26
May
By Robert Nissen
On May 22, 2009, the Federal Circuit issued its opinion in Epistar Corp. v. Int’l Trade Comm’n, No. 2007-1457.  This was an appeal from the Commission’s final determination in Investigation No. 337-TA-556, which held that Epistar’s LED products infringed U.S. Patent No. 5,008,718 (“the ‘718 Patent).  The’718 patent is owned by Philips Lumileds Lighting Co. LLC (“Lumileds”).  At the ITC, Epistar attempted to argue that the ‘718 patent was invalid and the parties disagreed on the claim constructions for two terms.  The Commission found that Epistar had waived its right to argue that the ‘718 patent was invalid due to a settlement agreement signed by its subsidiary.  After the Commission ruled against Epistar’s construction of two claim terms, it found that Epistar’s products infringed and issued a Limited Exclusion Order (“LEO”) prohibiting the importation of Epistar’s LED products, regardless of the manufacturer or importer of those products.  Epistar appealed to the Federal Circuit.

In the opinion, the Federal Circuit reversed the Commission’s decision that Epistar could not raise the defense of patent invalidity, affirmed the Commission’s claim construction, and reversed the grant of the LEO.  The Federal Circuit remanded the case to the ITC so that Epistar could raise its invalidity defense and reconsider the grant of the LEO.

The Commission found that Epistar was estopped from raising an invalidity defense because its subsidiary (“UEC”), before it was purchased by Epistar, had entered into a settlement agreement with Lumileds, in which it agreed that it would not raise an invalidity defense to the ‘718 patent.  The Commission so ruled, even though there had previously been a settlement agreement between Epistar and Lumileds, in which Epistar had not waived its right to raise an invalidity defense to the ‘718 patent.  The Federal Circuit reversed because it found under California law (there was a California choice of law provision in both settlement agreements) that the agreement with UEC only applied to UEC products and not to Epistar products.  Consequently, it remanded the case so that Epistar could assert an invalidity defense. 

Epistar also appealed the Commission’s construction of two claim terms:  “transparent window layer” and “substrate.”  (Epistar did not separately appeal the finding of infringement.)  The Federal Circuit affirmed both constructions.  Regarding ‘transparent window layer,” the Federal Circuit held, that while the specification may have been critical of the use of a substance called indium-tin-oxide (“ITO”), it did not expressly disclaim using that substance.  Thus, the Federal Circuit affirmed the Commission’s ruling that the scope of “transparent window layer” included ITO.

Regarding “substrate,” Epistar argued that the term should be limited to a single, thicker layer.  (The Commission modified the ALJ’s construction of this term.)  The Federal Circuit affirmed because, while there was a specific embodiment in the specification that described such a substrate, “the disclosure of a preferred or exemplary embodiment encompassing a singular element, does not, without more, disclaim a plural element.”

Finally, although the issue had not been briefed, the Federal Circuit reversed and remanded the grant of the LEO due to an intervening case.  In Kyocera Wireless Corp. v. ITC, 545 F.3d 1340 (Fed. Cir. 2008), which issued after oral argument in this case, the Federal Circuit “held that the ITC lacks statutory authority to issue a LEO that excludes imported products by entities not named as respondents before the ITC.”  Thus, the Federal Circuit held that under Kyocera, it was improper for the Commission to issue the LEO against third parties who were not respondents below.  Consequently, the Court reversed the grant of the LEO and remanded for the Commission to reconsider who the LEO should apply to in light of Kyocera.
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