take no position on the issue of whether HTC had also established the affirmative defense of patent exhaustion for the ‘769 patent with respect to the accused WP7 smartphones.

Lastly, because the Commission found that the asserted claims of the ‘769 patent were not infringed and that HTC had established an implied license to practice the ‘769 patent with respect to the accused WP7 smartphones, the Commission took no position on ALJ Luckern’s finding that Flashpoint had not established the technical prong of the domestic industry requirement with respect to the ‘769 patent.

Accordingly, based on its findings of non-infringement and implied license, the Commission affirmed ALJ Luckern’s determination that there has been no violation of Section 337.

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