By Eric Schweibenz
On March 23, 2010, ALJ Theodore R. Essex issued the public version of Order No. 5 (dated February 26, 2010) in Certain Hybrid Electric Vehicles and Components Thereof (Inv. No. 337-TA-688).  In the Order, ALJ Essex denied Complainant Paice LLC’s (“Paice”) motion for summary determination that it has satisfied the domestic industry requirement with respect to the patent-in-suit, U.S. Patent No. 5,343,970 (the ‘970 patent).

In its motion, Paice argued that it had made substantial investments in research and development related to the ‘970 patent through compensation of outside vendors, compensation of employees and consultants, and investments relating to the development of a relationship with an unidentified entity whose name had been redacted from the public version of the Order.  Additionally, Paice argued that it had made substantial investments relating to licensing through negotiations with third parties, litigation with Toyota, and patent prosecution.

Respondents Toyota Motor Corp., Toyota Motor North America, Inc., and Toyota Motor Sales, U.S.A., Inc. (collectively, “Toyota”) opposed Paice’s motion for summary determination.  Toyota argued that disputed issues of material fact remained with respect to the extent and nature of Paice’s alleged domestic activities, and whether those activities sufficiently relate to the ‘970 patent.  Toyota further argued that Paice’s expenses relating to litigation with Toyota could not be used to satisfy the domestic industry requirement, as such a holding would effectively reduce the domestic industry requirement to nothing more than a requirement that a complainant own the asserted patent.  Moreover, Toyota argued that a court-imposed ongoing royalty that it was paying to Paice based on earlier litigation could not be considered a license for purposes of satisfying the domestic industry requirement.  Finally, Toyota argued that Paice’s ongoing expenses for patent prosecution were unrelated to the ‘970 patent and thus lacked the requisite nexus to the patent-in-suit.

The Commission Investigative Staff (“OUII”) opposed Paice’s motion and argued that there was insufficient evidence to find a domestic industry based on either research and development or licensing.  OUII also argued that there was an insufficient nexus between Paice’s activities and the ‘970 patent.

ALJ Essex denied Paice’s motion.  According to the Order, ALJ Essex was persuaded by Toyota’s and OUII’s arguments that several genuine issues of fact remained in dispute and that summary determination was not appropriate.  ALJ Essex also specifically found that Paice had failed to demonstrate a sufficient nexus between its domestic activities and the ‘970 patent.  ALJ Essex declined to rule on whether litigation expenses and/or a court-imposed ongoing royalty could be used to satisfy the domestic industry requirement, but noted that Paice faced “an uphill battle” if it continued to rely on those arguments.