13
Mar
By Eric Schweibenz
On March 6, 2014, ALJ Theodore R. Essex issued the public version of Order No. 14 granting Apple’s motion for summary determination that it had satisfied the economic industry prong of the domestic industry requirement in Certain Mobile Devices and Related Software (Inv. No. 337-TA-750).

According to the Order, Complainant Apple, Inc. (“Apple”) filed a motion for summary determination that it had satisfied the economic prong of the domestic industry requirement.  Apple argued that it satisfied the economic prong of the domestic industry requirement in light of its significant investment in plant and equipment, significant employment of labor and capital, and substantial investment in the exploitation of the asserted patents through engineering and research and development.  According to Apple, each of these activities independently meet the economic prong of the domestic industry requirement enumerated in § 1337(a)(3).  Regarding investments in plant and equipment, Apple pointed to its Cupertino, CA headquarters, its call center in Elk Grove, CA and numerous capital investments between 2008 and 2011 for leases in equipment and retail stores.  With respect to its significant labor investments, Apple argued that it employed numerous people in the U.S. dedicated to research and development on the iPhone 4 and Mac OS X and also employed many people to work in its retail stores.  Apple also argued that it had substantially invested in research and development by investing large amounts of money in research and development in 2008, 2009, and 2010, substantially all of which occurred in the U.S.  Apple further provided itemized expenditures regarding research and development for the technology of the asserted patents.

Respondents opposed the motion, arguing that § 1337(a)(3)(A) and (B) are limited to manufacturing activities, and that Apple does not manufacture the domestic industry products in the U.S.  Respondents also argued that Apple failed to link its investments in plant and equipment, labor, and research and development with the identified domestic industry products and had provided inaccurate and unreliable allocation data.

ALJ Essex found that, at the very least, Apple had satisfied the economic prong of the domestic industry requirement under §1337(a)(3)(C).  ALJ Essex noted that Respondents had presented no genuine issues of disputed fact and had failed to offer any evidence regarding Apple’s research spending on its domestic industry products.  ALJ Essex further found that, contrary to Respondents’ arguments, Apple had invested significantly in its domestic research and development activities related to its domestic industry products.  Regarding whether Apple’s investment in research and development was substantial, ALJ Essex found that Apple had established that its iPhone 4 hardware and Mac OS X employee investments in research and development related to the domestic industry products is substantial.  Regarding whether Apple had provided evidence regarding the number of employees working abroad, ALJ Essex found that this lack of information was insufficient to create a disputed issue of material fact because Apple had presented evidence that its domestic expenditures represented a large percentage of its investment in research and development of iPhone 4 software, hardware, and Mac OS X software.  With respect to whether Apple had linked the investments to the asserted patents or patented technology, ALJ Essex found that Apple had made a substantial investment with respect to the articles protected by the patent, and that the inquiry does not require Apple to make a substantial investment in the specific features containing the patented technology. 

While ALJ Essex found that Apple had met the economic prong under § 1337(a)(3)(C), ALJ Essex found that there were disputed issues of material fact preventing a finding that Apple met the economic prong under subsections (A) and (B).  ALJ determined that there were disputed issues of material fact remaining with respect to Apple’s allocation of its investments in plant and capital, and the allocation of Apples’ overall domestic employment, to the domestic industry products.  Accordingly, ALJ granted the motion for summary determination that Apple had satisfied the economic prong of the domestic industry requirement § 1337(a)(3)(C).