ALJ Gildea Denies Motion For Sanctions In Certain Blu-Ray Disc Players (337-TA-824)

On December 14, 2012, ALJ E. James Gildea issued the public version of Order No. 36 (dated December 5, 2012) in Certain Blu-Ray Disc Players, Components Thereof and Products Containing the Same (Inv. No. 337-TA-824).  In the Order, ALJ Gildea denied Respondents Funai Electronic Co., Ltd., Funai Corporation, Inc., P&F USA, Inc., Toshiba America Information Systems, Inc., and VIZIO, Inc.’s (collectively, “Respondents”) motion for sanctions against Complainant Walker Digital, LLC (“Walker Digital”).

According to the Order, Respondents argued that Walker Digital had violated its duty of candor under Commission Rule 210.4(c) with respect to two aspects of Walker Digital’s domestic industry allegations:  (1) the Declaration of Jonathan Ellenthal attached to the Complaint and (2) the Oppo Digital, Inc. (“Oppo”) settlement agreement (“Oppo agreement”) along with the declaration of Oppo’s CEO.  In particular, Respondents asserted that Ellenthal’s declaration included false statements regarding Walker Digital’s licensing expenditures.  Respondents further asserted that the Oppo agreement was a “sham” license agreement that included an unenforceable promise made by Walker Digital after it had already settled its lawsuit with Oppo in an earlier agreement.  Respondents argued that Walker Digital intentionally deceived the Commission by not disclosing the earlier agreement until compelled to do so by ALJ Gildea.  Respondents also argued that Oppo’s CEO did not have personal knowledge of the facts contained in his declaration, and that Walker Digital should not have relied on the CEO’s declaration.

Walker Digital opposed the motion, arguing that it had been forthright and honest in all of its dealings with the Commission.  Regarding the Ellenthal declaration, Walker Digital asserted that the declaration was truthful in all respects and that Respondents had deliberately misread what were otherwise objectively reasonable statements.  Regarding the Oppo agreement, Walker Digital asserted that the earlier agreement had been rescinded before either party had begun performance, and that the new Oppo agreement had been substituted for the old one.  Walker Digital asserted that the rescinded agreement was null and void, and thus, the payment listed in the new Oppo agreement was the consideration that Respondents asserted was lacking in the agreement.  Regarding the declaration of Oppo’s CEO, Walker Digital argued that it was justified in relying on this declaration because it never had any reason to believe that the statements in it were false.

The Commission Investigative Staff (“OUII”) also opposed the motion.  Regarding the Ellenthal declaration, OUII argued that the evidence and arguments presented by Respondents were directed more to a determination of whether Walker Digital could tie its expenditures to the asserted patent (to support its domestic industry allegations) than to showing that the declaration included false statements.  Regarding the Oppo agreement and the CEO’s declaration, OUII asserted that the evidence cited by Respondents called into question the probative value of the agreement, but did not warrant sanctions.

After considering the arguments, ALJ Gildea determined to deny Respondents’ motion.  Regarding the Ellenthal declaration, ALJ Gildea found that the statements identified by Respondents were objectively reasonable under the circumstances and did not warrant sanctions.  Regarding the Oppo agreement, ALJ Gildea found that Respondents’ arguments were based primarily on conjecture without sufficient supporting evidence.  He further found that it was objectively reasonable for Walker Digital to have considered the original agreement null and void, and not to have included the original agreement with the Complaint.  Lastly, ALJ Gildea found that Walker Digital’s reliance on Oppo’s CEO’s declaration did not warrant the imposition of sanctions.  Accordingly, ALJ Gildea denied Respondents’ motion.

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