The en banc re-hearing focused on two main issues:

• Whether an agreement between developers of a new standard to license a patent to be used only under the standard (thus foreclosing the creation of a competing standard) should be held anti-competitive without addressing the relevant market for the standards or proving injury to competition as a result of the agreement; and
• Whether such an agreement, even if found to be anti-competitive, can be a proper basis for a patent misuse defense preventing enforcement of other patents used to practice the standard.

While it is difficult to predict how the CAFC will rule in Princo, in order to determine whether the license agreement is anti-competitive on its face, the court will likely consider the possible effects of such an agreement.

One possible anti-competitive effect that could result from an agreement of this type relates to what would happen if a particular standard, which is the subject of such an agreement, fails.  For instance, it may be the case that two standards are in direct competition.  There may be patents that are considered essential to both standards.   If one of the standards was to fail due to widespread adoption of the competing standard, and an agreement such as the one at issue in Princo is in place, developers of the failed standard would be left with a number of essential patents that may be unavailable for inclusion in a pool linked to the surviving standard.  As a result, the pro-competitive advantage provided by the pooling of essential patents would have been impeded.  In contrast, if an agreement between developers of a new standard to license a patent to be used only under the standard was found to be anti-competitive on its face, such agreements would be disfavored, and the resultant problems would be avoided.

In addition, it is possible that a ruling that is consistent with the FTC’s amicus brief may result.  The FTC’s amicus brief takes the position that an agreement not to license a patent except for uses complying with a particular standard should be justified only when done ex ante (i.e., before the standard is finalized), and only when reasonably necessary to further pro-competitive technical collaboration.

Whatever the outcome, the CAFC ruling in the Princo case could have significant effects in the area of patent pools and standards.  A ruling is expected soon.

Both appeals originate from the ITC’s March 9, 2009 final determination in Certain Ground Fault Circuit Interrupters and Products Containing Same (Inv. No. 337-TA-615).  See our March 11, 2009 post for more details.  Pass & Seymour (“P&S”) initiated the investigation against a number of respondents in connection with the importation and sales of products containing Ground Fault Circuit Interrupters (GFCI) that allegedly infringed certain of P&S’s U.S. patents.   The U.S. patents involved in the appeals are U.S. Patent Nos. 7,212,386 (the ‘386 patent), 5,594,398 (the ‘398 patent), 7,283,340 (the ‘340 patent), and 7,165,564 (the ‘564 patent).  Only three of the original respondents are involved in the appeals:  General Protecht Group, Inc. (“GPG”), Shanghai ELE Manufacturing Corporation (“ELE”), and Wenzhou Trimone Company (“Trimone”) (collectively, the “Respondents”).

Pass & Seymour Appeal

In Pass & Seymour v. ITC, P&S appeals from the ITC’s final determination that none of the Respondents’ products infringe the ‘386 patent, and certain of their products did not infringe the ‘398 patent.  The ITC’s final determination modified the ALJ’s initial determination that these products infringed the ‘386 and ‘398 patents.  With respect to the ‘398 patent, P&S argues in its opening and reply briefs against the ITC’s constructions of two claim limitations on claim 1:  “mounting means” and “unitary electrically conducting member carrying a pair of spaced electrical contacts.”  With respect to the ‘386 patent, P&S argues against the ITC’s constructions of three claim limitations on claim 1: “wiring state detection circuit, “actuator assembly,” and “circuit interrupter.”

In its response brief, the ITC likens P&S’s positions on appeal to “straw-man arguments” that “attempt[ ] to create a different case through assumptions and misrepresentations” rather than challenge the ITC’s conclusions directly.  Further, the ITC argues it correctly construed the disputed claim limitations as mandated by the plain language of the claim, the specification, and the prosecution history of the patent.  The ITC also argues that its construction of disputed claim limitations in the ‘386 patent is consistent with certain extrinsic evidence, including expert testimony.

Each of the intervenor briefs of GPG, ELE and Trimone seek affirmation of the ITC’s finding that none of their products infringe the ‘386 patent.  GPG and Trimone additionally seek the affirmation of the ITC’s determination that certain of their products did not infringe the ‘398 patent.

General Protecht Group Appeal

In General Protecht Group v. ITC, ELE, GPG and Trimone filed separate opening and reply briefs seeking reversal of the ITC’s determination that some of their products infringed certain claims in the ‘340, ‘398, and ‘564 patents.

With respect to the ‘340 patent, the three appellants raise issues on claim construction, literal infringement, and invalidity of the asserted claims in the patent.  Regarding claim construction, Trimone argues that the ITC erred in the claim construction of the claimed “load terminal” limitation, and GPG argued that the ITC erred in the claim construction of the claimed “detecting circuit” limitation.

Regarding literal infringement, all three appellants argue that claims 14 and 18 require “four sets of interrupting contacts providing electrical continuity” instead of “two sets of interrupting contacts” present in their products.  ELE and GPG challenged the ITC’s application of the claim construction for “detection circuit” and “circuit interpreter” to reach the conclusion of infringement.  ELE further challenged the ITC’s conclusion of infringement by arguing that there is no substantial evidence that ELE products (1) “detect” their wiring condition, (2) provide a “predetermined” signal, and (3) can be “permanently disabled” as required by claim 30 in the ‘340 patent.

Additionally, ELE and GPG raise invalidity arguments in connection with the ‘340 patent.  More particularly, they argue that the asserted claims in the ‘340 patent would have been obvious in view of U.S. Patent No. 6,246,558 (the “DiSalvo patent”) alone, or the combination of the DiSalvo patent and U.S. Patent No. 5,600,524 (the “Neiger patent”).

In their response briefs, the ITC and P&S argued that the ITC’s claim constructions are proper and supported by substantial evidence, and even if they were not, it should not change the ITC’s ultimate determination on infringement.  In defense of its original validity finding of the ‘340 patent,  the ITC argues that substantial evidence supports its finding that the Neiger patent failed to disclose two limitations in the claims of the ‘340 patent.  Lastly, the ITC rejected GPG’s argument of obviousness based on the DiSalvo patent alone.

With respect to the ‘398 patent, ELE and GPG argue that (1) the ITC erred in interpreting two claim limitations: the “unitary, electrically conducting member” and the function of the “mounting means,” (2) the asserted claims would have been invalid under the ITC’s broad construction because they were obvious in view of the combination of U.S. Patent Nos. 4,595,894 (the “Doyle patent”), 4,421,959 (the “Chen patent”) and 4,616,117 (the “Kleine patent”).

The ITC replies that the Chen and Kleine patents are in the “contactor” field and thus are not analogous to the problems addressed by the ‘398 patent.  Furthermore, the “contactor” patents taught away from making the asserted combination of references.  Lastly, the ITC argues that, by relying on the combination of Doyle and the “contactor” patents, appellants are admitting that the Doyle patent by itself is not obvious to the ‘398 patent.

With respect to the ‘564 patent, ELE, the lone appellant on this issue, argued the ITC misconstrued the claim element “device parameter”, which should have included a limitation regarding the “end-of-life indicator.”  ELE also argued that under the ITC’s broad construction, the claims of the ‘564 patent would have been invalid for anticipation by U.S. Patent No 4,051,544, and for obviousness over prior art such as the Neiger patent or U.S. Patent No. 5,546,266.

The ITC rebuffed both of ELE’s arguments.  With respect to ELE’s claim construction argument, the ITC replies that ELE can not read device parameters enumerated in the specification into the claim, which explicitly recognize that various device parameters could be used to characterize a device.   With respect to the invalidity argument, the ITC dismisses it as “cursory.”  Specifically, the ITC points out that ELE’s invalidity argument “did not contain element-by-element analyses of the claims to the prior art.”

GPG’s brief also includes a challenge to the validity of the ‘386 patent.  The ITC replies that GPG’s appeal on the ‘386 patent is improper because GPG is not adversely affected by the Commission’s determination.  The ITC further suggests that the invalidity argument against the ‘386 patent would be better suited for GPG’s reply brief in the Pass & Seymour appeal, where P&S seeks to reverse the ITC’s determination of non-infringement on the ‘386 patent.

Oral arguments are scheduled for June 11 at 10:00 a.m.

* Joe Yang is a summer associate at Oblon Spivak

By way of background, on April 17, 2007, Tessera, Inc. (“Tessera”) filed a complaint alleging violations of Section 337 in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain semiconductor chips with minimized chip package size or products containing the same by reason of infringement of U.S. Patent Nos. 6,433,419 (“the ‘419 patent”) and 5,852,326 (“the ‘326 patent”).  The complaint named Spansion, Inc. and Spansion, LLC (collectively, “Spansion”), Freescale Semiconductor, Inc. (“Freescale”), ATI Technologies, Ulc. , ST Microelectronics N.V., and Qualcomm Inc. (“Qualcomm”) (collectively, “Appellants”) as respondents.  On May 21, 2007 the Commission instituted an investigation (Inv. No. 337-TA-605).  An evidentiary hearing was held, and on December 1, 2008 ALJ Theodore R. Essex issued an Initial Determination (“ID”).  In the ID, ALJ Essex found no violation of Section 337 with respect to the ‘419 and ‘326 patents.  ALJ Essex also determined that the patents were not indefinite under 35 U.S.C. § 112, ¶ 2, and not anticipated under 35 U.S.C. § 102.

On December 15, 2008, the Commission determined to review the ID in part, specifically, (1) whether Appellants’ accused devices directly infringe the asserted claims of the ‘419 and ‘326 patents, and (2) whether Tessera waived any argument that the accused products indirectly infringe the ‘419 patent.  On May 20, 2009, the Commission issued a Final Determination reversing the ALJ’s determination that Appellants did not infringe asserted claims 1-11, 14, 15, 19, and 22-24 of the ‘419 patent and claims 1, 2, 6, 12, 16-19, 21, 24-26, and 29 of the ‘326 patent.  The Commission also reversed the ALJ’s determination that Tessera had waived any argument that the accused products indirectly infringe the ‘419 patent and determined that Appellants contributorily infringed the ‘419 patent.  All of ALJ Essex’s remaining determinations, including those concerning claim construction, domestic industry, and validity were adopted by the Commission.  With respect to remedy, the Commission issued a limited exclusion order (“LEO”), prohibiting the unlicensed entry of Appellants’ infringing semiconductor chips with limited chip package size and products incorporating those chips that are manufactured abroad.  In addition, the Commission issued cease and desist orders against Qualcomm, Freescale, and Spansion.

According to Appellants’ opening and reply briefs to the Federal Circuit, four primary issues are raised on appeal.  First, Appellants assert that the ITC improperly concluded that the accused semiconductor packages possess the movement claimed by the ‘419 and ‘326 patent.  Specifically, Appellants assert that Tessera’s expert testimony was unreliable and should not be accorded evidentiary value because movement of the baseline package, a claimed element of the patents-in-suit, was measured using finite element modeling, based on numerous assumptions and, therefore, does not accurately represent whether the actual product infringes the asserted claims.

Second, Appellants argue that the ITC mistakenly read limitations into the claims of the asserted patents in order to find the terms “moveable” terminals or “movement” of terminals definite under 35 U.S.C. § 112, ¶ 2.

Third, Appellants assert that even if found liable for infringement, the Commission’s issuance of a LEO was in error, as the ITC did not meaningfully consider the public interest in its decision to grant injunctive relief.  Appellants argue that the public welfare is not served by enforcing Tessera’s patents, which were found invalid by the PTO’s Central Reexamination Unit.

Fourth, Appellants argue that the ITC’s decision and orders prohibiting contributory infringement of the ‘419 patent should be vacated because once Tessera and Motorola, Inc. (“Motorola”), an initial party to this action, entered into a licensing agreement, there was no act of direct infringement as required to establish liability for contributory infringement.

With respect to Appellants’ first argument, the Commission asserts in its brief that Tessera’s use of finite element analysis was based upon “realistic input parameters” and a “solid theoretical foundation” and, therefore, could be used to accurately determine the amount of movement in the accused package.  Further, the Commission notes that the language of the ‘419 and ‘326 patent only requires an accused package to be “capable” of movement, and that Tessera’s direct-loading test showed this, notwithstanding any differences between Tessera’s finite element models and printed circuit boards in actual use.

Regarding Appellants’ second issue, the Commission asserts that the term moveable is rendered definite by the ‘419 and ‘326 patent’s intrinsic evidence.  Similarly, the Commission contends that one skilled in the art would understand the meaning of the term as shown by prior adjudications before Judge Wilken (U.S. District Court for the N.D. Cal.) finding the term “movement,” as used in the ‘326 patent, not indefinite.

In response to Appellants’ third argument, the Commission asserts that the on-going PTO reexamination proceedings should not be considered on appeal, as its decision to grant exclusionary relief was neither arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.

Finally, in response to the Appellants’ contributory infringement arguments, the Commission asserts that it is not clear what effect, if any, Motorola’s dismissal from the case after the Commission issued its final determination would have on an analysis of contributory infringement.  Further, the Commission argues that because Appellants have not exhausted all available administrative remedies concerning this issue, the Commission should hear new questions raised by the Motorola settlement before Appellants can seek judicial review.

In its intervenor brief, Tessera argues, as does the Commission, that its direct-loading tests showed that Appellants’ packaging exhibited the movement limitations claimed in the asserted patents, thereby proving infringement.  Additionally, Tessera relies on Judge Wilken’s claim construction, referenced above, and subsequent Commission decisions adopting Judge Wilken’s reasoning to assert that the claim term “movement” is not indefinite as used in the ‘419 and ‘326 patents.  Tessera also maintains that the Commission’s decision to grant exclusionary relief properly considered the effect of the ongoing PTO reexamination proceedings on the public welfare.

With regard to contributory infringement of the ‘419 patent, Tessera asserts that because Appellants design their packages to be mounted to a printed circuit board and specifically instruct their customers as to how to attach the packages, a direct infringer exists and the Commission’s determination of contributory infringement should be upheld, notwithstanding the Motorola settlement agreement.

* Christopher Ricciuti is a summer associate at Oblon Spivak

By way of background, on October 15, 2007, Funai Electric Co., Ltd. and Funai Corporation (collectively, “Funai”) filed a complaint alleging violations of Section 337 through importation or sale of certain digital televisions that infringed several claims of U.S. Patent Nos. 6,115,074 (“the ‘074 patent”) and 5,329,369 (“the ‘369 patent”).  The complaint named Vizio, Inc., AmTran Technology Co., Ltd., TPV Technology Ltd., TPV International, Inc., Top Victory Electronics Co., Ltd., and Envision Peripherals, Inc. (collectively, “Appellants”) as respondents.

On November 15, 2007, the Commission instituted an investigation (Inv. No. 337-TA-617).  ALJ Carl C. Charneski held an evidentiary hearing in August 2008 and issued an Initial Determination (“ID”) on November 17, 2008.  In his ID, ALJ Charneski found a violation of Section 337 with respect to the ‘074 patent and concluded that the asserted claims of the ‘074 patent were not invalid and infringed by both Appellants’ legacy and work-around products.  ALJ Charneski found no violation with respect to the ‘369 patent.

The ’074 patent relates to apparatuses and methods by which television decoder devices identify and assemble specific “channel map information” carried in an MPEG compatible datastream in order to decode a digital television user’s selected program in a digital transmission.  The asserted claims of the ‘074 patent relate to the replication of this “channel map information.”  In the ID, ALJ Charneski construed the claim term “channel map information” to include at a minimum 4 specific data fields (program number, PCR_PID, elementary_PID, and stream_type) and that in order for the claimed apparatus to operate under an MPEG standard, certain Program Map Table (“PMT”) information must also be used.

On February 11, 2009, the Commission determined to review the ID in part.  On April 10, 2009, the Commission issued a Final Determination overturning ALJ Charneski’s finding of direct infringement by testing as to some respondents, but otherwise affirming ALJ Charneski’s findings with respect to infringement and validity.  The Commission also accepted ALJ Charneski’s recommendations concerning remedy, which included the issuance of a limited exclusion order and cease-and-desist orders.  Appellants then timely filed an appeal to the Federal Circuit.

On appeal, in an opinion written by Judge Dyk, the Federal Circuit first addressed three issues of claim construction.  The first issue was whether “channel map information” must replicate the four specific data fields named in ALJ Charneski’s ID and by the Commission.  Appellants argued that only one of the four data fields was required.  The Federal Circuit concluded that, based on intrinsic evidence and the understanding of one of ordinary skill in the art, the claims reciting “MPEG compatible channel map information” referred to the MPEG-2 standard.  These claims thus required associating the program with all of the identifiers conveyed in the MPEG-2 program map information that are necessary to constitute a program, specifically all four minimum data fields identified by ALJ Charneski and the Commission.

The second claim construction issue considered was whether the claims precluded the use of information other than “channel map information,” particularly whether they precluded the use of the MPEG PMT (i.e., the data used for decoding in the prior art).  Appellants argued that the patentees had disavowed any and all use of the PMT during prosecution of the ‘074 patent.  The Federal Circuit found that the cited statements from the ‘074 patent’s prosecution history merely explained the benefits of the patented invention over the prior art, namely, that it did not require the use of the MPEG PMT.  Thus, the Federal Circuit agreed with the Commission, concluding that there had been no broad disclaimer of any and all use of the PMT, only a disclaimer of systems that required the use of the MPEG PMT.

The third claim construction issue addressed was whether the claims required that the device and method be capable of utilizing the “channel map information,” or whether mere receipt and storage of the “channel map information” is sufficient.  The Federal Circuit agreed with appellants that the “channel map information” must be capable of being used.  Funai argued that even if the “channel map information” must be used for decoding, only some, not all, of the data need be suitable for use.  The Federal Circuit disagreed, finding that all 4 minimum data fields of the “channel map information” must be suitable for use in decoding.

Using this claim construction, the Federal Circuit affirmed the Commission’s determination that the asserted claims were not invalid.

With regard to infringement, the Federal Circuit found that although Appellants’ legacy products infringed under the adopted claim construction, Appellants’ work-around products did not.  The Federal Circuit concluded that the work-around products did not convert all the necessary “channel map information” into a useable format, and thus did not meet the requirements identified in the construction of the third claim construction issue discussed above.  The Federal Circuit found no infringement by the work-around products, reversing the Commission’s determination in that respect and remanding.

In dissent, Judge Clevenger disagreed with the majority’s finding of non-infringement with regard to the work-around products.  Judge Clevenger stated that the third claim construction issue identified by the majority was not raised by the parties, and thus was not appealed.  Therefore, Judge Clevenger expressed his opinion that, as that issue was not properly before the Federal Circuit, it should instead affirm.

By way of background, the ITC instituted an investigation in February 2003 based on a complaint filed by Deere alleging that Bourdeau and other Deere dealers unlawfully imported and sold Deere’s European-version harvesters in the U.S. in violation of Section 337’s prohibition against importation of products “produced by the owner of the United States trademark or with its consent, but not authorized for sale in the United States,” often called “gray market goods.”  In May 2004, the ITC determined there were material differences between Deere’s North American version and European version harvesters, supporting a finding of trademark infringement and thus a general exclusion order.

In March 2006, the Federal Circuit vacated-in-part and remanded the ITC’s decision based on the additional requirement that Deere also show that all or substantially all of its authorized domestic products (North American version) are materially different from the accused gray market goods (European version).  On remand, in December 2006, the ALJ issued an initial determination of infringement, finding that the original record showed that Deere did not authorize the sales of the European version in the U.S., that new evidence of alleged Deere financing of the European version sold by its dealers did not show authorization, and that the number of sales Bourdeau alleged were authorized was in any event so small that “substantially all” of Deere’s authorized U.S. sales were of the North American version.

In August 2008, the ITC reversed the ALJ, finding substantial evidence that Deere’s U.S. and European dealers had apparent authority to sell the European version, that Deere itself sold and/or facilitated the sale of the European version in the U.S., and that not “all or substantially all” of the authorized harvesters sold in the U.S. were the North American version.  The ITC noted that since the total number of authorized sales of the North American version in the U.S. was approximately only 4400, the introduction of even a small number of the European version could cause substantial consumer confusion.  The ITC then found such confusion based on its determination that at least 141 European version harvesters sold in the U.S. were sold by official Deere dealers.  The ITC considered 141 to be a “substantial quantity” of nonconforming goods because it constituted 40 to 57% of the 247 to 347 European version harvesters sold in the U.S. by both official and independent (in some cases, accused) dealers.  Importantly, the ITC did not use as its denominator the total number of authorized harvesters sold in the U.S., which would have been the number of authorized North American version harvesters (4400) plus the number of authorized European version harvesters (141), or 4541.

In the current appeal, Deere argued that (1) the ITC incorrectly determined the number of authorized European version harvesters sold in the U.S., and (2) even using the numerator that the ITC found, the ITC erred in applying the “all of substantially all” test by using 247 to 347 as the denominator instead of 4541; the latter results in only 3.1% of the authorized harvesters sold in the U.S. being of the European version, which Deere asserts is an insignificant number under the test.

The Federal Circuit found that substantial evidence supported the numerator determined by the ITC.  In particular, the court found, contrary to Deere’s arguments, that (a) sales by official Deere dealers of the European version in the U.S. were authorized based on buyers’ reasonable belief given Deere’s actions that such sales were authorized; (b) substantial evidence supports the ITC’s finding that Deere’s official dealers, including its official European dealers, had apparent authority to sell the European version; (c) the ITC did not err in including sales by Deere’s official European dealers in the U.S. in its calculation; and (d) Deere had an opportunity to introduce evidence regarding authorization of its official European dealer sales.

With respect to Deere’s denominator argument, the Federal Circuit agreed that the ITC misapplied the “all or substantially all” test, and that the denominator should have been total authorized sales in the U.S. in accordance with the court’s remand instructions, not the total European version sales in the U.S.  Using the ratio dictated by its remand instructions as well as the ITC’s lower-end and upper-end findings, the court concluded that a total of 3.1 to 3.4% of the authorized harvesters sold in the U.S. were the European version, or conversely that 96.6 to 96.9% of the authorized harvesters sold in the U.S. were the North American version.  The court observed that those figures may be insubstantial, but that is for the ITC to determine on remand based on all of the relevant facts, noting that “[t]he cutoff as to what is to be considered ‘substantially all’ is a question of fact.”

Judge Newman concurred in the remand but dissented-in-part from the majority’s holding that the importation and sales of the European version were deemed to be authorized by Deere, stating that “it is incorrect to hold that the infringing sales are ‘authorized’ by a concoction of ‘apparent authority’” because to do so “improperly requires the trademark owner to prove that it tried and was unable to impose restrictions on its independent official dealers in the United States and overseas.”

By way of background, GL filed a complaint with the ITC against SiRF in 2007, alleging that  SiRF’s importation and sale of certain Global Positioning System (“GPS”) chips, chipsets, products, and software infringed the ‘346 patent, the ‘651 patent, the ‘000 patent, U.S. Patent No. 6,937,187 (the ‘187 patent), U.S. Patent No. 7,158,080 (the ‘080 patent), and U.S. Patent No. 6,417,801 (the ‘801 patent).  The ITC instituted an investigation (Inv. No. 337-TA-602).  ALJ Carl C. Charneski issued an initial determination on August 8, 2008, concluding that all asserted claims were valid and infringed.  SiRF and the Commission Investigative Staff petitioned for review of several of ALJ Charneski’s rulings, but the ITC determined to review only three:  (1) whether GL had standing to assert the ‘346 patent, (2) whether SiRF directly infringed the ‘651 patent, and (3) whether SiRF directly infringed the ‘000 patent.  The ITC declined to review aspects of the ALJ’s decision relating to claim construction, invalidity, and infringement.  On January 15, 2009, the ITC found that GL had standing to assert the ‘346 patent and that SiRF directly infringed both the ‘651 patent and the ‘000 patent.  The ITC did not address several issues raised by SiRF, including claim construction issues and whether the intervening In re Bilski decision rendered certain of the claims of the ‘187 patent and the ‘801 patent not eligible under 35 U.S.C. § 101.  The ITC issued a limited exclusion order and cease-and-desist orders, prohibiting the importation and sale of covered GPS devices.

SiRF appealed the ITC decision.  In its appeal,  SiRF asserted that the investigation should have been terminated as to the ‘346 patent because of lack of standing due to the failure to join a co-owner of the patent.  Specifically, SiRF argued that the invention was conceived while the inventor worked for another company, and that the other company should be deemed a co-owner of the patent.  In reaching its decision to affirm the ITC’s finding that GL had standing, the Federal Circuit considered the language of the inventor’s employee agreement with the other company.  That agreement required that employees assign “all inventions… which are related to or useful in the business” to the company.  The Federal Circuit agreed with the ITC’s findings that SiRF did not prove that the ‘346 patent was “related to or useful in” the other company’s business, and thus failed to establish that the other company was a co-owner of the patent.

Regarding the ‘651 and ‘000 patents, SiRF asserted that it did not infringe the two patents because it did not perform all of the steps in the method claims since, according to SiRF, certain steps of the method claims directed to satellite communication were performed by customers and end users.  The ITC found joint infringement of such method claims.  However, the Federal Circuit did not address joint infringement.  Instead, the Court reviewed the claim construction, and concluded that SiRF directly infringed the claims.

According to the Federal Circuit’s claim construction, the “communicating” step of claim 1 of the ‘651 patent and the “transmitting” step of the ‘000 patent are not limited to direct communication or transmission.  Accordingly, SiRF performed these steps by initiating the process of communicating or transmitting, if the files are actually transmitted to the end users.  No downloading – the step completed by the receiver- is required by the claim.  The Federal Circuit also considered the construction of the “processing” limitation in claim 1 of the ‘651 patent, and the “representing” step in claim 1 of the ‘000 patent.  The parties agreed that these steps must take place in the mobile GPS device.  SiRF asserted that this meant the end users had to initiate the steps.  The Federal Circuit disagreed, and found that SiRF infringed since its devices and software dictate the performance of the “processing” and representing” steps.  The Federal Circuit noted that “once the GPS receiver is enabled and ready to process the data, only SiRF’s actions are involved in ‘processing’ or ‘representing’ the data.”  Since SiRF performed all of the steps, the Federal Circuit found direct infringement.

The Federal Circuit found SiRF’s arguments regarding certain issues which the ITC declined to review unpersuasive, including issues regarding claim construction in the ‘080 patent, the ‘801 patent, and the ‘187 patent.  However, the Federal Circuit did comment on SiRF’s In re Bilski argument.  SiRF asserted that the methods of the ‘801 and ‘187 patents do not meet the “tied to a particular machine or apparatus” or “transforms a particular article into a different state or thing” tests announced in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), rendering the claims not patent-eligible under 35 U.S.C. § 101.  SiRF contended that the claimed methods could be performed entirely in the human mind.  The Federal Circuit disagreed.  The Court noted that claim 1 of the ‘801 patent required “pseudoranges” to estimate the distance from “the GPS receiver to a plurality of GPS satellites.”  Claim 1 of the ‘187 patent requires the estimation of “states” that are “associated with the satellite signal receiver, and the formation of a “dynamic model… to compute [the] position of the satellite signal receiver.”  The Court found that the methods could not be performed without the use of a GPS receiver, and that the presence of the GPS receiver placed a “meaningful limit on the scope of the claims.”  Thus, the Court held that the claims of the ‘801 and ‘187 patents were directed to patentable subject matter.

By way of background, the ‘698 and ‘160 patents relate to processes for manufacturing lysine.  Lysine is an essential amino acid that livestock must obtain from their food sources.  Since naturally occurring lysine may be inadequate, feed manufacturers and farmers regularly add lysine as a dietary supplement to grass feed for livestock.   The industry uses microorganisms such as Eschericia coli (E. coli) to synthesize lysine from a carbon source.  The methods that are the subject of the ‘698 and ‘160 patents improve the processes through which  genetically engineered E. coli can synthesize lysine, thus allowing for the production of greater quantities of lysine than from naturally occurring E. coli strains. 

On April 25, 2006, Ajinomoto filed a complaint with the ITC alleging respondents Global Bio-Chem Technology Group Co. Limited, Changchun Dacheng Bio-Chem Engineering Development Co., Ltd., Changchun Balocheng Bio-Chem Development Co., Ltd., Changchun Dahe Bio Technology Development Co., Ltd. and Bio-Chem Technology (HK) Limited (collectively, GBT) violated Section 337 in the importation and sale of certain lysine feed products.  After the ITC initiated an investigation, but before the evidentiary hearing, GBT admitted infringement.  On July 31, 2008, ALJ Charles E. Bullock rendered an initial determination (“ID”) that the asserted claims of the ‘698 and ‘160 patents were invalid for violation of the best mode requirement, and that both patents were thus unenforceable due to inequitable conduct.  Ajinomoto petitioned the ITC for review.  On September 29, 2008, the Commission issued a notice determining to review, but taking no position on, ALJ Bullock’s finding that the ‘160 patent was invalid for failing to meet the best mode requirement based on fictitious data and that the ‘160 patent was procured by inequitable conduct.

On appeal to the Federal Circuit, Ajinomoto did not dispute many of the ITC’s underlying factual findings but instead asserted error in the legal test employed by the ITC in defining the best more requirement.  In particular, Ajinomoto asserted that the best mode requirement applies to “innovative aspects” or “innovative features” of the invention.  The Federal Circuit, however, disagreed with Ajinomoto.  The court held that the best mode inquiry relates to the invention as claimed — in this case, processes for making lysine using a genetically altered E. coli bacterium — and is not limited to “innovative aspects or features,” which the court characterized as “vague” terms that “appear nowhere in our best mode case law.”

The Federal Circuit concluded that the ITC applied the correct test to the best mode analysis, and that, in accordance with 35 U.S.C. § 112, first paragraph, the inventors were obligated to disclose their preferred host strains to the U.S. Patent and Trademark Office.  Because the Federal Circuit concluded that the best mode requirement had been violated based solely on the inventors’ failure to disclose their preferred host strains, the court did not address the other best mode violations found by the ITC.

The Federal Circuit also rejected Ajinomoto’s alternative argument that it had satisfied the best mode requirement because it had publicly deposited a strain containing a lysic variant.  The court held that the strain deposited was not the strain preferred by the inventors, and thus, “the deposit failed to enable one skilled in the art to practice the inventors’ preferred embodiment and thus concealed the best mode.”

Finally, with respect to inequitable conduct, the Federal Circuit noted that Ajinomoto failed to challenge the ITC’s finding of intent to deceive and that Ajinomoto’s sole argument on appeal of this issue was limited to a single sentence asserting that the inequitable conduct decision should be reversed because it was based upon an erroneous best mode conclusion.  The Federal Circuit characterized Ajinomoto’s argument as “conclusory” and held that it was therefore waived on appeal.  The Federal Circuit concluded that its decision not to address the ITC’s inequitable conduct decision “does not affect the finding of no violation of section 337 in this case” based upon its conclusion that the asserted patents were invalid for failure to comply with the best mode requirement.

By way of background, Sony and Philips jointly developed the standard for CD-R and CD-RW discs which they called the “Orange Book” standard.  The Court held that U.S. Patent Nos. 4,999,825 and 5,023,856 (the “Raaymakers patents”), claiming an analog method of encoding discs, undeniably relate to the Orange Book.  Another patent, Sony’s U.S. Patent No. 4,942,565 (the “Lagadec patent”) claims a digital method of encoding, which is incompatible with the analog standard.  One of the claims in the Lagadec patent, however, is arguably broad enough to fall within the Orange Book.  Philips, the party responsible for licensing the patents, pooled all three patents together.  Princo took a license, but when it stopped paying royalties, Philips initiated an action before the ITC.

As a defense to the infringement claim, Princo made two patent misuse arguments before the ITC.  First, Princo argued that the package license was an illegal tying arrangement, because it required licensing the Lagadec patent which was not necessary for the Orange Book Standard.  Second, Princo argued that Sony and Philips had entered into an agreement to not license the Lagadec patent separately from the patents in the pool.  The Federal Circuit panel rejected Princo’s first misuse argument but remanded to the Commission for further analysis of the second allegation.  Specifically, the panel ordered the Commission to determine whether there was, in fact, such an agreement and whether Lagadec was a potentially viable alternative to the Orange Book standard.

In response to the panel opinion, the Commission, plaintiff U.S. Philips Corporation and Princo all filed petitions for rehearing en banc.  The Federal Circuit denied Princo’s petition but granted the ITC’s and Philips’ petitions.  The Court asked for briefing from the parties addressing the second misuse theory.

The ITC argues that the Federal Circuit erroneously ordered a remand on an issue that was never before the Commission.  According to the ITC, no party raised the issue of whether Sony and Philips had entered into an agreement not to license the Lagedec patent as competitive technology to the Orange Book.

In its brief, Philips agrees with the ITC that it is not proper to remand to the ITC for findings on the existence of an agreement when Princo, who had the burden of proving the existence of an agreement, never sought those findings before the Commission.  Furthermore, Princo never proved existence of an agreement nor identified a market that such an agreement might have harmed.  According to Philips, both of these factors are essential to proving a patent misuse case.

Philips also asserts that, even if the issue had been raised and an agreement existed, it could not be the basis of a patent misuse defense without an unprecedented and unwarranted expansion of misuse law.  According to Philips, since the Lagadec patent stemmed from a joint effort by Sony and Philips to develop CD-R/RW technology, any agreement not to license separately is a reasonable ancillary restraint that has the pro-competitive effect of encouraging joint ventures.  Because such an agreement is facially reasonable, the proper standard by which to analyze any alleged agreement is under a rule of reason, rather than the lower per se standard.  Under the rule of reason standard, Princo failed to prove patent misuse.  Princo did not present proof of a relevant market, did not prove actual or likely competitive harm, and did not prove that the Lagadec patent would be used to enter a relevant market to compete with the Orange Book.

Philips further asserts, even if the agreement existed and was anticompetitive, it could not be used as the basis for a misuse defense.  According to Philips, the misuse defense applies only where the patentee conditions a license on terms that improperly expand the patent grant.  For the ITC to find misuse — where Philips never tried to impose license conditions going beyond the terms of the patents in the Orange Book — would be an “unprecedented and unwise expansion of the misuse defense.”

Princo, on the other hand, asserts in its brief that it (and the Commission Investigative Staff ) did argue to the Commission that Philips and Sony had an agreement to suppress competition.  According to Princo, it asserted at the ITC that Philips decided to combine with its competitors and create a patent pool and this created a horizontal restraint of trade.  Princo also points to arguments it made about how the cost of patent licenses went down when the Taiwan Fair Trade Commission ordered the pool licensors to license the patents individually.  Princo also points to arguments it made that when Philips and Sony tied essential and non-essential patents in the pool, they ensured there would be no competing standard.  According to Princo, there is sufficient argument and evidence on the record to support its patent misuse allegation.

Princo also asserts that the Commission did, in fact, address Princo’s horizontal competition-suppression theory in its final determination.  As to the waiver arguments made by the ITC and Philips, Princo asserts that it raised the issues in its opening brief on appeal and that the ITC and Philips both addressed the merits of its argument substantively, without asserting that these issues had been waived.  In other words, Princo asserts that the waiver argument has been waived.

Oral argument in this case is scheduled for March 3 at 2:00 p.m.

By way of background, Crocs filed a complaint and an amended complaint with the ITC on March 31, 2006 and April 27, 2006, respectively, naming eleven respondents that allegedly violated Section 337 by importing and selling certain foam footwear.  After the ITC instituted an investigation and held an evidentiary hearing, ALJ Charles E. Bullock issued an initial determination (“ID”) on April 11, 2008, in which he concluded that (i) there was no violation because the design of the ‘789 patent was not infringed by respondents’ shoes, (ii) Crocs’ shoes did not satisfy the technical prong of the domestic industry requirement in connection with the ‘789 patent, and (iii) the ‘858 patent was obvious.  Crocs, Respondents Collective Licensing International, LLC, Effervescent Inc., Holey Soles Holding Ltd., and the Commission Investigative Staff filed petitions for review of the ID.  Respondents Gen-X Sports, Inc. and Double Diamond Distribution Ltd. subsequently filed joinders to the petition.  The Commission granted the petitions in part and upheld the ID on July 25, 2008 with modifications and clarifications set forth in a separately issued opinion.  Crocs appealed the ITC’s final determination to the Federal Circuit.

The Federal Circuit reversed the ITC’s finding that the ‘858 patent was obvious on the grounds that the ITC erred in finding that the prior art taught all of the claimed elements of the ‘858 patent and incorrectly weighed the secondary considerations evidence.  The Federal Circuit also reversed the ITC’s findings on the ‘789 patent on the grounds that the Commission erred in claim construction, in applying the ordinary observer test for infringement, and in applying the technical prong of the domestic industry requirement.

Noting lower courts’ often misplaced reliance on detailed verbal descriptions in design patent infringement cases, the Federal Circuit found that the verbal claim construction provided by ALJ Bullock erroneously focused on particular features of the ‘789 patent design and led the ITC away from proper consideration of the design as a whole.  Specifically, the Federal Circuit found that two details required by the written claim construction – uniform strap width and uniform hole spacing – were contrary to the claimed invention.

According to the decision, the claim construction error in turn distorted the infringement analysis under the ordinary observer test.  In particular, the Federal Circuit found that the ITC placed undue emphasis on the details of its written description of the patented design, which “became a mistaken checklist for infringement.”  The proper analysis instead required a side-by-side comparison of the drawings of the patented design and the accused products, which, according to the Federal Circuit, showed that the shoes appeared nearly identical to an ordinary observer familiar with the prior art designs.  The Federal Circuit held that the accused products embodied the overall effect of the patented design in sufficient detail to cause market confusion, and thus infringed the ‘789 patent.

The Federal Circuit went on to find that because the test for the technical prong of the domestic industry requirement is essentially the same as for infringement, the ordinary observer test should be used to compare Crocs’ own shoe products to the ‘789 patent design.  Noting again that the test applies best in a side-by-side comparison, the Federal Circuit found that an ordinary observer familiar with the prior art designs would consider the Crocs shoes the same as the patented design.  Thus, the Federal Circuit determined that the technical prong of the domestic industry requirement was satisfied.

Regarding obviousness, the Federal Circuit found that the record showed that the prior art actually taught away from the use of foam straps as claimed in the ‘858 patent because foam was likely to stretch and deform, and cause the wearer discomfort.  According to the Federal Circuit, the record also showed that, contrary to the ITC’s final determination, choosing foam as the material for a strap for a shoe that is otherwise made of foam is not a logical modification because foam was known to be an unsuitable material that was prone to tearing.  The new combination was therefore not found to have been obvious.  Moreover, the Federal Circuit found that even if the ‘858 patent claimed a combination of known elements, it yielded more than predictable results because the “passive restraint system” employed by the patent (whereby frictional forces that develop between the foam components keep the strap in place so that it can maintain the shoe in the correct position without constant contact with the Achilles part of the foot) facilitates a loose anatomical fit that makes the claimed invention more comfortable than prior art products.  Finally, with respect to secondary considerations of non-obviousness, the Federal Circuit found that (1) Crocs established a prima facie case of nexus between its shoes that practice the ‘858 patent and the commercial success they enjoy, and that the record contained little or no rebuttal evidence; (2) the ITC’s finding of substantial industry praise for the claimed invention and the products covered by it deserved even more credit than commercial success; and (3) the ITC’s finding of copying tips the scale still farther in the direction of non-obviousness.

Accordingly, the Federal Circuit reversed the ITC’s final determination that the ‘789 patent was not infringed, that Crocs did not satisfy the technical prong of the domestic industry requirement of Section 337 relating to the ‘789 patent, and that the ‘858 patent would have been obvious.  Further, the Federal Circuit remanded the investigation to the ITC for a determination of infringement of the ‘858 patent and any appropriate remedies.

On January 8, 2003, Deere & Company (“Deere”) filed a complaint alleging violations of Section 337 in the importation into the United States, sale for importation, and sale within the United States after importation of certain agricultural vehicles and components thereof by reason of infringement and dilution of U.S. Registered Trademarks Nos. 1,254,339, 1,502,103, 1,503,576, and 91,860.  The complaint named, among others, Bourdeau Brothers, Inc., OK Enterprises, and Sunova Implement Co., (collectively, “Bourdeau”) as Respondents.  On February 13, 2003, the Commission instituted an investigation (Inv. No. 337-TA-487).  On January 13, 2004, Chief ALJ Paul J. Luckern issued his Initial Determination (“ID”) finding violation of Section 337.  On May 14, 2004, the Commission issued a Final Determination adopting ALJ Luckern’s ID together with a general exclusion order, two limited exclusion orders, and cease-and-desist orders.

On appeal by Bourdeau, the Federal Circuit affirmed various aspects of the Commission’s Final Determination.  However, the Federal Circuit found error with the Final Determination, in particular finding that ALJ Luckern erred in placing the burden of proving authorization on Bourdeau rather than on Deere in violation of its opinion in SKF USA, Inc. v. ITC, 423 F.3d 1307 (Fed. Cir. 2005).  Thus, on March 30, 2006, the Federal Circuit vacated the Commission’s Final Determination as it related to European version self-propelled forage harvesters (“EVSPFHs”) and remanded the investigation for further proceedings at the ITC.

On June 20, 2006, the Commission referred the investigation to ALJ Luckern for further proceedings consistent with the Federal Circuit’s decision.  On August 18, 2006, ALJ Luckern issued Order No. 55 denying the parties’ cross motions for summary judgment and held an evidentiary hearing in November 2006.  ALJ Luckern issued his Initial Determination on remand on December 20, 2006 (“Remand ID”).  In his Remand ID, ALJ Luckern found that a violation of Section 337 occurred, determining that Deere had established that it did not authorize the sale of EVSPFHs in the United States, and that “all or substantially all” of Deere’s self-propelled forage harvesters (“SPFH”) sales in the United States were North American version self-propelled forage harvesters (“NAVSPFH”).  After requesting additional comments and briefing, the Commission issued, on August 12, 2008, its final opinion and order reversing ALJ Luckern’s determination of violation of Section 337.

According to Deere’s opening and reply briefs, Deere raises four issues on appeal.  First, Deere asserts that the Commission erred in determining whether “all or substantially all of Deere’s sales in the United States were of North American forage harvesters” as set forth in Bourdeau Bros. v. ITC, 444 F.3d 1317 (Fed. Cir. 2006).  In particular, Deere asserts that the Commission improperly “compared the number of ‘authorized’ EVSPFH sales by official Deere dealers to the total number of EVSPFHs known to be in the United States” rather than to the total number of SPFH sales in the United States (i.e., the number of NAVSPFH sales combined with “authorized” EVSPFH sales).  Second, Deere asserts that the Commission erred “in determining that sales by Deere’s official European dealers were relevant to the ‘all or substantially all’ test and that Deere had ‘authorized’ these dealers’ sales of EVSPFHs.”  In support of this assertion, Deere argues that (i) the relevance of such sales had not been in dispute prior to the Commission’s request on remand for further briefing on the issue; (ii) on remand Bourdeau and ALJ Luckern did not include such sales in the “all or substantially all” analysis; (iii) inclusion of such sales is “inconsistent with the territorial nature of U.S. trademarks and the language and purpose of Section 337”; and (iv) record evidence demonstrates that Deere was unaware of and could not have prevented such sales.  Third, Deere asserts that “even if the sales of European dealers are relevant, the ITC erred as a matter of law in not giving Deere an opportunity to demonstrate that it did not authorize the sale of EVSPFHs by its official European dealers.”  Fourth, Deere asserts that the Commission erred in its analysis of whether Deere’s official U.S. dealers were authorized to sell EVSPFHs.  In support of this assertion, Deere argues that the Commission’s findings with respect to the theory of “apparent authority” were legally erroneous and not supported by substantial evidence.

In its brief, the Commission asserts that substantial evidence supports the Commission’s factual findings that Deere failed to (1) meet its burden under the “all or substantially all” test and (2) prove that its official dealers were not authorized to sell subject EVSPFHs.  In support of the assertion that Deere failed to meet its burden under the “all or substantially all” test, the Commission argued that it was impossible to complete the test because “Deere failed to put on any evidence of its authorized European dealer sales to purchasers in the United States” as required for the analysis.  Further, the Commission argued that even with all the available data, the record did not support a finding that “all or substantially all” of Deere’s sales in SPFHs in the United States were NAVSPFHs, because the available data demonstrated that “authorized Deere dealer sales accounted for approximately half of the non-conforming sales of EVSPFHs in the United States.”  Next, with respect to the assertion that Deere failed to prove its official dealers were not authorized to sell subject EVSPFHs, the Commission argued that the Commission’s finding in this regard was reasonable based on the following factors: (i) the volume of non-conforming sales by official Deere dealers; (ii) Deere’s knowledge of sales by official dealers and failure to act to curb such sales; (iii) Deere’s provision of warranty services to EVSPFHs present in the United States; (iv) the lack of a stated policy discouraging or forbidding the practice of gray market importations by Deere’s official dealers; (v) the Machinefinder.com website maintained and operated by Deere; and (vi) Deere’s involvement in the financing of EVSPFHs by official dealers through JD Credit.

In Bourdeau’s Intervenor brief, Bourdeau asserted that Deere failed to (i) satisfy the “all or substantially all” standard by a preponderance of the evidence, because Deere failed to sufficiently “establish the total number of European harvesters sold by official Deere dealers, and the total number of harvesters sold by official Deere dealers”; (ii) establish a diminution of the value of its trademarks; (iii) rebut the presumption of authorization given the lack of “testimony or documentary proof that Deere prohibited, or even tried to prohibit its authorized European Deere Dealers from selling or offering for sale for importation to the U.S., [EVSPFHs]”; and (iv) rebut the presumption that sales of EVSPFHs by official European Deere dealers were authorized by submitting insufficient proof on this issue and having actively supported the conduct of its dealers.